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Facts
The assessee, an individual dealing in land, filed an income return of Rs. 55,77,360/- for AY 2020-21. The Assessing Officer made substantial additions, including a disallowance of interest expenses under Section 57 and additions for unsecured loans under Section 68, leading to an assessed income of Rs. 50,75,26,068/-. The CIT(A) partly upheld these additions, but the assessee contended that additional evidences could not be presented to the lower authorities.
Held
The Tribunal found merit in the assessee's submission regarding the inability to furnish additional evidences earlier. It, therefore, remanded the entire matter back to the Ld. CIT(A) to re-examine the disallowance of interest expenses under Section 57 and the additions under Section 68, considering the new evidences after providing a fresh opportunity of hearing. The assessee was also permitted to raise an additional ground concerning interest capitalization.
Key Issues
Whether the disallowance of interest expenses under Section 57 was justified; whether additions for unsecured loans under Section 68 were valid given the assessee's claim of having fresh evidence to substantiate identity, genuineness, and creditworthiness; and the capitalization of interest on loans for properties.
Sections Cited
57, 68, 37, 143(2), 234A, 234B, 234C
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI MANISH BORAD & SHRI VINAY BHAMORE
Assessment Year : 2020-21 Vishal Ashok Chugera, Vs. DCIT, Central Circle- C/o Parag Lodge, 327/a Na, 1(3), Pune. Pratima Chembers, Laxmi Road- 411002. PAN : AAMPC1344D Appellant Respondent Assessee by : Shri Kishor B. Phadke Revenue by : Shri Amit Bobde Date of hearing : 21.08.2025 Date of pronouncement : 14.11.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 20.12.2024 passed by Ld. CIT(A), Pune-11 [‘Ld. CIT(A)’] for the assessment year 2020-21.
2. The appellant has raised the following grounds of appeal :-
1. The learned Commissioner of Income Tax (Appeals) 11, Pune (hereinafter called as learned CIT(A), Pune) erred in law and on facts in upholding the total addition of Rs. 14,88,24,299/- comprising a disallowance of Rs. 1,70,71,299/-u/s 57 of the ITA, 1961 and an addition of Rs. 13,17,53,000/- u/s 68 of the Act.
2. The learned CIT(A), Pune erred in law and on facts in sustaining the disallowance the deduction of Rs. 1,70,71,299/- u/s 57 of ITA, 1961 by holding that the such interest expenditure was not incurred wholly or exclusively for the purpose of earning interest income under the "Income from Other Sources," without appreciating that there is direct indirect nexus of utilization of interest bearing funds for lending to appellant's group concern namely, Vishal Chugera Properties India Private Limited (M/s VCPLI) on which interest is earned.
3. Appellant contends that, income earned on providing advances to M/s VCPIL is in nature of business activities as appellant & VCPIPL, both are engaged in real estate business & hence, interest expenses incurred for the said purpose ought to have been allowed u/s 37 of ΙΤΑ, 1961.
4. The learned CIT(A), Pune erred in law and on facts in upholding the addition of Rs. 2,72,00,000/- u/s 68 for obtaining advances from two parties with the observation that, appellant failed to substantiate identity, genuineness, and creditworthiness of parties. Learned CIT(A) failed to consider, the documentary evidences submitted like confirmations, sale deed & legal suit before upholding the addition u/s 68 of ITA, 1961.
5. The learned CIT(A), Pune erred in law and on facts in upholding the addition of Rs. 10,45,53,000/- u/s 68 of ITA, 1961 for unsecured loan obtained from 19 parties during A.Y.2020-21 by holding appellant has failed to substantiate the identity, the genuineness of the transactions, creditworthiness of the parties without appreciating fact that, appellant has discharged the primary onus to substantiate pre- condition of section 68.
The learned CIT(A), Pune erred in law and on facts in upholding the addition of Rs. 10,45,53,000/- u/s 68 of ITA, 1961 with the observation that, appellant failed to substantiate identity, the genuineness of the transactions, and the creditworthiness of lenders with documentary evidence without appreciating that, appellant has provided PAN, Address, Confirmations in most of the parties. Further, learned CIT(A) failed to appreciate that, appellant has also made partial repayment of loans obtained during the year.
The Appellant craves leave to add to, alter, amend, or withdraw any of the foregoing grounds of appeal
at or before the time of hearing, in the interests of substantial justice.”
