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2016 (3) TMI 1014 - AT - Income TaxAddition pertaining to interest income - Held that - We are of the view that there is merit in the contention of the assessee that the period of Jan Dec stated in the later part of the loose paper should relate to the calendar year 2001. Since the assessee is following cash system of accounting and since these figures have been claimed to have been noted by the broker, there is merit in the submission of the assessee that the broker has noted down the prospective interest income of the calendar year 2001. Accordingly, we are of the view that the above said amount of ₹ 3,36,000/- could not be assessed in AY 2001-02, since there is no evidence to show that the assessee has received this interest income. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the addition of ₹ 3,36,000/- pertaining to interest income. Addition of loan - Held that - As observed by us in the earlier paragraphs, the question before us is about the interpretation of the entries found noted in the loose paper. It is also a fact that the entries made in the loose paper have not been corroborated with any other material. There is no dispute that the money lending business was carried on by assessee s spouse and it has been inherited by the assessee. Further, these transactions have been accepted to have been made through a broker and the receipt of ₹ 2.00 lakhs on 6.6.2000 supports the contentions of the assessee the amount of ₹ 22.00 lakhs were deployed prior to 1.4.2000. This is also supported by the fact that an amount of ₹ 1,08,000/- was shown as adjusted against the amount of ₹ 2.00 lakhs, meaning thereby the amount of ₹ 1,08,000/- pertain to the period prior to 6.6.2000, in which case, the corresponding principal amount of ₹ 12.00 lakhs should have been available prior to 1.4.2000. Further, it is seen that the broker Shri Chottu has deployed the amount of ₹ 10.00 lakhs on various dates and he has been working from the firm R.Ravinder & Co. also. Hence it is seen the loans were given as and when there was a demand and hence the claim of the assessee that the amount of ₹ 10.00 lakhs was also available with the assessee prior to 1.4.2000 is, in our view, finds merit. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete the addition of ₹ 22.00 lakhs. Addition from her brother in law - Held that - We notice that the seized documents as well as the explanations furnished by the assessee would show that Ld CIT(A) has proceeded to make this addition on wrong presumption. The seized documents as well as the evidences furnished by the assessee show that the brother in law of the assessee had included his name along with the name of original owner of the flat. Later on the flat has been claimed to have been sold for a sum of ₹ 61.00 lakhs and the brother in law of the assessee has been claimed to have appropriated a sum of ₹ 20,25,000/- in settlement of loan obtained by him from State Bank of India. Thus, we notice that the brother in law of the assessee has indulged in the property transaction and it is claimed that the assessee later on lodged her claim over the sale consideration. Accordingly, in a family settlement, it is claimed that the brother in law of the assessee paid a sum of ₹ 28.50 lakhs to the assessee, which was shown as gift. Due to family dispute about the ownership of flat, it is stated that the incidence of capital gains tax, if any, is required to be addressed separately. It is an undisputed fact that the details of property transactions are available in the seized records. Considering the contents of the seized records as well as the explanations furnished by the assessee, we are of the view that the claim of receipt of ₹ 28.50 lakhs from her brother in law cannot be doubted with. Accordingly, we are not inclined to agree with the view taken by the Ld CIT(A) in the peculiar facts and circumstances of the instant case. Accordingly, we set aside his order on this issue and direct the AO to delete the addition - Decided in favour of assessee
Issues Involved:
1. Addition based on loose sheet and bad debts claim for AY 2001-02. 2. Addition of interest income and assessment of gift receipt for AY 2007-08. 3. Addition of difference between income surrendered and income returned for AY 2003-04 to 2006-07. Issue-wise Detailed Analysis: 1. Addition Based on Loose Sheet and Bad Debts Claim for AY 2001-02: - Facts & Background: The assessee inherited a money lending business and during a search operation, disclosed Rs. 72.11 lakhs. The AO added the difference between the revised amount offered and the income returned. For AY 2001-02, the AO made additions based on a loose sheet and bad debts claimed by the assessee. - Assessee's Reply: The assessee explained the transactions noted on the loose sheet, arguing that the interest amounts noted were prospective and not received during FY 2000-01, thus should not be treated as income for that year. - AO's Findings: The AO interpreted the loose sheet as evidence of cash loans and interest received, adding Rs. 6.25 lakhs as income from other sources. - Tribunal's Decision: The Tribunal accepted the assessee's explanation that the interest noted was prospective for the calendar year 2001 and not received in FY 2000-01. Thus, the addition of Rs. 3,36,000/- was deleted. Regarding the principal amount of Rs. 22 lakhs, the Tribunal agreed with the assessee that it was available prior to 1.4.2000, thus not an investment during AY 2001-02. The addition of Rs. 22 lakhs was deleted. The addition of Rs. 36,000/- was upheld as it related to estimated interest income. - Bad Debts Claim: The revenue's appeal on the bad debts claim was dismissed as the tax effect was below Rs. 10 lakhs and the claim was not made in the return of income. 2. Addition of Interest Income and Assessment of Gift Receipt for AY 2007-08: - Interest Income: Similar to earlier years, the AO added the difference between disclosed and returned income. The Tribunal, following the same reasoning as for AY 2003-04 to 2006-07, deleted the addition of Rs. 14,60,000/- determined by the CIT(A). - Gift Receipt: The AO proposed assessing a gift of Rs. 28.50 lakhs as income, but did not add it. The CIT(A) treated it as income due to lack of supporting documents. The Tribunal accepted the assessee's explanation that the amount was received from her brother-in-law as part of a family settlement over a property dispute, supported by seized documents. The addition of Rs. 28.50 lakhs was deleted. 3. Addition of Difference Between Income Surrendered and Income Returned for AY 2003-04 to 2006-07: - Facts & Background: The AO added the difference between the higher additional income offered during search and the actual income returned by the assessee for these years. - Assessee's Argument: The higher income was offered out of confusion and the actual income was accurately reflected in the profit and loss account prepared based on documents found during the search. - Tribunal's Decision: The Tribunal noted that the profit and loss account prepared by the assessee was based on seized documents and was not faulted by tax authorities. The CIT(A)'s estimation of income at 18% was found unjustifiable. The Tribunal directed the AO to delete the additions for these years. Conclusion: - Appeals for AY 2001-02 and AY 2007-08 were partly allowed, with significant deletions of additions made by the AO. - Appeals for AY 2003-04 to 2006-07 were allowed, with the Tribunal directing the deletion of additions based on the difference between disclosed and returned income. - The revenue's appeal on the bad debts claim was dismissed.
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