2012 (9) TMI 800 - AT - Income Tax

ITAT Upholds CIT(A) Decisions on Three Issues, Ensuring Fair Resolution

The ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all three issues. The judgments were based on detailed assessments of the ... Addition on account of deemed rent - property was deemed to have been let out. - Held that:- On perusal of the agreement of sale dated 19th day of Septebmer-2007, it is evident from the schedule of payment that the same was agreed to be paid on the basis of the stage-wise completion of the construction. Due to this reason, the respondent-assessee has shown an outstanding current liability of Rs.11 lacs of Rajyog Enterprises as on 31.03.2008. The assessee has placed on record a possession letter through which it has also been established that the same was delivered in the following years on 15.12.2010. Under the totality of the circumstances, it is to be concluded that the addition made by the AO was merely on presumption, hence deserves to be reversed - in favour of assessee. Addition on account of deemed rent of motor garage - Held that:- AO has presumed that the motor-car garage might have been let out by the assessee. In the absence of any evidence in his possession of letting out of the motor-car garage, thus AO has faulted in taxing an income merely on hypothesis - in favour of assessee. Deemed dividend by invoking the provisions of section 2(22)(e) - assessee happened to be a beneficial holder of 50% share in company imparting loan - Held that:- As it was a trade transaction as evident from the copy of accounts placed on record and there are certain correspondences way back dated 8.2.2006, placed in the compilation, stated therein that the said deposit of Rs.5,00,000/- was towards supply of material on regular basis and that deposit was required to be adjusted against the pending dues, if any, thus the nature of deposit was not a “loan deposit” but in the nature of a “trade deposit” and out of purview of section 2(22)(e) - in favour of assessee. Issues:1. Addition on account of deemed rent for a house property.2. Addition on account of deemed rent for a motor-car garage.3. Addition on account of deemed dividend income.Issue 1: Addition on account of deemed rent for a house property:The Revenue appealed against the CIT(A)'s decision to add deemed rent of Rs.4,20,000 for a house property. The AO based the addition on the presumption that the property was let out due to possession being taken before the accounting period. However, the CIT(A) found that possession was given to the appellant later, on 15.12.2010, not before the accounting period. The possession letter and payment schedule supported the appellant's claim. The ITAT upheld the CIT(A)'s decision, stating the AO's addition was based on presumption and reversed it.Issue 2: Addition on account of deemed rent for a motor-car garage:The AO added Rs.2,10,000 as deemed rent for a motor-car garage without giving the appellant a chance to be heard. The CIT(A) found that the garage was used for personal use and not let out, thus reversing the addition. The ITAT agreed, noting the absence of evidence of letting out the garage. The AO's decision was considered speculative, and the CIT(A)'s view was upheld, leading to the dismissal of this ground of appeal.Issue 3: Addition on account of deemed dividend income:The AO treated a transaction with a company as deemed dividend income under section 2(22)(e) of the IT Act, despite the appellant's explanation that it was a trade deposit. The CIT(A) accepted the appellant's argument, supported by documents and resolutions, that the transaction was a trade deposit, not a loan. The ITAT concurred, citing precedents and correspondence showing the nature of the deposit as trade-related. Consequently, the addition was deemed unjustified, and the CIT(A)'s decision was upheld, leading to the dismissal of this ground of appeal.In conclusion, the ITAT dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all three issues. The judgments were based on detailed assessments of the evidence and legal provisions, ensuring a fair and accurate resolution of the disputed matters.