ACIT CC 7(3), MUMBAI vs. CALCULUS PROPERTIES PRIVATE LIMITED, MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRINARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No.5908-5911 & 6164/Mum/2025 (Assessment Years: 2018-19, 2019-20, 2020-21, 2021-22 & 2022-23) ACIT CC 7(3), Mumbai Calculus Properties Private Limited Room No.655, 6th floor, Aayakar Office No.6, 1st Floor, Afshar 283, Vs. Bhavan, MK Road, Mumbai- S.B.S. Road, Fort, Mumbai-400001 400020 PAN: AADCC5951E Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

C.O. No. 317/Mum/2025 (Arising out of ITA No.6164/Mum/2025) (Assessment Years: 2022-23) Calculus Properties Private ACIT CC 7(3), Mumbai Room No.655, 6th floor, Aayakar Limited Office No.6, 1st Floor, Afshar Vs. Bhavan, MK Road, Mumbai-400020 283, S.B.S. Road, Fort, Mumbai- 400001 PAN: AADCC5951E Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assessee by : Shri Vimal Punmiya, CA Revenue by : Smt. Esther Ninghauvung Hanghal, CIT DR. Date of Hearing : 02.07.2026 Date of Pronouncement : 18.08.2026 O R D E R Per Bench: The aforesaid appeals are filed by the Revenue, challenging the orders of Commissioner of Income Tax Appeals [in short, “the Ld. CIT(A)”], for the

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Assessment Years(AYs) 2018-19, 2019-20, 2020-21, 2021-22 and 2022- 23. The assessee is representing through its cross-objection for AY 2022-23. The details of impugned orders are as under:

Appeal No. Assessment Year Date of CIT(A)’s Date of AO’s orders u/s 250 orders and section 5908/Mum/2025 2018-19 30.07.2025 05.06.2023 u/s 147 5909/Mum/2025 2019-20 30.07.2025 07.06.2023 u/s 147 5910/Mum/2025 2020-21 30.07.2025 01.06.2023 u/s 147 r.w.s 143(3) 5911/Mum/2025 2021-22 30.07.2025 31.12.2022 u/s 143(3) 6164/Mum/2025 2022-23 30.07.2025 01.06.2023 u/s 143(3)

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited been processed u/s 143(1) of the Income Tax Act, 1961 (in short, “the Act”). Further, as per information emerging from a search and seizure action u/s 132 conducted on 18.12.2021, the case of M/s. CFM Assets Reconstruction Ltd. Pvt. Ltd. and its related entities/individuals, the assessee was also covered by the search proceedings. Subsequently, the case of assessee was centralized in Central Circle 7 (3), Mumbai. The Ld. AO noted that the case of assessee is covered u/s 149(1)(b) of the Act, since the initiation was after three years, but not more than ten years, from the end of the relevant assessment year. It is noted by the Ld. AO that the assessee has entered into bogus unsecured loan transactions amounting to Rs.1.00 crore with M/s. Eknath Developers LLP during the year under consideration. Accordingly, he formed the reason to believe that the income of assessee chargeable to tax has escaped in the form of entries in assessee’s books of accounts amounting to Rs.1.00 crore. Accordingly, the case of assessee was re-opened under the provisions of section 148 of the Act. Ld. AO referred to the evidence gathered from the mobile phone and laptop of one Shri D P Nair from the premises covered u/s 132 of the Act located at 1st floor, Wakefield House, Sprott Road, Ballard Estate, Mumbai in the form of incriminating materials such as documents, what’s app chats, excel files, loose papers etc. Ld. AO, thereafter has discussed the modus operandi of M/s. CFM Assets Reconstruction Ltd. Pvt. Ld. AO also noted about the evidence found and seized during the search action which are broadly divided into two categories, first the evidence related to cash transaction and second evidence related to accommodation entries. The said 3

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited evidences were found and seized as Annexure A-1(digital data), Annexure A-2 (loose paper that is pages 1 to 59), Annexure A-3 (loose paper that is pages 1 to 356).

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited the assessee with the interest debited under P & L account amounting to Rs.1,25,753/- pursuant to bogus unsecured loan, should not be treated as non- genuine expenses and added to the total income.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited transactions are carried out through banking channel only and there is no cash involved in any of these transactions.

Book Profit u/s 115JB of the assessee for the year under assessment is computed as under: 6

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Particulars Amount (Rs.) Amount (Rs.) Total Income u/s 115JB (as per return of (-)5,64,192 income) Add: Disallowance u/s 14A 84,920 84,920 Book Profit (-) 4,79,272

“7.5 DECISION- I have considered the discussion in the assessment order and submission of the appellant. The basis of addition of Rs 100,00,000/- and interest of Rs.1,25,753/- can be summarized as under:- During the year under consideration, the appellant had shown unsecured loans of Rs 1 Crores received from M/s Eknath Developers LLP. During the search action on the appellant group, an excel sheet marked as Y DEPAR Total 18_1.xls" was found on the computer of Shri D P Nair, the executive assistant of Shri Om Prakash Porwal (promoter of CFM Group). Said excel sheet contained the details of transactions relating to period 27/3/2017 to 3/10/2018, wherein Shri D P Nair (DPN) had transferred fund of Rs.8,05,61,003/- to Shri Narottam Jobanputra (NAR). Shri D P Nair has admitted that all the transactions recorded against "Nar" are actually referring to cash transactions and hence not recorded in the books of account of either of the parties. Shri Narottam belongs to the Shree Naman Group of companies, which is promoted by Shri Jayesh Shah, a key shareholder in CFM ARC. Cheque transactions found in the excel sheet were duly recorded in the books of the respective entities of CFM group, which imply that the cashtransactions recorded in the excel sheet had actually taken place, but were not recoded in the books. 7

