MILAP CHAMPALAL MUNOT ,MUMBAI vs. INCOME TAX OFFICER WARD 19(2)(2), PIRAMAL CHAMBERS

Per Saktijit Dey, Vice President:

Present appeal by the assessee arises out of order dated 25.11.2025 of National

Faceless Appeal Centre (‘NFAC’ for short), Delhi for the assessment year (A.Y. for short)

2018-19.

u/s. 41(1) of the Income Tax Act, 1961 (‘the Act’ for short).

assessee filed its return of income for the assessment year under dispute, declaring income

of Rs.17,63,450/-. Subsequently, a search and seizure operation u/s. 132 of the Act was

carried out in case of One world group and other sister concerns.

2 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO 4. As stated, in course of search and seizure operation, it was found that the companies

is operating within the group including M/s. Aneri Fincap Ltd. are shell companies

providing accommodation entries through bogus loans. Based on such information,

assessee’s case was reopened u/s. 147 of the Act.

time to time called upon the assessee to furnish various details. In compliance, the assessee

furnished the details called for. However, insofar as loan of Rs.15 lacs stated to have been

received from M/s. Aneri Fincap Ltd., the A.O. was not satisfied with the genuineness of

the transactions. Referring to the information gathered in course of search and seizure

operation carried out in case of One world group, the A.O. observed that the lender

company is a bogus entity and providing the accommodation entries. He observed that

though summons u/s. 131 of the Act was issued to the lender company, however, none of

the Directors appeared in response. Therefore, the genuineness of the transaction could not

be verified. He observed, the assessee had availed loan of Rs.15 lacs during the year

through its proprietary concern M/s. Cupro Met India. Thus, he ultimately concluded that

the assessee is a beneficiary of accommodation entry provided through bogus loan

transaction. Accordingly, he proceeded to add the amount invoking the provision of section

41(1) of the Act.

however, the addition was sustained.

have made the addition u/s. 41(1) of the Act, as it is not a trading liability. Without

3 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO prejudice, he submitted, there cannot be any doubt regarding the genuineness of the

company as its status is still active as per Registrar of Companies (ROC) website. Further,

he submitted, the assessee has repaid the loan on 05.10.2020. In this context, he sought

indulgence of the Bench to furnish certain additional evidences, reflecting repayment of

loan. Thus, he submitted, since, the loan availed has been repaid, no addition can be made

u/s. 41(1) of the Act.

observations of the A.O. and learned first appellate authority. Further, he submitted that

the additional evidences now furnished by the assessee having not been examined by the

departmental authorities, issue can be restored back.

record. Undisputedly, questioning the genuineness of the lender company and the

transaction, the A.O. has treated the loan availed of Rs.15 lacs by the assessee from M/s.

Aneri Fincap Ltd. as non-genuine and added u/s. 41(1) of the Act, by treating it as remission

of liability. However, the first issue which arises for consideration is whether the addition

could have been made u/s. 41(1) of the act. A reading of section 41(1) of the Act makes it

clear that any trading liability appearing in books of the assessee if ceases to exist and the

assessee receives the benefit either in cash or kind against such liability in the relevant

assessment year, then addition can be made u/s. 41(1) of the Act. In the facts of the present

case, the departmental authorities have clearly and categorically stated that the amount

represents loan availed by the assessee. Therefore, it cannot be termed as trading liability.

However, in our view, the addition under a wrong provision is not fatal, as the preliminary

reason for which the A.O. has made the addition is on account of non-genuineness of the

4 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO transaction. Even, for the very same reason, the addition can be made u/s. 68 of the Act.

Therefore, we cannot accept assessee’s contention that merely because the addition has

been made u/s. 41(1) of the Act, it has to be deleted. So far as the merits of the issue is

concerned, it appears on record that in course of assessment proceeding, the assessee has

furnished some details including loan confirmation to prove the identity, creditworthiness

of the loan and genuineness of the transaction. However, the A.O. was not satisfied with

the evidences furnished.

repaid on 05.10.2020. In this context, the assessee has made a request for furnishing

additional evidences such as ledger account of the lender company in assessee’s book,

copies of bank statements, etc. as additional evidences. Admittedly, these evidences are

being furnished for the first time before the ITAT and were never brought to the notice of

the departmental authorities. Therefore, the authenticity of the additional evidences now

furnished by the assessee requires to be established through enquiry. In view of the

aforesaid, though we admit the additional evidences, however, their authenticity is required

to be verified through proper enquiry. This can only be possible if the issue is restored back

to the AO. Accordingly, we are inclined to restore the issue to AO for de novo adjudication

after making proper inquiry and examining the documentary evidences brought on record

by the assessee, including the additional evidences. Needless to mention, the AO must

provide due and reasonable opportunity of being heard to the assessee before deciding the

issue.

representing alleged undisclosed interest income.

