2025 (2) TMI 446 - AT - Income Tax

Deduction u/s 80C - interest on housing loan - HELD THAT -Considering the nature of business carried on by the assessee and the turnover disclosed which is mainly received in cash and since it is also not the case of the AO that total deposits in the bank account both cash and through cheques / DD etc. far exceeds the turnover disclosed by the assessee the addition of the entire cash deposited in the bank account appears to be on the higher side. Disallowance of sundry creditors especially when the assessee has given Ledger copy of various parties from whom land was purchased. At the same time by not furnishing the full details as per the satisfaction of the AO the claim of the assessee that no addition is called for cannot be accepted. Since the assessee in the instant case is engaged in plotting business and full details were not given before the AO in the manner in which it should have been given as per the direction of the AO and since the assessment year involved is assessment year 2013-14 which is very old and litigation must come to an end therefore considering we are of the considered opinion that the estimation of income @ 10% of the total turnover of Rs. 2, 23, 77, 000/- as mentioned by the Assessing Officer in the assessment order will meet the ends of justice. Since the assessee has filed a copy of the interest certificate from the bank showing the repayment of principal amount of Rs. 72, 643/- and interest amount of Rs. 3, 59, 357/- totaling to Rs. 4, 32, 000/- for the period between 01.04.2012 to 31.03.2013 which was also filed before the CIT(A) we direct the AO to allow the consequential deduction as per the provisions of section 80-C of the Act and interest on self occupied house property. Appeal filed by the assessee is partly allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this appeal were:

1. Whether the assessment completed under Section 144 of the Income Tax Act, 1961, was justified given the alleged non-compliance by the assessee in providing requisite details.

2. The legitimacy of the disallowance of the deduction claimed under Section 80C for interest on a housing loan.

3. The correctness of the addition of Rs. 113,23,000/- as unexplained cash deposits.

4. The validity of the addition of Rs. 62,29,700/- related to sundry creditors.

5. The appropriateness of disallowances related to various expenses, including interest paid to SREI Finance, excess depreciation on JCB, and expenses for printing, stationery, and entertainment.

ISSUE-WISE DETAILED ANALYSIS

1. Assessment under Section 144 of the Income Tax Act:

The legal framework under Section 144 allows for best judgment assessment when an assessee fails to comply with notices or furnish requisite details. The Tribunal noted that while the assessee had filed certain details during the assessment proceedings, these were not to the satisfaction of the Assessing Officer. Despite the partial compliance, the Tribunal acknowledged the nature of the assessee's business, which involved cash transactions and rural customers, and found that the complete addition of cash deposits was excessive. The Tribunal balanced the interests of justice by directing an estimation of income at 10% of total turnover.

2. Deduction under Section 80C:

The Tribunal considered the disallowance of the deduction claimed under Section 80C for interest on a housing loan. The assessee presented a certificate from the bank indicating repayment details, which was not considered by the lower authorities. The Tribunal directed the Assessing Officer to allow the deduction as per the provisions of Section 80C, based on the evidence provided.

3. Addition of Rs. 113,23,000/- as Unexplained Cash Deposits:

The Tribunal evaluated the addition of cash deposits as unexplained. The assessee claimed these deposits were from sales proceeds, advances, and bookings. The Tribunal found that the addition of the entire amount was excessive, considering the nature of the business and the turnover disclosed. The Tribunal directed an estimation of income, which inherently addressed the issue of cash deposits.

4. Addition of Rs. 62,29,700/- Related to Sundry Creditors:

The Tribunal reviewed the addition related to sundry creditors. The assessee had provided ledger copies and agreements for land purchases, yet the Assessing Officer added the amount due to insufficient details. The Tribunal found the addition unwarranted, given the documentation provided, and included this in their directive for income estimation.

5. Disallowances of Various Expenses:

The Tribunal considered disallowances related to interest paid to SREI Finance, excess depreciation on JCB, and expenses for printing, stationery, and entertainment. The Tribunal acknowledged that these disallowances were high relative to the business's nature. However, they did not provide specific relief for these items, instead incorporating them into the overall income estimation directive.

SIGNIFICANT HOLDINGS

The Tribunal established several core principles:

- The Tribunal emphasized the importance of fairness in assessments, particularly when an assessee provides partial compliance and documentation.

- The Tribunal underscored the need for assessments to reflect the nature of the business and the realities of cash transactions in rural settings.

- The Tribunal highlighted the necessity for authorities to consider all evidence, including documents submitted during appellate proceedings.

Final determinations included:

- The Tribunal directed an estimation of income at 10% of the total turnover, reflecting a balanced approach to the issues of cash deposits and sundry creditors.

- The Tribunal instructed the Assessing Officer to allow deductions under Section 80C based on the bank certificate provided by the assessee.

In conclusion, the appeal was partly allowed, with the Tribunal providing a directive for income estimation that addressed multiple issues raised by the assessee.

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