3. The appellant has also raised following additional ground of appeal :- “8. Without prejudice to other grounds, Appellant contends that, interest on loans availed from various banks / institutions and invested in various properties including following properties, may please be capitalized on the cost of such properties - a. Four flats in Kothrud acquired from M/s Seyash Buidldcon b. Mumbai flat acquired from Mrs. Sumisha Lalchandani c. Bunglow at Padma Vilas Society from Mrs. Prem Kaur Appellant further contends that, deduction of the capitalized interest may please granted at the time of sale of the properties.”
Facts of the case, in brief, are that the assessee is an individual earning income from the business of land dealing and income from other sources. The return of income for the year under consideration was filed on 31.03.2021 by declaring total income of Rs.55,77,360/-. The case was selected under CASS and notice u/s 143(2) of the Act was issued on 29.06.2021. During the assessment proceedings, various notices were issued by the Assessing Officer, however, on some occasions, the assessee did not respond to these notices and on some occasions he either sought adjournment or filed part details. The details of notices issued and the compliance made by the assessee has been tabulated by the Assessing Officer at page no.2 of the assessment order. As the assessee did not fully comply with various notices, a final show cause notice was issued by the Assessing Officer which has been reproduced at para 3.2 of the assessment order. Since, this show cause notice was not responded by the assessee, the assessment was completed by making following additions :-
1. Disallowance of expenses amounting to Rs.1,70,71,299/- claimed as deduction u/s 57 of the Act.
Addition of Rs.48,48,77,409/- being the difference in the unsecured loan shown outstanding as on 31.03.2020 vis- à-vis loan shown outstanding as on 31.03.2019. In this manner, the total income was assessed at Rs.50,75,26,068/- as against the income returned by the assessee at Rs.55,77,360/-.
Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A). After considering the submissions of the assessee, Ld. CIT(A) partly allowed the appeal by observing as under :- “31. The above table clearly suggests that for the loan creditors mentioned at Sl. No. 2. 5, 8, 9, 13, 14, 16, 18 and 20, the appellant has not filed copy of confirmation, ITR as well as the copy of their bank statements. As discussed earlier in this order, for these loan creditors, the appellant has failed to discharge his primary onus by submitting supporting documents such as confirmation, copies of bank statements of creditors, copies of ITR of creditors and copies of their financial statement. Therefore, by applying the ratio laid down by the case laws discussed earlier in this order, it is held that the appellant has failed to prove the genuineness of fresh loans claimed to have been received from these persons.
It is further seen that except the loan creditor namely, Shri Ramesh Chhabria (sr. no. 17) and Shri Vinay A. Chugera (sr. no. 21), the appellant has failed to file the copy of ITR as well as bank statement, It is a well settled legal position that merely filing a copy of confirmation is not sufficient to discharge the onus casted by section 68 of the Act. Accordingly, it is held that the appellant has failed to substantiate the loans raised from these loan creditors.
As regards to the loan raised from Shri Ramesh Chhabria, it is seen that Shri Ramesh Chhabria had disclosed an income of Rs.6,21,120/- in his ITR for AY 2020-21. On the other hand, it is claimed that Shri Ramesh Chhabria advanced an amount of Rs.4.20,00,000/- as unsecured loan during the year. Thus, the capacity of Shri Ramesh Chhabria remained doubtful. Moreover, the appellant has not filed the copy of bank statement of Shri Ramesh Chhabria. These facts suggest that the appellant has failed to prove the creditworthiness of Shri Ramesh Chhabria as well as the genuineness of said loan transaction.
As regards to the loan of Rs.1,25,00,000/- raised from Shri Vinay A. Chugera is concerned, the appellant has not filed the copy of bank statement of Shri Vinay A. Chugera. Moreover, the income shown in the ITR by Shri Vintly. A. Chugera is Rs 43,72,780/-, Thus, the capacity of Shri Ramesh Chhabna remained doubtful. These facts suggest that the appellant has failed to prove the creditworthiness of Shri Ramesh Chhabria as well as the genuineness of said loan transaction, 35. To sum up, the appellant has failed to discharge his primary onus by submitting supporting documents such as confirmation, copies of bank statements of creditors, copies of ITR of creditors and copies of their financial statement. Therefore, by applying the ratio laid down by the case laws discussed earlier in this order, it is held that the appellant has failed to prove the genuineness of fresh loans amounting to Rs. 10,45,53,000/- received during the year under consideration and therefore the addition to the extent of Rs. 10,45,53,000/- is upheld.
