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2022 (4) TMI 958 - AT - Income TaxTreating the interest income as 'income from other sources' - disallowing business expenditure after holding that no business was carried out by the appellant during the year under consideration - HELD THAT - From the above observations of ld. CIT(A) for A.Y. 2004-05 and from the material on record, it can be concluded that no evidence has been filed by the assessee in support of its claim that it was engaged in the business of providing need based finance. The assessee either during the course of assessment or at appeal stage did not produce any books of accounts, bills, vouchers, etc. in support of the genuineness of the claim. Regarding the alternate claim of the assessee that in the event the interest income is treated as income from other sources then the interest expenses should be allowed as a deduction against such interest income u/s. 57 of the Act, we are of the view that in absence of evidence from the assessee that such borrowing is directly linked with such loans/advances, such deduction cannot be allowed u/s. 57. CIT(A) in his order has observed that the assessee submitted profit and loss account and balance sheet only reflecting various assets/sundry creditors and debtors but failed to produce books of accounts or any details to establish the nexus between borrowed fund to such loans and advances. In view of the above, we hold that the ld. CIT(A) has not erred in treating interest income as income from other sources. We are of the view that since the assessee has not established that it is engaged in carryout out any business activity, the ld. CIT(A) has not erred in law and on facts in confirming the action of the ld. CIT(A) in disallowing the entire business expenditure after holding that no business was carried out by the assessee. Further, since the assessee has failed to establish any nexus between payment of interest on borrowed fund and giving of loans and advances for earning interest income, in our view, the ld. CIT(A) has not erred in not granting deduction of expenditure u/s. 57 of the Act, against interest income. Addition u/s. 68 - Onus to prove - HELD THAT - We note that the assessee has not discharged the onus cast upon it u/s. 68 of the Act. Despite several opportunities the assessee has not produced either the PAN No. of the concerned person nor has produced any details of the address of the person. It is a well established law that the initial onus is on the assessee to prove the genuineness and creditworthiness of the party which has not been discharged in the instant set of facts. Mere production of ledger account and the contention that the amount has been received through banking channel would in our view not suffice when the identity of the creditor itself has not been established. - Decided against assessee. Addition u/s. 22 - Claim of standard deduction u/s. 24 - HELD THAT - As noted in the preceding paragraphs, the ld. counsel for the assessee has already submitted before us that the Department has already granted 30% standard deduction u/s. 24 of the Act and he has nothing further to submit in the matter. Therefore ground no. 6 of the assessee hereby is dismissed. Disallowance of entire business expenditure after holding that no business was carried out by the assessee during the year under consideration - HELD THAT - We find no infirmity in the order of Ld. CIT(A), where he has held that the assessee has taken inconsistent position in various years. Further, the Ld. CIT(A) has also specifically observed that there has been non production of books of accounts, bills, vouchers etc. for various expenses claim being genuine both during assessment as well as in appeal proceeding where no such bills, vouchers, were produced. Accordingly, we are of the view that ld. CIT(A) has not erred in confirming the action of the ld. Assessing Officer in disallowing the business expenditure. Penalty u/s. 271(1)(c) - HELD THAT - We are in agreement with the order of ld. CIT(A) that the assessee has been inconsistent in his approach wherein in one year, he has shown interest as income from other sources whereas in another year he has offered the same as business income . The assessee has not been able to establish that he is carrying on any business and ld. CIT(A) has correctly noted that interest income has been categorized as 'business income' and not as 'income from other sources' in order to claim deduction of various expenses against such income so as to avoid payment of taxes. When the case was opened for scrutiny, the assessee deliberately did not cause appearance and did not produce books of accounts, vouchers, evidence etc. in supports of any of its claim. Even in proceedings before the ld. CIT(A), both in quantum and penalty no evidence was produced by the assessee in respect of any of its claim. The assessee despite having ownership of several properties did not offer tax on any rental income in respect of those properties which were not self occupied. In respect of addition made u/s. 68 of the Act, the assessee was unable to prove the genuineness and creditworthiness of the creditors and failed to discharge the initial onus cast upon him. From the above facts of the case, we are of the view that the ld. CIT(A) has not erred in law and on facts in confirming the penalty levied u/s. 271(1)(c). Penalty u/s. 271D and 271E - HELD THAT - We are in agreement with argument of the Counsel for the assessee that when as per the Rule of Literal interpretation, when the words of the Statute are plain and unambiguous, the same should be understood to represent the legislative intent. In the instant case, the language of sections 271D and 271E is plain and unambiguous and states specifically that penalty shall be imposed by the Joint Commissioner of Income Tax. We therefore are of the view that the CIT(Appeals) erred in law and in facts in initiating and levying penalty u/s. 271D and 271E of the Act.