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Excel sheet contains a entry of amount of Rs 1 Crore being transferred from DPN to NAR on 11/1/2018 followed by entry of Rs 1 Crore from M/s Eknath Developers LLP to the appellant on 6/2/2018. M/s Eknath Developers LLP had negative capital of Rs 4,28,00,448/- and has shown loss of Rs 4,38,34,797/- as on 31/3/2018 and therefore did not have the capacity to advance loans. Retraction statement of Shri DPN was filed after a period of 18 months and was self- serving and without any basis. It was held that the amount of Rs 1 Crores was paid by the appellant group was to Shri Narottam by cash and same money was routed back to the appellant as unsecured loans from M/s Eknath Developers LLP. The unsecured loan of Rs 1 Crore from M/s Eknath Developers LLP was treated as unexplained and added u/s 68 of the Act. Since the unsecured loans of Rs 1 Crore were treated as bogus, the interest paid of Rs 1,25,753/- on the loans was also treated as bogus and non-genuine and was disallowed u/s 37 of the Act. 7.6. Before me, the appellant has stressed on the following points:- 1. Appellant has executed a loan agreement with M/s Eknath Developers LLP and paid an interest at the rate of 8.50% p.a. on the loan taken. 2. Entire loan was repaid with interest on 30/3/2019. 3. It had discharged its onus by submitting the documents such as Loan agreement, relevant bank statements reflecting the transactions, ledger confirmation of the lender, ITR Form of the lender for AY 2018-19, financial statements of the lender for FY 2017- 18 and ledger of the lender in the books of the appellant till the date of repayment of loan. 4. Lender is assessed to income tax, GST and is registered in the registrar of companies, thereby proving its identity and existence. 5. Excel sheet reproduced by the AO in the assessment order is different from the excel sheet annexed with the statement of Shri D P Nair. The excel sheet annexed with the statement of Shri D P Nair does not contain the additional column of mode of transfer. 6. Shir D P Nair has no role to play in affairs of the company and had retracted the statement given during the search. 7. Another excel sheet was found in the found in the laptop of Shri D P Nair, which does not contain entries the alleged cash transactions and said excel sheet was ignored by the AO. 8. The excel sheet relied upon by the AO is nature of a dumb document. 7.7. I have considered the facts narrated in the assessment order and weighed them against the arguments put forth by the appellant. As held by the AO, I do agree that the retraction statement of Shri D P Nair was in a nature of afterthought. I find that Shri D 8

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited P Nair, in its original statement, had admitted that the transaction with Shri Narottam were not recorded in the books of accounts. While Shri Nair admitted to unrecorded transactions with Shri Narottam, he did not concede that the amount paid to Shri Narottam was directly linked to, or routed through, the unsecured loan from M/s Eknath Developers. It appears that such connection was assumed by the AO. Upon independent examination of the loan transaction with M/s Eknath Developers, it is evident that the appellant has provided supporting documentation including the Income Tax Returns (ITR) of the lender Financial statements of the lender Bank account statements Confirmation from the lender Although M/s Eknath Developers reported losses and negative share capital in the relevant year, it has sufficient funds in form of secured and unsecured loans, exceeding the Rs 1 crore advanced to the appellant. Furthermore, the appellant demonstrated the genuineness of the loan by paying interest thereon and duly deducting Tax Deducted at Source (TDS) on this interest. More importantly, the entire loan amount has been repaid with interest on 30/3/2019, i.e. much before the search action on the appellant group. Considering the evidence presented, I find that the appellant has discharged its onus to prove the genuineness of the unsecured loan from M/s Eknath Developers. The AO's addition of Rs 1 crore to the appellant's income under Section 68 of the Income Tax Act appears to be based on an assumption that the amount paid to Shri Narottam was routed as an unsecured loan. The fact that the loan amount was fully repaid to M/s Eknath Developers LLP further corroborates the appellant's claim. Therefore, the addition of Rs 1 crore made to the income of the appellant under Section 68 of the Act cannot be sustained. The Assessing Officer is hereby directed to delete this addition. 7.8. Further, the appellant has claimed interest of Rs 1,25,753/- on the unsecuredloans of Rs 1 Crores. Since, the loan was treated as bogus, the interest amount was also treated as non-genuine. I find that the interest of Rs 1,25,753/- was actually paid through banking channels with deduction of TDS. The issue of unsecured loans stands decided in the favour of the appellant as discussed in the paras above. Therefore, there is no basis for treating the interest payment as non-genuine. AO is directed to delete the addition of Rs 1,25,753/- 7.9. Ground nos 5 & 6 are allowed.” 9. Regarding disallowance u/s 14A of the Act, the Ld. CIT(A) deleted the addition with the following observations:

“7.12 DECISION- I have considered the facts of the case, discussion made in the assessment order and submission of the appellant. The appellant had earned dividend income of Rs 1,88,000/- which has been claimed as exempt. Against the same, it had worked out the disallowance u/s 14A of the Act at Rs 45,200/- and added the same to its income. AO has not accepted the calculation made by the appellant and has reworked 9

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited the calculation as per the rule 8D of the IT Rules at Rs 1,30,120/-. The difference of Rs 84,920/- has been added to the income of the appellant u/s 14A of the Act, which is challenged before me. 7.13. It is seen that the appellant in its working u/s Rule 8Ds has considered only such investments which have yielded exempt income during the year. It has relied upon number of judicial pronouncements in support of its calculation. The Rule 8D clearly lays down that all such investment, income from which does not or shall not form part of the total income shall be considered for the purpose of calculation. Thus, even if the investment has not yielded any exempt income but is capable of yielding such exempt income in the future, it shall be considered for the purpose of the calculating the disallowance u/s 14A. However, there are number of judicial pronouncements, where Hon'ble Courts and Tribunals have held that only such investment which have yielded exempt income be considered for the purpose of Rule 8D(ii) and 8D(iii). Following the said case laws, it is held that the appellant has correctly calculated the disallowance of Rs 45,200 u/s 14A of the Act. The addition of Rs 84,920 made u/s 14A cannot be sustained. AO is directed to delete the same.” 10. Since the Ld. CIT(A) has deleted the entire substantive additions/disallowances made by the Ld. AO, the Revenue, being aggrieved by the said order, has preferred the present appeal before us.

“Grounds of appeal for ITA No.5908/Mum/2025AY 2018-19 1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹1,00,00,000/- made by the Assessing Officer u/s 68 of the Act on account of unexplained cash credit in the form of unsecured loan received from M/s. Eknath Developers LLP. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not discharged the primary onus of proving the identity, creditworthiness of the lender, and genuineness of the transaction as required u/s 68 of the Act. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that documentary evidences were found during the course of search action which proved that the amount of Rs. 1 crores was paid by the assessee group to Shri Narottam Jobanputra by cash which is unaccounted and same money was routed back to the assessee as unsecured loans from M/s. Eknath Developers LLP and that Shri D. P. Nair in this original statement had admitted that the transaction with Shri Narottam Jobanputra were not recorded in the books of accounts.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of 1,25,753/- made by the Assessing Officertowards interest claimed by the assessee on the aforesaid unsecured loan which having been held to be non-genuine. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of 284,920/- made by the Assessing Officer u/s 14A r.w.r. 8D of the Income-tax Rules, 1962. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had made substantial investments capable of yielding exempt income, had not furnished a proper working of disallowance, and had not substantiated that no expenditure was incurred in relation thereto, warranting disallowance u/s 14A of the Act. 7. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing." 11. At the outset, Ld. DR representing the Revenue submitted that the Ld. CIT(A) was in error in deleting the addition of Rs.1.00 crore made by the Ld. AO u/s 68 of the Act as the assessee had not discharged the primary onus of providing the identity, creditworthiness of the lenders and genuineness of transactions as required u/s 68 of the Act. Further, it is submitted that during the search action certain evidences were found against the assessee and further, an amount of Rs.1.00 crore was paid by the assessee to Narottam Jobanputra in cash which is unaccounted and same was debited to the assessee as unsecured loan from M/s. Eknath Developers LLP and this fact has been admitted by Shri D P Nair in his original statement that the transactions with Shri Narottam Jobanputra were recorded in the books of accounts. It is further submitted that the payment of interest by the assessee was also held to be non-genuine by the Ld. AO, therefore, the same cannot be allowed as deduction to the assessee.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 12. Regarding disallowance u/s 14A, the Ld. DR objected to the findings of Ld. CIT(A) that the Ld. AO has rightly made the disallowance invoking provisions of section 14A r.w.r 8D of the Income Tax Rules which the CIT(A) failed to appreciate that the assessee had made substantial investment capable of yielding exempt income but had not furnished a proper working of disallowance and had not substantiated that no expenditure was incurred in relation to such exempt income. Thus, the same warrants disallowance u/s 14A of the Act. It was the prayer that the order of Ld. CIT(A) was erroneous on both grounds and, therefore, the same is liable to be reversed, the additions/disallowances made by the Ld. AO, thus deserves to be restored. Ld. DR also furnished a report containing comments of the Ld. AO on the issue. The same is extracted hereunder for the sake of completeness of facts:

