KUMAR BUILDERS PROJECT PUNE PVT. LTD,PUNE vs. DCIT CIR-7, PUNE

First we take up ITA No.742/PUN/2026 for assessment year 2012-13 as the lead case. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of developing commercial and residential projects in Pune

During the course of assessment proceedings the Assessing Officer noticed that the assessee has taken unsecured loans from 50 parties totaling to Rs.5,24,75,479/- and has paid interest of Rs.33,90,833/- to them. He asked the assessee to furnish copies of confirmation from these parties. Since the assessee failed to furnish the confirmations from the above mentioned parties, the Assessing Officer, relying on various decisions, made addition of Rs.5,24,75,479/- by treating the same as unexplained cash credit within the meaning of section 68 of the Act. Consequently, he also disallowed the payment of interest of Rs.33,90,833/- to the above parties. He, thus, made addition of Rs.5,58,66,312/- to the total income of the assessee being the unexplained cash credit and interest paid thereon.

The Assessing Officer further noted that the assessee during the year under consideration has advanced interest free loans to certain parties. He, therefore, asked the assessee to explain as to why the interest of Rs.90,89,322/- should not be considered as its income and why it should not be added back to the total income of the assessee. In absence of any satisfactory explanation the Assessing Officer made addition of the same to the total income of the assessee. He accordingly determined the total income of the assessee at Rs.7,48,31,140/- as against the returned income of Rs.98,75,506/-.

Before the Ld. CIT(A) / NFAC the assessee filed certain details in shape of additional evidences based on which the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer. After considering the contents of the remand report of the Assessing Officer and rejoinder of the assessee to such remand report, the Ld. CIT(A) / NFAC upheld the addition made by the Assessing Officer u/s 68 of the Act, the disallowance of interest paid to above creditors and the disallowance of interest u/s 36(1)(iii) of the Act.

So far as the addition of Rs.5,24,75,479/- from 50 parties are concerned, the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer by observing as under:

So far as the disallowance of interest of Rs.33,90,833/- paid to unsecured loan creditors is concerned, he upheld the same by observing as under:

So far as the disallowance of interest of Rs.90,89,322/- on account of diversion of interest bearing funds to interest free advances are concerned, he upheld the action of the Assessing Officer by observing as under:

Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds: The following grounds are taken without prejudice to each other - On facts and in law, 1] The learned CIT(A) erred in confirming an addition of Rs.5,24,75,479/- made u/s 68 of the Act on the ground that the assessee had failed to establish the creditworthiness and genuineness of the unsecured loans taken by it. 2] The learned CIT(A) erred in confirming the addition made u/s 68 of the Act without appreciating that the unsecured loans taken by the assessee amounting to Rs.5,24,75,479/- were genuine and the assessee had established the identity, creditworthiness and the genuineness of the lenders and hence, there was no reason to confirm the addition made of Rs.5,24,75,479/-.

Grounds of appeal No.1 to 5 by the assessee relate to the order of the Ld. CIT(A) / NFAC sustaining the addition of Rs.5,24,75,479/- made by the Assessing Officer u/s 68 of the Act.

The Ld. Counsel for the assessee referring to the paper book filed by the assessee drew the attention of the Bench to the two remand reports obtained by the Ld. CIT(A) / NFAC from the Assessing Officer. He submitted that the first remand report is dated 01.02.2019 and the second remand report is dated 23.12.2025.

So far as the first remand report is concerned, copy of which is placed at pages 34 to 36 of the paper book, he submitted that the Assessing Officer in that case had issued notices u/s 133(6) of the Act to 18 parties out of which 6 parties did not reply. Further, in case of Ramesh C. Shah (HUF), the bank statement had not been provided. Therefore, the Assessing Officer submitted that the genuineness of the transaction of the assessee with the said party had not been established.

