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TMI Blog2022 (7) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... een included in the income and offered for tax or not, took a different stand that the genuineness of amount was not proved by the assessee. The real issue during the assessment was that whether the cash received by assessee has been duly impounded for profit or not? - We find that the ld. CIT(A) rightly appreciated the fact that once the advance as per the impounded material is found matching with the Schedule of advances in the final account. There was no reasonable cause to doubt these cash payments as being outside the books. AO has not brought any evidence that the impounded record did not recorded in the final books. It is interesting to note that survey was conducted by survey team in December 2009 and the notice under section 148 was served on 29th March 2014. The assessing officer kept the matter under cold storage for four years. CIT(A) on appreciation of fact, found that the assessee has included the cash component in his regular books of account and deleted the addition. No contrary fact or law is brought to our notice to take other view. Thus, we affirm the order of ld. CIT(A) on deleting the addition of Rs. 1.239 crore. In the result, the ground of appeal is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. 2. On the facts and circumstances of the facts and in law, whether the ld. CIT(A) was justified in deleting the addition of Rs. 35,72,114/- made on account of disallowance of interest expenses. 3. On the facts and circumstances of the case, the ld. CIT(A) ought to have upheld the order of the assessing officer. 4. It is, therefore, prayed that the order of the ld. CIT(A) may be set aside and that of assessing Officer may be restored to the above extent. 2. Brief facts of the case are that the assessee company is engaged in the business of land developer and civil construction, filed its return of income for the Assessment Year (AY) 2008-09 on 31/03/2009 declaring income of Rs. 9,69,041/-. The return of assessee was selected for scrutiny and assessment as completed under section 143(3) on 12/07/2009 accepting the returned income. Subsequently, the case of assessee was reopened on 29/03/2014. Notice under Section 148 of the Income Tax Act, 1961 (in short, the Act) dated 29/03/2014 was served upon the assessee. The assessment was reopened by recording the reasons that a survey was conducted under Section 133A of the Act on business premises of assessee on 31/12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this figure is much higher than the amount of Rs. 1.239 crore referred by the Assessing Officer. The audit report was prepared on 01/09/2008 whereas survey was carried out on 30/12/2009 which further substantiated the fact that the assessee recorded entire amount received from various parties for booking of residential units in its books of account. The Assessing Officer failed to consider the facts which are evident on perusal of audited balance sheet. On the disallowance of interest expenses, the assessee submitted that the Assessing Officer without giving any reasonable opportunity disallowed the entire interest expenses of Rs. 35.72 lacs and added the same to the total income of assessee. The Assessing Officer accepted the interest income of Rs. 45.41 lacs in the P L account but made disallowance of interest expenditure which is debited to the P L account. The assessee paid interest on unsecured loans and the same is claimed as deduction against interest income earned. Copy of ledger account of parties showing interest payment was furnished. The assessee further submitted that the Assessing Officer has not given fair and reasonable time and opportunity before making addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has failed to prove the fact despite providing opportunity. The assessee filed complete details of confirmation in three files containing confirmation letter of parties, sale deeds and ledger accounts of parties. All these details were filed when matter was remanded to the file of Assessing Officer. The observation of Assessing Officer that confirmation of only six customers was filed is incorrect. The assessee filed confirmation in seven cases. Subsequently, the sale deeds was executed in respect of other units for which advances were received. Copy of sale deeds were filed before the Assessing Officer. The Assessing Officer has not considered those sale deeds nor made any verification of his own. The name of all 37 persons who made booking and advances were received are matching with the annexure in the audit report, which was prepared much before the date of survey. The Assessing Officer totally failed to consider such fact. In six cases relating to A.Y. 2007-08 and in one case relating to A.Y. 2008-09, the assessee received part payment through cheque and part payment through cash. All these payments are reflected in the ledger account of respective parties an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee had borrowings from HUDCO of Rs. 9.11 crores and has given advance of Rs. 7.46 crore to various persons on interest. As such approximately, 79% of borrowed funds have been used for giving advances on interest and consequently, interest expenditure has been claimed to the extent of 79% of interest income (Rs. 45.11 lacs) as set off. Thus, proportionate interest expenses have been claimed as deduction which is very much allowable under the provisions of the Act. 6. The ld. CIT(A) on consideration of submission of assessee, held that the addition of Rs. 1.239 crore is based on the plea as recorded for reopening the case and the allegation that advances found recorded in the impounded material during the survey do not find place in the final books of account and declared final profit. The Assessing Officer made addition of the amount by taking a view that the assessee did not prove before him that these amount in fact were taken into books of account. In the remand report, the Assessing Officer took a totally opposite stand that the credits in the books of account are not explained and genuineness is not proved. The ld. CIT(A) on considering the submission of assessee, ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as per accounting practice and law. This interest disallowance cannot be added and justified and deleted such disallowance. Aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before this Tribunal. 8. We have heard the submissions of learned senior departmental representative (ld. Sr. DR) for the Revenue and the ld. authorised representative (AR) for the assessee and have gone through the orders of the authorities below. The ld. Sr. DR for the revenue submits that during the remand proceedings for the A.Y. 2008-09 out of total 37 customers, the assessee furnished confirmation of 5 or 6 customers only. The assessee was asked to produce the parties and the assessee has neither produced any party nor filed any confirmation. Therefore in absence of complete details, the claim of assessee cannot be ascertained as correct and genuine. On deleting the interest disallowance, the ld. Sr. DR submits that the secured loans were availed by assessee for the purpose of completion of project. The assesse was following project completion method, thus the interest expenses incurred on the so called secured loan should have been part of work in progress and the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore than 8 years old, thus it cannot be expected from the assessee to file confirmation letter from all the parties. When the assessee is not having any power to compel the parties to file their confirmation or to appear before the Assessing Officer. Complete details of residential unit are appearing in the audited balance sheet, sale deeds and ledger accounts. 10. Against the interest disallowance, the ld AR for the assessee submitted that the assessee incurred interest expenses of Rs. 60,96,751/- and out of this amount proportionate interest expenses of Rs. 35,72,114/- attributable to earning of interest income has been duly claimed as a set off against the interest income earned. The balance amount of interest expenses of Rs. 25,24,637/- has been added to work in progress. This fact is clearly mentioned in the note in books of accounts. The ld. AR submits that assesse claimed set off of proportionate interest expenses as the said expenses relates to earning of interest income from various parties as advances to them were given from borrowings made from HUDCO. Thus, proportionate interest expenses has been claimed as deduction which is very much allowable under the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition. No contrary fact or law is brought to our notice to take other view. Thus, we affirm the order of ld. CIT(A) on deleting the addition of Rs. 1.239 crore. In the result, the ground of appeal is dismissed. 14. Ground No. 2 of the appeal relates to disallowance of interest expenses. The Assessing Officer made the addition by taking a view that assessee received interest of Rs. 45.41 lacs and paid interest of Rs. 35.72 lacs. The assessee was asked to explain and give the details about such interest paid and received and that the assessee has failed to submit any explanation, therefore, interest paid of Rs. 35.72 lacs was added to the total income of assessee. We find that the ld. CIT(A) has given relief to the assessee by holding that though, the borrowings from HUDCO were for the purpose of project only, however, the account shows that a substantial part of borrowing were diverted to various parties on interest and earned interest of Rs. 45.41 lacs from such advances. It was held the department has not to see whether HUDCO permitted the assessee to do or not. The fact is that about 79% of borrowings from HUDCO were diverted for earning interest income. The total inter ..... X X X X Extracts X X X X X X X X Extracts X X X X
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