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Facts
The assessee filed a return declaring a loss for AY 2016-17, which was selected for scrutiny. Due to non-compliance, the Assessing Officer passed a best judgment assessment u/s 144, making additions for unexplained cash credits u/s 68 (an unsecured loan from Nanubhai Desai HUF and a difference in unsecured loan balances) and disallowing interest expenses claimed against management fees. The Ld. CIT(A) subsequently deleted all these additions, leading the Revenue to appeal before the Tribunal.
Held
The Tribunal set aside the CIT(A)'s findings on all three additions (unsecured loan, difference in loan balances, and disallowance of interest expenses). The matters were restored to the Assessing Officer for fresh adjudication, with directions for the assessee to provide necessary documentary evidence and explanations. Consequently, the penalty levied u/s 271(1)(c) was also restored to the AO, allowing for potential initiation of penalty proceedings based on the outcome of the quantum assessment.
Key Issues
Whether the CIT(A) erred in deleting additions for unexplained cash credits u/s 68 related to unsecured loans and loan balance differences, and in deleting the disallowance of interest expenses claimed without establishing nexus to management fees; and the corresponding penalty u/s 271(1)(c).
Sections Cited
Section 68, Section 143(2), Section 142(1), Section 131, Section 144, Section 271(1)(c)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
Both the appeals being connected to the same Both the appeals being connected to the same Both the appeals being connected to the same matter of dispute, therefore, same dispute, therefore, same were heard together and disposed off by were heard together and disposed off by way of this consolidated order for convenience. The grounds raised way of this consolidated order for convenience. The ground way of this consolidated order for convenience. The ground by the Revenue in Revenue in for quantum of addition by the Revenue in ITA No. 809/Mum/2024 for quantum of addition are reproduced as under: are reproduced as under:
"Whether on the fact and in the circumstances of the case, the Ld. 1. "Whether on the fact and in the circumstances of the case, the Ld. 1. "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,05,81,181/ CIT(A) erred in deleting the addition of Rs. 2,05,81,181/- to total income to total income as unexplained cash as unexplained cash credits us 68 of the IT. Act, 1961 made in respect of credits us 68 of the IT. Act, 1961 made in respect of unsecured loans which werc taken from Nanu Bhai Desai HUF ignoring unsecured loans which werc taken from Nanu Bhai Desai HUF ignoring unsecured loans which werc taken from Nanu Bhai Desai HUF ignoring the fact that no such advances appeared in the balance sheet that no such advances appeared in the balance sheet that no such advances appeared in the balance sheet of Nanubhai Desai HUF." Nanubhai Desai HUF." 2. "Whether on the fact and in the circumstances 2. "Whether on the fact and in the circumstances of the case, the Ld. of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,58,34,686/to total income as CIT(A) erred in deleting the addition of Rs. 2,58,34,686/to total income as CIT(A) erred in deleting the addition of Rs. 2,58,34,686/to total income as unexplained cash credits u/s 68 of the IT. Act, 1961 being differential unexplained cash credits u/s 68 of the IT. Act, 1961 being differential unexplained cash credits u/s 68 of the IT. Act, 1961 being differential amount of closing balance of unsecured loans as on 31.03.2015 and amount of closing balance of unsecured loans as on 31.03.2015 and amount of closing balance of unsecured loans as on 31.03.2015 and 31.03.2016 despite th 31.03.2016 despite the fact that the assessee had not submitted any e fact that the assessee had not submitted any documentary evidence to establish the creditworthiness of the parties documentary evidence to establish the creditworthiness of the parties documentary evidence to establish the creditworthiness of the parties and genuineness of the transaction." and genuineness of the transaction." 