“5. Comments of the A.O (a) During the year under consideration, the assessee had shown unsecured loans of Rs 1 Crores received from M/s Eknath Developers LLP. During the search action on the assessee group, an excel sheet marked as Total 18_1.xls" was found on the computer of Shri D P Nair, the executive assistant of Shri Om Prakash Porwal (promoter of CFM Group). Said excel sheet contained the details of transactions relating to period 27/3/2017 to 3/10/2018, wherein Shri DP Nair had transferred fund of Rs. 8,05,61,003/- to Shri Narottam Jobanputra. Shri D P Nair has admitted that all the transactions recorded against "Nar" are actually referring to cash transactions and hence not recorded in the books of account of either of the parties, Shri Narottam Jobanputra belongs to the Shree Naman Group of companies, which is promoted by Shri Jayesh Shah, a key shareholder in CFM ARC. Cheque transactions found in the excel sheet were duly recorded in the books of the respective entities of CFM group, which imply that the cash transactions recorded in the excel sheet had actually taken place, but were not recorded in the books. Excel sheet contains an entry of amount of Rs 1 Crore being transferred from Shri D. P. Nair to Shri Narottam Jobanputra on 11/1/2012 followed by entry of Rs 1 Crore from M/s Eknath Developers LLP to the appellant on 6/2/2018. M/s Eknath Developers LLP had negative capital of Rs 4,28,00,448/- and has shown loss of Rs 4,38,34,797/- as on 31/3/2018 and therefore did not have the capacity to advance loans. 12

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited (b) Retraction statement of Shri D. P Naar was filed after a period of 18 months and was self-servine and without any basis. The Assessing Officer observed that, the amount of Rs. 1 Crores was paid by the assessee group to Shri Narottam Jobanputra by casts and same money was routed back to the assessee unsecured loans from Mis Eknath Developers 1.1. The Ld. CITA) in his findings has also agreed that retraction statement of Shri DP Nair was in the nature of afterthought and that Shri D. P. Nair, in his original statement, had admitted that the transaction with Shri Narottam Jobanputra were not recorded in the books of accounts. This signify that, the Assessing Officer was justified in arriving at the conclusion that the unsecured lean amounting to Rs. 1 crore is unexplained and therefore is added u/s. 68 of the Act. Since the unsecured loans of Rs 1 Crore was treated as bogus, the interest paid of Rs 1,25,753/- on the loans was also treated as bogus and non-genuine and was disallowed u/s 37 of the Act. (c) In view of the above, the decision of the Ld.CIT(A) deleting the addition of Rs. 1,00,00,000/-made u/s. section 68 and of Rs. 1,25,753/- as interest paid on unsecured loan is not acceptable. Hence, further appeal before the Hon'ble ITAT is recommended on this issue, if approved.” 13. Per contra, Ld. Counsel of the assessee had submitted brief synopsis of the case and had argued that the assessee has taken an unsecured loan of Rs.1 crore and had paid interest amounting to Rs.1,25,753/- on the said loan at the rate of 8.5% per annum. It is further clarified that the loan taken by the assessee had been repaid finally on 30.03.2019, which is an undisputed fact on records verifiable from the ledger account of the party in the books of assessee. Ld. AR submitted that the assessee has furnished following documents in support of genuineness of transaction with M/s. Eknath Developers LLP-

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 14. It was the submission that while the assessee has furnished aforesaid documents before the authorities below, the assessee has sufficiently discharged its primary onus of substantiating the genuineness of transaction with M/s. Eknath Developers LLP. The Ld. AR further argued that the allegation of Ld. AO was that the assessee has obtained the loan as Inter-Corporate Unsecured Borrowing (ICUB). That the agreement was on plain paper instead of stamp paper. On this aspect, it is submitted that merely because the loan agreement is not on stamp paper, the genuineness of transaction cannot be adjourned. The non- execution of loan agreement on stamp paper could be a violation under any other law, but this violation shall not have a bearing on the income tax proceedings. The fact that the said agreement was not executed on stamp paper does not automatically negate the underlying transaction. Regarding the status of lender, it is submitted by the Ld. AR that the lender has registration in compliance with several government authorities such as Income Tax Act 1961, LLP Act 2008 and GST Act 2017. It was the submission that the basis of allegation and impugned addition was the excel sheet found during the search and seizure action from the laptop of Shri D P Nair and the statement of Shri Nair recorded u/s 132(4) of the Act dated 08.12.2021. It is submitted that the Ld. AO has extracted the relevant part of the excel sheet in the assessment order by modifying it with one extra column regarding the mode of transfer by adding there in‘cash and ICD’ which was not there in the original excel sheet impounded during the search action. Therefore, the observation of Ld. AO based on modified information, which was 14

ITA No. 5908-5911 & 6164 5911 & 6164/Mum/2025 & CO 317/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Calculus Properties Private Limited not found from the search cannot be the basis for addition in the case of assessee. not found from the search cannot be the basis for addition in the case of assessee. not found from the search cannot be the basis for addition in the case of assessee. Ld. AR has furnished such original as well as modified extract in his submissions Ld. AR has furnished such original as well as modified extract in his submissions Ld. AR has furnished such original as well as modified extract in his submissions which are reproduced hereunder: ereunder:

