YASH DISTRIBUTORS,THANE vs. ITO WD 3(3), KALYAN

The captioned appeal by assessee for Assessment Year [AY] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-1 [CIT(A)], Mumbai Appeal No.53/14-15 dated 11/12/2015 qua Yash Distributors Assessment Year 2011-12 confirmation of certain addition of Rs.30 Lacs on account of notional interest on security deposits. The assessment for impugned AY was framed by Ld. Income Tax Office, Ward-3(3) on 07/03/2014 u/s 143(3) of the Income Tax Act, 1961. 2.1 Facts leading to the same are that the assessee being resident firm engaged as distributor of medicines & cosmetics has been assessed for impugned AY at Rs.33.65 Lacs after certain additions / disallowances as against returned loss of Rs.1.34 Lacs e-filed by the assessee on 29/09/2011. The addition of Rs.30 Lacs on account of accrued interest on security deposit is the sole subject matter of this appeal. 2.2 During assessment proceedings, it was noted that the assessee advanced deposit of Rs.2.50 crore to an entity namely MAC Remedies Pvt. Ltd. pursuant to distribution agreement dated 14/04/2009. It was noted that the assessee offered interest income of Rs.27.50 Lacs against the same in immediately preceding AY but did not offer any interest income in the impugned AY. Upon perusal of documents furnished by MAC Remedies Pvt. Ltd. in reply to notice u/s 133(6), Ld. AO came to conclusion that the said party paid interest of Rs.30 Lacs to the assessee on security deposit and credited net amount of Rs.27 Lacs to the assessee’s account after deduction of TDS thereupon @10%. The assessee made an attempt to reconcile the figures with financial statements and made various submissions. However, not convinced, Ld. AO rejected the same and made the impugned addition. The same, upon confirmation by Ld. first appellate authority, is being contested before us. 3. The Ld. Authorized Counsel for Assessee [AR], drawing our attention to the documents placed in the paper book, contended that