AQUA TRANSLINERS PVT. LTD.,KOLKATA vs. D.C.I.T., CIRCLE - 7(1),, KOLKATA

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ITA 3165/KOL/2025Status: DisposedITAT Kolkata29 October 2026AY 2018-20194 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the disallowance of Rs. 1,19,73,218/- was not justified. The Tribunal noted that the loans taken by the assessee were in earlier years and the interest paid on these loans had been regularly allowed by the Department in previous assessment years, including AY 2015-16 and 2013-14. The ledger account confirmed that the loan was taken in earlier years and interest had been consistently paid and allowed. The Tribunal found no justification for the CIT(A)'s order to confirm the addition when the revenue had accepted the position in earlier years. Applying the principle laid down by the Hon'ble Apex Court in Radhasoami Satsang vs. CIT, the Tribunal held that in the absence of any material change justifying a different view, the Department should not reopen a settled position. The ratio decidendi is that consistency in assessment should be maintained by the revenue across assessment years when there is no change in facts or circumstances, and a settled position should not be disturbed. The Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition.

What were the facts?

The assessee, Aqua Transliners Pvt. Ltd., filed its return of income for Assessment Year 2018-19, declaring a total loss. The Assessing Officer (AO) noted that the assessee paid interest of Rs. 1,68,48,871/- on a loan of Rs. 15,51,18,990/-. The AO also observed that the assessee had given loans totaling Rs. 11,02,50,626/- to various parties, earning only Rs. 1,62,348/- as interest income. Believing the assessee had diverted funds for non-business purposes and charged lower interest on its own loans, the AO disallowed Rs. 1,19,73,218/- representing notional interest on the aggregate loans given. The Commissioner of Income Tax (Appeals) confirmed this disallowance. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the disallowance of Rs. 1,19,73,218/- on account of interest paid on loans taken for business purposes, by treating it as diverted for non-business purposes, is justified, considering the assessee has also advanced loans to other parties? (Question of law and fact, turning on Section 37(1) of the Income-tax Act, 1961). Assessee's Contention: The assessee argued that the loans were taken in earlier years and interest paid thereon had been allowed by the Department in previous assessment years. They relied on the principle that the Department cannot blow hot and cold and must maintain consistency in the absence of changed facts, citing the Supreme Court decision in Radhasoami Satsang vs. CIT. Revenue's Contention: The revenue, through the AO and confirmed by the CIT(A), contended that the assessee had diverted funds for non-business purposes by giving substantial loans to other parties while earning minimal interest, thus justifying the disallowance of interest paid on its own borrowings.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA

Before: SHRI RAJESH KUMARAND SHRI PRADIP KUMAR CHOUBEY

For Appellant: Shri Sunil Surana, AR
For Respondent: Shri Sanjay Jha, Sr. DR
Hearing: 29.09.2026Pronounced: 29.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBERAND SHRI PRADIP KUMAR CHOUBEY, JUDICIAL MEMBER I.T.A. No.3165/KOL/2025 Assessment Year: (2018-19) Aqua Transliners Pvt. Ltd., DCIT, 99A, Siddha Park, 5th Floor, Park Vs. Circle – 7(1), Street, Kolkata – 700016, West Kolkata Bengal [PAN: AAGCA3607C] (Appellant) .. (Respondent) Appellant by : Shri Sunil Surana, AR Respondent by: Shri Sanjay Jha, Sr. DR Date of Hearing 29.09.2026 Date of Pronouncement 29.10.2026

O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER:

This appeal preferred by the assessee is against the order passed u/s 250 of the Income-tax Act, 1961 (In short, ‘the Act’) by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as the “ld.CIT(A)”], dated 28.08.2025 for the Assessment Year (AY) 2018-19.

2.

The only issue raised by the assessee is against the confirmation of disallowance of Rs.1,19,73,218/- as made by the Assessing Officer (In short, ‘the AO’) in respect of interest paid on loan taken for business purposes.

