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TMI Blog2023 (5) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... of income claiming it to be an interest U/s. 24(b) - we find that the assessee has taken mortgage loan for the purpose of money lending business and has admitted interest income with respect to the money lending activities. The Ld. AO ought to have disallowed the claim u/s. 24(b) of the Act but allowed the claim as a business expenditure since the interest income is offered by the assessee. CIT(A) has rightly considered the facts of the case and has allowed the same. Therefore, in our considered view there is no need to interfere in the order of the CIT(A) on this issue and the thus this Ground raised by the Revenue is dismissed. Suppression of interest - DR argued that the assessee has not charged any interest from various borrowers and therefore, the Ld. AO has rightly concluded the interest being suppressed by the assessee as his business income for the AY under consideration - HELD THAT:- As find from the order of the AO the assessee has admitted interest voluntarily being the difference in the computation by the assessee on the interest receipts after netting interest admitted in the return of income - AO has not substantiated his assuming of interest at 18% as the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 [the Act], dated 31/12/2019 for the AY 2017-18. The Cross objection is filed by the assessee. 2. At the outset, we noticed from the appeal record there is a delay of 80 days in filing the Revenue s appeal before the Tribunal. Explaining the reasons for belated filing of the appeal, the Ld. DR brought our attention to the affidavit filed for condonation of delay, dated 18/8/2021 wherein the Deputy Commissioner of Income Tax (International Taxation), Visakhapatnam (I/c) has explained the unavoidable circumstances that prevented the Revenue to file the appeal with a delay of 80 days. For the sake of reference, the reasons explained by the Revenue for the delay are extracted herein below: . .. .. (i) Sri Varun Ogili for the AY 2017-18 this office could not file the appeal before the Hon ble ITAT within the due date as a result of the Covid-19 pandemic situation. The Commissioner of Income Tax (IT TP), Hyderabad ie., Aayakar Bhavan Building was being operated as per DoPT Home Ministry Guidelines and as per the guidelines in Para 6 of the Ministry of Health Family Welfare on preventive measures dated 18/5/2020. This had adverse effect in obtaini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of Agricultural income Rs. 6,55,000 2 Suppression of interest income Rs. 36,90,643 3 Unexplained cash deposit by peak credit Rs. 1,06,70,000 4 Excess claim of interest payment Rs. 11,632 5. Interest on borrowed capital claimed U/s. 24(b) of the Act Rs. 19,05,640 6. Suppression of Bank Interest Rs. 69,191 Total Rs. 1,94,68,908 Aggrieved by the above additions, the assessee filed an appeal before the Ld. CIT(A). 5. Before the Ld. CIT(A), the assessee submitted evidences with respect to the land holdings on which agricultural income was derived by the assessee. Further, the Ld. AR also argued before the Ld. CIT(A) that the interest on the outstanding balances has been calculated based on the amount of loan outstanding at the end of the year for a period of full year and not from the date of granting of loan to the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sunderstanding the concept of telescoping which is applicable to explain or delete, as the case may be, the addition proposed to be made towards explained investment / expenditure / advances on the basis of addition made towards unexplained / unaccounted income and therefore unaccounted cash deposits / peak credit assessed to tax in one particular assessment year cannot explain the accounted sources of cash deposits / peak credit found in subsequent assessment years. 6. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if considerate necessary. 7. Further, the Revenue filed the following additional grounds of appeal: 1. The CIT(A) has erred in deleting the agricultural income of Rs. 2,00,000 in the absence of any evidence furnished by the assessee in support of carrying on agricultural activities and generation of agricultural income. 2. The CIT(A) is not justified in allowing the interest expenses to an extent of Rs. 10,81,524/- for which the assessee never filed any statement of certificate from the bank before the Assessing Officer. Further, there is no finding of fact reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al U/s. 24(b) of the Act, the Ld. DR submitted that the assessee has wrongly claimed the interest U/s. 24(b) of the Act and hence the Ld. AO has rightly disallowed the same. The Ld. DR further submitted that the interest payments were for the purpose of mortgage loan taken by the assessee which is not eligible for deduction U/s. 24(b) of the Act. The Ld. DR therefore pleaded that the order of the Ld. AO be upheld. Per contra, the Ld. AR submitted that the assessee while submitting a reply to the Ld. AO has clearly stated that the interest was wrongly claimed U/s. 24(b) of the Act. The Ld. AR further submitted that the interest has to be considered as a business expenditure as the amount borrowed has been utilized for granting loans to various parties and the interest income arising out of the loans granted has been admitted while filing the return of income. The Ld. AR further submitted that these facts have been submitted before the Ld. AO and the Ld. AO has failed to consider the same. He therefore pleaded that the order of the Ld. CIT(A) be upheld. 11. We have heard both the parties and perused the material available on record as well as the orders of the Ld. Revenue Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has failed to charge interest thereby suppressing interest on various amounts lent by the assessee during the year. Further, the Ld. AO also calculated the interest @ 18% on the outstanding loans at the end of the year since the assessee has failed to file any evidences for adopting the rate of interest @ 12%. Further, we find that the Ld. AO has also not considered the interest free short term loans given to the relatives by the assessee and has also charged interest on the same @ 18% on the outstanding amounts. The Ld. CIT(A) has therefore found that the Ld. AO has estimated a uniform rate of interest and has adopted uniform time period with respect to every loan lent by the assessee. However we find that the Ld AO has not adopted uniform time period but has adopted interest @ 18%. We find that the Ld CIT(A) has computed the interest on the loans advanced by the assessee @ 12%. However the Ld CIT(A) has failed to consider the voluntary admission of interest for Rs 10,42,193/-. We also find from the order of the Ld AO in Page No 7 the assessee has admitted interest voluntarily for Rs.10,42,193/- being the difference in the computation by the assessee on the interest receipts ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier assessment years which were also not disputed by the Revenue. From the table in para 10.4 as mentioned in the Ld. CIT(A) order, we find that the assessee is regularly making cumulative cash deposits out of the taxed income until the AY 2016-17. However, we find that no details are provided regarding the cash deposits made during the impugned assessment year where the Ld. CIT(A) erred in treating the cash deposits made during the AY 2016-17 and considered it as available for depositing during the impugned assessment year. In our view these cash deposits of Rs 1.85 crores pertains to AY 2016-17 and cannot be considered for telescoping during the impugned AY. Therefore, we are not in agreement with the conclusions drawn by the Ld. CIT(A) and consequently set-aside the order of the Ld. CIT(A) on this ground and allow the grounds raised by the Revenue. 16. Ground No.6 is general in nature and needs no adjudication. 17. In the result, appeal of the Revenue is partly allowed for statistical purposes. 18. With respect to Cross Objection raised by the assessee, since it is supportive in nature, and therefore the adjudication of the CO becomes infructuous. Pronounced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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