2019 (12) TMI 407 - AT - Income Tax

Purchase of the jewellery, gold, diamond and property - Allowable business expenses - HELD THAT - CIT(A) has given a categorical finding that the loan of ₹ 2.50 crores taken from ICICI Bank is not home loan and is loan against the property which was purchased way back in 1970 and, therefore, the observation of the AO that the property purchased against the loan is factually incorrect could not be covered by the Ld. DR. CIT(A) has given a finding that the intention of the assessee for purchase of the jewellery, gold, diamond and property which reflected from the trading account and P L account declared from 2008-09 onwards and were shown under the head purchased/ closing stock / opening stock of properties and jewelleries. He has also given a finding that the documents purchased during the assessment proceedings clearly reveals that the loan availed from ICICI Bank is utilized for purchase of jewellery and property w.e.f. 01.04.2007 further the assessee was showing the sale and purchase of the jewellery and property under the head business and profession a detailed factual finding given by the Ld. CIT(A) could not be controverted by the DR. We find under identical circumstances the Tribunal in assessee s own case for A.Y.2009- 10 has deleted similar addition sustained by the CIT(A) - no infirmity in the order of the CIT(A) in deleting the disallowance made on account of business expenses Addition of unsecured loan - HELD THAT - As given a finding that the payment was made directly by Standard Chartered Bank to ICICI Bank and, therefore, such entries cannot appear in the bank statement of Mr. Jaswinder Singh. In our opinion such entries cannot appear in the bank statement of the assessee as well as her husband since the amount has been paid directly by Standard Chartered Bank to ICICI Bank for taking over the loan. Since the deletion by the CIT(A) is based on facts and there is nothing on record to controvert the same by revenue, therefore, we do not find any infirmity in the order of the CIT(A) on this issue. Accordingly the ground No.2 raised by the revenue is dismissed. Low house hold expenses - HELD THAT - CIT(A) while deleting the disallowance has considered the size of the family, withdrawal by other members and has also given an observation that the same was based on surmises. Nothing contrary was brought to our notice against the reasons given by the CIT(A) on this issue. Accordingly the ground raised by the revenue on this issue is also dismissed. Reopening of assessment - assessment was earlier completed u/s. 143 (1) and not u/s. 143 (3) - HELD THAT - Hon ble Supreme Court in the case of Raymond Woolen Mills Ltd. Vs. ITO 1997 (12) TMI 12 - SUPREME COURT has held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could re-open the case. The sufficiency and correctness of the material is not a thing to be considered at this stage. Further, the assessment was earlier completed u/s. 143 (1) and not u/s. 143 (3). No merit in the arguments advanced by assessee that the re-opening of the assessment was not valid and not as per law. In our opinion the reassessment proceeding in the instant case has validly been initiated and, therefore, the Ld. CIT(A) was fully justified in upholding such reassessment CIT(A) has given a finding that the intention of the assessee for purchase of the jewellery, gold, diamond and property which reflected from the trading account and P L account declared from 2008-09 onwards and were shown under the head purchased/ closing stock / opening stock of properties and jewelleries. He has also given a finding that the documents purchased during the assessment proceedings clearly reveals that the loan availed from ICICI Bank is utilized for purchase of jewellery and property w.e.f. 01.04.2007 further the assessee was showing the sale and purchase of the jewellery and property under the head business and profession a detailed factual finding given by the Ld. CIT(A) could not be controverted by the Ld. DR

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act.
2. Disallowance of interest expenditure and other expenses.
3. Addition on account of unexplained loan.
4. Addition on account of low household withdrawals.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee challenged the reopening of the assessment on the grounds that it was done without fulfilling mandatory jurisdictional conditions and was based on mechanical and vague reasons. The CIT(A) upheld the reopening, stating that there was tangible material indicating escapement of income. The Tribunal agreed with the CIT(A), noting that the AO had reasons to believe that income had escaped assessment, thus justifying the reopening under Section 147.

2. Disallowance of Interest Expenditure and Other Expenses:
The AO disallowed interest expenditure of ?21,07,080 and other expenses totaling ?1,21,350, arguing that the assessee had not conducted any business activities. The CIT(A) deleted the addition, observing that the loan taken from ICICI Bank was not a home loan but a loan against property, and the assessee had shown the purchase of properties and jewelry as stock-in-trade with the intention to conduct business. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's actions and documentation supported the claim of conducting business.

3. Addition on Account of Unexplained Loan:
The AO added ?2,64,14,000 as unexplained credit, doubting the genuineness of a loan from Mr. Jaswinder Singh. The CIT(A) deleted the addition, accepting the assessee's explanation that the amount was related to the repayment of an ICICI loan, which was directly paid by Standard Chartered Bank to ICICI Bank. The Tribunal upheld the CIT(A)'s decision, agreeing that the transactions were genuine and properly documented.

4. Addition on Account of Low Household Withdrawals:
The AO added ?2,40,000 for low household withdrawals, estimating the household expenses at ?20,000 per month. The CIT(A) deleted the addition, noting that the AO's estimation was based on surmises and did not consider the size of the family or withdrawals by other family members. The Tribunal upheld the CIT(A)'s decision, finding no basis for the AO's estimation.

Conclusion:
The Tribunal dismissed the revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decisions on all issues. The reassessment proceedings were deemed valid, and the additions made by the AO were found to be unjustified based on the evidence and explanations provided by the assessee.