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Income Tax Appellate Tribunal, MUMBAI BENCH “H”,MUMBAI
Before: SHRI AMIT SHUKLA & Ms. PADMAVATHY S.
O R D E R Per Padmavathy S (AM): This appeal of the revenue is against the order of Commissioner of Income- tax, National Faceless Appeal Centre (NFAC)[hereinafter ‘the Ld.CIT(A)’] dated 28/03/2023 for A.Y. 2018-19. The revenue raised the following grounds of appeal:-
2 ITA 1883/Mum/2023 Kheemaya Project LLP “1. Whether, on the facts and in circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition on account of interest income of R.7,56,21,843/- without appreciating the fact that the assessee has not provided the details of rate of interest at which the loans were disbursed with supporting documents.
Whether, on the facts and in circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the addition on interest income without taking into account the factual observation of the A.O that no commercial expediency for giving the loan given were submitted by the assessee with relevant documents.
3. Whether, on the facts and in circumstances of the case and in law, the Ld.CIT(A) is justified in deleting the addition on interest income without giving any logical reasoning as to why it was inferred that the loans though given in the same time period as loans taken could not have been given at a higher interest rate.
4. Whether, on the facts and in circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition on account of suppression of loans u/s 69B of the I.T. Act, amounting to Rs.2,64,72,535/- without appreciating the fact that the assessee has not provided details for the suppression of loans advanced as per the difference in balance sheet uploaded by the assessee.”
2. The assessee is a limited liability partnership firm engaged in the business of undertaking development and construction activity under slum rehabilitation authority at Kandivli (E). The assessee filed the return of income for A.Y. 2018-19 on 04/02/2019 declaring a total income of R.13,84,030/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the course of hearing, the Assessing Officer raised query with regard to the huge refund claimed by the assessee. The assessee submitted that it booked a loan of Rs.105.92 crores from DHFL and pending its deployment in business, the same was advanced @12% to NBFC and the developers which earned a total interest of Rs.4,52,62,157/-. The assessee further submitted that the tax on the interest received was deducted by the parties which amounted to Rs.44,95,475/-. The 3 ITA 1883/Mum/2023 Kheemaya Project LLP assessee also submitted that the assessee paid interest to DHFL @10% which resulted in net interest income of Rs.14,38,017/- only and, therefore, the major portion of the tax deducted at source is claimed in the return as refund. The Assessing Officer worked out interest income of the assessee by applying the rate of interest @12% for the whole year that came to Rs.12,08,84,000/- and held that the assessee has suppressed interest income to the tune of Rs.7,56,21,843/- i.e. Rs.12,08,84,000/- (-) Rs.4,52,62,167/-. The assessee submitted before the Assessing Officer that the loan from DHFL was received on multiple dates from October 2017 till the end of the year and that the advances were also accordingly given in tranches to various parties. The assessee submitted the copy of ledger account, bank account, and confirmation from the parties before the Assessing Officer praying that no addition is warranted. However, the Assessing Officer did not accept the submissions of the assessee and proceeded to make an addition towards suppressed interest for an amount of Rs.7,56,21,843/-. The Assessing Officer also made an addition under section 69B towards the difference between the outstanding advances as on 31/03/2018 and the loans received from the DHFL for Rs.2,64,72,535/- stating that the advances given is in excess of the loan and the same is to be treated as undisclosed investment under section 69B. The Assessing Officer levied tax under the provisions of section 115BBE on the said undisclosed investment. Aggrieved, the assessee filed appeal before the CIT(A). Before the CIT(A), the assessee submitted the relevant details pertaining to the loan. The CIT(A) allowed the appeal in favour of the assessee by holding that – “4.3.6 The appellant submissions are duly considered. It is evident both from the assessment order and submissions made that the appellant was in receipt of a loan of Rs.105,92,00,000 from DHFCL and Rs.2,12,00,000/- from other parties totaling to Rs.108,04,00,000/-. Further, the appellant extended loan of Rs. 106,61,00,000/- during the year under consideration.
4 ITA 1883/Mum/2023 Kheemaya Project LLP It is very clear from the above details that the appellant both received and expended loans during the period from October 2017 to March 2018 only. Hence, the AO's action of charging of 12% notional interest for entire year on the loan expended is not correct and hence, the addition of Rs.7,56,12,843/- made by the AO is hereby deleted.” “4.4.4 The appellant's submissions are considered. It is seen from the balance sheet submitted that both Secured and Unsecured loan under Liabilities side and Loans and Advances in Assets side were shown as outstanding including the interest accrued thereon which was already offered for taxation. Hence, considering the same the addition of Rs.2,64,72,535/- is found to be not in order and hence the same is deleted. The appellant succeeds on this ground.”
Aggrieved, the revenue is in appeal before the Tribunal.