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited  Amar Natvarlal Shah vs. ACIT 60 ITD 560 (Ahm)  ACIT vs. Shailesh Shah 63 ITD 153 (Mum)  Maladar Oil Marketing Co. vs. ACIT 91 TTJ 348 (Mum)  DD Malhan vs. DCIT 91 TTJ 947 (Del)

a) DCIT(CC)-1(3) vs.M/s Jainam Investments ITA No. 6099/Mum/2016 b) DCIT 25(1) vs M/s. YRV International ITA No. 1414/Mum/2017 c) Shri Ashok Nagraj Mehta vs. ACIT Circle 19(1) ITA No.2100/Mum/2016 and ITA No.1645/Mum/2017 d) Asst CIT-19(1) vs.Shri Dilip Chimanlal Gandhi ITA No. 7079/Mum/2016 e) ITA No. 7049 & 7050 /Mum/2016 Jitendra M Kitawat vs.ΙΤΟ 18(1)(5) f) Smt. Ritu Kamal Singhal vs.ITO-24(3)(4), MUMBAI g) ITA No. 7047/Mum/2016 Jitendra M Kitawat (HUF) vs. ITO 18(1)(5) h) [2015] 58 taxmann.com 226 (Madras)HIGH COURT OF MADRAS Commissioner of Income-tax vs Mark Hospitals (P.) Ltd. i) [2014] 42 taxmann.com 473 (Gujarat) HIGH COURT OF GUJARAT Commissioner of Income-tax -1 v. Apex Therm Packaging (P.) Ltd. j) [2013] 36 taxmann.com 429 HIGH COURT OF MADHYA PRADESH Commissioner of Income-tax-II, Indore v. Vaibhav Cotton (P.) Ltd.* k) [2014] 45 taxmann.com 203 (Rajasthan) HIGH COURT OF RAJASTHAN Commissioner of Income-tax, Ajmer v. Jai Kumar Bakliwal l) [2013] 40 taxmann.com 285 (Allahabad) HIGH COURT OF ALLAHABAD Commissioner of Income-tax-II, Lucknow vs. Shalimar Buildwell Pvt. Ltd m) IN THE ITAT AHMEDABAD BENCH 'D' Sarjan Corporation v.Assistant Commissioner of Income-tax. n) [2012] 23 taxmann.com 374 (Luck.) (TM) IN THE ITAT LUCKNOW BENCH (THIRD MEMBER) Vishnu Jaiswal v. Commissioner of Income-tax (Appeals)- o) 2014] 50 taxmann.com 419 S (Gujarat) HIGH COURT OF GUJARAT Commissioner of Income-tax-III vs. Manoj Indravadan Chokshi p) [2015] 61 taxmann.com 28 (Mumbai - Trib.) IN THE ITAT MUMBAI BENCH 'E' Assistant Commissioner of Income-tax v. Sanjay M. Jhaveri*

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited q) [2014] 45 taxmann.com 473 (Rajasthan) HIGH COURT OF RAJASTHAN Commissioner of Income-tax, Jaipur –II v. Morani Automotives (P.) Ltd. r) Hon'ble ITAT Mumbai in an identical case of Asstt. Commissioner of Income Tax, Central Circle 18 and t 19, Mumbai Vs. A Nitin Fire Protection Ind. Ltd. pronounced on 9.02.2016 ITA No.757/Mum/2015, s) a recent landmark decision by Hon'ble ITAT, Hyderabad in an identical case and having the same issue of Komal Agrotech Pvt. Ltd. Vs. The Income Tax Officer 2(1), Hyderabad t) Recent Judgment delivered by Jurisdictional Hon'ble ITAT, Mumbai for an identical case i.e. Income Tax Officer, M/s Shree Laxmi Estate Pvt. Ltd. V/s. 15(3)(3) On 29.12.2017 ITA-5954/Mum/2016 u) ITAT E Bench in M/s. SDB Estate Pvt Ltd vs. ITO-(5)(3)(2) in ITA No. 584/Mum/2015: AY 2008-09 v) The ACIT 25(2) Vs M/s. H.K. Pujara Builders (ITAT Mumbai) ITA No. 3127/Mum/2017 w) ACIT VS. SHREEDHAM BUILDERS BOMBAY TRIBUNAL on dated Jun 22, 2018.” Summarizing all the above contentions, the following can be concluded: The assessee had taken a loan of Rs. 1,00,00,000 from Eknath Developers LLP. The assessee has made the repayment of the entire balance outstanding in the lender's ledger account. The assessee has discharged its primary onus by submitting all the relevant documents during the course of assessment proceedings. No evidence has been brought on record by the Ld.AO to discharge his onus of proving as to why the loan transactions are not genuine. The allegation that there was corresponding payment in cash on the basis of seized material has not been proved conclusively by the Ld. AO by making any sort of further inquiries. In view of the foregoing facts, documentary evidences on record, and the categorical findings recorded by the learned Commissioner of Income-tax (Appeals), it is respectfully submitted that the unsecured loan transaction under consideration is genuine in nature. Accordingly, no interference is warranted with the order of the learned CIT(A) deleting the addition made under section 68 of the Act and the consequential disallowance of interest thereon, and the appeal filed by the Revenue deserves to be dismissed.”

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited exempt income during the year. It is a settled principle of law that the average value of investment cannot be taken into consideration while computing the disallowance under Rule 8D(2)(ii), where the investments have not yielded any income during the year under consideration and therefore, they would not form part of the average value of investments. Ld. AR has also furnished the working of computation of disallowance u/s 14A r.w.r 8D following the aforesaid principle according to which the average monthly balance investments under Rule 8D(2)(ii) has worked out at Rs.45,20,000/-. Accordingly, the disallowance should be of Rs.45,200/- (1% of the average investment). It was the submission that in the present case, the assessee had already made a reasonable and proportionate disallowance by considering only such investment which yielded exempt income, however, the Ld. AO has not pointed out any defect in the assessee’s working and without recording any dissatisfaction as mandated u/s 14A(2), mechanically applied Rule 8D by including investments which had not fetched any exempt income.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited a) Pr. CIT vs M/s Ballarpur Industries Limited ITA No. 51 of 2016(Bom) b) CIT vs M/s Delite Enterprises ITA No. 110 of 2009 (Bom) c) Chemnivest Limited vs CIT 378 ITR 33 (Delhi) d) CIT vs Winsome Textile Industries Ltd. 319 ITR 204 (P&H) e) CIT vs Shivam Motors (P) Ltd. (2015) 230 Taxman 0063 (Allahabad) f) CIT vs Corrtech Energy Pvt. Ltd. ITA No. 239 of 2014 (Guj)

