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Judgment
PER S. RIFAUR RAHMAN, AM :
This appeal is filed by the assessee against the order of Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 04.06.2025 for the Assessment Year 2012-13 raising following grounds of appeal :-
“The ld AO as well as CIT (Appeals) erred in making the following additions which are not justified as per facts of the case and law:
1.Making an addition of Rs.65,272 as per Rule 80(2)(iii) which is duplication to the extent Rs.65,242 which was already added back by the appellant.
2.The AO erred in disallowing Rs.14,423 u/s 36(1)(va) and the ld. CIT(A) blindly mentioning the decision of Checkmate Service without going into the fact that the e no de y in payment of any PF dues.
3.The ld AO erred in making an addition Rs.634,998/- on account of alleged mismatch of income as per books and Form 26 AS whereas the appellant had already considered the full amount as income. The CIT(A) erred in directing the AO to verify rather deciding himself the issue.
4.The ld AO erred in not granting the credit for TDS of Rs 15,108 which could not be claimed in an earlier year as the deductor had deposited it in later year. ITAT, G-Bench, Delhi in this assessee's case in ITA No.1665/Del/2020 order dt 07/02/2023 has allowed the similar TDS credit. The CIT(A) erred in issuing direction to AO in place of adjudicating the issue himself.
5.The ld. AO erred in disallowing interest amounting to Rs.42,09,837 on borrowed funds taken and utilized for business purposes only several years ago and had been allowed in those years as deduction in regular assessments. Rule of consistency and facts do not require any disallowance. CIT(A) in summary manner rejected the ground without considering detailed facts as were filed before him.
6.The ld AO erred in making addition of Rs.12,00,000 as unexplained investment whereas the same was made through regular bank a/c, duly recorded in account books and reflected in audited financial statements. The AO had seen books of accounts and bank statement during assessment proceedings and made the addition on his own surmises and conjectures much against evidences produced. CIT(A) has summarily rejected plea without considering the detailed letter filed before him.
7.The ld AO erred in making an addition of depreciation of Rs.28,75,049 which works out to be double disallowance of the same amount. It is not permitted in law. The CIT(A) in summary manner has brushed aside this ground without going into the merits of the case.
8.The ld AO erred in making addition for Municipal Tax of Rs.5,50,270 in such manner that the disallowance has resulted into double disallowance of the same amount. The CIT(A) summarily has rejected this ground without considering the facts.
9.The ld AO erred in not giving credit for MAT b/f u/s 115 JB of I.T. Act while computing the tax on assessed income.”
At the time of hearing, ld. AR of the assessee submitted that assessee is not pressing Grounds No.1, 3, 4, 7, 8 & 9. With regard to Ground No.2, he submitted that the issue is relating to PF & ESI which assessee is not pressing at this stage.
Coming to Ground No.5, ld. AR submitted the relevant facts, AO observed from the record that assessee has taken loan from the bank and it is not sure that assessee has made interest payments and how the loan was utilised, therefore, assessee was asked to submit and substantiate the purpose of availing loan, interest payment and utilization of the same with the supporting documents. In response, assessee submitted that with regard to interest payments of Rs.48,58,505/-, the full amount of loan was paid during the year and companies also received interest income of Rs.1,20,684/-whereas assessee invested only Rs.1,30,48,315/- as compared to total assets of Rs.9,89,96,158/-. After considering the above submissions, the AO observed that assessee never clarified the purpose of availing loan and utilization of the same. Even after allowing several opportunities, still assessee has not clarified the purpose of availing loan and utilization. Accordingly, he disallowed Rs.42,09,817/- (Rs.48,58,505 minus Rs.6,48,668).
Aggrieved assessee preferred an appeal before the NFAC, Delhi. Assessee filed appeal and grounds of appeal and also filed written submissions along with it order passed u/s 263, assessment order under section 143(3) r.w.s. 263 of the Income-tax Act, 1961 (for short ‘the Act’), ITAT order wherein 263 order was dismissed. After considering the submissions of the assessee, ld. CIT(A) dismissed various grounds raised by the assessee with the observation that no evidences were given regarding the additions/disallowances made by the AO and merely assessee has filed 263 order, order giving effect of 263 order and ITAT order.
Aggrieved with the above order, assessee is in appeal before us.
