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Facts
The assessee declared an income which was processed under Section 143(1). Subsequently, the case was selected for scrutiny, and the AO noticed a claim of interest payment on a loan allegedly taken from entities providing bogus entries. The AO disallowed this interest.
Held
The Tribunal held that the disallowance of interest on the loan amount of Rs. 25 lakhs, which was already deleted by a coordinate bench for AY 2012-13, is to be deleted. The AO is directed to recompute the income accordingly.
Key Issues
Whether the disallowance of interest on loans taken from entities alleged to be involved in bogus entries is justified, especially when part of the loan has been deemed genuine by a previous tribunal order?
Sections Cited
143(1), 57(iii), 250
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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH : MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
For Assessee : Shri Vimal Punmiya, Ld. CA For Revenue : Shri Sushil Bhagwat Shendge, Ld. Sr.DR Date of Hearing : 19-11-2025 Date of Pronouncement : 30-12-2025 O R D E R This appeal has been preferred by the assessee against the order dated 26-06-2025 impugned herein passed by the ADDL/JCIT(A)-1, Kolkata/Ld. Commissioner of Income Tax (appeals) (in short “Ld. Commissioner”) u/s. 250 of the Income Tax Act, 1961 (in short „the Act‟).
In the instant case, the assessee had declared total income at Rs. 5,24,780/- by his filing return of income on dt. 31-03- 2014,which was initially processed u/s. 143(1) of the Act, without making any variation in the income returned, however,
subsequently, selected for scrutiny through Computer Assisted Scrutiny Selection (CASS) and accordingly statutory notices were issued calling for various details which were filed from time to time by the assessee.
On perusing the details filed, the AO noticed that the assessee has claimed interest payment of Rs. 8,52,594/- (being part of gross interest of Rs.15,00,000/-) made on loan taken from the entities, who were allegedly engaged in providing bogus entries to various parties. During the AYs. 2011-12 and 2012-13, the said loan was considered as unproved loan from bogus parties involving in providing bogus entries and, therefore, the AO show caused the assessee to provide the details and justification of claim of deduction u/s. 57(iii) of the Act.
The assessee in response to the same submitted that loan taken in earlier assessment years were genuine loan transactions, accordingly interest paid on such loans, is claimed deductible from interest income u/s. 57(iii) of the Act.
Though the AO considered the aforesaid claim of the assessee, however, found the same to be untenable in the light of the findings of the DCIT (Investigation) and ultimately disallowed being interest on unproved loans claimed u/s. 57(iii) of the Act. The assessee being aggrieved, challenged the said addition/disallowance by filing first appeal before the Ld. Commissioner, however, could not get any relief, as the Ld.
Thus, the assessee being aggrieved has challenged the impugned order.
Heard the parties and perused the material available on record. Admittedly, the assessee during the AY. 2011-12 had taken loan of Rs. 1 crore from M/s. Nakshatra Business Pvt. Ltd. and M/s. Viraj Mercantile Pvt. Ltd., which resulted into making the addition by the AO pertaining to AY. 2011-12, against which, the appeal is still pending before the Ld.CIT(A).
Subsequently, the assessee during the AY. 2012-13 has also taken the loan amount of Rs. 25 lakhs from M/s. Josh Trading Pvt. Ltd., which also resulted into making the addition by the AO and affirmation of the same by the then Ld.CIT(A), however, the Hon‟ble Co-ordinate Bench of the Tribunal vide order dt. 27-09-2021 in assessee‟s own case for the AY. 2012-13 being deleted the said addition of Rs. 25 lakhs.
However, subsequently in the assessment year under consideration, the AO disallowed the interest expenses claimed to the tune of Rs. 8,52,594/- being part of the gross interest paid to the tune of Rs. 15 lakhs on the loans taken from the aforesaid parties to the tune of Rs. 1,25,00,000/- in the previous years and, therefore, the assessee preferred first appeal before the Ld. Commissioner,
It is also a fact that during the subsequent assessment year, the Ld.CIT(A) by taking cognizance of the order dt. 27-09- 2021passed by the Hon‟ble Co-ordinate Bench of the Tribunal in assessee‟s own case for the AY. 2012-13 wherein the Bench deleted the addition of Rs. 25,00,000/-, vide order dt. 18-02- 2025deleted the identical disallowance with regard to interest paid to M/s. Josh Trading Pvt. Ltd., on such loan amount of Rs. 25 lakhs which is not in existence now.
However, the Ld. CIT(A) in the said order, noted that in case the addition of loan from other two parties, would be deleted by the higher authorities in AY. 2011-12 or the year when such loans were taken, then the disallowance of interest paid to these two entities would also get deleted. Otherwise, the disallowance of interest will sustain.
Before this court, the assessee has claimed that the addition of Rs. 25 lakhs made qualoan taken during AY. 2012-13 on the basis of which partaddition on account of disallowance of interest has been made in this case, has already beendeletedby the Hon‟ble Co-ordinate Bench of the Tribunal in the assessee‟s case for the AY. 2012-13. Thus, the proportionate disallowance quainterest paidonthe said amount of loan, may be deleted and rest of the disallowance be directed to be deleted on finalization
As observed above that the Ld. CIT(A) in the order 18-02- 2025 not only deleted the identical disallowance with regard to interest paid to M/s. Josh Trading Pvt. Ltd., on loan amount of Rs. 25 lakhs, however, in the order, also noted that in case of deletion of addition of loan amount of Rs. 1 Crores taken from other two parties, by the higher authorities in AY. 2011-12 or the year, when such loans were taken, then the disallowance of interest paid to these two entities, would also get deleted, otherwise, the disallowance of interest will sustain.
Thus in view of the order of the then CIT(A) (supra), no further order is required, as the order of the Ld. CIT(A) is loud and clear.
With regard to disallowance in respect of loan amount of Rs. 25 lakhs, which has already been deleted by the Hon‟ble Co- ordinate Bench of the Tribunal in the case referred to above, thus the addition made on account of disallowance of interest paid to extent, on such loan amount of Rs. 25 Lakhs, is deleted.
Thus, the AO is accordingly directed to re-compute the income by deleting the proportionate disallowance, as directed above.
In the result, appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 30-12-2025