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TMI Blog2024 (2) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the books of account would not come under the purview of Section 69 . We also note that repayment of amount was made through banking channel and also duly recorded, in the books of accounts. As gone through the party-wise, unsecured loan, findings given by the ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A). Hence, we dismiss ground No.1 raised by the Revenue. Addition on the account of Section 24 v/s business head u/s 37 - interest paid on housing loan - CIT(A) deleted addition as per Section 36(1)(iii) which is the relevant provision regarding Interest on borrowed capital, according to which the amount of interest paid in respect of capital borrowed for the purpose of Business and Profession of assessee shall be allowed - HELD THAT:- The provisions of Section 37 is a general in nature allowing deduction of an expenditure laid out or expended wholly and exclusively for the purposes of the business. Since, AO in the assessment order had given a categorical finding that the assessee had availed a loan by mortgaging a business asset and that the loan is utilised for the purposes of business, then the deduction claimed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation and remand report thereon. The additional evidences were resent to Assessing Officer also, however, Assessing Officer failed to submit the remand report. Hence, we note that there was no violation of provisions of Rule 46A of the I.T. Rules, therefore, we dismiss both the grounds raised by the Revenue. - SHRI PAWAN SINGH, JM DR. A. L. SAINI, AM For the Appellant : Shri Ravinder Sindhu, CIT(DR) For the Respondent : Shri Rasesh Shah, CA ORDER PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short the ld. CIT(A) ], National Faceless Appeal Centre (in short the NFAC ), Delhi, dated 03.01.2023, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), dated 17.12.2019. 2. The grounds of appeal raised by the Revenue are as follows: 1. Whether on the facts and in the circumstances of the case in law, the Ld.CIT(A) has erred in deleting the addition made on account of section 69 of the I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer noted the assessee has during the year squared off unsecured loans from Tushit Bansal amounting to Rs. 20,00,000, Kavita Bansal amounting to Rs. 30,00,000, Ankur Thakkar Rs. 87,10,700. It is observed that the assessee has taken a loan of Rs. 70,89,932/- during the year, being difference of unsecured loan as at 31.03.2017 and as at 31.03.2016. It has squared off, the unsecured loan to the extent of Rs. 1,37,10,700/- in addition to other loans squared off, as seen from Form 3CD, in the following cases: The confirmations of the said loans and documents pertaining to their creditworthiness was obtained and analyzed in cases in which the assessee gave confirmations as indicated above. Perusal of the same shows that the said loan has been acquired from relatives. Though interest has been shown to have been paid but no TDS u/s 194A has been deducted as per the confirmations given. Perusal of the Form no.3CD, clause 23 in respect of 40A(2)(b) transactions does not match with the repayment schedule as seen in clause 31(c) of the said Tax audit report. No confirmation in these instances of squaring of the loans has been given. Moreover, the bank statement and the capital acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41611281017 dated 28-10-2017. He is in the business of trading in the name and style of Ankur Traders and clocked a turnover of Rs 2.70 crores in the relevant year. He had confirmed the transactions with the appellant and the same are reflected in the bank statements held by him in Cosmos Cooperative Bank and HDFC Bank. As seen from the accounts, the loan transaction between this creditor and the appellant is as follows: It can be noticed that there is an opening balance of Rs. 82,01,976 and a further loan of Rs. 12,00,000 on two occasions. As against the total sum of Rs. 94,01,976 due, the appellant repaid an amount of Rs. 87,10,700 on 11 occasion starting from 27.04.2016 to 26.12.2017 leaving a balance of Rs. 6,91,976 due to the loan creditor. The repayments transactions that were doubted by the assessing officer were perused from the evidences submitted and it is noticed that all the repayments to the tune of Rs. 87,10,700 were all made from the appellants cash credit account held with M/s Cosmos Cooperative Bank and from the credit funds available from the cash credit facility. This shows that the immediate and effective source of the funds that were utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional evidences submitted by the appellant. Lakshit Bansal It can be noticed from the above that the appellant received Rs. 50,00,000 from the loan creditor on 27-05-2016 through HDFC bank and returned the same on 31-05-2016 again through