At the time of hearing, ld. AR of the assessee submitted that the assessee company had borrowed Rs 10 Crore from HDFC bank LTD in the year 2006 primarily for the purpose of massive renovation and for acquiring new plant & machinery, to modernise 30 year old commercial complex at Jaipur, entering into joint venture with another company for the expansion of company's real estate business and for acquiring additional properties for earning lease rental in Bangalore, Gurgaon and Jaipur. He further submitted that the amount of loan was spent as under :-
Fin. Year Amt spent on major AC Plant & DG repairing of Plant & Machinery Equipment 2006-07 50,47,922 4,40,000 2007-08 37,42,922 -2008-09 63,58,905 4,50,000 2009-10 54,18,180 1,88,76,000 2010-11 52,37,127 -2011-12 69,25,153 52,440 3,27,30,209 2,01,39,258 Grand Total 5,28,69,457
He further submitted that the company's commercial complex is more than 30 years old commercial complex which is approx. 1,05,000 sq. ft. centrally air conditioned complex which has prestigious tenants like Reliance Industries Ltd, IFCI, Oriental Insurance Co. Ltd, ECGC, UTI, Oriental Bank of Commerce, Central Bank of India and Bank of Baroda etc. Its old machinery had become obsolete and used to have very frequent break down and was giving poor service at a very high cost of repairs. Some portion of plant & machinery thus undergo massive overhead every year since 2006. He submitted that to finance the required amount, funds were borrowed from HDFC Bank Ltd. and apart from the amount spent on the massive repairs and renewals of old plants, machinery, following other investments were made out of borrowed funds.
Jt. Venture with Jatin Investment {P} Ltd Rs.76,75,000 for development of commercial property in Indirapuram, Ghaziabad during F Y. 2006-07
Purchase of property at Jaipur from Rs.96,03,642 Megha Real Mart {P} Ltd. {payment made from 20~8 to 2012}
Purchase of property in Bangalore Rs.19,78,833 from M/s Adarsh Developers
Purchase of land from DLF Univers.al Ltd Rs.12,00,000 Gurgaon {booking amount}
Investment in shares, stocks, Rs.1,30,09,712 and Mutual fund
Capital work in progress Rs.12,07,465
Funds utilized in purchasing various Rs.38,02,008 Other terms relating to business
Amt. returned back to HDFC Bank Rs.86,53,883 as unused funds during F.Y 2011-12 TOTAL Rs.10,00,00,000
From the above, he submitted that it becomes clear that :
That the money was borrowed way back in 2006 and in all these years, interest on this loan had been allowed even in some scrutiny assessments.
No new money had been' borrowed in this relevant previous year
All the borrowings have been used for the purpose of the assessee's business.
Therefore, he pleaded to delete the addition of Rs 42,09,837 made by the AO without considering the past accepted history of the case and in a casual manner and rule of consistency must be followed where the facts have remained the same.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. We observed that AO has noticed that assessee has claimed interest expenditure of Rs.48,58,505/- during the year and assessee was asked to substantiate the same. We observed from the record that assessee is a commercial complex and it has taken loan from HDFC bank. As per the data brought to our notice, the loan was borrowed in 2006 and over the years, the claim of the assessee was accepted and allowed. The assessee has not borrowed any new loan during the previous year and as per the record, the loan was taken in 2006 and relevant borrowings were applied for the purposes of business. Since the loan was borrowed in the earlier year and the assessee was constantly claiming the interest expenditure, the same cannot be disallowed in the year under consideration. Accordingly, ground no.5 is allowed.
Coming to next ground no.6, the relevant facts are, during assessment proceedings, the AO observed that assessee had acquired a plot at DLF and made a payment of Rs.12 lakhs during the year under consideration. When the assessee was asked to furnish the source of above payment, in response, assessee furnished copy of allotment letter by DLF Utilities Limited, copy of receipt of payment and copy of schedule of payment. With regard to source of the same, it was submitted that no sources of company were used to acquire the above said plot. After considering the same, the AO observed that the source explained by the assessee is not satisfactory. Accordingly, he disallowed the same. Ld. CIT (A) also dismissed the ground raised by the assessee.
At the time of hearing, ld. AR of the assessee submitted as under :-
“The learned AO has made another addition of Rs.12,00,000 in disregard to the facts as placed before him. The ld. AO erred in making addition of Rs.12,00,000 as unexplained investment whereas the investments were made through regular bank account, out of running balance and recorded in the audited books of account and reflected in the audited final financial statement. The appellant in support of this produced the books of account and bank A/C statement. The AO has ignored these evidences and incorrectly found that the source of investment in missing.
It was initial payment for booking with DLF Universal Ltd towards the cost of plot of land at Garden City, Gurgaon The bank statement (now also attached) reveal that in Feb 2012, the payment of Rs.12,00,000 out of opening balance that day at Rs 84,75,521 was made. A residential complex was planned to be constructed on the said plot to earn additional lease rental income. As the available balance in bank was sufficient for payment of Rs.12,00,000, no special or separate arrangement or borrowing was needed. Copy of bank statement of HDFC Bank and letter of allotment from DLF Utilities Ltd are enclosed. As the investment in out of explained sources appearing in balance sheet, no addition in called for in this case, Necessary evidence being bank statement was on the file of AO. It be kindly deleted.”
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. We observed that assessee has invested Rs.12 lakhs in DLF Utilities Limited towards cost of plot of land at Garden City, Gurgaon. As per the bank statement, the assessee has made the payment out of its regular funds. Since the assessee has utilized regular funds for above investment, the sources are already explained in the books maintained by the assessee. Therefore, ground no.6 is accordingly allowed.
In the result, the appeal filed by the assessee is partly allowed.