2017 (6) TMI 952 - AT - Income Tax

Tax Tribunal Grants Partial Relief and Accepts Assessee's Claim on Disallowed Loans

The Tribunal dismissed the appeals for A.Ys 2005-06 and 2006-07. For A.Ys 2007-08, 2008-09, and 2009-10, partial allowances were granted. Specific reliefs ... Disallowance of agricultural income - Held that:- Except for reiterating the submissions made before the authorities below, the learned Counsel for the assessee has not been able to produce before us any evidence whatsoever in support of earning of the agricultural income as explained by the assessee in his returns of the income for the respective A.Ys. We find that the CIT (A) has considered all the aspects of the issue before allowing certain part of the income as agricultural income. The assessee has not filed any evidence to rebut the findings of the CIT (A). As the order of the CIT (A) is a well considered order, we do not see any reason to interfere with the same on the issue of agricultural income for all the A.Ys. The assessee’s grounds of appeal for all the A.Ys against disallowance of part of the agricultural income are accordingly rejected. Interest Income - accrual of income - Held that:- We find that the assessee is following the mercantile system of accounting and therefore is bound to offer the income on accrual basis. Further, the assessee himself is the Director of the company in which the interest is shown to be payable and the assessee has not challenged the assessment completed in the hands of the company. Therefore, the interest income receivable by the assessee is taxable in the hands of the assessee even if it is not yet received by the assessee. Therefore, we see no reason to interfere with the order of the CIT (A) on this issue. Addition on “unexplained loan creditor' - Held that:- When the AO has not offered any comment, it is to be presumed that he has satisfied with the submissions of the assessee. If at all any addition is to be sustained, it can only be of ₹ 2.00 lakhs which is still shown to be payable to the assessee out of the advance of ₹ 10.00 lakhs given to his wife. Therefore, we sustain the addition of ₹ 2.00 lakhs only. The assessee gets a relief of ₹ 12,72,000. Therefore, the assessee’s grounds of appeal for the A.Y 2007-08 on this issue are partly allowed. As regards the loan from the assessee’s daughter-in-law for the A.Y 2008-09 an amount of ₹ 8,30,000 has been shown to have been cleared through SBH and only a sum of ₹ 1,90,000 was brought in cash from the cash received by her from the assessee in earlier A.Y. The CIT (A) has clearly observed that the assessee has not filed any reliable evidence to explain the cash credit of ₹ 1,90,000. The assessee has not filed any details before us also to substantiate his claim. Addition on account of investment in construction of commercial complex - Held that:- We find that the assessee has filed the details of year-wise investment before us and further that these investments were also reflected in the balance sheet of the respective A.Ys and none of the authorities have verified the same. Therefore, we are inclined to set aside the issue to the AO and direct the AO to verify the contentions of the assessee and since the CIT (A) has considered the difference in the valuation as per the CPWD rates and the State PWD rates and has given relief of 10% accordingly and since the CIT (A) has also given relief of 10% for self supervision, we direct the AO to allow the same while arriving at the cost of construction as per the details furnished by the assessee. In the result, assessee’s ground of appeal on this issue is partly allowed Addition on account of additional investment in the residential property - Held that:- DVO has adopted the CPWD rate as against the State PWD rates and as held by the CIT (A) in the assessee’s husband’s case, 10% relief is to be given for the difference between the CPWD and State PWD rates. Therefore, grounds of appeal partly allowed. Architect & Structural Engineers fee inclusion in valuation report - Held that:- We find that the CIT (A) has already given relief of 10% for self supervision and we are satisfied that it would take care of the Architect and Engineer’s fee as well. Therefore, no further exemption is to be allowed. Disallowance of the loans allegedly received by the assessee from her spouse - Held that:- The assessee has claimed these amounts for the relevant A.Ys as remission of advances given by her to her husband in the earlier years and has submitted relevant financial statements. During the remand proceedings, the AO has verified the same, but did not offer any comment, leave alone, any adverse comments. Therefore, it has to be deemed that the AO is satisfied with the contention of the assessee. Since considerable time has lapsed, we are of the opinion that no useful purpose would be served in remanding the issue to the file of the AO at this stage for re-verification of assessee’s contentions. In view of the same, we are inclined to accept the contentions of the assessee and the assessee’s appeals for the A.Ys 2007-08 to 2009-10 are allowed Issues Involved:1. Disallowance of agricultural income2. Interest income3. Loan creditors4. Addition on account of investment in construction of commercial complex5. Addition on account of additional investment in the residential propertyDetailed Analysis:Disallowance of Agricultural Income:The assessee claimed agricultural income in returns for multiple assessment years (A.Ys). The Assessing Officer (AO) disallowed the income due to lack of supporting evidence beyond the ownership of 3.25 acres of agricultural land. The Commissioner of Income Tax (Appeals) [CIT (A)] partially allowed the claim, recognizing the ancestral nature of the land but reducing the claimed income due to insufficient details on crops and expenses. The Tribunal upheld the CIT (A)’s decision, noting the assessee’s failure to provide additional evidence.Interest Income:For A.Ys 2008-09 and 2009-10, the assessee did not disclose interest income in returns. The AO added this income based on the company's records where the assessee was Managing Director. The CIT (A) upheld the addition, emphasizing that income must be reported on an accrual basis. The Tribunal agreed, rejecting the assessee’s appeals for these years.Loan Creditors:- A.Y 2007-08: The AO disbelieved loans from the assessee’s wife and children, treating them as unexplained credits. The CIT (A) confirmed the addition of Rs. 14,72,000 from the wife but deleted others. The Tribunal reduced the addition to Rs. 2,00,000, accepting the rest as explained.- A.Y 2008-09: The AO accepted only Rs. 10,00,000 out of Rs. 20,20,000 claimed as loans from the daughter-in-law. The CIT (A) confirmed the addition of Rs. 1,90,000 due to lack of evidence. The Tribunal upheld this decision.Addition on Account of Investment in Construction of Commercial Complex:For A.Y 2009-10, the AO added Rs. 1,04,27,870 as unexplained investment based on a valuation report. The CIT (A) accepted the Departmental Valuation Officer’s (DVO) lower valuation and granted relief for self-supervision and CPWD rate differences. The Tribunal directed the AO to verify year-wise investments and apply the reliefs granted by the CIT (A).Addition on Account of Additional Investment in the Residential Property:For A.Y 2006-07, the AO added Rs. 9,16,065 as unexplained investment based on the DVO’s report. The CIT (A) granted partial relief for self-supervision but did not adjust for CPWD rate differences or other claimed costs. The Tribunal allowed 10% relief for CPWD rates but rejected further claims, partly allowing the appeal.For A.Ys 2007-08 to 2009-10, the AO disallowed loans claimed as returned advances from the husband. The CIT (A) confirmed these additions. The Tribunal accepted the assessee’s contention due to lack of adverse comments from the AO during remand, allowing the appeals.Conclusion:The Tribunal's final order resulted in:- Dismissal of appeals for A.Ys 2005-06 and 2006-07.- Partial allowance for A.Ys 2007-08, 2008-09, and 2009-10.- Specific reliefs granted for self-supervision and CPWD rate differences in construction cost assessments.