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Facts
The assessee, a partnership firm, collected funds from flat owners for maintenance and invested them, earning interest. This interest was erroneously shown as income and a deduction claimed, which the assessee later argued did not belong to the firm. The Assessing Officer disallowed the deduction.
Held
The Tribunal noted that the assessee failed to provide necessary documentation to substantiate their claim regarding the interest income and the deduction. The lower authorities also could not properly adjudicate the issue due to lack of evidence.
Key Issues
Whether the deduction claimed under Section 57 of the Income Tax Act for interest income, which the assessee later claimed did not belong to the firm, was admissible. Whether the AO and CIT(A) erred in disallowing the claim without proper consideration of the facts.
Sections Cited
57, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “K(SMC
Before: SHRI NARENDER KUMAR CHOUDHRYSHRI PRABHASH SHANKAR
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 27.02.2024, impugned herein, passed by the National Faceless Appeal Center (NFAC)/ Ld. Commissioner of Income Tax (Appeals) (in short Ld. CIT(A)) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2020-21.
M/s. Gurukrupa Group Logistic Services 2. In the instant case, the Assessee being a partnership firm was formed with the object of providing various services related to maintenance and upkeep of the premises/complexes and therefore was appointed on behalf of the promoters/developers, during the year under consideration. The Assessee collected funds from flat owner’s related to services qua maintenance and upkeep of premises and thus invested some of the funds in various fixed deposit and received interest to tune of Rs. 84,78,320/- and claimed the said amount as deduction u/s 57 of the Act.
Subsequently, the case of the assessee was selected for scrutiny to examine the issue qua deduction claimed u/s 57 of the Act. The Assessee before the Assessing Officer has claimed that said receipt of interest, as did not belong to the Assessee and thus the same was not shown in the profit and loss account of the Assessee’s firm, however, while preparing the ITR, the Accountant erroneously shown interest on FD under the head ‘income from other sources’ and claimed such deduction u/s 57 of the act, which in fact didn’t belong to Assessee’s firm. The Assessee further claimed that it has not claimed any expenditure to earn such interest. In fact, the said deduction was claimed to nullify a mistake committed by Accountant, by including the interest income in the total income. The facts remain that no income existed, belonged to the Assessee’s firm and nothing had included or received by it.
The Assessing Officer though considered the aforesaid claim of the Assessee qua interest, however not being satisfied with the same, ultimately disallowed the deduction claimed by more or less holding as under:
M/s. Gurukrupa Group Logistic Services “That interest income is the income of the Assessee as the Assessee itself has claimed the same under the head ‘income from other sources’. The deduction claimed u/s 57 is not supported with any material or facts or as per the provision of the Act. When the assessee was asked about the proof for deduction claimed, the Assessee claimed that it is not the income of the Assessee, whereas the Assessee itself shows the income in its return and claimed the deduction out of the same, the Assessee has failed to substantiate the same, with necessary proof. In this case, the assessee miserably fails in that aspect, therefore the Assessee’s claim of deduction u/ 57 of the act, is not admissible and this interest income amounting to Rs. 84,78,320/- is added back, as the Assessee income under the head of ‘income from other sources’ by being variation in respect of interest income.
The Assessee being aggrieved challenged the said addition by filing first appeal before the Ld. Commissioner, however, fails to substantiate its claim raised against the addition made by the AO and therefore the Ld. Commissioner by considering the peculiar facts and circumstances, affirmed the said addition, by holding more or less as under:
“That the Assessee is simply required to provide the accounts, as per MOU entered into with the promoter, the complete picture of income in collection from members, income earned on investments, various expenses incurred and also the income tax paid on such interest in controversy and therefore there should not be any ambiguity in it.
And therefore the Assessee being aggrieved has preferred this appeal.
M/s. Gurukrupa Group Logistic Services 7. Heard the parties and perused the material available on record. Admittedly the assessee before the authorities below has failed to file the relevant details and submissions, as observed by the Ld. Commissioner in the impugned order. The assessee has submitted that if one opportunity is provided to the Assessee then the assessee can file the relevant documents, as would be essentially required to substantiate its claim. The Ld. DR also suggested the same course of action by submitting that it would be appropriate, if the case be remanded back to the file of the Ld. Commissioner but with a condition that the Assessee shall file relevant document and details before the Ld. Commissioner, in due course of time.
Considering the aforesaid peculiar facts and circumstances, as both the authorities below specifically in the absence of relevant documents, failed to consider the issue involved in its right perspective and proper manner and thus for just and proper decision of case, substantial justice, fair play and equitable relief, we are inclined to remand the instant case to file of the Ld. Commissioner for decision afresh, however, subject to deposit of Rs 1,100/- in the Revenue Department under “other head” within 15 days of receipt of this order. Suffice to say that the Ld. Commissioner shall provide reasonable opportunity of being heard to the assessee.
The assessee is also directed to comply with the notices to be issued by the Ld. Commissioner and file the relevant documents, as would be essentially required to substantiate its claim. This court clarifies that in case of default, the Assessee shall not be entitled for any leniency.
In the result, Assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open court on 31.10.2025.