2021 (4) TMI 291 - AT - Income Tax

Tribunal allows appeals, deletes additions on capital gains, permits deductions under Sections 24, 80C, 80TTA

The Tribunal partially allowed the appeals by directing the deletion of additions concerning alleged bogus long-term capital gains and associated ... Surrender of undisclosed income before the Income Tax Settlement Commission and its effect on subsequent assessment - prohibition against double taxation by re taxing income already admitted and taxed in the hands of another taxable entity - assessment proceedings under section 153A after search and scope of reassessment where income has been earlier surrendered - allowance of deduction for interest on housing loan under section 24 where co ownership and payment are established - deduction for repayment of housing loan under section 80C where payments are evidenced - deduction under section 80TTA for interest on savings bank account where such interest is admitted and returnedSurrender of undisclosed income before the Income Tax Settlement Commission and its effect on subsequent assessment - prohibition against double taxation by re taxing income already admitted and taxed in the hands of another taxable entity - assessment proceedings under section 153A after search and scope of reassessment where income has been earlier surrendered - Whether the long term capital gains declared and surrendered as undisclosed income of M/s Rohit Traders before the Income Tax Settlement Commission could be taxed again in the hands of the assessee in assessment proceedings under section 153A. - HELD THAT: - The Tribunal found on the record that the impugned long term capital gains were categorically surrendered as undisclosed income of M/s Rohit Traders before the Settlement Commission and the Revenue did not controvert this fact. The Settlement Commission's limited observation that it refrained from commenting on utilization in hands of entities not before it does not negate the admitted surrender and taxation of the same income in the firm's hands. Taxing the identical income again in the assessee's hands would result in double taxation of the same income. Consequently the addition made by the AO and confirmed by the CIT(A) on account of the said LTCG and related expenditure could not be sustained. [Paras 14, 15, 16]Addition of Rs. 17,19,989 (LTCG) and Rs. 1,34,027 (expenditure related thereto) deleted; grounds allowing deletion upheld.Allowance of deduction for interest on housing loan under section 24 where co ownership and payment are established - deduction for repayment of housing loan under section 80C where payments are evidenced - deduction under section 80TTA for interest on savings bank account where such interest is admitted and returned - Whether the assessee was entitled to deductions for (a) interest on housing loan under section 24, (b) repayment of housing loan under section 80C, and (c) deduction under section 80TTA for savings bank interest, in view of documentary evidence of co ownership and payments. - HELD THAT: - The Tribunal examined the sale deed showing joint ownership, bank ledger/loan statement and the bank certificate corroborating that the house loan related to the assessee jointly with her husband and that the assessee had been repaying installments and interest. These documents were on record before the lower authorities but were ignored; no infirmity in the documents was pointed out by Revenue. As to savings bank interest, the amount was returned as income by the assessee and accepted; denial of the corresponding deduction under section 80TTA lacked logical basis. On the combined documentary evidence, the Tribunal held that the assessee had established entitlement to the claimed deductions and directed the AO to allow them. [Paras 23, 24, 25, 28, 29]Deductions allowed: interest under section 24 and repayment under section 80C directed to be admitted by AO; deduction under section 80TTA for savings bank interest also allowed.Final Conclusion: Both appeals are partly allowed: the additions relating to the disputed long term capital gains and associated expenditure are deleted as those amounts were surrendered and taxed in the hands of M/s Rohit Traders, and the assessee's claims for deductions under section 24, section 80C and section 80TTA are directed to be allowed by the assessing officer. Issues Involved:1. Addition of alleged bogus long-term capital gains under Section 68 of the Income Tax Act.2. Disallowance of commission paid for the accommodation entry.3. Denial of deduction of interest paid on housing loan under Section 24.4. Denial of deduction claimed under Section 80C.5. Deduction under Section 80TTA.Issue-wise Detailed Analysis:1. Addition of Alleged Bogus Long-Term Capital Gains Under Section 68:During the assessment, the AO noted information from the Investigation Wing about large-scale tax evasion via bogus long-term capital gains through penny stocks, including the assessee. The assessee's income from the sale of shares in M/s Cressanda Solutions Limited was treated as bogus. Statements from search operations revealed admissions of unaccounted income from such transactions. The assessee's revised return included this income as 'Income from other sources,' but it was not disclosed in the return filed in response to notice under Section 153A. The AO added this to the assessee's income, which the CIT(A) upheld.However, the assessee contended before the Tribunal that this income was disclosed and taxed in the hands of M/s Rohit Traders before the Settlement Commission. The Tribunal found merit in this argument, noting the specific surrender of the impugned capital gains in the hands of M/s Rohit Traders. The Tribunal directed the deletion of the addition, preventing double taxation of the same income.2. Disallowance of Commission Paid for the Accommodation Entry:The AO also disallowed the commission paid for the accommodation entry related to the bogus long-term capital gains. The CIT(A) upheld this disallowance. However, since the Tribunal directed the deletion of the addition related to the bogus long-term capital gains, the disallowance of the commission paid for the same was also deleted.3. Denial of Deduction of Interest Paid on Housing Loan Under Section 24:The AO denied the deduction of interest paid on the housing loan, citing the interest certificate issued in the name of the assessee's husband. The assessee argued that the property was jointly owned, and the loan was jointly taken, with repayments made by the assessee. The Tribunal examined the sale deed, loan statements, and bank certificates, confirming joint ownership and repayments. The Tribunal directed the AO to allow the deduction under Section 24.4. Denial of Deduction Claimed Under Section 80C:The AO denied the deduction under Section 80C for the repayment of the housing loan, citing similar reasons as for the interest deduction. The Tribunal, after reviewing the evidence, including the joint ownership and repayments, directed the AO to allow the deduction under Section 80C.5. Deduction Under Section 80TTA:The AO denied the deduction under Section 80TTA for interest earned on the savings bank account due to a lack of evidence. The Tribunal noted that the interest income was accepted by the Revenue, and thus, the deduction should logically follow. The Tribunal directed the AO to allow the deduction under Section 80TTA.Conclusion:The Tribunal partly allowed the appeals, directing the deletion of additions related to bogus long-term capital gains and associated commission, and allowing deductions under Sections 24, 80C, and 80TTA. The appeals for both assessment years 2015-16 and 2016-17 were disposed of with similar findings and directions.