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2016 (10) TMI 927 - AT - Income TaxAddition u/s 68 - AO has made the addition u/s 68 crores as undisclosed cash credit in the hands of assessee on the ground that assessee has made the sale of the impugned property without recording the same in its books of account - CIT(A) deleted the addition made by AO by observing that assessee in the instant case was a confirming party and it has not made any sale - Held that:- The assessee initially advanced the money to MAESL which was returned back to assessee and MNI. Now the question before us arise so as to whether assessee has made any sale of the impugned property without recording the impugned sale in its books of account. From the facts, we find that provision of Sec. 68 of the Act are attracted only in a case where any credit entry found in the books of account of assessee which is not explained by assessee. In the instant case, no such entry was detected by AO. In our considered view, the provisions of Sec. 68 are not applicable in the present case. Similarly, from the details submitted by assessee, we find that assessee has given advanced money for the purchase of impugned property and same money was returned. In this point, Ld. DR has not brought anything on record to the finding of Ld. CIT(A). We also find that AO before making such addition on the basis of ITS information from the office of Sub Registrar should have issued a notice u/s. 133(6) of the Act. The AO has not exercised his power u/s. 133(6) of the Act. In this view of the matter, we find no reason to interfere with the findings arrived by the Ld. CIT(A). Addition u/s 36 - Held that:- We find that assessee in the instant case, has incurred interest expenditure on the money borrowed for an amount of ₹ 2,47,91,689/- and assessee claimed the interest expenditure as revenue expenditure. However, the AO disallowed the same by holding that assessee has no experience of property business, therefore, it should have been treated as investment in assessee’s business. Therefore, the interest expenditure incurred on the borrowed fund utilized for the purpose of investment cannot be allowed as deduction. However, Ld. CIT(A) deleted the addition made by AO by observing that assessee has treated the same as stock-in-trade in its books of account. Now the issue before us arise so as to whether the interest expenditure is business expenditure or part of investment. From the facts, we find that the activities for the property business are duly covered in the Memorandum & Articles of Association of the assessee in terms of its clause-4. Besides, we also find that assessee during the year has earned a sum of ₹ 40,500/- by way of storage charges which has been offered as income under the head “business & profession”. We further also find that assessee has shown the property as stock-intrade in its books of account. From the facts, we find that assessee has shown the impugned property as stock-in-trade and AO cannot step in the shoes of assessee to decide whether it is capital asset or stock-in-trade.
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