SHANTA LAL CHOPRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following questions of law have been referred for decision under Section 256 of the IT Act in Ref. Appln. No. 149 of 1993 filed by the applicant and in Ref. Appln. No. 172 of 1993 filed by the assessee (sic Revenue):

(2.) BRIEF facts of the case are that the assessee is engaged in the business of real estate. He used to purchase land, raise construction thereon and sell the property to different persons. For the asst. yr. 1989 90 the assessee had received a sum of Rs. 65,000 from one Anil Kapur and Rs. 1,90,(900 from Smt. Shanta Kapur, mother of Anil Kapur. According to the assessee these amounts were received as advance for sale of property. The AO did not accept the version of the assessee and proceeded to treat these two advances as cash credit. The two amounts totaling Rs. 2,55,000 were added to the income of the assessee as income from undisclosed sources. The assessee filed an appeal and thereafter approached the Tribunal, but his claim that he had received this amount as an advance for sale of property was not accepted. All the authorities came to the conclusion that the version of the assessee was doubtful since the aforesaid two persons, namely Anil Kapur and Smt. Shanta Kapur had failed to show the source of the funds.

(3.) FOR the same year, the assessee had raised loans against security of certain FDRs from two banks. He received interest of Rs. 1,41,412 as interest on one FDR from one bank and Rs. 99,982 as interest from another bank. The total amount of interest which accrued was Rs. 2,41,395. As against this the assessee had paid interest in his loan account to the extent of Rs. 6,49,500. He had accordingly adjusted the interest received by him against the interest paid by him. The AO did not* accept the version of the assessee and came to the conclusion that the deposits were made by the assessee not for the purpose of business and, therefore, the interest accruing on the fixed deposits had to be added to his income. However, the Tribunal came to the conclusion that there was a direct nexus between the FDRs and the loans. The loans had been raised for the purpose of business and the FDRs were being pledged for the purpose of business. The Tribunal held that the amount of interest was income from business and not income from any other source. The Revenue assails this finding of the Tribunal.