Referring to the copy of second remand report dated 23.12.2025, copy of which is placed at pages 37 to 39 of the paper book, he submitted that the assessee during the remand proceedings has filed confirmations from all the 50 parties. Further, the Assessing Officer has also stated in the remand report that the assessee

Referring to the order of the Ld. CIT(A) / NFAC, he submitted that the Ld. CIT(A) / NFAC has sustained the addition made by the Assessing Officer by mentioning that the assessee has shown unsecured loans from M/s. Kesha Appliances Pvt Ltd, M/s. Vidya Education Investments Pvt Ltd and M/s. Tarika Property Investments Pvt Ltd. However, the assessee has not taken any such loans from the above parties.

Referring to the submissions made before the Ld. CIT(A) / NFAC which has been reproduced by the Ld. CIT(A) / NFAC from page 7 to 31 of his order, the Ld. Counsel for the assessee drew the attention of the Bench to page 17 where the decision of the Delhi Tribunal in the case of M/s. Kesha Appliances Pvt Ltd vs. ITO vide ITA No.2715/Del/2016 order dated 09.03.2018 for assessment year 2012-13, the decision of the Delhi Tribunal in the case of Vidya Education Investments (P) Ltd vs. DCIT vide ITA No.1778/Del/2016 order dated 26.04.2021 for assessment year 2011-12 have been replied upon. Referring to page 19 of the order of the Ld. CIT(A) / NFAC, he drew the attention of the Bench to the decision of the Hon’ble Supreme Court in the case of N. Tarika Property Invest (P) Ltd. vs. CIT reported in (2014) 51 taxmann.com 387 (SC). He accordingly submitted that these are the decisions relied upon by the assessee whereas the Ld. CIT(A) / NFAC has held that the assessee has taken unsecured loans from the above 3 parties.

So far as the order of the Ld. CIT(A) / NFAC stating that the immediate deposits were made in the respective bank accounts before issue of cheques are concerned, he submitted that the assessee has not filed any bank statement of the loan creditors and therefore, the finding of the Ld. CIT(A) / NFAC is contrary to facts.

The Ld. Counsel for the assessee submitted that the Ld. CIT(A) / NFAC at page 36 of the order has mentioned that the assessee failed to prove the source of source. Relying on various decisions he submitted that the assessment year involved is assessment year 2012-13 and the assessee is not required to prove the source of source. For the above proposition, he relied on the decision of the Co- ordinate Bench of the Tribunal in the case of Dhaval Vinod Gada vs. DCIT vide ITA No.1817/PUN/2025 order dated 03.12.2025 for assessment year 2013-14 and Prem Grain Industries Pvt Ltd vs. DCIT vide ITA No.2012/PUN/2025 order dated 20.11.2025 for assessment year 2016-17 where it has been held that the amendment to section 68 of the Act introduced by virtue of the Finance Act, 2022 makes it abundantly clear that section 68 of the Act, as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share application money, share capital, share premium or any amount of such nature. It has thus been held the enlargement of the assessee’s onus to explain the source of the source of sums credited as unsecured loans necessitated the amendment to section 68 of the Act to expressly provide for the same. He accordingly submitted that since the Ld. CIT(A) / NFAC has ignored the

So far as the disallowance of interest paid to the above loan creditors as per grounds of appeal No.6 and 7 are concerned, he submitted that the same is consequential. Once the loans are held to be genuine, then the interest has to be allowed. He submitted that the assessee has made payments through banking channel after deducting due TDS. Therefore, the disallowance of such interest is un-called for.

Referring to the grounds of appeal No.8 to 10 he submitted that the same relate to the disallowance of interest u/s 36(1)(iii) of the Act amounting to Rs.90,89,322/-.

