RAGHAVAN SUNDARAM,MADURAI vs. ITO, NCC-1,, MADURAI

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ITA 3688/CHNY/2025Status: DisposedITAT Chennai19 June 2026AY 2018-194 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the allowability of interest on borrowings, which were treated as unexplained, needs to be decided along with the issue of the borrowings themselves being unexplained.

What were the facts?

The assessee purchased a property in Dubai and borrowed money for it. The Assessing Officer treated the borrowed amount as unexplained investment and made an addition. Subsequently, the interest on this loan was disallowed.

What were the issues?

Whether interest on borrowings treated as unexplained investment is allowable as a deduction. The need to decide the interest disallowance along with the primary issue of unexplained investment.

Which sections of the Income-tax Act were involved?

Section 69A,Section 24(b),Section 143(3),Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI

Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI

For Respondent: Mr. C.P.Solomon, Addl. CIT

आदेश / O R D E R

PER PADMAVATHY.S, A.M:

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 16.10.2025 for Assessment Year (AY) 2018-19.

2.

The assessee is an individual and filed the return of income for AY 2018- 19 on 21.07.2018 declaring total income of Rs.6,76,070/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the year under consideration, the assessee has purchased a

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property in Dubai jointly with his son-in-law and the assessee has borrowed money to the tune of Rs.90,75,000/- for funding the purchases of the property. The A.O treated the said amount as unexplained investment to make the addition u/s.69A of the Act and completed the assessment u/s. 143(3) of the Act determining the total income of the assessee at Rs.1,05,26,865/-. Subsequently, the PCIT, Madurai passed a revision order u/s. 263 of the Act setting aside the assessment order passed u/s.143(3) stating that the A.O. has not disallowed the interest on the unexplained investment which is claimed as a deduction u/s.24(b) by the assessee. The A.O subsequently passed an order u/s. 143(3) r.w.s 263 of the Act, wherein he made a disallowance of interest u/s. 24(b) of the Act to the tune of Rs.6,66,281/- related to the alleged bogus loan treated as unexplained investment. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) confirmed the disallowance made stating that when the original investment remained unexplained the corresponding interest thereon cannot be claimed as a deduction u/s. 24(b) of the Act. The assessee is in appeal before the Tribunal against the order of the CIT(A).

3.

We have heard the parties and perused the materials available on record. The Ld. Authorized Representative (AR) of the assessee submitted that in the original order passed u/s. 143(3), the A.O made an addition u/s. 69 of the Act treating the amount borrowed by the assessee towards purchase of a property in Dubai as unexplained. The Ld. AR further submitted that the assessee has filed a further appeal before the CIT(A) against the order u/s. 143(3) of the Act and the same is pending disposal. The Ld. A.R also submitted that the issue arising from the impugned order in this appeal pertains to the interest on the loan which is treated as unexplained by the A.O

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in the original assessment order. Accordingly, the Ld. AR prayed that the appeal can go back to the CIT(A) to be decided along with the issue of the loan borrowed by the assessee being treated as unexplained investment. Considering the facts and circumstances peculiar to assessee's case, we are of the view that since allowability of the interest u/s.24(b) is denied on the ground that borrowing is treated as unexplained, the issue in the present appeal is to be decided along with the appeal against the original assessee. Accordingly, we remit the appeal back to the CIT(A) with a direction to examine the issue of disallowance u/s. 24(b) of the Act on the borrowings along with the issue of the said borrowings being treated as unexplained in the original order of assessment u/s.143(3). The CIT(A) is further directed to call for necessary details and decide the issue in accordance with law. The assessee is required to submit the necessary details as may be called for and cooperate with appellate proceedings. It is ordered accordingly.

4.

In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 19th day of June, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार िग"र) (पदमावती यस) (Manu Kumar Giri) (Padmavathy.S) �याियक सद�य �याियक सद�य / Judicial Member लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य �याियक �याियक सद�य सद�य चे�नई/Chennai, �दनांक/Dated: 19th June, 2026. EDN, Sr. P.S

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आदेश क� �ितिल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु!/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF Digitally signed by EJTADA DURGA EJTADA DURGA NARESH NARESH Date: 2026.06.23 11:57:19 +05'30'

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