2014 (11) TMI 189 - AT - Income Tax

Denial of claim u/s 24(b) and u/s 80C - Assessee had claimed loss under the head income from house property by claiming deduction u/s 24(b) of the Act in respect of interest paid for purchase of house property and further deduction u/s 80C was claimed in respect of repayment of loan Held that - The assessee had purchased the property on 25th day of November 2005 - ICICI Bank disbursed the amount on 31.12.2005 - the loan taken by assessee from ICICI bank cannot be said to be taken for the purpose of purchase of the property as the property was already purchased on 25.11.2005 and full payment of consideration was already paid as is apparent from the copy of the sale deed - deduction can be allowed to assessee only if property was acquired out of borrowed capital - it has been established that loan was not taken for the purpose of acquiring asset as asset was already acquired before disbursement of loan CIT(A) had arrived at the correct conclusion that deduction u/s 24(b) and u/s 80-C cannot be allowed to the assessee. Unaccounted estimated expenses incurred on birthday of his grandson Held that - Assessee contended that the estimate was made without any basis and without considering that father would have incurred the expenses and moreover relatives from the maternal side would also have contributed to the expenses - The AO has made whole of the addition in the hands of the assessee which is not justified thus, the addition is reduced at ₹ 2.50 lacs Decided partly in favour of assessee. Addition on account of 89 liquor bottles found at the residence of the assessee Held that - During the assessment proceedings, the assessee had claimed that he is a non drinker and bottles were accumulated over a period of years as part of gifts from friends and relatives and since he was non drinker, the bottles kept on accumulating - he had only purchased 12 bottles for an amount of ₹ 14,400/- which was a small amount keeping in view his withdrawals - since the assessee was staying in a joint family consisting of his son and daughter in law and moreover all bottles cannot be said to have been purchased in one year and the existence of so many bottles can only point out to the fact that these must have been accumulated over a period of time the addition of ₹ 1 lac will meet the ends of justice Decided partly in favour of assessee. Deletion of ₹ 22 lacs out of cash found at the premises - Held that - CIT(A) had rightly deleted the addition by holding that total cash in hand as a whole as per books of accounts was more than total cash found during survey and there was no unaccounted cash thus, the order of the CIT(A) is upheld Decided against revenue.

Issues Involved:
1. Confirmation of denial of claim under Section 24(b) and Section 80C of the Income Tax Act.
2. Addition of Rs. 5 lakhs for unaccounted expenses on a birthday party.
3. Addition related to 89 liquor bottles found at the residence.
4. Deletion of Rs. 22 lakhs out of cash found at the premises.

Issue-wise Detailed Analysis:

1. Confirmation of Denial of Claim under Section 24(b) and Section 80C:
The assessee claimed deductions under Section 24(b) for interest paid on a housing loan and under Section 80C for repayment of the loan. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] denied these deductions, stating that the property was a vacant plot and not a residential property. The AO conducted a spot enquiry and found that the plot was vacant with some construction ongoing, and no rent agreement was provided. The assessee argued that the property was purchased with a loan from ICICI Bank and was rented out in subsequent years. However, the tribunal found that the loan was disbursed after the property was purchased, and thus, the deductions under Sections 24(b) and 80C were not applicable. The tribunal upheld the CIT(A)'s decision, confirming the denial of these deductions.

2. Addition of Rs. 5 Lakhs for Unaccounted Expenses on Birthday Party:
The AO added Rs. 5 lakhs to the assessee's income for unaccounted expenses incurred on a birthday party held at a five-star hotel. The assessee offered Rs. 50,000 towards the expenses but could not provide detailed bills or sources of funds. The CIT(A) upheld the AO's addition, considering the social status of the assessee and the nature of the event. The tribunal found that the addition was not fully justified as the invitation was from the assessee's son and daughter-in-law. The tribunal reduced the addition to Rs. 2.5 lakhs, partly allowing the assessee's appeal.

3. Addition Related to 89 Liquor Bottles Found at the Residence:
The AO added Rs. 2,22,500 for 89 liquor bottles found at the assessee's residence, estimating the average cost at Rs. 2,500 per bottle. The assessee claimed that the bottles were accumulated over the years, received as gifts, and purchased with withdrawals. The CIT(A) upheld the addition, but the tribunal found that the bottles could have been accumulated over time and the assessee lived in a joint family. The tribunal reduced the addition to Rs. 1 lakh, partly allowing the assessee's appeal.

4. Deletion of Rs. 22 Lakhs Out of Cash Found at the Premises:
The AO added Rs. 22 lakhs to the assessee's income, claiming it was unaccounted cash found during a search. The CIT(A) deleted the addition, stating that the cash balance as per the company's books was more than the cash found during the search. The tribunal agreed with the CIT(A)'s findings and dismissed the revenue's appeal, confirming that the cash balance was explained and no unaccounted cash existed.

Conclusion:
- Appeals for Assessment Years 2006-07, 2008-09, and 2009-10 were dismissed.
- Appeals for Assessment Years 2007-08 and 2010-11 were partly allowed.
- The revenue's appeal was dismissed.
- The cross-objection filed by the assessee was dismissed as infructuous.

Order Pronounced:
The order was pronounced in the open court on 15.10.2014.

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