The Ld. Counsel for the assessee referring to page 9 of the paper book drew the attention of the Bench to the partner’s capital at Rs.5,65,52,796/-. Referring to page 14 of the paper book, he drew the attention of the Bench to the amount of Rs.14,28,19,059/- shown as due from the group companies. Referring to page 15 of the paper book he drew the attention of the Bench to the advances from the customers at Rs.16,91,00,436/-. He submitted that the amount of own capital and

Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of DCIT vs. Sharada Erectors Private Limited vide ITA No.2899/PUN/2025 order dated 24.03.2026 for assessment year 2017-18, he submitted that the Tribunal in the said decision has held that since the own capital, free reserves and non-interest bearing funds available with the assessee are far more than the interest free loans and advances given to the directors and sister concerns, therefore, in view of the decision of Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd reported in 313 ITR 340 (Bom) no disallowance is called for. He accordingly submitted that since in the instant case also own capital and non-interest bearing funds available with the assessee are more than the interest free loans and advances given to the group companies, therefore, no disallowance u/s 36(1)(iii) of the Act is called for.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. He submitted that despite sufficient opportunities granted, the assessee failed to prove the ingredients of provisions of section 68 of the Act for which the Ld. CIT(A) / NFAC has rightly sustained the addition made by the Assessing Officer u/s 68 of the Act and also upheld the disallowance of interest paid to the above loan creditors. Since the assessee has diverted its interest bearing funds to the group companies without charging any

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as the grounds of appeal No.1 to 5 are concerned, we find the assessee in the instant case has accepted loan of Rs.5,24,75,479/- from the following 50 parties, the details of which are given at page 4 of the assessment order:

Although the assessee did not file loan confirmation letters from the above parties during the assessment proceedings, however, during the appeal proceedings the assessee filed various details based on which the Ld. CIT(A) / NFAC called for two remand reports from the Assessing Officer. The first remand report which is dated 01.02.2019 and copy of which is placed at pages 34 to 36 of the paper book read as under:

Similarly, the second remand report dated 23.12.2025 reads as under:

A perusal of the order of the Ld. CIT(A) / NFAC shows that while deciding the appeal he has not considered the second remand report where the Assessing Officer has specifically mentioned that the assessee has filed the confirmations from all the 50 parties and has also repaid the loans to the above parties.

A perusal of the order of the Ld. CIT(A) / NFAC also shows some glaring mistakes where he has mentioned that the assessee has taken loans from the following three parties: i) M/s. Kesha Appliances Pvt Ltd ii) M/s. Vidya Education Investments Pvt Ltd iii) M/s. Tarika Property Investments Pvt Ltd

However, a perusal of the list of 50 parties from whom the assessee has taken loans during the year, which has been reproduced by the Assessing Officer in the body of assessment order and which has been reproduced in the preceding

We further find the other objection raised by the Ld. CIT(A) / NFAC is that the assessee failed to prove the source of source. However, the provisions of section 68 as amended by the Finance Act, 2022 makes it abundantly clear that section 68 of the Act, as was in force prior to 01.04.2023, did not require the assessee to explain the source of the source of funds other than share application money, share capital, share premium or any amount of such nature.

We find the Co-ordinate Bench of the Tribunal in the case of Dhaval Vinod Gada vs. DCIT (supra), following the earlier decisions of the Tribunal in the case of Prem Grain Industries Pvt Ltd vs. DCIT (supra), has held that the amendment to section 68 introduced by virtue of the Finance Act, 2022 makes it abundantly clear that section 68 of the Act, as was in force prior to 01.04.2023 did not require the assessee to explain the source of the source of funds other than share application money, share capital, share premium or any amount of such nature. The relevant observations of the Tribunal from para 11 onwards read as under: “11. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.1.62 crores u/s 68 of the Act on the ground that the assessee has accepted loan of Rs.1.62 crores from Shri Manilal Gada who in turn has received the said amount from his wife Smt. Neeta Manilal Gada and Smt. Neeta Manilal Gada has obtained the loan from Shri Shantilal Shah, Smt. Nenshi L. Shah and Shri Lalji K.

