The Mumbai bench of the Income Tax Appellate Tribunal( ITAT ) has held that Interest on the loan of the leased portion of a building cannot be allowed as a work-in-progress when eligible for deduction under Section 24 of the Income Tax Act,1961.
The assessee namely M/s Alpha associates filed regular returns of income for relevant assessment years from AY 2008-09 to 2012-13,which were subjected to scrutiny assessments wherever applicable as per records. Subsequently, a search action on the premises of “ M/s Hiranandani Group” was carried out on 11/03/2014 by the Investigation wing of the Income-tax Department Mumbai.
Duringthe search proceeding on 12/05/2014, Sh. Niranjan Hiranandani, Managing Director of various companies of the group/ Partner of firms of the group, accepted booking of bogus purchases in books of accounts of the group entities amounting to ₹57,37,26,731/-. In post search proceeding before the Investigation wing, this amount was revised to ₹ 60,28,51,896.50/-.
The Assessing Officer has made the disallowance the reason the documentation of the purchase bills in dispute was not made according to the standard procedure followed by the purchasing department of the assessee group and bills have not been passed through certain checks by the Purchasing Department which was required in the normal course.
Secondly, the entries of purchases made in the SAP system ( i.e. books maintained electronically) using the user ID CLA0016have been offered before the settlement commission in case of other entities of the ‘Hiranandanigroup’, therefore the entries of the purchase bills in dispute made in the SAP system using the tainted User ID: CLA0016 are also bogus and liable for disallowance.
Sh Deepak Vibhute admitted that entries in respect of those ingenuine purchases were made in SAP systems ( software for maintaining business transactions) using the user ID “CLA0016”. He confirmed that said user was Sh Kishire Sawant, who expired on 20th No. 2012. The assessee has filed before us a certificate from the system administrator that the purchases in questionhave been entered by another user ID CLF 0076. This certificate was directed to be countersigned by the Managing Director of the assessee but the same has not been complied with. Therefore, this issue also needs verification at the end of the Assessing Officer.
A Coram of Shri Om Prakash Kant (Accountant Member) and Ms Kavitha Rajagopal (Judicial Member) held that interest on the loan in respect of the leased portion of the building cannot be allowed as work-in-progress as same is eligible for deduction u/s 24 of the Act under the head ‘income from house property. Accordingly, we direct the Assessing Officer to verify if the same has been claimed separately u/s 24 in the computation of income filed by the assessee. The appeal of the Revenue is accordingly allowed for statistical purposes.
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