3. "Whether on the fact and in the circumstances of the case, the Ld. "Whether on the fact and in the circumstances of the case, the Ld. "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the ad CIT(A) erred in deleting the addition of Rs. 4,27,86,117/- to total income to total income on account of disallowance of interest expenses claimed in the P & L on account of disallowance of interest expenses claimed in the P & L on account of disallowance of interest expenses claimed in the P & L account and the same been set off against management fees even though account and the same been set off against management fees even though account and the same been set off against management fees even though there there there exist exist exist no no no nexus nexus nexus between between between interest interest interest expenses expenses expenses claimed claimed claimed and and and management fee management fees earned." 4. The appellant craves leave to amend or alter or add a new ground 4. The appellant craves leave to amend or alter or add a new ground 4. The appellant craves leave to amend or alter or add a new ground which may be necessary. which may be necessary. 3. Briefly stated facts of the case are that for the year under Briefly stated facts of the case are that for the year under Briefly stated facts of the case are that for the year under consideration, the assessee e consideration, the assessee e-filed its return of income on filed its return of income on 16.10.2016 declaring total loss of Rs.( 16.10.2016 declaring total loss of Rs.(-)2,23,30,022/ )2,23,30,022/-. The return of income filed by the assessee was selected for scrutiny and notice income filed by the assessee was selected for scrutiny and notice income filed by the assessee was selected for scrutiny and notice u/s 143(2) of the Income u/s 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was tax Act, 1961 (in short ‘the Act’) was ITA Nos. 809 & 836/MUM/2024 & 836/MUM/2024 3 Nanubhai N Desai issued on 11.07.2017 and was served electronically upon the issued on 11.07.2017 and was served electronically upon the issued on 11.07.2017 and was served electronically upon the assessee. Thereafter, the Assessing Officer issued notice u/s 142(1) assessee. Thereafter, the Assessing Officer issued notice u/s 142(1) assessee. Thereafter, the Assessing Officer issued notice u/s 142(1) of the Act dated 17.09.2018 and 21.11.2018 of the Act dated 17.09.2018 and 21.11.2018 , which , which remain non- complied. The Assessing Officer further issued summon u/s 131 complied. The Assessing Officer further issued summon u/s 131 complied. The Assessing Officer further issued summon u/s 131 dated 03.12.2018 asking the assessee to appear before him however dated 03.12.2018 asking the assessee to appear before him however dated 03.12.2018 asking the assessee to appear before him however same remain non-complied. Thereafter, the Assessing Officer issued complied. Thereafter, the Assessing Officer issued complied. Thereafter, the Assessing Officer issued specific show cause notice proposing the additions u/s 68 of the Act specific show cause notice proposing the additions u/s 68 of specific show cause notice proposing the additions u/s 68 of as well as for disallowance of interest expenses. But in view of the as well as for disallowance of interest expenses. But in view of the as well as for disallowance of interest expenses. But in view of the compliance on the part of the assessee, the Assessing Officer non-compliance on the part of the assessee, the Assessing Officer compliance on the part of the assessee, the Assessing Officer passed the assessment order u/s 144 of the Act i.e. best judgment passed the assessment order u/s 144 of the Act i.e. best judgment passed the assessment order u/s 144 of the Act i.e. best judgment order whereby he made additions, firstly, for unsecured loan order whereby he made addition nsecured loan of 2,05,81,181/- from M/s Nanu Bhai Desai, from M/s Nanu Bhai Desai, secondly secondly, difference of Rs.2,58,34,686/- between closing unsecured loan and opening between closing unsecured loan and opening between closing unsecured loan and opening invoking section 68 of the Act and thirdly unsecured loan invoking section 68 of the Act and invoking section 68 of the Act and disallowance of interest expenses of Rs.4,27,86,170/-. disallowance of interest expenses of Rs.4,27,86,170/ disallowance of interest expenses of Rs.4,27,86,170/
On further appeal, the Ld. CIT(A) deleted all the three On further appeal, the Ld. CIT(A) deleted all the three On further appeal, the Ld. CIT(A) deleted all the three additions.
Aggrieved, the Revenue is in appeal before the Tribunal by way the Revenue is in appeal before the Tribunal by way the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. of raising grounds as reproduced above.
