2021 (5) TMI 143 - AT - Income Tax

Addition u/s 68 - advance received by crossed account payee cheque - HELD THAT - The assessee from their side reproduced the relevant details and documents to prove the identity, genuineness and creditworthiness of the loan party and the transactions. Since, the amount has already been paid, the assessee could no more exert any influence on the loan party. At the same time, the assessee can be said to have discharged his primary onus with regard to the advance. There was no information with the AO before or during the assessment proceedings to point out any suspicion with regard to the deposit and its sources either in the form of cash deposits or any other enquiries conducted. The addition has been made merely on the grounds that there was no compliance from M/ s Kakade Stone Crusher to the notice issued u/s 133(6). We have also gone through the judgment relied upon by the ld. CIT (A) while confirming the addition. We find that the judgment has been delivered while dealing with the question of genuineness of the huge premium paid on the shares. The addition was confirmed owing to presence of abundant corroborative evidences which is not show in the instant case. Having gone through the entire factum of the case, we hereby hold that the addition made by the AO cannot be sustained as the assessee has discharged the primary onus casted upon them and the revenue has not brought on record to treat the amounts u/ s 68 . Disallowance on account of architect fees - Before us, it was submitted that the architect fee has been paid owing to rendering of services regularly on monthly basis for project management consultation to the management of the company. The Architects are engaged to manage the property of the assessee and are paid for monthly charges as professional fee - DR argued that the assessee is receiving only rental income against which it is claiming standard deduction and interest on borrowings - HELD THAT - We find that the assessee is receiving rental income against which interest and others statutory deduction are claimed and hence no other deduction on account of maintenance charge or any other nomenclature is not an allowable deduction. Appeal of the assessee on this ground is dismissed. Income from house property - disallowance of interest paid on loan raised for construction of the school building and computation of ALV @ 8% of the total of the land and building - HELD THAT - Since, the matters stands squarely covered by the earlier order of the case of the assessee 2018 (6) TMI 1280 - ITAT DELHI in the absence of any material change in the facts of the case, the addition made by the revenue is hereby directed to be deleted.

Summary

Issues Involved:
1. Addition of ?50,00,000 on account of unexplained cash credit under Section 68 of the Income Tax Act.
2. Disallowance of ?13,51,175 paid as architect fees.
3. Disallowance of ?1,00,00,000 interest paid on a secured loan utilized for the construction of a school building.
4. Computation of Annual Letting Value (ALV) of the school building at ?3,47,77,778, enhancing taxable income by ?72,77,778.

Issue-wise Detailed Analysis:

1. Addition of ?50,00,000 on Account of Unexplained Cash Credit:
The Assessing Officer (AO) added ?50,00,000 as unexplained cash credit under Section 68, citing non-compliance with a notice issued under Section 133(6) by M/s Kakade Stone Crushers. The CIT(A) upheld this addition, stating that the assessee failed to prove the identity, genuineness, and creditworthiness of the depositor. However, the Tribunal found that the assessee had provided sufficient evidence, including the PAN, address, and bank details of the depositor. The Tribunal noted that the transaction was conducted through account payee cheques, and the amount was returned within the same financial year. The Tribunal held that the primary onus was discharged by the assessee, and the revenue did not provide any contrary evidence. Therefore, the addition was not sustained, and the appeal on this ground was allowed.

2. Disallowance of ?13,51,175 Paid as Architect Fees:
The AO disallowed ?13,51,175 paid to M/s Fourth Dimension Architects Pvt. Ltd., treating it as a capital expenditure. The CIT(A) confirmed this disallowance. The assessee argued that the fees were for regular project management consultation services and should be treated as revenue expenditure. However, the Tribunal found that the assessee was receiving rental income and claiming standard deductions and interest on borrowings. The Tribunal concluded that the architect fees were not administrative expenses but were related to the project of the school building, for which statutory deductions had already been claimed. Thus, the appeal on this ground was dismissed.

3. Disallowance of ?1,00,00,000 Interest Paid on Secured Loan:
The issue of disallowance of interest paid on a loan for constructing the school building was covered by a previous order of the Tribunal in the assessee's own case for the assessment year 2010-11. The Tribunal had earlier allowed the deduction under Section 24(b) of the Income Tax Act, recognizing that the borrowed funds were used for acquiring and constructing the school building. The Tribunal reiterated that the entire borrowed funds were utilized for the school building, and similar deductions in earlier years were not disputed. Therefore, the addition was deleted, and the appeal on this ground was allowed.

4. Computation of Annual Letting Value (ALV) of the School Building:
The CIT(A) had computed the ALV at ?3,47,77,778 by applying an 8% rate on the total cost of land and building, enhancing the taxable income by ?72,77,778. The Tribunal referred to its earlier order in the assessee's case, which emphasized that the ALV should be determined based on fair rent, considering the property's use and comparable cases. The Tribunal found that the CIT(A) did not undertake the necessary exercise to compute the ALV as per the guidelines and had no basis for enhancing the rent. The Tribunal set aside the CIT(A)'s order, deleting the enhancement in rent and the addition of ?16,80,870 for service tax paid by the assessee. Thus, the appeal on this ground was allowed.

Conclusion:
The Tribunal allowed the appeal of the assessee on the grounds of unexplained cash credit and disallowance of interest paid on the loan. It dismissed the appeal regarding the disallowance of architect fees and allowed the appeal concerning the computation of ALV, directing the deletion of the additions made by the revenue. The order was pronounced in the open court on 26/04/2021.