2023 (1) TMI 411 - AT - Income Tax

Addition on account of cash loans - cash loans was less than that admitted by the assessee of having taken at 1.25 crores and addition upheld by the ld.CIT(A) of Rs.1.25 crores - HELD THAT - Assessee had suitably demonstrated with evidence to the CIT(A) that the document represented details of interest paid on loans taken by the assessee and the rate of interest so paid was 2-2.5%. CIT(A), we have noted, found merit in the contentions of the assessee that figures mentioned in the said documents represented interest amount and not the cash loans, which finding has not been challenged by the Revenue before us. Since it is an admitted fact that Annexure II page 96 represented details of interest paid by assessee on various cash and cheque loans taken, which the assessee had suitably demonstrated as paid @ 2.5 %,the cash loans of Rs. 2.34 Crs worked out by the AO by taking interest rate of 1.5%, we hold, have been rightly rejected by the Ld.CIT(A). AO applied rate of 1.5% to arrive at the amount of cash loan for the month of Feb., 2003 worked out on the basis of page no.99-100 of Annexure-2. As is evident, the rate of interest of 1.5% pertained to the month of January 2004 i.e. relating to subsequent year. The assessee on the other hand demonstrated to the ld.CIT(A) and substantiated the same also that during the impugned year, he had paid interest at the rate of 2.5%. Therefore, we agree with the ld.counsel for the assessee that the CIT(A) was satisfied and convinced with this explanation of the assessee and had accepted rate of interest paid at 2.5%; that therefore, he had not considered cash loans computed by the AO for the month of February, 2003 at Rs.2.34 crores and instead had restricted the addition to the amount of cash loans admitted by the assessee of Rs.1.25 crores. We do not find any merit in the grounds of the appeal of the Revenue seeking restriction of addition on account of cash loan to Rs.2.34 crores as opposed to the ld.CIT(A) restricting to 1.25 crores. The Ground raised by the Revenue are accordingly dismissed.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Restriction of addition on account of cash loans from Rs.3.88 crores to Rs.1.25 crores.

Detailed Analysis:

Condonation of Delay in Filing the Appeal:

The Revenue challenged the condonation of a 22-day delay by the Commissioner of Income Tax (Appeals) (CIT(A)). The Revenue argued that the CIT(A) did not provide a reasoned order for condoning the delay and merely referred to a letter from his predecessor, which was not known to the department. The Revenue also contended that the condonation of delay is a legal issue and should involve the department's awareness.

The Tribunal noted that the delay of 22 days was too inconsequential to necessitate an elaborate order by the CIT(A). The Tribunal found that the CIT(A)'s act of condoning the delay was in compliance with the ITAT's direction, and the Revenue could not provide any facts to prompt a contrary stand. Therefore, the Tribunal dismissed the Revenue's ground on this issue, finding no infirmity in the CIT(A)'s order condoning the delay.

Restriction of Addition on Account of Cash Loans:

The Revenue contested the CIT(A)'s decision to restrict the addition of cash loans to Rs.1.25 crores, as opposed to Rs.3.88 crores added by the Assessing Officer (AO). The AO had based the addition on seized documents indicating cash loans taken by the assessee, totaling Rs.3.88 crores and Rs.2.34 crores in different periods. The CIT(A) deleted the addition of Rs.3.88 crores, finding no basis or material with the AO to substantiate the addition and noting that the AO's reliance on the documents was factually incorrect.

The CIT(A) found that the documents indicated interest payments rather than principal amounts of loans. The CIT(A) noted that the amounts mentioned were interest payments due to various parties, not principal loans, and thus, the AO's addition of two zeros to the figures was incorrect. The CIT(A) upheld the addition of Rs.1.25 crores based on the assessee's admission of taking cash loans from private financiers, which were not reflected in the books of accounts.

The Revenue argued that the CIT(A) should have considered the other peak cash loan of Rs.2.34 crores. However, the Tribunal found that the CIT(A) had rightly rejected the AO's calculation of Rs.2.34 crores based on an incorrect interest rate of 1.5%. The assessee had demonstrated that the actual interest rate was 2-2.5%, and the principal component of the cash loan worked out to Rs.1.06 crores, less than the Rs.1.25 crores admitted by the assessee.

The Tribunal upheld the CIT(A)'s decision to restrict the addition to Rs.1.25 crores, finding no merit in the Revenue's grounds for seeking a higher addition. The Tribunal noted that the CIT(A) had exhaustively dealt with the issue and found the assessee's explanation and evidence convincing.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order condoning the delay and restricting the addition on account of cash loans to Rs.1.25 crores. The Tribunal found no infirmity in the CIT(A)'s findings and decisions.