HDFC bank. The loan transactions are reflected in the appellant s 3CD report in columns 31(a) and 31(c). As stated above, the assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. Naveen Bansal He is assessed to with ITO Circle [New], Vapi, Gujarat under PAN: AANPB7475M. For the relevant AY the loan creditor filed his RoI vide Ack. No. 185383081240817 dated 24-08-2017. He is in the business of trading in the name and style of Naveen Steels and clocked a turnover of Rs. 385 crores in the relevant year. He had confirmed the transactions with the appellant and the same are reflected in the bank statements held by him and the loan transaction between this creditor and the appellant is a s follows: It can be noticed from the above that the appellant received funds from the above loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled for upon the additional evidences submitted by the appellant. Doubting the repayments made by the appellant against the loans, the assessing officer had rested his inference on the following grounds: (1) Though interest has been shown to have been paid (to the loan creditors) but no TDS u/s 194A has been deducted as per the confirmations given. (2) Perusal of the Form no.3CD, clause 23 in respect of 40A(2)(b) transactions does not match with the repayment schedule as seen in clause 31 (c) of the said Tax audit report. (3) No confirmations in these instances of squaring of the loans has been given. Moreover, the bank statement and the capital account has not been furnished. The copies of the Financial statements and ITR has also not been filed. As far as (1) is concerned the contention of the appellant as verified from the details filed is that interest had not been paid to the above parties except in the case of Smt Kavita Bansal to whom interest is stated to have been paid as per the ledger confirmation and the same is reflected in column 23 of the 3CD report filed by the appellant. As seen from the computation of total income filed by Smt Kavita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. So, it is clear from the assessment order that the addition u/s 69 of amounts representing repayments is only on account of non-furnishing of certain details/confirmations from the loan creditors and of course erroneously view of mismatch in the disclosures in clauses 23, 31 (a) and 31 (c) of 3CD report. It is also pertinent to mention here that the appellant-assessee had reported repayment of loan to 14 parties vice clause 31 (c) of the 3CD report and the assessing officer selected above mentioned 5 parties of these 14 parties. Whether repayment of loan can be treated as unexplained investment u/s 69 Section 69 of the I T Act states as follows: Unexplained investments 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the loan is doubtful, then addition as deemed income cannot be made. In view of the foregoing discussion, the addition made by the assessing officer u/s 69 of the IT Act holding the repayment of loan as unexplained, is deleted. 7. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 8. The Learned Commissioner of Income Tax Departmental Representative (ld. CIT-DR), argued that from the balance sheet for the year ending 31.03.2017, it was observed by assessing officer that during the year the assessee squared off loans form Tushit Bansal amounting to Rs. 20,00,000, Kavita Bansal amounting to Rs. 30,00,000, Ankur Thakkar Rs. 87,10,700. Further, during the year the assessee took loan of Rs. 1,37,10,700/-. It is pertinent to mention that even if a loan was squared off, the assessee is shown to have paid interest but did not deduct TDS u/s 194A of the Income Tax. Further, no concrete confirmations of these squaring off the loans were provided, and therefore, the veracity of the same cannot be proven. Therefore, ld Counsel contended that addition made by the assessing officer may be confirmed. 9. Shri Rasesh Shah, Learned Counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 parties vide clause 31 (c) of the 3CD report and the assessing officer selected above mentioned 5 parties of these 14 parties. The ld CIT(A) observed that only those investments that are found to have been not recorded in the books qualify for addition under the said section, if assessee fails to offer proper/satisfactory explanation. In the instant case the transactions made by the assessee that are subjected to addition under this section are all reflected in the books of account maintained by him. Nowhere did the assessing officer state that these repayments were made from undisclosed sources. Moreover, the assessing officer perused 3CD report and found that that repayments have been disclosed in clause 31(c) of the Tax Audit Report. The ld CIT(A) also observed that repayments of loan/creditor cannot be regarded as 'investments' for the reason that investments are assets of the investor which are likely to yield returns and investment as such can be redeemed to obtain the principal. So, the repayment of loan disclosed in the books of account would not come under the purview of Section 69. We also note that repayment of amount was made through banking channel and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on housing loan qualifies for deduction u/s 24 of the Income Tax under the head income for house property. However, this was shown by assessee under business head in Section 37 of the Income Tax Act, which is wrong, hence addition made by the Assessing Officer may be sustained. 