The Ld.DR submitted that the assessee did not provide any documentary evidence in support of the advances given out of the borrowed funds from DHFL. The Ld.DR further submitted that the assessee has not substantiated charging of interest @12% on the advances given and that details as to when the advances were given to the parties is also not substantiated justifying the interest income. The Ld.DR supported the order of the AO by stating that the AO has correctly made the addition by applying interest @12% for the whole year for want of details from the assessee. With regard to the addition made under section 69B, the Ld.DR submitted that assessee could not properly reconcile the difference between the balance in advance account as on 31/03/2018 and the amount of loan taken from DHFL and, therefore, the Assessing Officer is correct in adding the difference as undisclosed investments.
The Ld.AR, on the other hand drew our attention to the various details submitted by the assessee with regard to the loan taken from DHFL and also the 5 ITA 1883/Mum/2023 Kheemaya Project LLP advances given to various parties, which the Assessing Officer has reproduced in the assessment order. The Ld.AR further submitted that from the bank statements submitted before the Assessing Officer, it will be clear that the loan from DHFL was taken only from October, 2017 and, therefore, charging of interest for the whole year on the advances given out of the said loan is not correct. With regard to the addition under section 69B, the Ld.AR submitted that the amount outstanding in the advance account includes the interest receivable from the party net of TDS and this fact has been clearly explained to the Assessing Officer which is reproduced in his order of assessment. Accordingly, the Ld.AR submitted that the CIT(A), after considering the details furnished has correctly deleted the addition made. 6. We heard the parties and perused the materials on record. During the year under consideration, the assessee has taken a loan of Rs.105.92 lakhs from DHFL at an interest rate of 10% p.a. The date of receipt of loan is as per the details given below:-
Date of receipt of Loan amount Amount Received 06.10.2017 Rs.25,00,00,000 11.10.2017 Rs.49,00,00,000 21.11.2017 Rs.15,28,00,000 02.02.2018 Rs. 9,21,00,000 05.03.2018 Rs. 7,43,00,000 --------------------- Total Rs.105,92,00,000 ----------------------- It is further noticed that the assessee has given advances out of the said loan to various parties as per details given below:-
Date Concern Amount of loan 10.10.2017 Thar Commercial Fin P Ltd Rs.15,00,00,000 10.10.2017 D K Realty (India) Rs. 9,90,00,000 6 ITA 1883/Mum/2023 Kheemaya Project LLP 11.10.2017 Thar Commercial Fin P Ltd Rs. 10,00,00,000 11.10.2017 Thar Commercial Fin P Ltd Rs. 10,00,00,000 21.11.2017 White Lion Real Estate P Ltd Rs. 15,28,00,000 03.02.2018 White Lion Real Estate P Ltd Rs. 9,20,00,000 08.03.2018 White Lion Real Estate P Ltd Rs. 7,43,00,000 ---------------------- Total Rs.105,81,00,000 ----------------------- 7. We also notice that the assessee has submitted before the Assessing Officer stating that the loan from DHFL was received on multiple dates starting from October 2017 and that the advances out of the said loan have been extended only after the said date. The Assessing Officer has in the order of assessment has reproduced the submissions of the assessesse and the fact that the assessee has submitted the loan statement from DHFL, the ledger copies of the loans advanced and the copies of bank statement to substantiate the above submissions. The Assessing Officer has also reproduced the ledger copies and other details submitted by the assessee in the order of assessment. From the ledger accounts reproduced in the assessment order, it is very clear that the assessee has lent the loan after October, 2017 on various dates and that interest is calculated considering the number of days for which the loan was advanced. Given this, we are unable to understand or appreciate why despite reproducing all the details the Assessing Officer proceeded to calculate interest for the whole assessment year. Since it is evident from the details submitted by the lower authorities that the assessee has obtained the loan from DHFL only in October 2017 and has advanced the same to various parties out of the said loan, we see no logic in Assessing Officer calculating interest for the whole year. Therefore we hold that there is no infirmity in the findings of the CIT(A) deleting the addition towards interest. This ground of the revenue is dismissed.
7 ITA 1883/Mum/2023 Kheemaya Project LLP 8. With regard to the addition made under section 69B, we notice that the assessee had made the below submission before the Assessing Officer (as reproduced on pages 12 & 13 of the assessment order):
We hereby provide details of loan and advances given + interest accrued along with TDS deducted by party Name of the party Opening Given during Interest TDS deducted Closing Balance Balance as the year accrued by party as on 01.04.2017 31.03.2018 Whitelion Real 31,91,00,000 87,86,267 8,78,625 32,70,07,642 Estate Developers P Ltd Agarwal Financial 55,853 55,853 Consultancy Orbit Venture 49,50,000 49,50,000 devlopers Parag Sanghavi 50,00,000 3,07,397 53,07,397 Sarika Fabrics 25,00,000 1.19,178 11,918 26,07,260 Thar Commercial 64,00,00,000 3,60,49,315 36,04,932 67,24,44,383 Finance Pvt Ltd D.K. Realty (India) 9,90,00,000 9,90,00,000 P Ltd Damodhar Suruchi 5,00,000 5,00,000 Developers Total 50,05,853 1,06,61,00,000 4,52,62,157 44,93,475 1,11,18,72,535