2024 (7) TMI 1551 - HC - Income Tax

Disallowance of business expenses relating to business of money lending merely on the ground that no interest income has been earned in this year - Engagement of the assessee in the business of money lending - Whether Tribunal has erred in holding that business of money lending was an afterthought merely on the ground that no interest income has been earned in this year? HELD THAT - As decided in SHRI ASHOK J. THAPAR HUF 2023 (12) TMI 1026 - ITAT DELHI the averments in the complaint do not at all indicate that the money claimed to have been standing as a loan was ever given as a loan for the purpose of money lending business. In fact, in AY 2012-13, there was an issue of undisclosed income wherein the AO had made an addition on the ground that the assessee had been showing interest income from M/s Sunil Mantri Realty Ltd. on actual basis. M/s Sunil Mantri Realty Ltd. had paid interest and deducted tax which was reflected in 26AS, but, there was lack of reconciliation. We are of the considered view that what ld. AR has relied in regard to the previous or subsequent years about the money lending business of the assessee is not sustainable in the facts discussed above from the perspective of ld. CIT(A) and we do not consider that there is any error in the sustenance by ld. CIT(A).

Summary

Issues:
1. Appellant challenging the order of the Income Tax Appellate Tribunal.
2. Questions of law posed for consideration by the High Court.
3. Tribunal's findings on the engagement of the assessee in the business of money lending.
4. Application of the rule of consistency in the case.

Analysis:
The High Court considered an appeal where the appellant contested the order of the Income Tax Appellate Tribunal (Tribunal). The appellant raised several questions of law for the court's consideration, including the alleged perversity of the Tribunal's findings, the applicability of the principle of consistency, and the treatment of business expenses related to money lending. The Tribunal had examined the issue of the appellant's engagement in money lending business in detail. It was noted that the Tribunal had made specific findings regarding the appellant's activities in previous assessment years and the lack of interest income in the current year. The Tribunal emphasized the independence of each assessment year and the need for distinguishable facts for each year.

The Tribunal's analysis revealed that the appellant had claimed to be engaged in money lending business in addition to property leasing. However, the Tribunal found discrepancies in the appellant's claims, especially regarding the lack of interest income and the nature of transactions labeled as money lending. The Tribunal highlighted that the appellant's assertions lacked sufficient evidence to support the existence of a money lending business. The Tribunal also addressed the appellant's reliance on the rule of consistency, emphasizing the need for factual substantiation in each assessment year.

Ultimately, the High Court upheld the Tribunal's findings, concluding that the rule of consistency was not applicable in this case. The Court agreed with the Tribunal's assessment that the appellant's claims regarding money lending business were not adequately supported by the evidence presented. Therefore, the appeal was dismissed, and the Tribunal's decision was affirmed. The judgment underscores the importance of factual substantiation and consistency in establishing the nature of business activities for tax assessment purposes.