2023 (5) TMI 275 - AT - Income Tax

Tribunal grants relief for agricultural income, allows interest on borrowed capital, and partially accepts Revenue's appeal.

Deputy Commissioner of Income Tax (International Taxation), Visakhapatnam. Versus Sri Varun Ogili, Nellore. And (Vice-Versa)

The Tribunal condoned the delay in the Revenue's appeal due to the Covid-19 pandemic. Partial relief of Rs. 2 lakhs was granted for agricultural income ... Disallowance of agricultural income - AO considering that the holding of the land cannot procure agriculture income and therefore rejected the agricultural income claimed by the assessee - HELD THAT:- CIT(A) in his order has estimated the agricultural income and has granted partial relief to the extent of Rs. 2 lakhs - CIT (A) has rightly considered the fact in the instant case and we find no reason to interfere in the order of the Ld. CIT(A) on this ground. This ground raised by the Revenue is dismissed. Disallowance of interest on borrowed capital u/s. 24(b) - DR submitted that the assessee has wrongly claimed the interest U/s. 24(b) and hence the AO has rightly disallowed the same - 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) - HELD THAT:- We find from the assessment order that the AO has not considered the reply of the assessee stating that it was a wrong claim made while filing the return 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 prevailing rate. Neither the Ld AO conducted any enquiry with the borrowers. We find that Ld CIT(A) has adopted interest @12% as claimed by the assessees, but has failed to consider the assessee’s computation and his voluntary admission - We therefore do not concur with the revised computation and direct the Ld. AO to adopt the amount voluntarily admitted by the assessee - Accordingly, this ground raised by the Revenue is partly allowed for statistical purposes. Unexplained cash deposits in the bank accounts of the assessee - DR submitted that the assessee has made cash deposits into the multiple bank accounts - HELD THAT:- The undisputed fact in the instant case is that the assessee is into money lending business through his GPA holder and has frequently made cash deposits and withdrawals into the bank accounts. Assessee has also declared interest income from the money lending business during the earlier assessment years which were also not disputed by the Revenue. From the table 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. 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. These cash deposits 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. Issues Involved:1. Condonation of delay in filing the appeal.2. Disallowance of agricultural income.3. Disallowance of interest on borrowed capital under Section 24(b) of the Income Tax Act.4. Suppression of interest income.5. Unexplained cash deposits in bank accounts.Summary:Condonation of Delay:The Revenue's appeal was delayed by 80 days due to the Covid-19 pandemic. The Tribunal condoned the delay, considering the reasonable and sufficient cause presented by the Revenue.Disallowance of Agricultural Income:The Revenue argued that no proof of land holdings was provided. However, the Tribunal upheld the Ld. CIT(A)'s decision to grant partial relief of Rs. 2 lakhs, noting that the assessee had submitted evidence of land holdings and leased lands.Disallowance of Interest on Borrowed Capital U/s. 24(b):The Ld. AO disallowed Rs. 19,05,640/- claimed under Section 24(b), as it was not supported by a bank certificate. The Tribunal found that the interest was wrongly claimed under Section 24(b) but should be allowed as a business expenditure since it was used for money lending. The Tribunal upheld the Ld. CIT(A)'s decision.Suppression of Interest Income:The Ld. AO estimated interest at 18% on outstanding loans, while the Ld. CIT(A) adopted 12%. The Tribunal directed the Ld. AO to adopt the amount voluntarily admitted by the assessee, Rs. 10,42,193/-, acknowledging the assessee's computation and voluntary admission.Unexplained Cash Deposits:The Revenue contended that the Ld. CIT(A) wrongly allowed telescoping benefits for cash deposits. The Tribunal found that the Ld. CIT(A) erred in treating cash deposits from AY 2016-17 as available for the impugned year. The Tribunal set aside the Ld. CIT(A)'s order on this ground, allowing the Revenue's appeal.Conclusion:The appeal of the Revenue was partly allowed for statistical purposes, and the cross-objection raised by the assessee was deemed infructuous.