M/S. SOHAM ESTATES,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE -1, THANE

आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal by the assessee is directed against the order dated 28.11.2025 passed by the learned Commissioner of Income

2 ITA No. 818/Mum/2026 M/s Soham Estates Tax (Appeals), Pune-11[hereinafter referred to as "the CIT(A)"], under section 250 of the Income-tax Act, 1961[hereinafter referred to as "the Act"], for A.Y. 2019-20, arising from the assessment order dated 26.09.2021 passed under section 143(3) of the Act by the Assistant Commissioner of Income Tax, Central Circle-1, Thane[hereinafter referred to as "Assessing Officer"].

1) On the facts and in the circumstances of the case and law on the subject, the learned Commissioner of Income Tax (Appeal)-11 erred in upholding the action of Assessing officer without correct appreciation of facts and law on the subject. 2) On the facts and in the circumstances of the case and law on the subject, the learned Assessing Officer erred in making addition of Rs.5,30,09,620/- u/s 36(1) (iii) of the Income Tax Act to the returned Income as interest attributable towards excess withdrawn by the partner in form of capital from the firm being out of interest bearing fund and the learned CIT(A) erred in confirming the addition made by the ld. AO on account of excess capital making a disallowance of Rs.5,30,09,620/- u/s. 36(1)(iii) of the Act as interest attributable towards excess withdrawn by the partner in form of capital from the assessee firm being out of Interest bearing funds.In view of the facts and circumstances of the case and law on the subject, the same be deleted. 3) The appellant craves leave to amend, alter, add or delete the ground of appeal on or before the date of hearing. 3. The brief facts are that the assessee is a partnership firm engaged in the business of construction of residential-cum- commercial complexes. It filed its return of income for A.Y. 2019- 20 on 30.09.2019, declaring total income of Rs.2,44,88,660/-.

3 ITA No. 818/Mum/2026 M/s Soham Estates The assessment was completed under section 143(3) of the Act vide order dated 26.09.2021, determining the total income at Rs.8,76,75,150/-.During the assessment proceedings, the Assessing Officer observed that the partners’ capital accounts reflected an aggregate debit balance of Rs.44,17,46,818/- as on 31.03.2019. He further noticed that the assessee had outstanding secured borrowings of Rs.63,85,53,225/- from Axis Bank Ltd. and Axis Finance Ltd. and had debited finance expenses of Rs.23,55,72,491/-, including interest expenditure of Rs.17,71,02,559/-. Referring to clause 14 of the reconstituted partnership deed dated 28.12.2016, under which the partners were liable to pay interest at 12% per annum on the debit balances in their capital accounts, the Assessing Officer held that interest-bearing borrowed funds had been utilised for withdrawals by the partners. He accordingly computed interest at 12% on the debit balance of Rs.44,17,46,818/- and made a disallowance of Rs.5,30,09,620/- under section 36(1)(iii) of the Act. 4. Aggrieved, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A) recorded that notices under section 250 of the Act were issued to the assessee on various dates, but no ground-wise written submissions or supporting evidence were filed. The learned CIT(A), therefore, proceeded to decide the appeal on the basis of the material available on record. By the impugned order dated 28.11.2025, he held that the

4 ITA No. 818/Mum/2026 M/s Soham Estates assessee had failed to explain the business purpose or commercial expediency behind the withdrawals by the partners and confirmed the disallowance of Rs.5,30,09,620/-. 5. Before us, the learned AR reiterated the facts and submitted that the Assessing Officer had computed the disallowance by adopting the closing debit balance of the partners’ capital accounts at Rs.44,17,46,818/-, without examining the actual withdrawals made by the partners during the year and the corresponding sources thereof. Referring to the material placed in the paper book, the learned AR submitted that the assessee had furnished before the Assessing Officer, vide reply dated 17.09.2021, the details of the secured loans, loan sanction letters, ledgers of interest payments and secured loans, and the relevant bank statements. 6. The learned AR further submitted that the secured loans raised during the year amounted only to Rs.3,95,64,748/-, whereas Rs.8,48,43,288/- represented interest and loans aggregating to approximately Rs.15,02,00,000/- were repaid during the year. It was, therefore, contended that the secured borrowings were not utilised for withdrawals by the partners. 7. The learned AR also submitted that the assessee had prepared a date-wise statement of the withdrawals made by the partners and the corresponding sources thereof, supported by the relevant ledgers and bank statements. The said documents were