Since the assessee in the instant case has filed confirmation letters from all the 50 parties during the second remand proceedings and has also repaid the loans by that time a fact which has been mentioned by the Assessing Officer in the second remand report and not controverted by the Revenue, therefore, the order by the Ld. CIT(A) / NFAC sustaining the addition made by the Assessing Officer by ignoring the second remand report is not justified. Further, as mentioned earlier the assessee has not taken any loan from M/s. Kesha Appliances Pvt Ltd, M/s. Vidya Education Investments Pvt Ltd and M/s. Tarika Property Investments Pvt Ltd. However, the Ld. CIT(A) / NFAC mentioned that the assessee failed to discharge the onus cast on it to prove the identity and creditworthiness of the above parties and genuineness of the transaction which is factually incorrect. In view of the above discussion, we set aside the order of the Ld. CIT(A) / NFAC sustaining

Since we have held that the loans from the above 50 parties are genuine, therefore, the interest paid to the above loan creditors also is held to be allowable expenditure. The grounds of appeal No.6 and 7 are accordingly allowed.

Grounds of appeal No.8 to 10 are concerned, we find the Assessing Officer disallowed the interest of Rs.90,89,322/- on the ground that the assessee has diverted its interest bearing funds to group companies without charging any interest.

A perusal of the audited accounts shows that the assessee has given interest free funds to the group companies amounting to Rs.14,28,19,059/-. However, a perusal of the Balance Sheet shows that the assessee has partners’ capital amounting to Rs.5,65,52,796/- and interest free advances from the customers amounting to Rs.16,91,00,436/-. The total of partners’ capital and interest free advances from the customers amounting to Rs.22,56,53,232/- far exceeds the interest free advances of Rs.14,28,19,059/- given to group companies without charging any interest. Under these circumstances, we have to see as to whether any disallowance is called for u/s 36(1)(iii) of the Act when the interest free advances were given to group companies / sister concerns without charging any

We find an identical issue had come up before the Co-ordinate Bench of the Tribunal in the case of DCIT vs. Sharada Erectors Private Limited (supra). We find the Tribunal, following the decision of the Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd (supra) held that since the own capital and non-interest bearing funds available with the assessee are more than the interest free loans and advances given to the group companies, therefore, no disallowance u/s 36(1)(iii) of the Act is called for. Various other decisions relied on by the Ld. Counsel for the assessee also supports his case to the proposition that when own capital and interest free funds available with the assessee are more than the interest free loans and advances given to other parties, no disallowance is called for. Since in the instant case also, as mentioned earlier, the partners’ capital and non-interest bearing funds available with the assessee are far more than the interest free loans and advances given to the group companies, therefore, no disallowance u/s 36(1)(iii) of the Act is called for. The grounds of appeal No.8 to 10 by the assessee are accordingly allowed.

In the result, the appeal filed by the assessee is allowed.

Facts of the case, in brief, are that the assessee filed its return of income for the impugned assessment year on 30.09.2013 declaring total income of Rs.29,77,157/-. The case was selected for scrutiny under CASS. Statutory notice u/s 143(2) of the Act was issued and served on the assessee. Thereafter notice u/s 142(1) of the Act along with a questionnaire were issued and served on the assessee in response to which the assessee filed the requisite details from time to time.

During the course of assessment proceedings the Assessing Officer noted that the assessee has taken loan of Rs.3,85,00,000/- from the 20 parties and paid an amount of Rs.37,55,932/- as interest. He asked the assessee to submit the name, PAN & confirmations from all these unsecured loan creditors who had extended unsecured loan to the assessee during the year. The assessee expressed its inability to furnish details of address or PAN of these parties and confirmations from them. The Assessing Officer, therefore, held that the assessee failed to prove the identity and creditworthiness of the lenders and genuineness of these transactions. Relying on certain decisions the Assessing Officer made addition of Rs.3,85,00,000/- to the total income of the assessee as unexplained cash credit within the meaning of section 68 of the Act. Since he treated the unsecured loans as unexplained cash credit, he disallowed the interest of Rs.37,55,932/-.

The Assessing Officer further noted that the assessee advanced loans to various persons without charging any interest from them. He, therefore, asked the assessee to explain as to why the interest of Rs.1,93,87,222/- should not be disallowed u/s 36(1)(iii) of the Act. In absence of any satisfactory explanation given by the assessee, the Assessing Officer made addition of Rs.1,56,31,290/- after deducting Rs.37,55,932/- which was already disallowed towards interest paid on unsecured loan creditors. There are certain other additions which are not the subject matter of appeal. We, therefore, are not concerned with the same. The Assessing Officer accordingly determined the whole income of the assessee at Rs.6,71,49,739/-.

