2021 (10) TMI 1041 - AT - Income Tax

Addition u/s 68 - advances for agricultural land as shown by the assessee - assessee failed to provide necessary evidences to prove the genuineness or transactions and creditworthiness of the persons giving advances - CIT-A deleted the addition - HELD THAT - Addition as made by the Assessing Officer on account of advance received against sale of land by invoking the provisions of section 68 of the Income-Tax Act, 1961 were unjustifiable since the amount of advances received by the assessee were subsequently adjusted against the sales made by the assessee and the same was also verifiable from the registered sale deeds - AO was not justified in treating the amount of advance received by the assessee as his income as the AO failed to consider the fact that the assessee had sold agricultural land belonging to him to Shri Rakesh Agrawal in lieu of consideration which included the amount of advance received from the said party. Accordingly, we are of the view that the additions made by the Assessing Officer were rightly deleted by the Ld CIT(A). - Decided against revenue. Additions u/s 68 - unsecured loan from various persons - HELD THAT - On perusal of the remand report, we find that the Assessing Officer did not comment on any of the documents filed by the assessee during the course of the appellate proceedings rather the Assessing Officer reiterated the findings of the then Assessing Officer. Thus, it is clear that the Assessing Officer failed to controvert the genuineness of the transaction and identity as well as creditworthiness of these parties. As from documentary evidences, it is apparent that the assessee satisfactorily discharged the primary onus cast upon him under section 68 of the Income-Tax Act, 1961 to establish the identity and creditworthiness of these parties and genuineness of the transactions as entered into with them. Taking into consideration all these facts, the ld. CIT(A) examined each and every entry in respect of unsecured loan received from the creditors and reached to the conclusion that the addition made by the Assessing Officer is unjustified. In view of these facts, we are of the view that it is a settled position of law that no addition is called for under section 68 of the Income-Tax Act, 1961 on account of unsecured loans if the assessee establishes the identity and creditworthiness of the parties and genuineness of the transactions as entered into with them - Decided against revenue. Disallowance of interest out of property income and on account of disallowance of interest out of income from other source - HELD THAT - We find that copy of repayment schedule/ loan statement in respect of the loan taken from ICICI Bank Ltd. and State Bank of India have been filed so as to justify the amount of interest paid and claimed as deduction during the year under consideration. In view of these facts, it is clear that the disallowance made by the Assessing Officer was unjustified as the borrowed funds were utilized towards purchase of the properties which were let-out and rental income earned therefrom was offered for tax under the head Income from House Property and more so when such deduction on account of interest was allowed in the preceding as well as subsequent years. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A) on this point. Accordingly, ground of the Revenue is dismissed. Addition on account of interest claimed under the head Income from Other Sources - assessee failed to prove the direct nexus of funds borrowed and advanced to the parties from whom interest income was earned - HELD THAT - It is clear that the disallowance made by the Assessing Officer was unjustified as the borrowed funds were utilized towards advancement of loan to the parties from whom interest income was earned and was duly offered for tax under the head Income from Other Sources and more so when such deduction on account of interest was allowed in the preceding as well as subsequent years. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A) on this point. Accordingly, ground no.4 raised in the appeal of the Revenue is dismissed. Taxability of agricultural income as income from other sources - HELD THAT - We find that the assessee had submitted before the Revenue Authorities that that agricultural land owned by him was given on Batai and agricultural income earned therefrom was duly shown in the income-tax return and the Assessing Officer himself did not disbelieve the agricultural lands owned by the assessee. Further, the assessee has filed the detail of the persons to whom agricultural land was given on Batai and from whom agricultural income was received during the year along with the details with respect to area of land - the amount of agricultural income was duly shown by the assessee in his income-tax return every year and the agricultural income shown by the assessee had also been duly examined and accepted in the preceding as well as subsequent years. On consideration of above facts, it is clear that non-acceptance of agricultural income shown by the assessee in his income-tax return was unjustified more so when agricultural income was shown by the assessee on a year-to-year basis and such agricultural income had also duly been examined and accepted in the preceding as well as subsequent years. Thus, we direct the Assessing Officer to accept the agricultural income in full. Disallowance u/s 40(a)(ia) of the I.T. Act for non-deduction of TDS on the amount of late payment charges - benefit of the second proviso to section 40(a)(ia) - HELD THAT - As second proviso to section 40(a)(ia) of the Act shall have retrospective effect from 01-04-2005 and in the present case, the relevant assessment year is the Assessment Year 2010-11 and the benefit of the second proviso to section 40(a)(ia) of the Act shall be available to the assessee as the assessee had obtained and furnished the certificate of the CA of the broker wherein it has been clearly certified that the amount on which TDS not deducted by the assessee was included in the total income of the payee and requisite amounts of taxes due were also paid on it. Therefore, we do not find any reason to interfere with the order of the ld. CIT(A) on this point. Accordingly, ground no.6 raised in the appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Deletion of additions made under Section 68 of the IT Act for advances against agricultural land.
2. Deletion of additions made under Section 68 of the IT Act for unsecured loans.
3. Deletion of disallowances of interest on property claimed by the assessee.
4. Deletion of disallowances of interest claimed out of income from other sources.
5. Taxability of agricultural income as income from other sources.
6. Deletion of disallowance under Section 40(a)(ia) of the IT Act for non-deduction of TDS on late payment charges.

