AKRUTI BUILDERS AND DEVELOPERS,MUMBAI vs. ADDL CIT 15(2), MUMBAI

We have heard the learned counsel for the assessee and the learned D.R. for the Revenue and perused the material available on record. Ground No. 1 relates to disallowance of interest of Rs. 1,24,386/-. The learned counsel for the assessee submitted that the assessee has taken interest bearing funds for the purpose of business and claimed the expenses in the Profit & Loss Account. The assessee has also given interest free advances to Shree Krishna Developers. Two partners of the assessee, namely Shri Ashok Patel and Shri Mohanlal Gopalbhai Ramjiyani held profit sharing in the said firm (Shree Krishna Developers) of 25% and 20% respectively. The advance was given to Shri Krishna Developer as business advance. The amount was utilised by Shree Krishna Developers for commercial purposes. The assessee was having surplus interest free funds available with it. The assessee has capital of Rs. 32,37,799/- as on 31st March, 2007. The lower authorities have not rejected the Balance Sheet of the assessee. The assessee has given interest free advance of Rs. 22,50,000/- only. The assessee has sufficient interest free funds available with it, therefore no disallowance on account of interest expenses was warranted. The learned counsel for the assessee has shown us a copy of the Balance Sheet as on 31st March, 2007. In support of his submission the learned counsel for the assessee relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT vs. Reliance Utilities and Power Ltd. in of 2008.

On the other hand, the learned D.R. supported the order of the CIT(A). The learned D.R. further submitted that the fact that the assessee was having sufficient interest free funds with it may be verified by the AO.

We have heard the rival contentions and gone through the orders of the Authorities below. We have noticed that the assessee has paid interest of Rs. 8,20,915/- on unsecured loans. The unsecured loans as on 31st March,

Ground No. 2 relates to confirmation of addition of Rs. 37.50 lakhs on account of unsecured loans. The learned A.R. of the assessee submits that during the relevant period the assessee received certain unsecured loans amounting to Rs. 44,50,000/- from 10 parties. The AO added the entire amount under Section 68 of the Act holding that the loan transactions were not genuine. The CIT(A) confirmed the addition with respect to 6 parties. The learned A.R. further submits that the assessee has furnished all documentary evidences in respect of lenders to prove the capacity of lender, identity and genuineness of transactions. The loan was taken through account payee cheques. Assessee paid interest through account payee cheques after deducting TDS in accordance with law. All documentary evidences were furnished before the lower authorities. The assessee has furnished complete name, address, PAN and loan confirmation of all the creditors. The learned A.R. further submits that subsequently the assessee has repaid the loans. The learned A.R. of the assessee furnished details of M/s. Akruti Builders and Developers repayment of loan and prayed that the details about repayment was not furnished before the lower authorities and the issue may be restored to the file of the AO for verification of facts and for passing appropriate order in accordance with law.

On the other hand, the Revenue submits that the assessee has not given details and confirmation of the parties to prove the genuineness of the transaction. The assessee has not discharged his onus by filing sufficient documentary evidences.

In the rejoinder submitted, the learned A.R. submits that the assessee had furnished complete details of all the creditors, which is summarised by the learned CIT(A) in para 4.1.1 of his order.

We have heard the rival contentions and gone through the orders of the Authorities below. We have noted that the assessee has furnished the details of repayment of loan, which was admittedly not before the lower authorities. Considering the relevancy of the details regarding repayment of loans in subsequent period, we deem it appropriate to restore this ground of appeal to the file of AO to verify the facts and pass appropriate order in accordance with law. Ground No. 2 of the appeal is allowed statistically.

In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 19th September, 2018.