2021 (10) TMI 91 - AT - Income Tax

Computation of Capital gain - whether interest on loan taken for purchase of vacant site goes to increase the cost of acquisition u/s.48 - HELD THAT - The assessee has not placed on record his return of income and computation statement - in a position to determine whether the interest paid on ICICI Bank loan was claimed as deduction u/s. 24 - matter needs to be decided by the A.O. afresh. Accordingly, this issue is restored to the files of the A.O. A.O. is directed to examine the interest which was claimed as deduction u/s. 24 of the I.T. Act. In the event, the assessee establishes that there is no claim of deduction u/s. 24 of the I.T. Act in respect of interest paid A.O. shall consider the claim that interest paid whether it goes to increase the cost of asset in light of the dictum laid down in the case of Addl. CIT v. K.S. Gupta 1976 (8) TMI 9 - ANDHRA PRADESH HIGH COURT and shall take a decision in accordance with law. Ground relating to computation of capital gains in respect of interest paid on loan, whether it goes to increase the cost of acquisition of land, is allowed for statistical purposes. Addition as unexplained money u/s. 69A - HELD THAT - Many of the credits appearing in assessee's bank account is on account of bank transfers. The assessee's submission that the FD deposits in the name of his deceased mother, which were in the joint account with the assessee, were automatically transferred to the assessee's bank account cannot be totally ruled out. The assessee being an NRI and not being present in India during assessment proceedings, is sufficient cause for not producing the necessary material/evidence before the A.O. In the interest of justice and equity, the additional evidence, which is furnished, goes to the root of the issue and for substantial cause, admit the same. Since the additional evidence is taken on record, the matter is restored to the files of A.O. A.O. is directed to consider the evidences placed with regard to the source of credits in the bank account to the extent which has been disbelieved by the A.O. The A.O. is directed to afford a reasonable opportunity of hearing to the assessee and take a decision in accordance with law. It is ordered accordingly.

Summary

Issues:
1. Whether interest paid on loan goes to increase the cost of acquisition.
2. Addition of ?6,84,423 as unexplained money under section 69A of the I.T. Act.

Issue 1: Whether interest paid on loan goes to increase the cost of acquisition

The assessee purchased a vacant site using a loan from ICICI Bank and claimed the total interest paid as part of the cost of acquisition while computing long-term capital gains. The Assessing Officer disallowed this claim, stating that interest expenditure should be claimed as a deduction under section 24 of the I.T. Act in the year of payment. The CIT(A) upheld this decision. However, the assessee argued that the interest claimed under section 24 was for a house property, not a vacant site, citing a precedent from the Hon'ble Andhra Pradesh High Court. The Tribunal noted the absence of the assessee's return of income and computation statement, leading to a lack of clarity on the deduction claimed. Consequently, the issue was remanded to the Assessing Officer for fresh examination. The Tribunal directed the A.O. to determine if the interest paid should increase the cost of the asset based on the Andhra Pradesh High Court's ruling.

Issue 2: Addition of ?6,84,423 as unexplained money under section 69A of the I.T. Act

The Assessing Officer added ?6,84,423 as unexplained money under section 69A after finding discrepancies in bank statements and unverified credits. The CIT(A) rejected additional evidence submitted by the assessee under Rule 46A of the I.T. Rules, as it was not considered during the assessment proceedings. The Tribunal acknowledged the challenges faced by the NRI assessee in providing necessary documents due to being abroad during assessments. Considering the substantial cause and the importance of the additional evidence, the Tribunal admitted the evidence and remanded the issue to the A.O. for reevaluation. The A.O. was directed to review the evidence related to the source of credits in the bank account and provide a fair hearing to the assessee. The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of justice and equity in the proceedings.

In conclusion, the Tribunal's judgment addressed two critical issues involving the treatment of interest paid on a loan for a vacant site and the addition of unexplained money in the assessee's bank account. The detailed analysis and remand orders reflect a commitment to fairness and thorough examination of the facts to ensure just outcomes in accordance with the law.