Before the Ld. CIT(A) / NFAC the assessee filed certain evidences with a request to admit the same as additional evidence based on which the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer. After considering the contents of the remand report of the Assessing Officer and rejoinder of the assessee to such remand report, the Ld. CIT(A) / NFAC upheld the addition made by the Assessing Officer u/s 68 of the Act as well as disallowance of interest u/s 36(1)(iii) of the Act.

So far as the addition of Rs.3,85,000/- u/s 68 and interest paid thereon amounting to Rs.37,55,932/- is concerned, the Ld. CIT(A) / NFAC sustained the addition by observing as under:

So far as the addition of Rs.1,56,31,290/- u/s 36(1)(iii) of the Act on account of diversion of interest bearing funds is concerned, he also sustained the addition made by the Assessing Officer by observing as under:

Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds: The following grounds are taken without prejudice to each other - On facts and in law, 1] The learned CIT(A) erred in confirming an addition of Rs.3,85,00,000/- made u/s 68 of the Act on the ground that the assessee had failed to establish the creditworthiness and genuineness of the unsecured loans taken by it. 2] The learned CIT(A) erred in confirming the addition made u/s 68 of the Act without appreciating that the unsecured loans taken by the assessee amounting to Rs.3,85,00,000/- were genuine and the assessee had established the identity, creditworthiness and the genuineness of the lenders and hence, there was no reason to confirm the addition made of Rs.3,85,00,000/-. 3] The learned CIT(A) failed to appreciate that the learned A.O. had accepted in the remand report that the assessee had discharged the onus cast upon it by proving the creditworthiness and the genuineness of the lenders and accordingly, question of confirming the said addition made u/s 68 simply did not arise.

Grounds of appeal No.1 to 5 by the assessee relate to the order of the Ld. CIT(A) / NFAC in sustaining the addition of Rs.3,85,00,000/- u/s 68 of the Act.

The Ld. Counsel for the assessee referring to page 3 of the assessment order drew the attention of the Bench to the list of 20 parties from whom the assessee has received unsecured loan of Rs.3,85,00,000/-. Referring to page 35 of the order of the Ld. CIT(A) / NFAC he drew the attention of the Bench to the copy of the remand report forwarded by the Assessing Officer and which has been reproduced. Referring to the copy of the remand report he submitted that the Assessing Officer in the remand report has stated that the assessee has discharged the onus on creditworthiness and genuineness of the lenders. However, the Ld. CIT(A) / NFAC completely ignored the remand report and sustained the addition.

Referring to the decision of the Hon’ble Bombay High Court in the case of Jivatlal Purtapshi reported in (1967) 65 ITR 261 (Bom), he submitted that the Hon’ble High Court in the said decision has held that when the AAC decided the appeal, where the ITO conceded the deletion of the said amount and the AAC after recording the said concession in his order deleted that amount, the department is not justified in filing the appeal before the Tribunal against the deletion by the AAC. It was held that it was impossible that the department could be treated as being aggrieved by that part of the order so as to be entitled to take an appeal to the Tribunal.

Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of ITO vs. Goldendreams Buildcon Private Limited vide ITA No.865/PUN/2024 order dated 18.05.2026 for assessment year 2018-19, he

So far as grounds of appeal No.6 and 7 are concerned, the same relate to the disallowance of interest on loan creditors. He submitted that in case the loan is accepted as genuine, interest on such loan is consequential in nature.

So far as grounds of appeal No.8 to 10 are concerned, he submitted that the same relate to the disallowance of interest by invoking the provisions of section 36(1)(iii) of the Act on account of diversion of interest bearing funds.