5 ITA No. 818/Mum/2026 M/s Soham Estates filed before the Tribunal as additional evidence. According to the statement so filed, the actual withdrawals made by the partners during the year amounted to Rs.5,49,52,500/- and not Rs.44,17,46,818/-, as adopted by the Assessing Officer. It was thus contended that the computation of the disallowance at 12% on the entire closing debit balance of the partners’ capital accounts was factually incorrect. 8. The learned AR further submitted that the opening debit balance of Rs.22,29,63,258/- had already been considered for disallowance by the Assessing Officer in A.Y. 2018-19 vide assessment order dated 28.06.2021 and the appeal against the said assessment order was pending before the learned CIT(A). It was contended that the impugned computation required verification also from the perspective of possible duplication of the disallowance in respect of the opening balance. 9. Explaining the non-appearance before the learned CIT(A), the learned AR submitted that the assessee was facing acute financial difficulties, which had resulted in the issuance of notices dated 11.11.2022 and 08.01.2025 for the auction of its ongoing project property under the SARFAESI Act. Due to these circumstances, the assessee could not effectively pursue the proceedings before the learned CIT(A). The learned AR, therefore, prayed that the additional evidence be admitted and the matter

6 ITA No. 818/Mum/2026 M/s Soham Estates be restored to the file of the learned CIT(A) for verification and fresh adjudication. 10. The learned DR relied upon the orders of the lower authorities. However, considering that the additional evidence and the factual assertions made by the assessee required examination by the lower authority, the learned DR did not raise any objection to restoration of the matter to the file of the learned CIT(A). 11. We have considered the rival submissions and perused the material available on record. The controversy concerns the disallowance of Rs.5,30,09,620/- under section 36(1)(iii) of the Act, computed by applying the rate of 12% to the closing debit balance of the partners’ capital accounts amounting to Rs.44,17,46,818/-. The assessee, however, contends that its actual withdrawals during the year were only Rs.5,49,52,500/- and that the secured loans were not utilised for such withdrawals. The assessee has also contended that the opening debit balance of Rs.22,29,63,258/- had already been considered by the Assessing Officer while making a disallowance for the immediately preceding assessment year. 12. The date-wise statement of the partners’ withdrawals and the corresponding sources thereof, along with the supporting ledgers and bank statements, was not available for examination before the learned CIT(A). The learned CIT(A) decided the appeal

7 ITA No. 818/Mum/2026 M/s Soham Estates on the basis of the assessment order and the material accompanying the memorandum of appeal since the assessee had not effectively participated in the appellate proceedings. The additional evidence now placed before us has a direct bearing on the quantum of the partners’ withdrawals, their sources, the nexus, if any, between the borrowed funds and such withdrawals, and the correctness of the disallowance. These are essentially factual matters requiring examination of the books of account, bank statements, loan accounts and capital accounts. 13. Having regard to the above circumstances and the fair concession of the learned DR, we consider it appropriate, in the interest of substantial justice, to set aside the impugned order on the disputed issue and restore the matter to the file of the learned CIT(A) for fresh adjudication. The learned CIT(A) shall admit and examine the additional evidence filed by the assessee and, if considered necessary, obtain a remand report from the Assessing Officer. 14. Needless to state, the assessee shall be afforded a reasonable opportunity of being heard and of producing all supporting documents. The assessee is also directed to cooperate with the appellate proceedings and not seek adjournment without sufficient cause. We have not expressed any opinion on the merits of the disallowance, and all contentions of both sides are kept open.

8 ITA No. 818/Mum/2026 M/s Soham Estates

Order pronounced in the open court on. 13.08.2026.

Sd/- Sd/- (SAKTIJIT DEY) (MAKARAND VASANT MAHADEOKAR) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai, Dated 13.08.2026 ANKIT, PS

आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई/ DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file.

आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai