2014 (2) TMI 839 - AT - Income Tax

Expenditure incurred on construction of compound wall Held that - The Assessee has not proved the cost on the improvement made to the property and even the cash flow statement filed does not show any expenditure incurred - in the absence of any evidence of incurring the amount, the same cannot be considered as deduction while computing capital gain - To that extent, the order of the AO/ CIT(A) is confirmed the AO made the addition to total income returned where as he has to adjust the same in capital gain computation the AO is directed to exclude the amount as a direct addition to the total income returned and to compute capital gain separately, as capital gain tax rate is lesser than the tax on other incomes Decided against Assessee. Addition towards domestic expenses on estimate basis - Held that - No evidence was furnished against the withdrawal from any other source towards domestic expenditure - in view of smallness of the personal expenditure claimed, it would be reasonable to restrict the disallowance Decided partly in favour of Assessee. Addition made u/s 68 of the Act Advances against sale of shop and agricultural land Held that - Assessee contended that the documentary evidence submitted by him has not been properly verified by the AO - it is better to examine the parties concerned and also the cash flow statement furnished by Assessee, which was not done by AO thus, the matter remitted back to the AO Decided in favour of Assessee. Disallowance of expenditure - Leveling of land and construction of compound wall claimed as cost of improvements for the purpose of capital gains Held that - The amount has not been shown as expenditure in ways and means statement thus, in the absence of explanation about source / evidence of having spent the amount of expenditure by way of documents, it cannot be allowed to that extent Decided against Assessee. Addition on account of interest receipt Held that - The decision in G. Venkat Rao & Others Versus Asstt. Commissioner of Income-tax, Circle 8(1), Hyderabad 2012 (10) TMI 530 - ITAT HYDERABAD followed - assessee submitted that there is income for the year under consideration and the profit & loss account does not debit any interest paid to the partners - Even the capital account does not have any credit under the head interest - Interest paid to partners, which has been disallowed in the hands of the partnership firms cannot be assessed in the hands of the partners thus, the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee.

Summary

Issues involved:
1. Condonation of delay in filing the appeal for AY 2004-05.
2. Addition of expenditure on construction of compound wall and domestic expenses for AY 2004-05.
3. Addition of advance against sale of shop and agricultural land for AY 2005-06.
4. Addition of unexplained cash credit and expenditure for AY 2006-07.
5. Addition of interest receipts and capital interest for AY 2007-08 and AY 2008-09.

Analysis:

1. Condonation of Delay (AY 2004-05):
The Assessee filed a petition for condonation of delay in filing the appeal due to reasonable cause, which was accepted by the ITAT. The delay was condoned, and the appeal was admitted for adjudication.

2. Expenditure Addition (AY 2004-05):
The Assessee claimed expenditure on a compound wall without providing evidence. The AO made the addition, which was confirmed by CIT(A). ITAT upheld the decision, directing the AO to adjust the amount in capital gain computation separately.

3. Advance Addition (AY 2005-06):
An addition was made against an advance for the sale of shop and land. ITAT directed the AO to conduct further inquiries and consider the investment made in the partnership firm, allowing the appeal for statistical purposes.

4. Unexplained Cash Credit (AY 2006-07):
The AO treated an amount as unexplained cash credit, which was contested by the Assessee. ITAT restored the issue to the AO for detailed examination, similar to the decision in AY 2005-06, allowing the appeal for statistical purposes.

5. Interest Receipts (AY 2007-08 & AY 2008-09):
The AO added interest receipts not offered for taxation by the Assessee. ITAT considered the partnership firm's treatment of interest paid to partners and directed the AO to tax only the amount allowed in the firm's case, allowing the appeals for statistical purposes.

In conclusion, the appeals for various assessment years were partly allowed or allowed for statistical purposes based on the specific issues and directions provided by the ITAT. The judgments were pronounced on 1st January 2014.