The Ld. Counsel for the assessee referring to page 11 of the paper book drew the attention of the Bench to the partners’ capital which shows an amount of Rs.31,36,77,983/- as credit balance. Referring to page 23 of the paper book, he

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. So far as grounds of appeal No.1 to 5 are concerned, the same relate to the addition of Rs.3,85,00,000/- made by the Assessing Officer u/s 68 of the Act. It is an admitted fact that during the assessment proceedings the assessee did not give sufficient details in respect of loans obtained from the 20 parties for which the Assessing Officer, invoking the provisions of section 68 of the Act, made addition of Rs.3,85,00,000/-. Since he made addition of unsecured loans by invoking the provisions of section 68, he disallowed interest of Rs.37,55,932/- paid to the above parties which is the subject matter of appeal vide grounds of appeal No.6 and 7. It is the submission of the Ld. Counsel for the assessee that during the course of appeal proceedings the assessee filed various details based on which the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer. We find

Since the Assessing Officer in the remand report has accepted the creditworthiness of the loan creditors on the basis of various details filed by the assessee and since the Ld. CIT(A) / NFAC while passing the order did not consider the remand report which was available with him, therefore, we set aside the order

So far as grounds of appeal No.8 to 10 are concerned, the same relate to the disallowance of interest u/s 36(1)(iii) of the Act on account of diversion of interest bearing funds to group companies without charging any interest.

A perusal of the assessment order shows that the Assessing Officer computed the disallowance of interest u/s 36(1)(iii) of the Act at Rs.1,93,87,222/- after deducting an amount of Rs.37,55,932/- which he had disallowed while making addition u/s 68 of the Act. The Assessing Officer made net addition of Rs.1,56,31,290/- by invoking the provisions of section 36(1)(iii) of the Act. A perusal of the Balance Sheet filed by the assessee in the paper book shows that as against the total own capital of Rs.31,36,77,983/- the assessee has given interest free loans and advances of Rs.20,43,84,895/- to the group companies / firms. Thus, the loans advanced to the group companies / firms is less than the own capital of the partners. We have already decided an identical issue while deciding the grounds of appeal No.8 to 10 in ITA No.742/PUN/2026 for assessment year 2012-13. Since the own capital is more than the interest free advances given to the group companies, therefore, following similar reasonings, the disallowance of

After hearing both the sides, we find the Assessing Officer invoking the provisions of section 68 of the Act made addition of Rs.5,72,51,000/- being the loan taken by the assessee from the 10 parties, the details of which are at page 2 of the assessment order on the ground that the assessee failed to furnish the confirmations from the lenders for which the genuineness of the transactions and creditworthiness and existence of lenders is highly doubtful. Since he disallowed the loan of Rs.5,72,51,000/-, he disallowed the interest paid to the above parties amounting to Rs.69,99,319/-. Similarly, the Assessing Officer invoking the provisions of section 36(1)(iii) of the Act made addition of Rs.5,40,70,616/- to the total income of the assessee. There were various other additions which were deleted by the Ld. CIT(A) / NFAC and the assessee is not in appeal, therefore, we are not concerned with the same.

Before the Ld. CIT(A) / NFAC the assessee filed certain additional evidences based on which the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer. After considering the contents of the remand report of the Assessing Officer, rejoinder of the assessee to such remand report, the Ld. CIT(A)/

Similarly he also upheld the disallowance of interest of Rs.5,40,70,616/- u/s 36(1)(iii) of the Act made by the Assessing Officer by observing as under:

Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds: The following grounds are taken without prejudice to each other - On facts and in law, 1] The learned CIT(A) erred in confirming an addition of Rs.5,72,51,000/- made u/s 68 of the Act on the ground that the assessee had failed to establish the creditworthiness and genuineness of the unsecured loans taken by it. 2] The learned CIT(A) erred in confirming the addition made u/s 68 of the Act without appreciating that the unsecured loans taken by the assessee amounting to Rs.5,72,51,000/- were genuine and the assessee had established the identity, creditworthiness and the genuineness of the lenders and hence, there was no reason to confirm the addition made of Rs.5,72,51,000/-. 3] The learned CIT(A) failed to appreciate that the assessee had submitted the confirmation of the lenders along with other documentary evidences to prove the identity, creditworthiness and the genuineness of the lenders and hence, there was no reason to confirm the addition made of Rs.5,72,51,000/- and accordingly, the same may kindly be deleted.

