ACIT CIRCLE 15(1)(2), MUMBAI, MUMBAI vs. CHALO MOBILITY PRIVATE LIMITED, NAVI MUMBAI

ITA 883/MUM/2026Status: DisposedITAT Bangalore25 September 2026AY 2023-202435 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the CIT(A)'s findings on both issues were not based on an independent and investor-wise examination of the primary material. For the disallowance under section 36(1)(iii), the Tribunal noted the assessee's grounds but did not provide a specific finding or reasoning in the provided excerpt, implying it was part of the overall remand. Regarding the addition under section 68, the Tribunal found that the CIT(A) made a generalized finding without an investor-wise examination of facts and supporting documentary evidence. The reliance on SEBI registration of AIFs was insufficient. The Tribunal emphasized the need for an investor-wise examination of financial particulars, available funds, bank transactions, and other material demonstrating financial capacity and creditworthiness. Consequently, the matter was restored to the CIT(A) for a fresh examination and adjudication, requiring an investor-wise assessment of documentary evidence, including financial statements, bank statements, and income-tax returns, to determine identity, creditworthiness, and genuineness of transactions. The assessee was directed to furnish all requisite documents. The revenue's ground was allowed for statistical purposes.

What were the facts?

The assessee, Chalo Mobility Private Limited, filed its return for AY 2023-24 declaring Nil income. The assessment order was passed under section 143(3) r.w.s 144B. The Assessing Officer (AO) disallowed Rs. 1,47,00,000/- under section 36(1)(iii) for interest on loans advanced to a subsidiary, Vogo Automotive Private Limited, at a lower rate than the assessee's borrowing cost. The AO also added Rs. 46,89,64,032/- under section 68 for share capital and securities premium, finding the assessee failed to establish the identity, creditworthiness, and genuineness of investors, especially as some did not respond to notices under section 133(6). The CIT(A) deleted these additions. The assessee and revenue filed cross-appeals before the ITAT.

What were the issues?

1. Whether the CIT(A) erred in upholding the disallowance of interest expenses amounting to Rs. 1,47,00,000/- under section 36(1)(iii) of the Act, by failing to appreciate that loans to Vogo were from internal accruals, not borrowed funds, and that the AO did not establish a direct nexus between borrowed funds and the loan given, and by overlooking the strategic business rationale. - Assessee's contention: Loans to Vogo were from internal accruals/free reserves, not borrowed funds. No direct nexus between borrowed funds and the loan was established by the AO. Commercial expediency should not be assessed solely on financial return. - Revenue's contention: Not recorded. 2. Whether the CIT(A) erred in deleting the addition of Rs. 46,89,64,032/- made under Section 68 of the Act, by failing to appreciate that the assessee did not fulfill the three-pronged test of identity, creditworthiness, and genuineness of the transaction, and by ignoring the proviso to Section 68 and the Supreme Court's ruling in PCIT vs. NRA Iron & Steel Pvt. Ltd. - Assessee's contention: Not recorded. - Revenue's contention: Assessee failed to establish identity, creditworthiness, and genuineness. SEBI registration of AIFs is not proof of financial capacity. Investors failed to respond to section 133(6) notices. Valuation and commercial expediency of share premium were not scrutinized.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 68,Section 143(3),Section 144B,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM

For Appellant: Shri Nishit Gandhi
For Respondent: Shri Ajay Soneji, Sr. DR
Hearing: 02.07.2026

Heard together (2 matters)

I.T.A. No. 9421/Mum/2025
I.T.A. No. 883/Mum/2026

Read from the judgment's own cause title. This page is filed under one of them.

Per Arun Khodpia, AM: These two cross-appeals are filed by the assessee and the revenue against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 07.11.2

The order continues below.

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