SHAH ARVIND SAREMAL HUF (PROP. JAINTEX CREATION),AHMEDABAD vs. THE ITO ,WARD 5(3)(2), AHMEDABAD

1 The order passed by U/s.250 passed on 22-08-2024 for A.Y. 2016-17 by NFACICIT(A)], Delhi (for short CIT(A)" upholding the addition of Rs.2,80,507/- towards interest income made by A.O. is wholly illegal, unlawful and against the principles of natural justice. Asst. Year : 2016-17 - 2–

1 The Id. CIT(A), has grievously erred in law and or on facts in not appreciating that the appellant had duly disclosed the interest income of Rs. 4,51,804/- derived from M/s SKZ Realities and disclosed the net interest income of Rs. 1,69,209/- and as such the addition of Rs. 2,80,507/- was not justified.

1 The Id.CIT(A) has grievously erred in law and or on facts in upholding the addition of Rs.2,80,507/- towards interest income, though the same was duly disclosed in the interest account.

2 That the in the facts and circumstances of the Id. CIT(A), ought not to have upheld the addition of Rs.2,80,507/- towards interest income because the interest income of Rs. 4,51,804/-derived from M/s SKZ Realities was duly credited in the interest account and net interest income of Rs. 1,69,209/-was taken to P & L A/c. so that there was no discrepancy between the interest income as per 26AS and that shown in ITR. It is, therefore, prayed that the addition of Rs. 2,80,507/- upheld by the CIT(A) may kindly be deleted.

The assessee is a Hindu Undivided Family (HUF) deriving income by way of commission and proprietary business under the name and style of Jain Tex Creation. The assessee maintains regular books of account. The return of income for A.Y. 2016-17 was not filed originally as the income was below the taxable limit. Subsequently, the Assessing Officer received information that the assessee had received interest income of Rs.4,51,805/- from M/s SKZ Realities, which was chargeable to tax. Accordingly, notice under section 148 of the Act was issued on 31.03.2021. In response, the assessee filed the return of income on 28.04.2021 declaring total income of Rs.4,23,860/-. During the course of assessment proceedings, the Assessing Officer issued notices calling for details regarding unsecured loan given to M/s SKZ Realities amounting to Rs.52,86,027/-. The assessee submitted that the interest income was part of its business income and was already included in the income derived from M/s SKZ Realities. However, the Assessing Officer rejected the explanation in the absence of detailed breakup, ledger accounts, etc., and completed the assessment at total income of Rs.7,04,367/- by making an Asst. Year : 2016-17 - 3– addition of Rs.2,80,507/- being the alleged difference between interest income of Rs.4,51,804/- reflected in Form 26AS and interest income of Rs.1,69,209/- declared in the return of income.

Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A), NFAC, Delhi. The appeal was disposed of ex-parte due to non- compliance with notices of hearing. The Ld. CIT(A) observed that the interest income shown in the Profit & Loss Account was Rs.2,80,507/-, whereas Form 26AS reflected interest receipts of Rs.4,51,804/-, and therefore confirmed the addition of Rs.2,80,507/-.

Aggrieved by the order of the Ld.CIT(A), the assessee is in further appeal before us.

On going through the record, we find that interest received was Rs.4,51,804/- which is as per the Form 26AS the same has been taken in the books under interest income as received from SKZ Realities and the net interest income of Rs.1,69,208/- was showed in the P & L. Since the revenue failed to observe the netting of the interest, we hold that no addition is called for.

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