ARVIND SHANKARLAL BHANUSHALI,VASHI vs. INCOME TAX OFFICER, VASHI

आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal is filed by the assessee against the order dated 24.09.2025 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as "CIT(A)"]under section 250 of the Income Tax Act, 1961[hereinafter referred to as "the Act"]for the Assessment Year 2020–21, arising out of the assessment order

2 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali dated 18.03.2025 passed by the Assessing Officer under section 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961. Facts of the Case 2. The assessee is an individual engaged in the business of wholesale and retail trading of pulses and rice under the name “Chandra Brothers”. The assessee filed his return of income for the year under consideration under section 139(1) declaring total income at Rs. 12,19,890/-, which included income from other sources to the extent of Rs. 368/-. 3. Subsequently, information was received by the department through the Insight Portal under the e-verification module indicating that the assessee had earned interest income aggregating to Rs. 21,82,290/-, which was not offered to tax in the return of income. Based on the said information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment within the meaning of section 147 of the Act. 4. Accordingly, notice under section 148 was issued on 29.03.2024. However, the assessee did not file any return of income in response to the said notice. During the course of assessment proceedings, notices under sections 142(1) and other communications were issued from time to time. The assessee furnished certain details, including a working of interest income and interest expenditure. The assessee submitted before the Assessing Officer that he had earned interest income on loans

3 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali and delayed payments from customers aggregating to Rs. 52,76,992/-, and had incurred interest expenditure towards bank loans and unsecured loans amounting to Rs. 52,39,988/-, resulting in net interest income of Rs. 37,004/-, which was offered to tax in the return of income. It was contended that the interest income had been disclosed on a net basis after adjusting interest expenditure and, therefore, there was no escapement of income. 5. The Assessing Officer, however, observed that the assessee failed to furnish any documentary evidence in support of the claim of interest expenditure, such as loan agreements, confirmations, bank statements, or proof of payment of interest. The Assessing Officer further noted that as per the information available on record, including Form 26AS, the assessee had earned gross interest income of Rs. 21,82,290/-, whereas only a sum of Rs. 368/- was disclosed in the return. 6. In the absence of supporting evidence, the Assessing Officer rejected the assessee’s claim of netting of interest income and held that the entire differential amount of Rs. 21,81,922/- (being Rs. 21,82,290/- minus Rs. 368/-) was liable to be taxed as income from other sources. Accordingly, the assessment was completed ex parte under section 147 r.w.s. 144 r.w.s. 144B, determining total income at Rs. 34,01,812/- by making an addition of Rs. 21,81,922/- under the head “Income from Other Sources”. The Assessing Officer also initiated penalty proceedings

4 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali under section 270A(9)(a) of the Act for under-reporting of income in consequence of misreporting. 7. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A).Before the Ld. CIT(A), the assessee reiterated that the interest income had already been offered to tax on a net basis after adjusting interest expenditure. It was submitted that the Profit and Loss account reflected net interest income of Rs. 37,004/-, and that the difference between gross receipts and net income was merely a matter of presentation. The assessee furnished a tabulation of interest income and interest expenses and contended that there was no escapement of income and that the addition resulted in double taxation. 8. The Ld. CIT(A), after considering the assessment order and submissions of the assessee, framed the issue as to whether the assessee had discharged the burden of proof to establish that the interest income reflected in Form 26AS had already been offered to tax after allowable set-off of expenditure. The Ld. CIT(A) observed that the burden to prove the claim of expenditure and set-off squarely lies on the assessee. It was noted that the assessee had merely furnished a self-prepared working without any supporting documentary evidence such as loan agreements, bank statements, confirmations from creditors, or proof of payment of interest. The Ld. CIT(A) held that self-serving statements cannot be accepted in the absence of corroborative evidence. The Ld. CIT(A) further held that under section 56, income from other sources is to be taxed on a gross basis, and

5 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali deduction under section 57 is allowable only when the assessee establishes the nexus between the income and expenditure. In the absence of any documentary evidence, the claim of netting of interest income was rejected. The Ld. CIT(A) also rejected the contention of double taxation by observing that there was no evidence to show that the gross interest income had been credited in the accounts and subsequently reduced by verifiable expenditure. It was noted that only Rs. 368/- was disclosed in the return as interest income. Relying upon the principle that unverifiable claims of expenditure cannot be allowed, the Ld. CIT(A) upheld the action of the Assessing Officer and confirmed the addition of Rs. 21,81,922/- as income from other sources. Accordingly, the appeal of the assessee was dismissed.