Issue-wise Detailed Analysis:

1. Deletion of Additions under Section 68 for Advances against Agricultural Land:
The Revenue challenged the deletion of additions amounting to ?85,00,000 and ?1,07,51,000 made by the Assessing Officer (AO) under Section 68 of the IT Act. The assessee had provided confirmation with PAN details and registered sale deeds to substantiate the genuineness of the transactions. The CIT(A) deleted the additions, noting that the AO failed to provide contrary evidence. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had filed ample documentary evidence to prove the identity, creditworthiness, and genuineness of transactions.

2. Deletion of Additions under Section 68 for Unsecured Loans:
The Revenue contested the deletion of additions totaling ?1,59,30,060 made under Section 68 for unsecured loans. The AO added the amounts due to insufficient evidence of the transactions' genuineness, identity, and creditworthiness. The CIT(A) deleted the additions after the assessee provided confirmation letters, PAN details, and bank statements. The Tribunal confirmed the CIT(A)'s decision, noting that the assessee had discharged the primary onus under Section 68 by providing adequate documentary evidence.

3. Deletion of Disallowances of Interest on Property:
The Revenue disputed the deletion of ?10,18,580 disallowed by the AO as interest on property. The assessee had claimed interest deductions on loans taken for purchasing let-out properties. The CIT(A) deleted the disallowance, noting that similar claims were allowed in subsequent years. The Tribunal upheld the CIT(A)'s decision, confirming that the borrowed funds were utilized for purchasing properties that generated rental income.

4. Deletion of Disallowances of Interest Claimed out of Income from Other Sources:
The Revenue challenged the deletion of ?9,15,600 disallowed by the AO as interest claimed under 'Income from Other Sources.' The assessee had advanced borrowed funds to parties from whom interest income was earned. The CIT(A) deleted the disallowance, noting that similar claims were allowed in preceding and subsequent years. The Tribunal confirmed the CIT(A)'s decision, emphasizing that the borrowed funds were used to generate taxable interest income.

5. Taxability of Agricultural Income as Income from Other Sources:
The AO treated the assessee's agricultural income of ?8,14,000 as 'Income from Other Sources' due to lack of evidence. The CIT(A) accepted ?5,00,000 as agricultural income and treated the rest as other income. The Tribunal directed the AO to accept the entire ?8,14,000 as agricultural income, noting that the assessee consistently showed agricultural income, which was accepted in preceding and subsequent years.

6. Deletion of Disallowance under Section 40(a)(ia) for Non-deduction of TDS on Late Payment Charges:
The AO disallowed ?18,99,796 under Section 40(a)(ia) for non-deduction of TDS on late payment charges. The CIT(A) deleted the disallowance, noting that the amount was reversed in the subsequent year and included in the broker's income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the second proviso to Section 40(a)(ia) has retrospective effect, and the broker had paid the requisite taxes.

Separate Judgment on Cross-Objection:
The assessee's cross-objection regarding the addition of ?2,00,000 under Section 68 was allowed. The Tribunal noted that the amount was initially advanced to Shri Tarun Dassani and returned the next day, and there was no justification for treating it as income under Section 68.

Conclusion:
The departmental appeal was dismissed, and the assessee's cross-objection was allowed, confirming the CIT(A)'s deletions and directions. The Tribunal emphasized the importance of documentary evidence in establishing the genuineness of transactions under Section 68 and the retrospective applicability of the second proviso to Section 40(a)(ia).