2022 (11) TMI 727 - AT - Income Tax

Expenses as claimed u/s. 57(iii) - old dues not payable shown as Income from other sources - AO observed that the expenses claimed has no nexus with the income from offered and therefore, made addition which was claimed under Section 57(iii) - HELD THAT - Assessee has shown in the return in respect of old dues not payable as income from other sources and was never shown the same as debts and liabilities by the assessee in the previous year.This fact was not denied by the assessee at any juncture. Merely stating that it is wrongly treated under income from other sources cannot show the genuineness of the assessee related to old dues. The assessee has not brought on record in particular instant where the assessee has right to approach Shri Rasik C. Patel. If the advance was taken from Shri Rasik C. Patel who is now expired as per submissions made before the CIT(A) by the assessee, the assessee has not shown any measures taken by him as to whether in legal heirs of the said party are present to whom the dues can be repaid. Merely writing off the dues cannot allow the claim of the assessee. CIT(A) rightly said that the old dues not payable is rightly shown as income from other sources . The CIT(A) has rightly placed the total expenses which reveals that no expenses were related to the advances against purchase received from Mr. Rasik Shah. Therefore, the same also cannot be allowed from the income. There is no need to interfere with the finding of the CIT(A). Hence, the appeal of the assessee is dismissed.

Summary

Issues:
1. Disallowance of expenses claimed under Section 57(iii)
2. Disallowance of business loss claim
3. Treatment of personal loan as income from other sources

Analysis:
1. The appellant contested the disallowance of expenses amounting to Rs. 29,28,423 under Section 57(iii) by the Assessing Officer. The appellant argued that these expenses were related to business income of Rs. 84,390 (Profit on sale of shops) and should have been allowed as business expenses. However, the CIT(A) upheld the disallowance stating that the expenses had no nexus with the income offered. The tribunal agreed with the CIT(A), emphasizing that the expenses were not related to the advances against purchases received, and therefore, the disallowance was justified.

2. The appellant also challenged the disallowance of the business loss claim after the alliance of business expenses. The tribunal noted that the CIT(A) did not allow the business loss claim for set off against income from other sources. The tribunal upheld the CIT(A)'s decision, stating that since the expenses claimed were not related to the income offered, there was no basis for allowing the business loss claim. Therefore, the tribunal dismissed this ground of appeal.

3. The appellant raised additional grounds regarding the treatment of a personal loan as income from other sources. The appellant argued that the loan taken in 1999 was wrongly considered as income during the assessment year. The tribunal examined the appellant's contentions and the Circular No. 14 dated 11.04.1955. The tribunal found that the appellant had not shown the loan as debts or liabilities in the previous year and had not taken measures to repay the loan. Therefore, the tribunal agreed with the CIT(A) that the old dues not payable should be treated as "income from other sources." The tribunal concluded that the appellant's claim regarding the personal loan treatment was not substantiated, and hence, dismissed this ground of appeal as well.

In conclusion, the tribunal upheld the CIT(A)'s decision and dismissed the appeal of the assessee, emphasizing the lack of substantiation for the claims made regarding expenses, business loss, and treatment of the personal loan as income from other sources.