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2015 (8) TMI 167 - ITAT DELHI

2015 (8) TMI 167 - ITAT DELHI - TMI - Unexplained investment u/s 69 - entire addition made by the AO rests on the valuation report of the DVO, who estimated the value of property at ₹ 40.50 lac against the purchase price at ₹ 34,65,000/- CIT(A) deleted addition - Held that:- A mere DVO’s report, which is nothing more than an estimate of the value of the property, cannot be a substitute for an evidence directly indicating unexplained investment. A fair market value determined by the D .....

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um of ₹ 34.65 lac and the AO has made addition of ₹ 5.85 lac simply on the basis of difference between the DVO’s report and apparent sale consideration. No attempt has been made for verifying the price from the seller of the property. CIT(A) correctly deleted the addition.- Decided against revenue.

Unexplained expenditure u/s 69C - CIT(A) deleted addition - Held that:- As regards the other amount of ₹ 3,81,999/-, we find that the assessee made a categorical claim bef .....

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hased in the year in question, we countenance the action of the ld. CIT(A) in deleting the addition to this extent - Decided against revenue.

Addition on account of the interest on loans - CIT(A) deleted addition - Loans advanced to sister concerns, namely, Exotic Fresh Produce Pvt. Ltd., and Narco Exports - Held that:- The assessee charged interest on such advances to sister concerns at 11% against the payment of interest at 10% to 11% on loans and advances taken by him. As such, the .....

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from which such shop was actually put to use. Going by the proviso to section 36(1)(iii), any interest paid for the period up to the date of actual use of the shop, cannot be allowed as deduction. The AO is directed to ascertain the date from which the assessee took possession of this shop and then put it to use. Interest up to the date of putting such shop of South City-II, Gurgaon to use shall not be allowed as deduction, but, will be capitalized. In the absence of any material throwing light .....

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he assessee for the simple reason that retaining of amount in cash and bank balances does not in any manner indicates the diversion of funds for non-business purpose. It is for the assessee to decide as to how he has to conduct his business by keeping the borrowed funds in cash or otherwise. If loan is taken for business purpose and the loan is still in the possession of the assessee, the interest paid thereon has to be allowed as deduction.- Decided in favour of assessee.

Repayment o .....

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id on fresh funds taken as loan.- Decided in favour of assessee.

Disallowance u/s 69B - Unaccounted investment in proprieties - Held that:- t is obvious that the assessee instead of separately showing Investments in these four properties has withdrawn the amount from his capital account, which fact was stated before the AO and has remained un controverted. There is hardly any difference in showing investment in properties either by way of separate asset in the balance sheet or by redu .....

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ing the amounts from his capital account and even after such withdrawals, there was some credit balance of his capital available with him. Under such circumstances, there can be no question of making any addition u/ss 69/69B - Decided in favour of assessee.

Disallowance of foreign travel expenses - CIT(A) deleted addition - Held that:- the assessee filed all relevant details with the AO about the foreign visits undertaken by him, meeting the suppliers of fruits and attending various c .....

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S. SIDHU, JJ. For The Assessee : Shri C.S. Aggarwal, Sr. Advocate & Shri Ravi Pratap Mall, Advocate For The Department : Shri T. Vasanthan, Sr. DR ORDER PER R.S. SYAL, AM: This appeal by the Revenue is directed against the order passed by the CIT(A) on 13.10.2011 in relation to the assessment years 2008-09. 2. Ground nos.1 and 2 of this appeal are interconnected and, hence, these are being taken up together for consideration and decision. Briefly stated, the facts of the case are that the as .....

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his property to the DVO, who determined its value at ₹ 40,50,000/-. It was also intimated that the assessee had made additions/alterations by way of furniture and fixtures amounting to ₹ 3,81,999/-. On being called upon to explain as to why difference of ₹ 5,85,000/- (Rs.40,50,000/- minus ₹ 34,65,000/-) should not be added as unexplained investment u/s 69 and, further, why a sum of ₹ 3,81,999/- be not added as unexplained expenditure u/s 69C for additions/alteration .....

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/s NGK Trading Company. Not convinced with the assessee s submissions, the AO made addition of ₹ 9,39,999/- (Rs.5,85,000/- plus ₹ 3,81,999/-). The ld. CIT(A) ordered for the deletion of these additions. The Revenue is aggrieved against such deletion. 3. We have heard the rival submissions and perused the relevant material on record. It can be observed that the entire addition made by the AO rests on the valuation report of the DVO, who estimated the value of property at ₹ 40.50 .....

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tory, the value of the investments may be deemed to be the income of the assessee of such financial year. It can be observed from this provision that an addition towards unexplained investment can be made only where the assessee has made investments , which are not recorded in the books of account. The factum of the assessee making investments outside the books of account is required to be positively proved by the Revenue with some cogent evidence. A mere DVO s report, which is nothing more than .....