“In view of the facts and circumstances of the case, the submissions made hereinabove, the documentary evidences placed on record, and the settled position of law, the assessee most respectfully prays that this Hon'ble Tribunal may be pleased to dismiss the appeal filed by the Revenue and uphold the well-reasoned and speaking order passed by the learned Commissioner of Income-tax (Appeals) deleting the addition of Rs. 1,00,00,000/- made under section 68 of the Income-tax Act, 1961 in respect of unsecured loan received from Eknath Developers LLP, the consequential disallowance of interest amounting to Rs. 1,25,753/-, as well as the disallowance made under section 14A of the Act.” 20. We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. Referring to the submissions of assessee, the order of Ld. CIT(A) and the order of assessment, it is found that the assessee has submitted various documents to substantiate that the loan availed by the assessee from M/s. Eknath Developers LLP was a genuine transaction. Further the Ld. CIT(A), while analyzing the addition made by the Ld. AO had noted that the entire loan was repaid on 30.03.2019. The assessee has discharged its onus by submitting documents such as loan agreement, relevant bank 19

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited statement reflecting the transactions, ITR Forms for AY 2018-19, financial statement of lender for FY 2017-18 and the ledger of the lender in the books of accounts of the assessee till the repayment of loan. The Ld. CIT(A) found substance in the assessee’s plea that the lender is assessed to Income Tax, GST and is registered in the registrar of companies, thereby proving its identity and existence. Ld. CIT(A) also noted that the excel sheet reproduced by the Ld. AO in assessment order is different from the excel sheet annexed with the statement of Shri D P Nair. The excel sheet annexed with document of DP Nair does not contain additional column showing “Mode of Transfer”. He further noted that Shri DP Nair has no role to play in the affairs of the company and had retracted the statement given during the search.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited assessee’s claim therefore, the addition of Rs.1 crore made to the income of assessee u/s 68 of the Act cannot sustain. The aforesaid findings of Ld. CIT(A) based on facts on records, after critical analysis of the corroborative evidence could not be negated by the Revenue by bringing on record any contrary fact, material or decision to dislodge the same. Under such circumstances, we do not find any error in the order of Ld. CIT(A), which needs modification or interference. We thus, uphold the decision of Ld. CIT(A) in deleting the additions u/s 68 of the Act for Rs.1.00 crore and Rs.1,25,753/- on account of non-genuine payment of interest.In result, Ground of Appeal Nos.1 – 4 raised by the Revenue stand dismissed in above terms.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 23. We find substance in the findings of the Ld. CIT(A), which are based on the judicial pronouncements relied upon by the assessee. Further, the decision of the Ld. CIT(A) is in consonance with the decision of the Hon’ble Special Bench of the ITAT, Delhi, in the case of ACIT v. Vireet Investment Pvt. Ltd. [2017] 82 taxmann.com 515 (Delhi). Therefore, we find no infirmity in the decision of the Ld. CIT(A) warranting our interference. Accordingly, the same is upheld. In the result, Ground Nos. 5 and 6 of the Revenue’s appeal stand dismissed.

Revenue’s Appeal ITA No.5909/Mum/2025 for AY 2019-20

“1On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of 77,00,000/- made by the Assessing Officer towards interest claimed by the 1 assessee on the unsecured loanamounting to Rs. 1,00,00,000/-received from M/s. Eknath Developers LLP which having been held to be non-genuine in the assessment order passed for AY 2018-2019." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of?1,00,00,000/- made 2 by the Assessing Officer u/s 68 of the Act for AY 2018-2019 on account of unexplained cash credit in the form of unsecured loan received from M/s. Eknath Developers LLP. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not discharged 3 the primary onus of proving the identity, creditworthiness of the lender, and genuineness of the transaction as required u/s 68 of the Act. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that documentary evidences were found during the course of search action which proved that the amount of Rs. 1 crores was paid by the assessee group to Shri 22

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Narottam Jobanputra by cash which is unaccounted and same money was routed back to the assessee as unsecured loans from M/s. Eknath Developers LLP and that Shri D. P. Nair in this original statement had admitted that the transaction with Shri Narottam Jobanputra were not recorded in the books ofaccounts. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of 71,42,844/-made by the Assessing Officer u/s 14A r.w.r. 8D of the Income-tax Rules, 1962. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had made substantial investments capable of yielding exempt income, had not furnished a proper working of disallowance, and had not substantiated that no expenditure was incurred in relation thereto, warranting disallowance u/s 14A of the Act. 7. The appellant craves leave to add, alter, amend, OR withdraw any of the above grounds of appeal at the time of hearing." 26. Ground of Appeal Nos.1 to 4 are regarding deleting the disallowance of Rs.7 lakh made by the Assessing Officer towards interest claimed on the unsecured loan received from M/s. Eknath Developers LLP during the assessment year 2018-19.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited so as the principal disallowance of Rs.1.00 crore on account of unsecured loan has been deleted by the Ld. CIT(A) and so by us, accordingly we do not find any infirmity in the order of Ld. CIT(A) to be interfered with. Ground of Appeal Nos.1 to 4 of revenue are thus dismissed.

Revenue’s appeal ITA No.5910/Mum/2025 for AY 2020-21

“1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of 789,00,000/- made by the Assessing Officer u/s 68 of the Act on account of 1 unexplained cash credit in the form of unsecured loan received from Mis. Alba Garnnents Pvt. Ltd. and M/s. Aventez Media & Technologies Ltd. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not discharged 2 the primary onus of proving the identity, creditworthiness of the lender, and genuineness of the transaction as required u/s 68 of the Act. 24

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that documentary evidences were found during the course of search action which proved that 3 bogus unsecured loan transactions took place between CFM group of companies, Calculus Properties Pvt. Ltd. with various parties viz. Aventez Media & Technology Ltd., Alba Garments Pvt. Ltd and the same have been backed up by cash receipts. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of? 2,21,093/-made 4 by the Assessing Officer towards interest claimed by the assessce on the aforesaid unsecured loan which having been held to be non-genuine. 5. On the facts and in the circumstances of the case and in law, the Ld. CTT(A) erred in deleting the disallowance of?1,87,4447-made by the Assessing Officer u/s 14A r.w.r. 8D of the Income-tax Rules, 1962. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had made substantial investments capable of yielding exempt income, had not furnished a proper working of disallowance, and had not substantiated that no expenditure was incurred in relation thoreto, warranting disallowance u/s 14A of the Act. 7. The appellant craves leave to add, alter, amend, OR withdraw any of the above grounds of appeal at the time of hearing." 31. Ground No.1 to 4, pertains to addition u/s 68 for Rs.89.00 lakh made by the Ld. AO on account of unexplained cash credit in the form of unsecured loan received from M/s. Alba Garments Pvt. Ltd. and M/s. Aventez Media and Technology Ltd. The basis of aforesaid addition was similar to the addition which was made in AY 2018-19 for Rs. 1.00 Crore. On this aspect, it is submitted by the Ld. AR that the assessee has furnished documents to explain the essential three ingredients under section 68 of the Act, i.e., identity and creditworthiness of the lender and genuineness of the transactions. The documents so furnished are loan agreement, bank statement of assessee and the lender, ledger account and confirmation, income tax return and