ITA No.3165/Kol/2025/A.Y.2018-19 Aqua Transliners Pvt. Ltd. vs. DCIT 3. The facts of the case in brief are that the assessee filed return of income on 31.10.2018, declaring total loss of Rs.16,54,123/-. The case of the assessee was selected for scrutiny under CASS. Notices u/s 143(2) and 142(1) of the Act(s) along with questionnaire were issued and served upon assessee. The assessee is engaged in the business of barge operation. During the year, the AO noted that the assessee made interest payment of Rs.1,68,48,871/- on the loan of Rs.15,51,18,990/- as on 01.04.2018 taken by the assessee from Sheri Equipment Finance Ltd. Accordingly, the AO noted that assessee has made interest payment @10.86%. The AO also noted that assessee has given long-term loans of Rs.23,74,705/- and short-term loan of Rs.10,78,921/- to some parties, which aggregating to Rs.11,02,50,626/- whereas the assessee has shown interest income of Rs.1,62,348/-. The AO noted that on other hand assessee made huge payment of interest of Rs.1,66,48,871/-. The AO, accordingly, reached a conclusion that assessee diverted its fund for non- business purposes. According to the AO, the assessee has charged interest on the loan at the lower. Accordingly, he calculated notional interest @ 10.86% aggregate loan given by the assessee, which comes to Rs.1,19,73,218/- and same was added to the income of the assessee.

4.

In the appellate proceedings, the ld. CIT(A) also confirmed the order of AO.

5.

We have heard rival submissions and perused the materials available on record. We find that these loans were given in the earlier years and there has been no disallowance even in the scrutiny assessment framed by the AO for A.Y. 2015-16 and 2013-14. The copies of assessment orders are available at pages 62 to 69 of the paper book. We note from copy of ledger account from 01.04.2010 to 31.03.2015, pertaining to A.Y. 2010-11 till the current financial year, that the said loan was taken in the earlier years and assessee has 2

ITA No.3165/Kol/2025/A.Y.2018-19 Aqua Transliners Pvt. Ltd. vs. DCIT regularly paid interest on the said loan, which has been allowed by the Department. Therefore, we do not find any justification in the order of the ld. CIT(A) to confirm the addition when the same has been accepted by the revenue in the earlier years. In our opinion, once the stand has accepted by the AO in the earlier years and there are no change of facts and circumstances during the year, then the AO cannot be allowed to blow hot and cold and take different stand in the current year. The case of the assessee is squarely covered by the decision of Hon’ble Apex Court in case of Radhasoami Satsang vs. CIT, reported in 193 ITR 321 (SC), wherein it has been held as under:

“In the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings, the question of the exemption of the assessee appellant should not have been reopened. …Though, strictly speaking, res judicata does not apply to income-tax proceedings, where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year…” 6. Considering the aforesaid decision cited supra, we set-aside the order of ld. CIT(A) and direct the AO to delete the addition.

7.

In the result, the appeal of the assessee is allowed.

The order is pronounced on 29/10/2026.

Sd/- Sd/- (Pradip Kumar Choubey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated: 29/10/2026 SAMANTA

ITA No.3165/Kol/2025/A.Y.2018-19 Aqua Transliners Pvt. Ltd. vs. DCIT आदेश �ȧ ĤǓ�ͧ �ͪ �\ Ē ȯͪ��/Copy of the Order forwarded to: 1. \ �Ȣ�ȡ�ȸ/ The Appellant 2. Ĥ×��ȸ/ The Respondent. 3. Ȳ�Ȳͬ��आयकर] �ǕÈ�/ Concerned CIT 4. आयकर] �ǕÈ�(अपील) / The CIT(A) 5. ��ȡ�Ȣ�ĤǓ�Ǔ�ͬ �, आयकर\ �Ȣ�ȣ�\ͬ ����,/ DR, ITAT, Kolkata 6. �ȡ�[ फाईल/ Guard file.

BY ORDER, // TRUE COPY // MANISH Digitally signed by MANISH KUMAR BHOI KUMAR BHOI Date: 2026.11.02 11:25:44 +05'30' Deputy Registrar, ITAT, Kolkata

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