The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the remand report dated 26.12.2024 given by the Assessing Officer, copy of which is placed at pages 38 to 44 of the paper book. Referring to the said copy of the remand report, he submitted that the Assessing Officer after considering the

So far as the disallowance of interest u/s 36(1)(iii) of the Act is concerned, he drew the attention of the Bench to the audited Balance Sheet, copy of which is placed at pages 6 to 26 of the paper book. Referring to page 17 of the paper book, he drew the attention of the Bench to the partnerss capital which is shown at Rs.89,29,58,011/-. Referring to page 21 of the paper book, he submitted that the assessee has given interest free loans of Rs.24,01,87,930/- to the group companies / firms. He submitted that since the partners’ capital of Rs.89,29,58,011/- is much more than the amount of interest free advances of Rs.30,31,98,618/- given to the group companies / firms, therefore, in view of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd (supra), no disallowance is called for.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. Grounds of appeal No.1 to 5 by the assessee relate to the addition of Rs.5,72,51,000/- made by the Assessing Officer being the unsecured loans obtained from the 10 parties, the details of which are as under: Sr. No. Particulars New loan taken Interest during the year 1 Sangeeta J Sancheti 2,00,000 34,100 2 Dipesh J Sancheti 5,00,000 81,550 3 Shefali Jayant Sancheti 16,00,000 1,55,550 4 Sanam Jain 8,00,000 65,800 5 Jayantkumar M Sancheti (HUF) 16,00,000 1,98,500 6 N Vensimal Securities Ltd 5,00,000 75,000 7 A.G. Enterprises 10,00,000 - 8 Star Right Homes (India) Pvt Ltd 5,51,000 - 9 Amrit Rajkumar Gaba 5,00,000 93,750 10 Cello Industries 5,00,00,000 62,95,069 Total 5,72,51,000 69,99,319

We find the Ld. CIT(A) / NFAC sustained the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. We find during the appeal proceedings the assessee filed various details based on which the Ld. CIT(A) / NFAC called for a remand report from the Assessing Officer who gave his report on 26.12.2024, copy of which is placed at pages 38 to 44 of the paper book. In the said remand report the Assessing Officer has categorically stated that the assessee has discharged its onus of creditworthiness and genuineness of the lenders. The relevant part of the remand report reads as under:

Since the Assessing Officer during the remand proceedings had categorically accepted the identity and creditworthiness of the loan creditors, therefore, the order of the Ld. CIT(A) / NFAC sustaining the addition made by the Assessing Officer by ignoring the remand report, in our opinion is not justified. Further, we find the Ld. CIT(A) / NFAC has stated that the assessee has received unsecured loans from M/s. T.S. Kishan & Co. Ltd, Smt. P.K. Noorjahan, M/s. N. Tarika Property Investments Pvt Ltd. and M/s. Blowell Auto Pvt Ltd. whereas these are the decisions relied on by the assessee before him and no such loan has been taken by the assessee from the above parties, the details of which are already given in the preceding paragraphs. In view of the above discussion, the order of the Ld. CIT(A) / NFAC sustaining the addition made by the Assessing Officer u/s 68 of the Act is not justified.

Since the loan amount of Rs.5,72,51,000/- from the 10 parties is held to be genuine, the interest paid to them also is liable to be allowed. Accordingly, the grounds of appeal No.1 to 5 challenging the addition u/s 68 of the Act and grounds of appeal No.6 and 7 challenging the disallowance of interest are allowed.

So far as grounds of appeal No.8 to 10 relating to the disallowance of interest u/s 36(1)(iii) of the Act is concerned, we find the amount of interest free advances given to the group companies at Rs.24,01,87,930/- is much less than the own capital of Rs.89,29,58,011/-. We have already decided an identical issue in assessment year 2012-13 while deciding grounds of appeal No.8 to 10. Following

In the result, all the three appeals filed by the assessee are allowed.