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2020 (5) TMI 622 - AT - Income TaxAddition on account of notional interest on interest free advances given - addition being deemed interest @ 15% on such interest free advances - HELD THAT - Referring to submission that the assessee has a capital balance and unsecured interest free loan and, therefore, no disallowance is called for - when the assessee has trade dealings with persons to whom advances were made and looking to the business expediency, disallowance of interest is not permissible. We find force in the above argument of the assessee. However, as mentioned by the Ld. CIT(A), the assessee has not submitted any reconciliation to show that the advances have been made out of non-interest bearing funds. The assessee also could not substantiate before us the trade dealings with the persons to whom such interest free advances are given - restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate his case. The first issue raised by the assessee in the grounds of appeal is accordingly allowed for statistical purposes. Addition of unexplained creditors - HELD THAT - Referring to assessee submission that all the details were given before the CIT(A) and it was submitted that purchases have been made from the parties continuously throughout the year for which cheques were issued to them at the end of the year. However, we find the ld.CIT(A) sustained the addition on the ground that the cheques were not encahsed during the year and the amounts were unpaid and the assessee did not furnish any further details to show when and how the payments to the sundry creditors have been made in subsequent years. Restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate regarding the subsequent clearance of the cheques and give an opportunity to the assessee to file confirmations from the said sundry creditors. The Ground No.2 raised by the assessee is accordingly allowed for statistical purposes. Addition on account of low household expenses, loans from friends and opening cash - HELD THAT - When the assessee is having a turnover of more than ₹ 3 crores during the year and the assessee has filed the cash flow statement of the whole year and the assessee is a person of means, therefore, merely because the assessee has not deposited the cash in bank account cannot be a ground for disbelieving the opening cash of ₹ 99,125/- which, in the peculiar facts and circumstances of the case, appears to be reasonable. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to delete the addition. So far as the amount received by the assessee from his friends and relations in cash is concerned, no justification or no details whatsoever was filed either before the AO or before the CIT(A) or even before us. Therefore, in absence of any details of such cash loan received from his friends and relations and considering the fact that the assessee was showing a huge amount of opening cash balance, there was no justification for receiving cash from friends and relations, the addition made by the AO and sustained by the CIT(A) is justified. - Decided partly in favour of assessee. Addition of transportation expenses and HRA - HELD THAT -, we find in absence of any supporting details regarding the transportation expenses and house rent allowance, the AO made the additions. Since no details were furnished before the CIT(A) he also sustained the addition. It is the submission of the ld. Counsel that these are part of the salary statement and the lower authorities have not gone through the same - restore the issue to the file of the AO with a direction to give one final opportunity to the assessee to substantiate the same. Ground No.5 raised by the assessee is accordingly allowed for statistical purposes. Deduction under the head Property income - HELD THAT - We find it is the submission of the ld. Counsel that the statutory deduction u/s 24 of the IT Act was not granted by the AO or the CIT(A). We, therefore, deem it proper to restore the issue to the file of the AO with a direction to verify the details and allow the statutory deduction allowable to the assessee from his income from house property as per law.
Issues Involved:
1. Addition on account of notional interest on interest-free advances. 2. Addition on account of unexplained creditors. 3. Addition on account of low household expenses, loans from friends, and opening cash. 4. Addition on account of transportation expenses and house rent allowance. 5. Addition under the head 'Property income'. 6. Levy of interest under sections 234B and 234C. Detailed Analysis: 1. Addition on Account of Notional Interest on Interest-Free Advances: The assessee challenged the CIT(A)'s decision to sustain an addition of ?2,67,190 on account of notional interest on interest-free advances. The AO had initially added ?7,42,500 and ?4,81,250 for interest-free advances given to various persons, which the CIT(A) reduced to ?2,67,190, being the interest debited in the P&L Account. The Tribunal noted that the assessee did not provide reconciliation to show that the advances were made from non-interest-bearing funds or substantiate trade dealings. Therefore, the Tribunal restored the issue to the AO to give the assessee another opportunity to substantiate his case, allowing the ground for statistical purposes. 2. Addition on Account of Unexplained Creditors: The assessee contested the addition of ?28,43,920 for unexplained creditors. The AO had added this amount due to the assessee's failure to prove the identity, creditworthiness, and genuineness of the creditors. The CIT(A) upheld the addition, noting the lack of confirmations and the unusual nature of credit purchases without payments. The Tribunal, considering the arguments and the need for justice, restored the issue to the AO to allow the assessee to provide confirmations and substantiate the subsequent clearance of cheques, thereby allowing the ground for statistical purposes. 3. Addition on Account of Low Household Expenses, Loans from Friends, and Opening Cash: The AO made an addition of ?2,34,350, comprising ?80,000 for unexplained opening cash, ?55,000 for loans from friends, and ?99,350 for low household expenses. The CIT(A) upheld the addition, citing the lack of satisfactory details. The Tribunal found the addition for low household expenses unjustified due to the lack of evidence of substantial expenditures and directed its deletion. The addition for opening cash was also deleted, considering the assessee's turnover and means. However, the addition for loans from friends was upheld due to the lack of details. Thus, this ground was partly allowed. 4. Addition on Account of Transportation Expenses and House Rent Allowance: The AO added ?22,800 for transportation expenses and HRA due to the absence of supporting details. The CIT(A) sustained this addition. The Tribunal restored the issue to the AO to give the assessee a final opportunity to substantiate the expenses, allowing the ground for statistical purposes. 5. Addition Under the Head 'Property Income': The assessee argued that the statutory deduction of ?30,000 under section 24 was not granted. The Tribunal restored the issue to the AO to verify the details and allow the statutory deduction as per law. 6. Levy of Interest Under Sections 234B and 234C: The Tribunal noted that the levy of interest under sections 234B and 234C is mandatory and consequential, thereby dismissing this ground. Conclusion: The appeal filed by the assessee was partly allowed, with several issues restored to the AO for further verification and substantiation. The Tribunal emphasized the need for justice and provided the assessee with additional opportunities to present evidence and reconcile discrepancies.
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