We have heard submission of the parties and perused the We have heard submission of the parties and perused the We have heard submission of the parties and perused the relevant material on record. As far as ground No. 1 of the appeal is record. As far as ground No. 1 of the appeal is concerned, the fact qua the issue in dispute are that the Assessing the fact qua the issue in dispute are that the Assessing the fact qua the issue in dispute are that the Assessing Officer observed from the return of income filed by Nanu Bhai Desai Officer observed from the return of income filed by Nanu Bhai Desai Officer observed from the return of income filed by Nanu Bhai Desai
ITA Nos. 809 & 836/MUM/2024 & 836/MUM/2024 4 Nanubhai N Desai HUF for assessment year under consideration i.e. AY 2016-17 and HUF for assessment year under consideration i.e. AY 2016 HUF for assessment year under consideration i.e. AY 2016 found that no unsecured loan no unsecured loan was advanced by HUF to the advanced by HUF to the assessee, whereas in the return of income filed by the assessee whereas in the return of income filed by the assessee whereas in the return of income filed by the assessee, an from HUF. During the advance of Rs.2,05,81,181/ advance of Rs.2,05,81,181/- was appearing from HUF course of the assessment proceedings neither any kind of the course of the assessment proceedings neither any kind of the course of the assessment proceedings neither any kind of the explanation or any any any documentary documentary documentary evidence evidence evidence to to to explain explain explain the the the inconsistency between the advance of Rs.2,05,81,181/- by the inconsistency between the advance of Rs.2,05,81,181/ inconsistency between the advance of Rs.2,05,81,181/ Nanu Bhai Desai HUF to the assessee was explained and therefore, Nanu Bhai Desai HUF to the assessee was explained and therefore, Nanu Bhai Desai HUF to the assessee was explained and therefore, the Assessing Officer held the same as unexplained cash credit u/s the Assessing Officer held the same as unexplained cash credit u/s the Assessing Officer held the same as unexplained cash credit u/s 68 of the Act. The Ld. 68 of the Act. The Ld. CIT(A) however has deleted the addition CIT(A) however has deleted the addition observing as under:
“6. Ground No. 3(a) and (b): In this ground the appellant is contesting the 6. Ground No. 3(a) and (b): In this ground the appellant is contesting the 6. Ground No. 3(a) and (b): In this ground the appellant is contesting the addition of Rs.2,05,81,181/ addition of Rs.2,05,81,181/- u/s 68 being the unsecured loan taken from u/s 68 being the unsecured loan taken from Nanu Bhai Desai HUF as unexplained cash credits. Nanu Bhai Desai HUF as unexplained cash credits. On perusal of the On perusal of the audit report in form CD dated 13.10.2016 filed by the appellant, it is audit report in form CD dated 13.10.2016 filed by the appellant, it is audit report in form CD dated 13.10.2016 filed by the appellant, it is noted that at item no. 31(b) [particulars of repayment of loan made during noted that at item no. 31(b) [particulars of repayment of loan made during noted that at item no. 31(b) [particulars of repayment of loan made during the previous year the appellant had disclosed that the total loan from the previous year the appellant had disclosed that the total loan from the previous year the appellant had disclosed that the total loan from Nanu Bhai Desai HUF Nanu Bhai Desai HUF was Rs. 13,83,55,200/- against which the amount against which the amount of repayment was Rs. 11,77,74,019/ of repayment was Rs. 11,77,74,019/- Therefore, the balance outstanding Therefore, the balance outstanding loan at the end of the year was Rs.2,05,81, 181/ loan at the end of the year was Rs.2,05,81, 181/- The Ld. AO had The Ld. AO had mistakenly construed that the loan from Nanu Bhai Desai HUF was mistakenly construed that the loan from Nanu Bhai Desai HUF was mistakenly construed that the loan from Nanu Bhai Desai HUF was taken during the year while the loan was taken in earlier year and is ring the year while the loan was taken in earlier year and is ring the year while the loan was taken in earlier year and is brought forward figure. The addition of the loan brought forward from brought forward figure. The addition of the loan brought forward from brought forward figure. The addition of the loan brought forward from earlier year cannot be added as cash credit u/s 68 in the current year. earlier year cannot be added as cash credit u/s 68 in the current year. earlier year cannot be added as cash credit u/s 68 in the current year. Therefore, the Assessing Officer is directed to dele Therefore, the Assessing Officer is directed to delete the addition of te the addition of Rs.2,05,81,181/ Rs.2,05,81,181/-. Accordingly, the appeal on these grounds is allowed. . Accordingly, the appeal on these grounds is allowed.” 