5 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO 12. Briefly, the facts are: in course of assessment proceedings, while verifying the

computation of income furnished by the assessee, the AO noticed that the assessee had

offered interest income of Rs.11,88,228/-. Whereas, upon verification of Form 26AS, it

was found that the actual interest income received by the assessee was to the tune of

Rs.13,15,665/-. Thus, according to the AO, the assessee had short declared interest income

to the tune of Rs. 1,27,437. Though, the assessee contended before the AO that there is no

short declaration of interest income and the actual amount of interest received was offered

to tax, however, the AO was not convinced. Accordingly, he added back the amount of

Rs.1,27,437/- to the income of the assessee.

fact, has offered the amount of Rs.1,27,437/-, being interest received from M/s Jugal Tube

Pvt. Ltd. He submitted, the amount of Rs.10 lakhs was advanced as loan to M/s Jugal Tube

Pvt. Ltd. in personal capacity on which he received the interest of Rs.1,27,437/-. Drawing

our attention to the computation of income, learned counsel submitted that the amount of

Rs.1,27,437/- was offered to tax. Further, referring to ,the return of income, learned counsel

submitted that the total interest income was offered to tax.

appellate authority.

on record, we find that, as per the computation of income, the amount of Rs.1,27,437/-,

being interest received from M/s Jugal Tube Pvt. Ltd. appears to have been offered to tax.

6 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO However, there seems to be discrepancy between the interest income offered to tax by the

assessee and the interest income appearing in Form 26AS. This requires proper

reconciliation through documentary evidences. Hence, we restore the issue to the AO for

fresh adjudication after providing due and reasonable opportunity of being heard to the

assessee.

the head ‘income from other sources’.

26AS, the AO found that the assessee has received an amount of Rs.10 lakhs towards

professional technical fee from M/s Jugal Tube Pvt. Ltd., on which TDS of Rs.1,50,000/-

has been done u/s.194J of the Act. Whereas, as alleged by the AO, the said income of Rs.10

lakhs was not offered to tax in the return of income. Thus, the AO proceeded to add the

amount to the income of the assessee.

Rs.10 lakhs was received towards director's remuneration from M/s Jugal Tube Pvt. Ltd.

and was offered to tax as salary income. In this context, he drew our attention to the

computation of income furnished along with the return of income. He submitted, while

making the payment of director's remuneration, the company had erroneously deducted tax

u/s.194J of the Act. Thus, he submitted, the amount having already been offered to tax

should not be taxed again.

7 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO 21. Ld. DR strongly relied upon the observations of the AO and learned first appellate

authority.

record. While the departmental authorities have held that the professional or technical fees

of Rs.10 lakhs received by the assessee from M/s Jugal Tube Pvt. Ltd. was not offered to

tax, it is the case of the assessee that the amount actually represents director's remuneration

and, in fact, has been offered to tax as ‘salary income’. In our view, the issue can be

resolved through factual verification and after ascertaining the correct facts from the payer,

M/s Jugal Tube Pvt. Ltd.

Tube Pvt. Ltd. and after ascertaining the correct facts, decide the issue. Of course, the

assessee must be provided reasonable opportunity of being heard in the matter.

Rs.9,25,149/- out of the interest expenditure.

an amount of Rs.11,93,714/- towards interest expenses. After calling for and examining

the documentary evidence, the AO observed that the assessee could substantiate interest

payment amounting to Rs.2,68,565/- only. Whereas, the assessee could not establish the

interest payment of Rs.9,25,149/-. In this context, the AO further observed that the assessee

could not establish the genuineness of the interest paid to M/s Kunj International and M/s

Riddhi Impex with supporting evidence. He further observed that the assessee could not

reconcile the ledger account or produce TDS certificates to conclusively prove the interest

8 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO payment to the aforesaid entities. Thus, ultimately, he disallowed the interest payment of

Rs.9,25,149/-.

record. Reiterating the stand taken before the departmental authorities, learned counsel

appearing for the assessee submitted that though the assessee furnished ledger accounts,

details of TDS deducted in Form 26Q, the AO, without properly verifying the documentary

evidence has made the disallowance. To establish his claim, learned counsel drew our

attention to certain documentary evidences placed in the paper book.

appellate authority.

record. Basically, the issue is purely factual and requires the claim to be established through

documentary evidences. Apparently, the documentary evidences furnished by the assessee

at assessment stage were not found sufficient by the AO to justify the claim. Before us, the

assessee has furnished a confirmation stated to have been received from M/s Kunj

International, confirming the receipt of interest on loan advanced to the assessee. Further,

the assessee has furnished a copy of TDS certificate in Form No.16A, evidencing deduction

of tax at source on interest payment of Rs.1,26,239/-. There is a second confirmation from

M/s Riddhi Impex towards receipt of interest of Rs.7,19,901/- with corresponding TDS

certificate in Form No. 16A. However, it appears, the confirmations towards interest

received were not furnished either before the AO or learned first appellate authority. Hence,

9 ITA No. 1094/Mum/2026 (A.Y. 2018-19) Mr. Milap Champalal Munot vs. ITO they are in the nature of additional evidences. Since, the departmental authorities had no occasion to verify the authenticity of the documentary evidences now furnished before us, we are inclined to restore the issue to the AO for fresh adjudication after examining all the documentary evidence furnished by the assessee, including confirmations and corresponding TDS certificates in Form No. 16A. If, upon such examination, it is found that the assessee indeed has paid interest to the lenders and deducted tax at source, in our view, no disallowance could be made. Needless to mention, the assessee must be provided reasonable opportunity of being heard, before deciding the issue.

Sd/- Sd/- (Makarand V. Mahadeokar) (Saktijit Dey) Accountant Member Vice President Mumbai; Dated : 14.10.2026 Roshani, Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER, Digitally signed by ABHINAV ABHINAV ANANT ANANT GAVANDE GAVANDE Date: 2026.10.24 14:50:37 +05'30' (Dy./Asstt. Registrar) ITAT, Mumbai