2021 (5) TMI 897 - AT - Income Tax

Disallowance u/s. 40A(3) - HELD THAT - Since the amounts are in the nature of reimbursement, not debited to P L account of the assessee, no disallowance u/s. 40A(3) is called for. Addition on account of seized material - HELD THAT - As argued that the name, address, PAN number, bank statement, details of debit, credit and details regarding the refund of the amounts have been duly submitted before the revenue authorities. The amount has been received on 07.03.2007, repaid on 11.06.2007 even before the date of search i.e. 15.11.2007, it can be considered as a business loan received and the same has been duly refunded. We have also perused the record before us and find that there is no material to prove that the amount received is liable for tax u/s. 68 and the addition made by the AO is directed to be deleted. Addition made on account of PDC and notional interest - HELD THAT - Since, the issue of PDC has already been dealt on merits of the case, we hereby hold that no notional interest on such amount can be upheld. The interest calculated on the PDC by the AO is without any basis or evidence. Hence, we direct the addition made by the AO be deleted.

Summary

Issues Involved:
1. Interest on Post-Dated Cheques (PDC) paid outside the books of accounts.
2. Additional payment made in violation of the Stamp Duty Act.
3. Disallowance under Section 40A(3) of the Income Tax Act.
4. Addition based on seized material.

Issue-Wise Detailed Analysis:

1. Interest on Post-Dated Cheques (PDC) Paid Outside the Books of Accounts:
The Tribunal examined whether the interest on PDCs paid in cash and not recorded in the books of accounts should be considered as undisclosed expenditure. The Assessing Officer (AO) had added ?27,11,797/- as interest paid on PDCs, based on seized documents indicating that interest was paid in cash at 1.25% per month. The CIT(A) partially agreed with the AO but directed the AO to recompute the interest only for the extended period of PDCs, considering six months as a reasonable period for PDCs. The Tribunal upheld the CIT(A)'s direction, noting that similar issues had been decided in favor of the assessee in other group cases, such as M/s. AIG Promoter & Developers Ltd. and M/s. Westland Developers Pvt. Ltd. The Tribunal found no merit in the revenue's appeal and dismissed it.

2. Additional Payment Made in Violation of the Stamp Duty Act:
The AO had added ?1,05,86,958/- as additional payment made to land vendors, which was not recorded in the books. The AO argued that these payments violated the Stamp Duty Act and were not allowable under Section 37(1) of the Income Tax Act. The CIT(A) allowed the expenditure as a business expense, noting that the assessee had not claimed these payments as expenses in the profit and loss account. The Tribunal upheld the CIT(A)'s decision, referencing similar rulings in other group cases, such as M/s. Westland Developers Pvt. Ltd. and M/s. Glitz Builders and Promoters Pvt. Ltd. The Tribunal dismissed the revenue's appeal, emphasizing that no disallowance could be made for expenses not claimed by the assessee.

3. Disallowance Under Section 40A(3) of the Income Tax Act:
The AO disallowed ?1,70,875/- under Section 40A(3), arguing that the assessee made cash payments exceeding ?20,000/- for land purchases. The assessee contended that these payments were reimbursed by M/s. BPTP Ltd. and were not claimed as expenses in the profit and loss account. The Tribunal agreed with the assessee, referencing similar decisions in other group cases, such as M/s. Westland Developers Pvt. Ltd. The Tribunal found that the payments were reimbursements and not expenses claimed by the assessee, thus no disallowance under Section 40A(3) was warranted. The Tribunal allowed the assessee's appeal.

4. Addition Based on Seized Material:
The AO made an addition of ?25,00,000/- based on a seized cheque and a note indicating it was a loan. The assessee provided evidence that the amount was a business loan received and returned before the search date. The Tribunal found no material to prove the amount was taxable under Section 68 and directed the deletion of the addition.

Another addition of ?1,52,25,000/- was made based on PDCs and notional interest. The Tribunal held that no notional interest could be upheld without evidence and directed the deletion of the addition.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, providing detailed reasoning for each issue. The Tribunal's decisions were consistent with previous rulings in similar cases within the same group, emphasizing the importance of consistency and judicial precedents. The order was pronounced in open court on 04/05/2021.