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TMI Blog2022 (4) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... on the money lending activity, the amount as computed by the ld. CIT(A) on this score at ₹ 4,17,350/- is held to be correctly added. This issue is, therefore, determined against the assessee. Unexplained investment in residential house construction - applicability of State PWD rates as against CPWD rates applied by the DVO in computing the value of the property - HELD THAT:- In view of the fact that the value has to be determined on the basis of State PWD rates and the ld. AR contended that the DVO applied Central PWD rates, we set aside the impugned order and remit the matter to the file of the AO for examining the rates applied by the DVO in determining the value of the property. In case, he applied the CPWD rates in determining the value of the property, then such value should be re-worked out by applying the State PWD rates. Amount of interest income added by the AO for which the addition has been sustained by the ld. CIT(A) should be telescoped in the unexplained investment in construction of Bungalow - Once an addition is made towards earning undisclosed income, then no addition should be made towards undisclosed investment to that extent. We order to reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that no interest income was shown on the remaining FDRs amounting to ₹ 22.00 lakh. In addition to that, the AO further observed that the assessee was engaged in money lending activity. No interest income from money lending activity was shown in such return. Applying 2% rate of interest per month on the money lending activity, the AO computed interest income of ₹ 9,74,221/-, which was in addition to certain interest income determined on FDRs. The ld. CIT(A) accepted the assessee s contention anent to the interest income on FDRs. As regards the interest on money lending activity, the ld. CIT(A) observed that the assessee was engaged in money lending activity and the advances made were active accounts even in later years. The assessee s contention that the money lending activity did not fructify because even the principal amounts were not recoverable, did not find countenance with the ld. CIT(A). He, however, noticed that the AO computed disallowance of interest on money lending activity at ₹ 9.72 lakh on the basis of total advances taken at ₹ 40.59 lakh on which interest rate of 24% per annum was applied. He accepted the assessee s contention that some o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to put across any material or document. We have also examined the submission of the assessee recorded u/s.132(4) of the Act in which he admitted to have been involved in money lending activity but there is no reference to the rate of interest at which the money was lent. Considering the fact that the assessee was engaged in the money lending activity, which is obviously with a purpose of earning interest income, a reasonable rate of interest has to be applied. Taking into account the peculiar facts of the case, we are satisfied that the ld. CIT(A) was more than reasonable in applying interest rate of 18%, as against the interest rate of FDRs prevailing at that time at 15%. We, therefore, approve the computation of interest at ₹ 4,17,350/-. 5. The ld. AR contended that the amount offered by the assessee as interest income in the return filed u/s.153A(a) should be reduced from the amount of interest computed by the ld. CIT(A). This contention of the ld. AR does not hold water for the reason that the amount of interest offered by the assessee at ₹ 1,17,414/- is on the FDRs which were encashed during the year. Though the AO made addition of interest income in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003-04 48% 16,02,360/- 2004-05 32% 10,68,240/- In this way, he sustained the addition at ₹ 6,67,651/- for the year under consideration. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 8. After considering the rival submissions and perusing the relevant material on record, the first issue raked up by the assessee is about the applicability of State PWD rates as against CPWD rates applied by the DVO in computing the value of the property. In principle, it is a fairly settled position that while determining the value, the recourse should be taken to the State PWD rates rather than Central PWD rates. The Hon ble Supreme Court in CIT Vs. Sunita Mansingha (2017) 393 ITR 121 (SC) accorded its imprimatur to the judgment of the Hon ble High Court approving the view taken by the Tribunal, wherein local PWD rates were held to be applicable for valuation of property rather than the Central PWD rates. In view of the fact that the value has to be determined on the basis of State PWD rates and the ld. AR contended that the DVO applied Cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est on money lending activity on the amount of investment as per the assessee s own version has been computed by the ld. CIT(A) at ₹ 4,17,350/- as per para 20 of the impugned order. For the A.Y. 2004-05, the amount of such interest on money lending activity, calling for the addition, has been computed at ₹ 4,65,280/-. The impugned order is upheld on this score and the issue of interest income on money lending activity to that extent is decided against the assessee. 12. The next issue for these two years is against the unexplained investment in the Bungalow which has been sustained by the ld. CIT(A) at ₹ 16,02,360/- for the assessment year 2003-04 and ₹ 10,68,240/- for the assessment year 2004-05. Following the view taken hereinabove for the assessment year 2002-03, we direct to reduce the amount of addition towards unexplained investment in bungalow for the two years under consideration by the amount of the above interest income on money lending activity, which relief will be in addition to the effect of converting the valuation from the CPWD rates, if applied by the DVO, to the State PWD rates. 13. In the result, these two appeals are partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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