Issues Involved:
1. Validity of assessment order under Section 144. 2. Treatment of interest income as 'income from other sources' instead of 'business income'. 3. Disallowance of business expenditure. 4. Addition under Section 68 for unexplained cash credits. 5. Addition under Section 22 for notional rental income. 6. Initiation and imposition of penalty under Sections 271D and 271E. 7. Jurisdiction of CIT(A) to levy penalties under Sections 271D and 271E. 8. Penalty under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars. Issue-wise Analysis: 1. Validity of Assessment Order under Section 144: The Tribunal upheld the action of the Assessing Officer (AO) in framing the assessment order under Section 144 due to the assessee's non-compliance with notices and non-appearance during the assessment proceedings. The Tribunal agreed that the AO was justified in passing a best judgment assessment based on available records. 2. Treatment of Interest Income as 'Income from Other Sources': The Tribunal confirmed the CIT(A)’s decision to treat the interest income of ?6,98,780/- as 'income from other sources' rather than 'business income'. The assessee failed to provide evidence that it was engaged in the business of providing need-based finance. The Tribunal noted inconsistencies in the assessee's treatment of income across different years and the absence of supporting documentation. 3. Disallowance of Business Expenditure: The Tribunal upheld the disallowance of business expenditure amounting to ?5,82,162/- since the assessee did not establish that it was carrying out any business activities. Consequently, the expenses were not allowable against 'income from other sources'. The Tribunal also denied the alternative claim for deduction under Section 57 due to the lack of evidence linking the borrowed funds to the earning of interest income. 4. Addition under Section 68 for Unexplained Cash Credits: The Tribunal sustained the addition of ?5 lakhs under Section 68, as the assessee failed to discharge the onus of proving the genuineness and creditworthiness of the creditor. The assessee did not provide the PAN or address details of the creditor, which is essential to establish the identity and genuineness of the loan transaction. 5. Addition under Section 22 for Notional Rental Income: The Tribunal upheld the addition of ?1,09,200/- under Section 22 for notional rental income. The assessee conceded that the department had already granted a 30% deduction under Section 24, and no further arguments were presented. 6. Initiation and Imposition of Penalty under Sections 271D and 271E: The Tribunal found that penalties under Sections 271D and 271E were imposed by the CIT(A) for the violation of Sections 269SS and 269T, respectively. However, the Tribunal ruled that only the Joint Commissioner of Income Tax (JCIT) is empowered to levy such penalties, as per the plain language of the statute. Therefore, the imposition of penalties by the CIT(A) was deemed beyond jurisdiction and invalid. 7. Jurisdiction of CIT(A) to Levy Penalties under Sections 271D and 271E: The Tribunal emphasized that the power to impose penalties under Sections 271D and 271E is explicitly vested in the JCIT. The CIT(A) overstepped his jurisdiction by levying these penalties, and the Tribunal annulled the penalties on this ground. 8. Penalty under Section 271(1)(c) for Concealment of Income and Furnishing Inaccurate Particulars: The Tribunal upheld the penalty under Section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The assessee's inconsistent treatment of income, non-cooperation during assessment proceedings, and failure to produce supporting documents justified the penalty. The Tribunal dismissed the assessee's arguments against the penalty, including the claim of the penalty order being barred by limitation. Conclusion: The appeals related to the assessment orders and penalties under Sections 271(1)(c) were dismissed, affirming the decisions of the lower authorities. However, the appeals against the penalties under Sections 271D and 271E were allowed, as the CIT(A) lacked jurisdiction to impose these penalties.
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