2020 (4) TMI 401 - AT - Income Tax

Addition on account of payment made to Ms. Kamladevi K Agarwal as full and final consideration for handing over vacant possession of its property - authorities below have rejected the claim of the assessee mainly on the ground that since the assessee had made payment in question in the financial year 2009, the assessee is not entitled to claim expenditure in the assessment year under consideration - HELD THAT - Appellant has not claimed the said payment/expenditure in its profit and loss account/computation of income and only capitalized the same amount in the schedule of fixed assets in its balance sheet - assessee had not claimed any depreciation. Since, there is no dispute with regard to the payment of ₹ 8,00,000/- to Ms. Kamladevi K Agarwal and since the assessee has only capitalized the same amount in the schedule of fixed assets, Ld. CIT (A) has wrongly upheld the findings of AO. Hence, we allow this ground of appeal and set aside the findings of the Ld CIT(A) and accordingly direct the AO to delete the addition of ₹ 8,00,000/-. Payment made to Bombay Municipal School for taking vacant possession of the school premises belonging to the appellant - HELD THAT - As pointed out by the Ld. CIT (A), the assessee is owner of only 81% of the property and therefore any expense incurred on the property has to be shared in the ratio of 81 19 between the assessee and C.K. Thakkar, who also happens to be Director of the company. Since, the assessee had the share of 81% in the said property, the Ld. CIT (A) has rightly allowed the capitalization to the extent of 81% of the total amount paid which comes to ₹ 2,19,810/-. Hence, we do not find any merit in the contention of the assessee to interfere with the findings of the Ld. CIT (A). We therefore, dismiss this ground of appeal and confirm the findings of the Ld. CIT (A). Unexplained cash credit u/s 68 - HELD THAT - The assessee furnished the confirmation from C.K. Thakkar as additional evidence. Moreover, the assessee has furnished the copy of certificate issued by the Chief Manager, NRI Branch, Bank of Baroda, Mumbai confirming that Sh. C.K. Thakkar who was maintaining NRE account no. 27920100000167 with the Bank and was having balance of ₹ 2,14,63,000/- in the said account. So far as the creditworthiness is concerned the assessee has furnished the copy of opening balance of ₹ 1.48 crore with the company, opening balance of ₹ 97,00,000/-with Ruby Home Holdings Pvt. Ltd., three solvency certificates issued by the Bank of Baroda each for about 2.2 crores, copy of affidavit of Bank Manger filed in the court confirming NRI deposits of high value in Bank, FCNR fixed deposit receipts, bank balance in NRO A/c of the lender, opening bank balance in A/c No. 27920100000167 and other documentary evidence to establish creditworthiness of the lender. As pointed out by the Ld. counsel, the Ld. CIT(A) has failed to consider the fact that even in the earlier years, the director had advanced unsecured loans to its company and no addition was made by the department. Moreover, the Ld. counsel did not point out any change in the material fact in the present case. Hence, we are of the considered view that the Ld. CIT(A) has wrongly confirmed the addition made by the AO u/s 68 - Decided in favour of assessee.

Issues Involved:
1. Incorrect assessment of total income
2. Addition of payment to Kamladevi K Agarwal
3. Addition of payment to Bombay Municipal School
4. Addition under section 68 of the Act
5. Levy of interest under section 234B of the Act
6. Inadequate opportunity

Analysis:

1. Incorrect Assessment of Total Income:
The appeal was against the order passed by the Commissioner of Income Tax (Appeals) regarding the assessment year 2012-13. The Assessing Officer had determined the total income of the assessee at a specific amount after making certain additions. The CIT(A) partly allowed the appeal, reducing the total income but confirming some additions. The assessee challenged this assessment before the Tribunal, raising issues regarding the assessment of total income.

2. Addition of Payment to Kamladevi K Agarwal:
The assessee had made a payment to Kamladevi K Agarwal for handing over vacant possession of a property. The AO had added this amount to the total income, which the CIT(A) partly upheld. However, the Tribunal found that the payment was not claimed as an expenditure in the profit and loss account but was capitalized in the fixed assets schedule. The Tribunal concluded that the CIT(A) wrongly upheld the AO's findings and directed the AO to delete the addition.

3. Addition of Payment to Bombay Municipal School:
Another payment made by the assessee to Bombay Municipal School was also under scrutiny. The CIT(A) confirmed part of the addition, considering the ownership ratio of the property between the assessee and another party. The Tribunal upheld the CIT(A)'s decision, stating that the expenses on the property had to be shared in the respective ownership ratio, leading to the confirmation of the addition.

4. Addition under Section 68 of the Act:
The addition of a significant amount under section 68 of the Act was challenged by the assessee. The AO had added this amount as unexplained cash credit, which the CIT(A) affirmed. However, the Tribunal found that the appellant had provided substantial documentary evidence to prove the genuineness of the transaction. The Tribunal disagreed with the CIT(A) and directed the AO to delete this addition.

5. Levy of Interest under Section 234B of the Act:
The issue of interest levied under section 234B of the Act was raised in the appeal. The CIT(A)'s decision to confirm the interest levy was challenged, alleging it was unjustified. However, the Tribunal did not provide detailed analysis on this issue in the judgment.

6. Inadequate Opportunity:
The assessee also raised concerns about inadequate opportunity provided by the CIT(A) and AO during the assessment process. Allegations of incorrect factual averments and conclusions based on incorrect information were made. The Tribunal did not delve into this issue in detail, mentioning it briefly in the judgment.

In conclusion, the Tribunal partly allowed the appeal filed by the assessee for the assessment year 2012-2013, addressing various issues related to additions made to the total income, payments to specific entities, and the genuineness of transactions under the Income Tax Act.

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