2017 (7) TMI 495 - AT - Income Tax

Unexplained expenditure u/s 69C - Held that - From the order of the lower authorities it is not clear as to whether AO has called for the concerned persons to whom interest was alleged to be paid and from whom loan was alleged to be received by the assessee. Merely on the basis of paper seized, the AO came to the conclusion that assessee had paid the interest without recording the same in its regular books of accounts. In view of the above discussion, we set aside the order of the lower authorities and the matter is restored back to the file of the AO for deciding afresh after considering the evidences filed by the assessee in support of the fact that interest was paid by the society and TDS was also deducted thereon by the society itself and not by the assessee. We also direct the AO to call the concerned parties to whom assessee has been alleged to be paid interest so as to verify the genuineness of the transaction of interest having actually been paid and the loan actually having been received. Appeal of the assessee is allowed in part for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A) under section 143(3) of the IT Act. Addition of interest paid to parties as unexplained expenditure under section 69C.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved the addition of interest paid to parties as unexplained expenditure under section 69C. The assessee contested the addition, arguing that the loans in question were taken by a cooperative housing society and the interest payments were made by the society, not the assessee. The assessee provided evidence including ledger accounts, bank statements, TDS returns, and certificates to support their claim that the interest payments were duly recorded in the books of the society. The Tribunal noted that the lower authorities had not adequately considered this evidence and had not verified the authenticity of the transactions. Consequently, the Tribunal set aside the order of the lower authorities and remanded the matter back to the Assessing Officer for a fresh decision. The Assessing Officer was directed to examine the evidence provided by the assessee, call the concerned parties, and verify the genuineness of the transactions. The appeal of the assessee was allowed in part for statistical purposes, indicating a partial success for the assessee in challenging the addition of interest as unexplained expenditure.

This judgment emphasizes the importance of thoroughly examining the evidence presented by the assessee and verifying the authenticity of transactions before making additions under section 69C. It underscores the need for Assessing Officers to conduct a detailed investigation into the facts of the case and not solely rely on seized documents. The decision highlights the principle of natural justice and the requirement for a fair and reasoned assessment based on concrete evidence.