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited acknowledgement of the lender, financial statement of the lender and ledger evidencing repayment. On this aspect, Ld. CIT(A) had observed as under:

“7.6.5. I have considered the submission of the appellant and weighed the same against the conclusions drawn made by the AO in the assessment order. As the facts stand, appellant has taken a loan of Rs 50 Lacs from M/s Alba Garments Pvt Itd on 30/8/20219 and a loan of Rs 39 Lacs from Aventz Media & Technologies Ltd on 16/11/2019. Both the loans amount haves been received by cheques. The loan transactions are supported by the loan agreements entered into with both the parties. In support of the loan transactions, appellant has submitted details such as loan agreements, the bank statements of the lenders, bank statement of the appellant showing all the transactions with the party, ledger confirmations of the lenders, ITR Forms and acknowledgements of the ITR filed by the lender for AY 2020-21, financial statements of the lender for FY 2019-20 and ledger of the lender in the books of the appellant till the date of repayment of loan. It is seen that the appellant has paid interest on the loans and also deducted TDS on the same. The loan from M/s Alba has been repaid with interest on 21/5/2021, whereas loan from M/s Aventez has been repaid with interest on 20/4/2021. In case of M/s Aventez Media, part of the loan of Rs 20 Lacs has been repaid in the same year i.e. on 25/11/2019. Both the lender concerns are assessed to income tax, GST and are registered in the registrar of companies, thereby proving their identity and existence. M/s Alba has the share capital of Rs 1,81,22,630/- as on 31/3/2020 along with reserves of Rs 5,57,80,013 and returned income of Rs 13,12,410/-, M/s Aventez has a share capital of Rs 3,56,57,000 as on 31/3/2020 with reserves of Rs 64,493,447/- and income of Rs 1,38,60,163/-. In my view, both the lender concerns have adequate capacity to advance loans in question. With the forgoing facts, it can be said that the appellant has discharged its onus of proving the identity of the lenders and their capacity to advance the loans. 7.6.6. Regarding the third aspect pertaining to the genuineness of the loan transactions, it is observed that the Appellant has discharged its onus by furnishing confirmation from the respective lenders. Crucially, the subject loan amounts have been duly repaid along with accrued interest, on which Tax Deducted at Source (TDS) has been appropriately remitted. This substantiates the Appellant's assertion of having fulfilled its obligation to demonstrate the genuineness of these loans. On the allegation that the loan amount was backed by the cash receipt, it is noted that the Assessing Officer (AO) primarily relied upon documents seized during the search action and the statement recorded from Shri D.P. Nair, which form the basis for the AO's conclusion that the loan receipts were, in essence, a return of prior cash payments. In his statement, Shri D.P. Nair conceded that some transactions recordedin the seized material were unaccounted for, it is crucial to note that he did not admit that the loans in question were specifically linked to, or originated from, the aforementioned cash payments. It appears that such connection was assumed by the AO. It is seen that the seized documents relied upon by the AO contain entries of payments and receipts pertaining to the entire group, not exclusively the Appellant. While the AO did cite certain instances from the seized material purporting to show a one-to-one correlation between cheque transactions and equivalent cash transactions, such a correlation is absent in the case of the two specific loan amounts in question. The loan from M/s Alba was received on 30/8/2019. However, in the relevant excel sheet, there is no entry of 26

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited cash payment during the period from 31-7-2019 to 3-9-2019. Similarly, the loan of Rs 39 Lacs was received from M/s Aventz on 16/11/2019. However, in the relevant excel sheet containing the transaction, there is no entry of cash payment during the period from 14-11-2019 to 16-11-2019. The AO has also referred to cash payment of Rs.2.35 Crores made during the period from 4-6-2019 to 19-6-2019. It is seen that in the same excel sheet, there are other instances of bank receipts of Rs 3.20 Crores. The link between the cash payment of Rs 2.35 Crores and loans received by the appellant is unsubstantiated and appears to be based on assumption. 7.6.7. Considering the above, I am of the view that the appellant has furnished the relevant document to establish the identity and capacity of the lenders, genuineness of loan transaction. The conclusion that the cash payment made by the appellant group was received back in form of the loan is not backed by concrete evidence but is based on unsubstantiated assumption. Therefore, the addition of Rs 89,00,000/-made to the income of the appellant u/s 68 of the Act cannot be sustained. The AO is directed to delete the same. 7.8. Further, the appellant has claimed interest of Rs 2,21,093/- on the unsecured loans of Rs 89,00,000. Since, the loan was treated as bogus, the interest amount was also treated as non-genuine. I find that the interest of Rs 2,21,093/- was actually paid through banking channels with deduction of TDS. The issue of unsecured loans stands decided in the favour of the appellant as discussed in the paras above. Therefore, there is no basis for treating the interest payment as non-genuine. AO is directed to delete the addition of Rs 2,21,093/-.” 32. The submissions of Ld. DR on this aspect are identical to the submissions for AY 2018-19 and it was the prayer that the additions made by Ld. AO needs to be restored and the order of Ld. CIT(A) is liable to be set aside.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited decision of Ld. CIT(A), who examined the facts of the case and has particularly noted that the identity of the lenders is not in dispute, the lenders have adequate capacity to advance such loans, further regarding genuineness of the loan transactions, the assessee has discharged its onus by furnishing confirmation from the respective lenders and finally the loans have been duly repaid along with accrued interest on which the tax deducted at source has been properly remitted. In absence of any contrary fact brought on record by the Revenue to dislodge such findings of Ld. CIT(A), we do not find any infirmity in the impugned decision of Ld. CIT(A), so as to disturb the same. Accordingly, we concur with the decision of Ld. CIT(A) and uphold the same. In result, Ground Nos. 1 to 4 of the Revenue’s appeal are dismissed.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Revenue’s appeal ITA No.5911/Mum/2025 for AY 2021-22