16. On the other hand, Shri Rasesh Shah, Ld. Counsel for the assessee defended the order passed by the ld. CIT(A) and argued that asset was being used for business purposes and therefore assessee claimed depreciation. Hence interest expenses on loan for such asset should be allowed as business expenses and ld CIT(A) has rightly allowed the same, therefore order of Ld CIT(A) may be upheld. 17. We have heard the Learned Counsel appearing on behalf of the respective parties at length. Facts of the case are that Assessing Officer after a perusal of the details on record and the submissions made noted that the assessee has obtained a housing loan on mortgage for flat No. 801, Juhu, Mumbai and that interest has been paid on such loan which has been used for business purposes. Thereafter, the Assessing Officer opined that such interest paid on housing loan qualifies for deduction u/s 24 of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss Profession of assessee shall be allowed subject to the section 43B of the Act. The ld CIT(A) observed that when the capital is borrowed for acquisition of a capital asset, then interest liability pertaining to the period till the date such asset is put to use shall not be allowed as deduction. Going by the fact noted by the Assessing Officer, in the assessment order and the relevant provisions of the IT Act, it is held by ld CIT(A) that the disallowance of interest claim to the tune of Rs. 51,86,006/- made by the Assessing Officer is not in accordance with the provisions of the statute and therefore, ld CIT(A) deleted the same. We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 19. In the result, ground No.2 raised by the Revenue is dismissed. 20 20. Ground No.3 raised by the Revenue relates to addition made on account of cash deposits under section 68 of the Act. 21. Brief facts qua the issue are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by ld CIT(A) may be upheld. 25. We have heard both the parties. During the appellate proceedings, the ld CIT(A) noted that it was the claim of the assessee that the cash deposits of Rs. 34,50,000/- made in its bank accounts during the demonetization period were sourced out of its business receipts, that were duly recorded in its books of account. On the contrary, the Assessing Officer for the aforesaid reasons had rejected the claim of the assessee and had held the entire amount of Rs. 34,50,000/- as an unexplained cash credit u/s.68 of the Act. Ostensibly, the Assessing Officer had though rejected the assessee's claim that the cash deposit of Rs. 34,50,000/- was sourced out of its business receipts, but on the other hand he had accepted its returned income, and thus without rejecting the books of account of the assessee had framed the assessment u/s. 143(3) of the Act. Thus, ld CIT(A) observed that the Assessing Officer though had rejected the assessee's claim that the cash deposits of Rs. 34,50,000/- were sourced out of the business receipts for the year under consideration, but acting contrary to his aforesaid observation had at the same time accepted its book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 5 raised by the Revenue relates to violation of Rule 46A of the Income Tax Rules. Learned DR for the Revenue argued that Ld.CIT(A) has erred in not providing sufficient time to the Assessing Officer to provide its comment on the remand report which is clear violation of Rule 46A of the I.T. Rules, 1962. Therefore, ld DR contended that ld CIT(A) may be directed to afford the reasonable opportunity to the Assessing Officer to examine the fresh evidence submitted by the assessee. On the other hand, ld Counsel argued that additional evidences were sent to the Assessing Officer for his comment, however, the Assessing Officer failed to submit its report, hence there is no violation of Rule 46A of the I.T. Rules. 29. We have heard both the parties and gone through the order of ld CIT(A). We note that ld CIT(A), during the appellate proceedings, vide its letter dated 07.12.2022, the additional evidences submitted by the assessee before ld CIT(A), were forwarded to Assessing Officer for his examination and remand report thereon. The additional evidences were resent to Assessing Officer also, however, Assessing Officer failed to submit the remand report. Hence, we note that there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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