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ed, there can be no question of invoking the provisions of section 69 of the Act. Here is a case in which the assessee claimed to have purchased the property for a sum of ₹ 34.65 lac and the AO has made addition of ₹ 5.85 lac simply on the basis of difference between the DVO s report and apparent sale consideration. No attempt has been made for verifying the price from the seller of the property. In other words, there is no positive material evidencing the making of actual investment .....

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377; 50,000/-, the stamp duty value of such property as exceeded such consideration shall be taxed as Income from other sources. The legislature has brought in section 56(2)(vii)(b) with the sole intention of bringing such under-payment of sale consideration of immovable property to tax. This provision has been enshrined w.e.f. the AY 2014-15 and is not applicable retrospectively to the AY 2008-09 under consideration. Since this provision is prospective and there is no other authentic evidence o .....

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. This fact has not been denied by the authorities that the assessee, in fact, recorded this amount of ₹ 3,81,999/- in his books of account of M/s NGK Trading Company. Once this amount has been duly recorded in the books of account of a subsequent year and there is no material to indicate that such furniture and fixture was purchased in the year in question, we countenance the action of the ld. CIT(A) in deleting the addition to this extent. These two grounds are not allowed. 5. Ground no. .....

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erest was charged, which was without any business expediency. The assessee was also found to have made additional payment of ₹ 16,05,662/- for purchase of shop at South City, Gurgaon. In spite of the assessee having huge cash and bank balances of ₹ 1,50,17,867/-, the AO observed that the assessee had taken interest bearing loans, which ought not have been done. He further noticed that the assessee repaid a sum of ₹ 60 lac to various persons from whom unsecured loans were taken .....

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s, the AO made an addition of ₹ 16,25,945/-. The ld. CIT(A) ordered for the deletion of addition. The Revenue is before us against the deletion of such addition. 6. We have heard the rival submissions and perused the relevant material on record. It is noted that the AO has discussed the issue of advancing loans in various segments, the first being loans and advances of ₹ 57,40,000/- given to sister concerns, viz., Exotic Fresh Fruits Produce Ltd., and M/s Narco Exports. In this regar .....

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Investment in the balance sheet of M/s NGK Trading Company. We have gone through the assessee s balance sheet of NGK Trading Company, a copy of which is available at page 5 of the paper book. It can be seen that the assessee made investment of ₹ 16,05,662/- in shop at South City-II, Gurgaon during the year under consideration and the remaining amount of ₹ 10 lac was invested in the preceding year, making the total figure of investment in shop at ₹ 26.05,662 appearing in the bal .....

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ote here is that the legislature has inserted provisions to section 36(1)(iii) by the Finance Act, 2003 w.e.f. 1.4.2004, which provides that any amount of interest paid in respect of capital borrowed for acquisition of an asset, etc., for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction. The effect of the insertion of this proviso is that even in a running bu .....

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6.05 lac in the current year and a sum of ₹ 10 lac was paid in the preceding year. The case of the assessee is that the shop was acquired for carrying on business from this premises. There is no material on record manifesting the date from which such shop was actually put to use. Going by the proviso to section 36(1)(iii), any interest paid for the period up to the date of actual use of the shop, cannot be allowed as deduction. The AO is directed to ascertain the date from which the assess .....

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arco Exports. The assessee charged interest on such advances to sister concerns at 11% against the payment of interest at 10% to 11% on loans and advances taken by him. As such, there can be no question of making any disallowance of interest towards the use of interest bearing funds for non-business purpose. 10. The next item is cash and bank balance of ₹ 1,50,17,867/- which includes demand drafts in hand amounting to ₹ 51,03,840/-. The very fact that this much cash and bank balance .....

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is still in the possession of the assessee, the interest paid thereon has to be allowed as deduction. 11. The next item is repayment of old unsecured loans amounting to ₹ 60 lac. The assessee repaid these loans taken earlier for business purpose on which he was paying interest @ 11.33%, as against fresh loans taken on interest @ 10% to 11% per annum. It is, therefore, self evident that there is no loss of revenue in the repayment of unsecured loans. Even otherwise, the repayment of busines .....

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ents were not shown in the books of account. On being called upon to explain as to why the provisions of sections 69/69B be not applied, the assessee stated that these investments were made by means of withdrawals from his capital account. Not convinced, the AO made disallowance of ₹ 84.48 lac u/s 69B of the Act, which came to be deleted in the first appeal. The Revenue is aggrieved against the deletion of this addition. 14. We have heard the rival submissions and perused the relevant mate .....

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