To sum up, out of the addition of Rs. 48.48,77,409/- made by the AO on account of increase in loans and advances, the addition to the extent of Rs. 13,17,53.000/- (2,72,00,000 + 10,45.53,000) is upheld and balance is directed to be deleted as same is not corresponding to fresh loans and advances received during the year. The grounds no. 5. 6. 7. and 8 raised by the appellant stand PARTLY ALLOWED.
The ground no. 9 raised by the appellant is regarding levy of interest u/s 234A, 2348 and 234C of the Act. No separate submission has been made in this regard by the appellant. Furthermore, it is a settled position that charging of interest under these sections is of mandatory nature, The AO is however directed to recompute the interest while giving effect to this order. The ground no. 9 raised by the appellant is disposed accordingly.
The ground no. 10 is regarding initiation of penalty proceedings. The initiation of penalty proceedings cannot be challenged at this stage Accordingly, the ground no 10 is DISMISSED 39. The ground no. 11, 12, 13 and 14 are of general nature and do not require any specific adjudication 40. To conclude, the appeal of the appellant for AY2020-21 is PARTLY ALLOWED.”
6. Again being aggrieved with the above order passed by Ld. CIT(A), wherein addition u/s 57 of Rs.1,70,71,299/- was confirmed and addition u/s 68 of Rs.48,48,77,409/- was reduced to Rs.13,17,53,000/- the assessee is in appeal before this Tribunal.
7. Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A) is unjustified. Ld. AR submitted before us that during the period under consideration an interest income of Rs.2,29,04,734/- was received from Vishal Chugera Properties India Pvt. Ltd. (VCPIL) and against this interest receipt, the appellant has claimed deduction of Rs.1,70,71,299/- and net amount of Rs.58,37,099/- was shown under the head “Income from other sources”. Ld. AR submitted that during the course of assessment proceedings the details of expenses of Rs.1,70,71,299/- could not be produced before the Assessing Officer, however the details were furnished before Ld. CIT(A) wherein the assessee has clearly demonstrated that there is direct nexus between the expenses and income earned. Ld. AR also submitted that some additional evidences are also furnished before the bench in connection with above addition which goes to the root of the matter & needs to be admitted for consideration. Ld. AR requested to delete the addition in the light of additional evidences or alternatively Ld. AR Ld. CIT(A) to decide the issue a fresh in the light of additional evidences.
Ld. AR with regard to remaining addition of Rs.13,17,53,000/- u/s 68 of the Act submitted before us that earlier certain evidences could not be filed before Ld. CIT(A) and since they are now in the possession of the assessee, Ld. AR requested before the bench to admit & consider the above said additional evidences which has direct bearing on the case of the assessee and goes to the root of the matter. Ld. AR requested to delete the addition in the light of additional evidences or alternatively Ld. AR requested to set-aside the matter to the file of Ld. CIT(A) to decide the issue afresh in the light of additional evidences.
Ld. AR also raised an additional ground with regard to capitalization of interest to the cost of properties.
Ld. DR appearing from the side of the Revenue relied on the order passed by Ld. CIT(A) & requested to confirm the same & also opposed to admit the additional evidences filed by the assessee.
We have heard Ld. counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that Ld. CIT(A) has not allowed the ground of assessee with regard to addition of Rs.1,70,71,299/- u/s 57 of the Act and has partly allowed the ground of appeal
with regard to addition of Rs.48,48,77,409/- u/s 68 of the Act by reducing it to the extent of Rs.13,17,53,000/-. It was the sole contention of Ld. Counsel of the assessee that certain additional evidences could not be furnished before Ld. CIT(A) which resulted in above unfortunate additions and therefore it was requested by him to set-aside the matter back to the file of Ld. CIT(A) to decide the issue of addition of Rs.1,70,71,299/- and the issue of addition of Rs.13,17,53,000/- afresh in the light of above additional evidences.
12. Considering the totality of the facts of the case, we find some force in the above arguments of the assessee and therefore in the interest of justice, we deem it appropriate to remand the matter back to the file of Ld. CIT(A) with a direction to decide the issue of addition of Rs.1,70,71,299/- and the issue of addition of Rs.13,17,53,000/- afresh as per fact and law and also in the light of above additional evidences filed by the assessee before the Bench after providing reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. CIT(A) in this regard and to furnish additional evidences, in support of his contention without taking any adjournment under any