2023 (2) TMI 706 - AT - Income Tax

Addition of advances - CIT-A deleted the addition - Whether Asessee provided all relevant evidences that the amount in question was not received during the year under consideration? - HELD THAT - We find that the CIT(Appeals) in deleting the addition has given a finding of fact that the amount was received by the assessee in F.Y. 2008-09. Accordingly, considering the fact that since the advances were not received in the year under consideration, the learned CIT(Appeals) deleted the addition - This finding of fact is not rebutted by the Revenue. Therefore, we do not find any reason to interfere with the finding of the learned CIT(Appeals), same is hereby affirmed. Ground no. 1 is rejected. Disallowance of proportionate interest on loans and advances on which the assessee had not charged any interest - Whether assessee was having sufficient interest free funds available with him - CIT-A deleted addition - HELD THAT - We find that the learned CIT(Appeals) has given a finding of fact that the advances were given out of interest free funds. CIT(Appeals) in the impugned order has stated t4hat the assessee was having non-interest bearing funds - This fact is not rebutted by the Revenue. We find no infirmity in the action of the learned CIT(Appeals), which is hereby affirmed. Ground of appeal is rejected. Addition on account of personal use of car and 10% disallowance of depreciation on car - HELD THAT - There is no dispute with regard to the fact that the disallowance was made purely on ad hoc basis without pointing out as to what expenditure was not supported with evidence. Therefore, we do not see any reason to interfere with the finding of the learned CIT(Appeals) on this issue, the same is hereby affirmed. Ground raised by the Revenue is rejected. Addition of unproved alleged unsecured loans - HELD THAT - CIT(Appeals) has categorically stated that the advances were made out of the maturity of the FDRs of the concerned persons and the evidences are duly enclosed in the paper book filed by the assessee. Therefore, we do not see any infirmity in the order of the learned CIT(Appeals) on the issue in question. Moreover, the AO has not brought any contrary material to rebut the finding of learned CIT(Appeals). Thus, ground of Revenue lacks on merit, same is rejected.

Summary

Issues:
1. Addition of cash advance received from parties against sale of property as unexplained.
2. Disallowance of proportionate interest on interest-free loans.
3. Disallowance of personal use of car and depreciation.
4. Addition of unproved alleged unsecured loans.

Analysis:

1. Cash Advance Addition:
The Revenue challenged the deletion of the addition of Rs. 1.34 Crs made by the AO under section 68 of the Act. The Revenue contended that the advance received by the assessee was unexplained as it did not appear in the audited balance sheet, and the identity, creditworthiness, and genuineness of the parties were not established. However, the CIT(A) found that the amount was received in a previous financial year and deleted the addition. The Tribunal affirmed the CIT(A)'s decision, stating that the fact that the advances were not received in the relevant year justified the deletion.

2. Proportionate Interest Disallowance:
The Revenue disputed the deletion of the addition of Rs. 3,21,967 being the disallowance of proportionate interest on loans and advances where no interest was charged. The AO disallowed the interest based on interest-free loans given by the assessee. The CIT(A) deleted the disallowance, noting that the advances were made out of interest-free funds. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had sufficient non-interest bearing funds available, justifying the deletion of the disallowance.

3. Personal Use of Car and Depreciation:
The Revenue objected to the deletion of the addition of Rs. 45,469 and Rs. 66,246 made on account of personal use of car and 10% disallowance of depreciation on the car. The disallowance was made on an ad hoc basis without specific findings by the AO. The Tribunal upheld the CIT(A)'s decision, stating that the disallowance lacked proper support and reasoning, affirming the deletion.

4. Unproved Alleged Unsecured Loans:
The Revenue contested the deletion of the addition of Rs. 99,41,000 made by the AO towards unproved alleged unsecured loans. The Revenue argued that the genuineness of the transaction and creditworthiness of the lenders were not proven. However, the CIT(A) found that the loans were backed by FDRs of family members/relatives, supported by bank FDR copies and confirmations. The Tribunal upheld the CIT(A)'s decision, noting that the loans were clearly explained and supported by evidence, and the AO failed to provide contrary material to challenge the findings.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all grounds. The Tribunal found no merit in the Revenue's contentions and affirmed the deletions and adjustments made by the CIT(A) regarding the various additions and disallowances.