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2022 (4) TMI 454 - AT - Income TaxAddition towards interest from money lending business - AO adopted rate of interest at 24%, which the ld. CIT(A) brought down to 18% - HELD THAT:- Considering the fact that the assessee was engaged in the money lending activity, which is obviously with a purpose of earning interest income, a reasonable rate of interest has to be applied. Taking into account the peculiar facts of the case, we are satisfied that the ld. CIT(A) was more than reasonable in applying interest rate of 18%, as against the interest rate of FDRs prevailing at that time at 15%. We, therefore, approve the computation of interest. Though the AO made addition of interest income in respect of remaining FDRs worth ₹ 22.00 lakh also, but the ld. CIT(A) deleted the same and the Revenue is not in appeal. In that view of the matter, it becomes graphically clear that the amount of interest offered by the assessee as income at ₹ 1,17,414/- is only qua the FDRs, which is distinct from money lending activity separately carried out by the assessee. Since no interest income was suo motu offered by the assessee on the money lending activity, the amount as computed by the ld. CIT(A) on this score at ₹ 4,17,350/- is held to be correctly added. This issue is, therefore, determined against the assessee. Unexplained investment in residential house construction - applicability of State PWD rates as against CPWD rates applied by the DVO in computing the value of the property - HELD THAT:- In view of the fact that the value has to be determined on the basis of State PWD rates and the ld. AR contended that the DVO applied Central PWD rates, we set aside the impugned order and remit the matter to the file of the AO for examining the rates applied by the DVO in determining the value of the property. In case, he applied the CPWD rates in determining the value of the property, then such value should be re-worked out by applying the State PWD rates. Amount of interest income added by the AO for which the addition has been sustained by the ld. CIT(A) should be telescoped in the unexplained investment in construction of Bungalow - Once an addition is made towards earning undisclosed income, then no addition should be made towards undisclosed investment to that extent. We order to reduce the amount of addition towards unexplained investment in Bungalow by a sum of ₹ 4,17,350/-, being, interest income from the money lending activity which was not originally disclosed. This relief would be in addition to the effect of the conversion of valuation of the property from the CPWD rates, if applied by the DVO, to the State PWD rates. The impugned order is set aside and the matter is restored to the file of the AO for doing accordingly.
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