6 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali Income Tax Act, 1961. That the reassessment proceeding is illegal, void and bad in law. 4. The Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 21,81,922/- as undisclosed interest income without appreciating the factual matrix of the case. 5. All of the above grounds are without prejudice to each other. The appellant craves leave to add, amend, alter, or delete any of the above ground of appeal. 10. The Ld. Authorised Representative (AR) reiterated the submissions made before the lower authorities and invited our attention to the detailed working of interest income and interest expenditure placed on record. It was submitted that there was no escapement of income as alleged by the Assessing Officer and the addition had arisen solely on account of misappreciation of facts and incorrect understanding of the manner of disclosure.

7 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali claimed in the return are necessarily linked with the income offered, and therefore, the very fact that the TDS has been duly claimed establishes that the income corresponding thereto has been included in the total income. 13. Referring to the detailed working, the Ld. AR reiterated that the total interest income earned by the assessee was Rs. 52,76,992/-, whereas the corresponding interest expenditure was Rs. 52,39,988/-, resulting in net income of Rs. 37,004/-, which had been duly offered to tax. It was submitted that the Assessing Officer, by taxing the gross interest receipts of Rs. 21,82,290/-, has effectively ignored the corresponding expenditure and has brought to tax an amount which does not represent real income. 14. It was thus contended that the addition made by the Assessing Officer results in taxation of gross receipts without allowing corresponding expenditure and also leads to double taxation of the same income, which is contrary to settled principles of taxation. The Ld. AR accordingly prayed that the addition of Rs. 21,81,922/- sustained by the Ld. CIT(A) be deleted. 15. The Ld. Departmental Representative relied upon the order of the Ld. CIT(A). However, the Ld. DR fairly submitted that if the assessee is able to substantiate its claim with supporting documentary evidences, including reconciliation of interest income with Form 26AS and proof of corresponding interest expenditure, the matter may be restored to the file of the Assessing Officer for the limited purpose of verification.

8 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali 16. The Ld. AR, on the other hand, also requested that the matter may be restored to the file of the Assessing Officer for proper verification of the details of interest income, corresponding expenditure, and reconciliation with Form 26AS and TDS disclosures. 17. We have carefully considered the rival submissions and perused the material available on record. The controversy in the present appeal pertains to the addition of Rs. 21,81,922/- made on account of alleged undisclosed interest income based on information reflected in Form 26AS. 18. It is observed that the case of the assessee throughout has been that the interest income was not omitted but was duly accounted for and offered to tax, albeit under the head “Profits and Gains of Business or Profession” and further that the same was disclosed on a net basis after adjusting corresponding interest expenditure. The assessee has also placed reliance on the TDS details as reflected in the return of income to contend that the income corresponding to such TDS credits has already been offered to tax. At the same time, it is noted that the Assessing Officer has made the addition primarily on the ground that the assessee failed to furnish adequate supporting documentary evidences to substantiate the claim of interest expenditure and reconciliation of income with Form 26AS. The Ld. CIT(A) has also upheld the addition for want of verifiable evidence.

9 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali 19. Considering the entirety of the facts and circumstances of the case, we find that the issue essentially requires proper verification of the following aspects: (i) reconciliation of interest income as reflected in Form 26AS vis-à-vis the books of account and return of income; (ii) the head under which such income has been offered to tax; and (iii) the allowability and genuineness of corresponding interest expenditure claimed by the assessee. 20. We further note that both the parties fairly agreed that the matter may be restored to the file of the Assessing Officer for the limited purpose of verification of the above aspects. 21. In view of the above, and in the interest of justice, we deem it appropriate to restore this issue to the file of the Jurisdictional Assessing Officer for limited verification. The Assessing Officer shall examine the reconciliation of interest income with Form 26AS, verify the claim of interest expenditure with supporting evidences, and ascertain whether the income corresponding to TDS credits has already been duly offered to tax under the appropriate head. The assessee is directed to furnish all necessary documentary evidences and cooperate in the proceedings. 22. Since the issue on merits has been restored to the file of the Jurisdictional Assessing Officer, the other grounds raised by the assessee, including the legal grounds challenging the validity of

10 ITA No. 7408/Mum/2025 Arvind Shankarlal Bhansushali reassessment proceedings, are not adjudicated at this stage and are kept open.

Order pronounced in the open court on 02.04.2026.

Sd/- Sd/- (PAWAN SINGH) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 02/04/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 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