“1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer u/s 68 of the Act on account of unexplained cash credit in the form of unsecured loan received from M/s. Zinna Fashion Pvt. Ltd., M/s. Alba Garments Pvt. Ltd. and M/s. Aventez Media & Technologies Ltd. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not discharged the primary onus of proving the identity, creditworthiness of the lender, and genuineness of the transaction as required u/s 68 of the Act. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that documentary evidences were found during the course of search action which proved that bogus unsecured loan transactions took place between CFM group of companies, Calculus Properties Pvt. Ltd. with various parties viz. Zinna, Fashion Pvt. Ltd., Aventez Media & Technology Ltd., Alba Garments Pvt. Ltd. and the same have been backed up by cash receipts. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of 2,94,901/- made by the Assessing Officertowards interest claimed by the assessee on the aforesaid unsecured loan which having been held to be non-genuine. 5. The appellant craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing.” 37. Ground Nos.1 to 4 regarding interest on loans availed by the assessee from M/s. Zinna Fashion Pvt. Ltd., M/s. Alba Garments Pvt. Ltd. and M/s. Aventez Media Technologies Ltd. The facts in the present issue regarding interest paid by the assessee on aforesaid ground are identical to the facts of interest on loan in aforesaid appeals of Revenue for AY 2018-19. Accordingly, our decision remains the same for this year also and our observations for AY 2018-19 shall apply mutatis mutandis to the AY 2021-22 also. In result, Ground Nos. 1 to 4 of the Revenue stands dismissed in above terms as the addition/disallowance made by the Ld. AO which was deleted by the Ld. CIT(A)

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited cannot sustain in the eyes of law. We thus approve the findings of the Ld. CIT(A) on this aspect.

Revenue’s appeal ITA No.6164/Mum/2025 for AY 2022-23

“1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of? 20.559/-made by the Assessing Officer towards interest expenditure claimed by the assessee on the unsecured loans amounting to Rs. 150,00,000/-received from M/s. Alba Garments Pvt. Ltd. and Rs. 41,00,000/-received from M/s. Aventez Media & Technologies Lid, which have been held to be non-genuine in the assessment orders passed for AY 2020-2021 and AY 2021-2022. 2. On the facts and circumstances of the case and in law, the Ld. CTT(A) erred in deleting the additions made by the Assessing Officer u/s 68 of the Act for AY 2020-2021 and AY 2021-22022on account of unexplained cash credit in the form of unsecured loans received from M/s. Alba Garments Pvt. Ltd. and M/s. Aventez Media & Technologies Ltd. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had not discharged 3 the primary onus of proving the identity, creditworthiness of the lender, and genuineness of the transaction as required u/s 68 of the Act. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that documentary evidences were found during the course of search action which proved that bogus unsecured loan transactions took place between CFM group of companies, Calculus Properties Pvt. Ltd. with various parties viz. Zinna, Fashion Pvt. Ltd., Aventez Media & Technology Ltd., Alba Garments Pvt. Ltd. and the same have been backed up by cash receipts. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in granting relief to the assessee in respect of disallowance u/s. 36(1)(vii) r.w.s. 36(2) of the Act amounting to Rs. 8,01,700/- without appreciating the fact that the assessee company could neither establish from its books of accounts that the loans and advances was given in the ordinary course of business nor could it establish that the amount was given as loan in the ordinary course of money lending business. 6. On the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the amount of Rs. 18,46,529/-is 6 part and parcel of principal amount 30

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited of loans and advances given to M/s. Infovault Services Pvt. Ltd. and it does not includes the interest income offered for the AY 2010-11 and AY 2011-12 amounting to Rs. 8,01,700/-. 7. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in granting relief to the assessee in respect of addition of Rs. 3,88,687/-made u/s. 69A of the Act without appreciating the fact that the cash found at the premises of the assessee has no correlation with the cash balance of the assessee appearing in cash book. 8. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in appreciating that, the cash found was not part of 8 the regular books of account and the assessee could not submit any corroborative document to satisfactorily explain the source of cash which was seized during search action. 9. The appellant craves leave to add, alter, amend, OR withdraw any of the above grounds of appeal at the time of hearing." 40. Grounds of Appeal Nos. 1 to 4 are identical to Grounds of Appeal for AY 2021-22. Since the facts of the addition/disallowance on interest on unsecured loans which are held to be non-genuine by the Ld. AO but are reversed by Ld. CIT(A) treating those to be genuine loans, which we have approved, therefore, the interest thereon cannot be held an ingenuine expenditure claimed by the assessee. We, thus, find substance in the order of Ld. CIT(A), we uphold the same. In result, Ground Nos. 1 to 4 of the Revenue’s appeal stand dismissed.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited Rs.18,46,529/- was advanced to M/s. Infovault Services Pvt. Ltd. and it does not include the interest income offered for AY 2010-11 and 2011-12 amounting to Rs.8,01,700/-

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 43. During the assessment in the present case, the Ld. AO has alleged that the interest income accrued was already received by the assessee till 05.07.2013 and that since the outstanding amount of Rs.18,46,529/- is part and parcel of the principal amount, the same cannot be allowed u/s 36(1)(vii) as it is not a revenue expenditure an accordingly has made the addition to the total income of the assessee vide impugned order u/s 143(3) dated 1st June, 2023. It is submitted that the assessee has booked accrued interest amounting to Rs.8,01,700/- in AYs 2010-11 and 2011-12. It is further submitted that the amount received by the assessee should be first adjusted against the principal amount and thus, the outstanding amount represents interest income which was offered to tax by the assessee. As per common practice that in case the repayment of any debt, the payment should be first adjusted against the principal amount and then balance, if any, should be adjusted against interest liability. It was therefore, the prayer that the payment when reduced from the principal, the interest is charged on the reduced principal amount, had it been adjusted against interest first, the loan life extends and interest is charged again on the principal yet to be paid.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited under consideration includes principal as well as interest component and, therefore, the interest component would be allowable u/s 36(1)(vii) of the Act. The decision of Ld. CIT(A) is extracted hereunder for the sake of completeness: “7.10 DECISION: I have considered the submission of the appellant. The appellant had advanced a loan of Rs. 65,00,000/- in the FY 2008-09 to M/s. Infovault Services Private Limited. Since, the company was struck off by the MCA authorities, the appellant has written off the amount of Rs. 18,48,529/- shown as outstanding against the said company as bad debts. The contention of the appellant is that the said company had repaid the principal amount of company amount of Rs. 53,75,000/- till 05-07-2013 towards principal amount of Rs. 65,00,000/-and thereafter, no repayment was received from the company even after multiple reminders /correspondences. Consequently, the balance outstanding of Rs. 18,46,529/- being due for period of years has been written off in the books of accounts. 7.10.1 The claim of the appellant was not accepted by the AO on the ground that loans and advances given of Rs.65,00,000/-has not been routed through profit and loss account and the assessee has not offered such amount as revenue in earlier years. It was held by the AO that the appellant had offered interest income of Rs. 2,73,625/-for the A.Y.2010-11 and Rs.5,28,075/- for the A.Y.2011-12 and the said interest amount of Rs.8,01,700/- as accrued to the appellant was already received and adjusted against the amount of Rs 35,25,000/- received from M/s. Infovault Services Pvt. Ltd. between the period 01.04.2011 to 05.07.2013. 7.10.2. Before me, the appellant has objected to the conclusion drawn by the AO and contended that in case of repayment of any debt, the payment is first adjusted against the principal amount and then balance, if any, should be adjusted against interest liability and that the interest is charged on the reduced principal amount. 7.10.3. I do find merit in the submission of the appellant. Once a loan is advanced, the amount that is outstanding in the books of the lender includes the outstanding Principal amount and the accrued interest. The said outstanding amount keeps reducing as when the loan is repaid by the borrower. As stated by the appellant, the principal amount is first gets adjusted against the repayment. Total amount advanced by the appellant was Rs. 65,00,000/- on which the appellant has accounted for interest of Rs 8,81,871 (including TDS of Rs 80,171/-). Total outstanding amount was Rs 72,21,529/- out of which Rs 53,75,000/- stands repaid by the borrower. Balance of Rs. 18,46,529 comprises the interest portion of Rs. 8,01,700/- and principal amount of Rs. 10,44,829/- . Since, the interest amount of Rs. 8,01,700/- has been accounted and offered as income in the profit and loss account of earlier years, the said amount can be allowed as bad debts u/s 36(1)(vii) of the Act. As regards, the principal amount of Rs 10,44,829/-, the said amount was not offered as revenue receipt in the earlier years. Therefore, it does not qualify for deduction u/s 36(1)(vii) of the Act. The AO is directed to restrict the disallowance to Rs. 10,44,829/-. Appellant gets relief of Rs. 8,01,700/- 7.10.4 Ground no 5 is partly allowed.”

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 45. We have considered the rival submissions, perused the material available on record and the decisions of the authorities below. Admittedly, in the present case, the assessee had extended a loan of Rs.65,00,000/- to M/s. Infovault Services Pvt. Ltd. and had offered interest aggregating to Rs.8,01,700/- for AYs 2010-11 and 2011-12 in the respective years. The contention of the assessee is that, out of the total outstanding amount of Rs.72,21,529/-, the sum of Rs.53,75,000/- received from the said party was first adjusted against the principal amount, leaving a balance of Rs.18,46,529/-, comprising interest of Rs.8,01,700/- and principal of Rs.10,44,829/-. Accordingly, the assessee contended that, to the extent the interest component of Rs.8,01,700/- had already been offered to tax in the respective years, the same was allowable as a deduction towards bad debts under section 36(1)(vii) of the Act. The Ld. CIT(A) partly accepted the contention of the assessee and allowed the interest component under section 36(1)(vii), while upholding the disallowance of the principal component claimed by the assessee. On consideration of the facts and the findings recorded by the Ld. CIT(A), we find that the issue has been appropriately adjudicated after due appreciation of the material available on record. Accordingly, we find no reason to interfere with the findings of the Ld. CIT(A) at this stage. We, therefore, uphold the decision of the Ld. CIT(A). Accordingly, Ground Nos. 5 and 6 of the Revenue’s appeal stand dismissed.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 46. Ground No.7 of the Revenue is regarding relief granted to assessee in respect of addition of Rs.3,88,687/- u/s 69 of the Act. This issue was regarding cash found during the search at assessee’s premises at office No.11, Mezzanine Floor, EMCA House, 289, S.B.S Road, Fort, Mumbai, wherein a cash amounting to Rs.15,57,800/- was found, out of which the cash of Rs.15,12,000/- was seized. During the assessment proceedings it was explained that out of total cash found, an amount of Rs.2,50,000/- belongs to the assessee, 10,57,800/- belongs to M/s Growpure Agro Ventures LLP, and Rs.2,50,000/- belonged to M/s Strasscon Services LLP and that the cash found was as per the cash balances in their respective books. The Ld. AO was not convinced with such explanation by the assessee has treated the same as afterthought and the entire amount of Rs.15,12,000/- was added u/s 69 of the Act. The Ld. CIT(A) has decided the issue after verifying the facts on record and had decided the issue as under: “7.13.2. I have considered the submission of the appellant. The appellant has notprovided the basis on which it had allocated the ownership of the cash found to the three concerns. Further, there is a huge difference between the cash found and the cash balance as per the books of M/s Growpure Agro Ventures LLP and Strassoon Services LLP. The appellant has not explained where the remaining cash as per the books was kept. The contention of the appellant that the cash belongs to all three concerns is not backed by a plausible explanation. In my view, the entire cash of Rs 15,12,000 can be said to be belonging to the appellant. Since the cash balance as per the books of the appellant is Rs.3,88,686/-, the cash to that extent can be treated as explained. The balance excess cash of Rs.11,23,314/- can be treated as unexplained. The AO is directed to delete the addition of Rs 3,88,687/-. The addition to the extent of Rs 11,23,314/- is upheld.” 47. On this aspect, the Revenue is in appeal stating that the Ld. CIT(A) has not appreciated the facts correctly, being the cash found at the premises of the assessee and has no correlation with the cash balance in the books of assessee.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited 48. We have considered the rival submissions and perused the material available on record. We find that the assessee has made certain submissions before the Ld. AO as well as Ld. CIT(A). The Ld. AO has treated such submission as afterthought and was not satisfied with the assessee’s contentions; however, the Ld. CIT(A) has noted that the cash balance in the assessee’s books of accounts was showing for Rs.3,88,687/-, therefore, the assessee will get relief for such amount. Accordingly, the Ld. AO was directed to delete the addition to the extent of Rs.3,88,687/- and the addition of Rs.11,23,314/- was sustained.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited well as other two assessees without finding any fault in such details, the addition cannot be made. We accordingly, set aside the finding of the Ld. CIT(A) to the extent of confirming the addition for Rs.11,23,314/- and direct the Ld. AO to vacate the entire addition for cash found during the search u/s 69 of the Act.

Assessee’s CO No.317/Mum/2025 (Arising out of ITA No.6164/Mum/2025) Grounds “1. On the facts and circumstances of the case and in law, the impugned assessment order is required to be treated as invalid and bad in law as the said order was issued manually and without mentioning the Document Identification Number (DIN) which was in violation of CBDT's Circular No. 19/2019. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the disallowance of bad debts amounting to Rs. 10,44,829 claimed u/s. 36(1)(vii). 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of unexplained money of Rs.11,23,314 representing the cash found at the office premises of the appellant at the time of search.” 53. Ground No.1 is not pressed by the assessee, therefore, is dismissed as not pressed.

ITA No. 5908-5911 & 6164/Mum/2025 & CO 317/Mum/2025 Calculus Properties Private Limited cross-objection and therefore, the ground of cross-objection no.2 of the assessee stands dismissed.

Order pronounced in the open court on 18-08-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated : 18-08-2026. Ankit K., Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai