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2019 (6) TMI 1479 - AT - Income TaxDisallowance of interest expenses - availability of huge interest free funds with the assessee - claim of the assessee that the expenditure was incurred in connection with buying and selling of the land and also for the purpose of the business for working capital for the business and according to the assessee no expenditure out of this amount was incurred for its construction project - HELD THAT:- From Audited accounts of the assessee assessee had not debited any capital expenditure to the profit and loss account. The Special Auditor also verified the cost of work in progress of the project and also approved signatory profit and loss account in which no interest expenditure was debited to construction activity, but interest expenses were debited to land business. It was also acknowledged by the Special Auditor with the major source of funds for the assessee company was the findings received from the sale of flats and the sale proceeds received from sale of plot of land. The AO had ignored the clear findings of the Special Auditor and interest relied upon the couple of general observations as contained in the report. Even independent to the report of Special Auditor, it is significant to note that the AO has not disputed the basic facts and figures as placed on record by the assessee. The AO had not denied the availability of huge interest free funds with the assessee for its construction activity. At the same time, the revenue has not brought on record any cogent material to support its action. Thus, it appears that the disallowance made by the AO was passed purely on the basis of surmises. There was contradiction of inconsistency in the approach of the AO as much as he did not allege interest component to the work in progress either. Nowhere in the past or even in subsequent years any such disallowance is made, although the principle of fast Res judicata will not apply to the assessment proceedings, however, the settled legal position is that the rule of consistency equally applies to the assessment proceedings. More particularly, when a position was accepted in the past years in subsequent years then the same cannot be altered by the AO for a particular year except if there are changes in facts of legal position but nothing of this kind has been demonstrated by the AO, therefore we are in agreement with the findings recorded by CIT(A) to the effect that the additions made by the AO on account of disallowance out of interest expenses is not justifiable. No new facts have been brought before us in order to controvert and lawful findings recorded by CIT(A). Therefore, we have no other option except to upheld the finding of the ld. CIT(A) and dismissed this ground raised by the revenue. Unexplained cash receipts u/s 68 - HELD THAT:- No addition on account of on money was called for, because the amount mentioned against the names of Directors / shareholders and their relatives as well as other persons who had not made any booking were excluded. Similarly, the flats for which the agreements are cancelled were also righly excluded. Since the papers only related to the projects for construction of Gulmohar & Chinnair and as per record, no papers were found with respect to other projects. Thus CIT(A) had rightly conclude that if this is done, then the amount of such exclusion would be more than the amount of the addition made, which is clear from the figures and the calculations as already referred in the order of CIT(A). We have also gone through the decision in the case of Layers Exports P. Ltd. [2016 (10) TMI 1024 - ITAT MUMBAI]wherein it was held that no income in the form of alleged on-money can be taxed in the year in which the project is going on. Admittedly, assessee was following project completion method and thus while these principles in the present case, the claim of the assessee for deletion of such addition is sustainable on this ground also. Therefore, the ld. CIT(A) has rightly found the additions are unsustainable and deleted the same. No new facts have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, we find no reasons to interfere in to the findings so recorded by the ld. CIT(A), hence this ground raised by the revenue stands dismissed. Disallowance u/s 14A - AO had made additions by holding that possibility of having incurred some expenses on such investments cannot be ruled out therefore had made additions - HELD THAT:- Assessee had taken a categorical stand that assessee had not earned any exempt income during the year under consideration, therefore question of application of section 14A simply does not apply. Keeping in view the submissions of the assessee and while drawing strength from the judgment of Hon‟ble Delhi High Court in the case of Cheminvest Limited vs Commissioner Of Income Tax [2015 (9) TMI 238 - DELHI HIGH COURT]We restore this ground back to the file of AO with a direction to verify as to whether the assessee has earned any exempt income during the year under consideration or not and incase, it is found that assessee has not earned any exempt income, then in that eventuality while following the judgment in the case of Cheminvest Ltd. (supra), no disallowance be made. It is needless here to mention that before passing afresh order of assessment, the AO shall provide sufficient opportunity of hearing to the assessee. With these directions, this ground of appeal raised by the revenue is partly allowed for statistical purposes.
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