6.1 We find that though the Ld. CIT(A) inferred from the statement We find that though the Ld. CIT(A) inferred from the statement We find that though the Ld. CIT(A) inferred from the statement of the facts that loan amount of Rs.2,05,81,181/- was opening of the facts that loan amount of Rs.2,05,81,181/ of the facts that loan amount of Rs.2,05,81,181/ balance of the outstanding loan from balance of the outstanding loan from the Nanu Bhai Desai HUF the Nanu Bhai Desai HUF however, the Ld. CIT(A) has ignored the contrary however, the Ld. CIT(A) has ignored the contrary fact fact brought on record by the Assessing Officer that said loan or advance was not record by the Assessing Officer that said loan or advance record by the Assessing Officer that said loan or advance appearing as debtor in the return of income filed by the Nanu Bhai appearing as debtor in the return of income filed by the Nanu Bhai appearing as debtor in the return of income filed by the Nanu Bhai
ITA Nos. 809 & 836/MUM/2024 & 836/MUM/2024 5 Nanubhai N Desai Desai HUF. In the circumstances, Desai HUF. In the circumstances, the finding of the Ld. CIT(A) is the finding of the Ld. CIT(A) is without appreciation of the complete facts of the case and therefore, without appreciation of the complete facts of the case and therefore, without appreciation of the complete facts of the case and therefore, we set aside the said finding and restore the matter back to the file we set aside the said finding and restore the matter back to the file we set aside the said finding and restore the matter back to the file of the Assessing Officer for deciding afresh with the direction to the of the Assessing Officer for deciding afresh with the direction to the of the Assessing Officer for deciding afresh with the direction to the assessee to explain the queries raised by the Assessing Officer along explain the queries raised by the Assessing Officer along explain the queries raised by the Assessing Officer along with necessary documentary evidence. The ground No. 1 of the with necessary documentary evidence. The ground No. 1 of the with necessary documentary evidence. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical appeal of the Revenue is accordingly allowed for statistical appeal of the Revenue is accordingly allowed for statistical purposes.
As far as the ground No. 2 of the appeal is concerned, the As far as the ground No. 2 of the appeal is concerned, the As far as the ground No. 2 of the appeal is concerned, the Assessing Officer treated the closing balance difference in closing essing Officer treated the closing balance difference in closing essing Officer treated the closing balance difference in closing balance and opening balance as unsecured loan as the loan balance and opening balance as unsecured loan as the loan balance and opening balance as unsecured loan as the loan introduced during the year under consideration and in absence of introduced during the year under consideration and in absence of introduced during the year under consideration and in absence of any documentary evidence to justify identity, creditworthiness and any documentary evidence to justify identity, creditworthiness and any documentary evidence to justify identity, creditworthiness and genuineness of the transaction in respect of enuineness of the transaction in respect of that disffrence, that disffrence, he treated the same as unexplained cash credit u/s 68 of the Act. The treated the same as unexplained cash credit u/s 68 of the Act. The treated the same as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) however referred to the statement of the facts filed Ld. CIT(A) however referred to the statement of the facts filed Ld. CIT(A) however referred to the statement of the facts filed wherein he referred to auditor report in Form No. 3CD for det referred to auditor report in Form No. 3CD for details of referred to auditor report in Form No. 3CD for det loan provided during the year and loan repaid during the year provided during the year and loan repaid during the year provided during the year and loan repaid during the year under consideration. The relevant finding of the Ld. CIT(A) is under consideration. The relevant finding of the Ld. CIT(A) is under consideration. The relevant finding of the Ld. CIT(A) is reproduced as under: reproduced as under:
“7. Ground No. 3(c): In this ground the appellant is contesting the addition Ground No. 3(c): In this ground the appellant is contesting the addition Ground No. 3(c): In this ground the appellant is contesting the addition of Rs.2,58,34,686/ of Rs.2,58,34,686/- u/s 68 being the difference of unsecured loan as on u/s 68 being the difference of unsecured loan as on 31.03.2015 and 31.03.2016 as unexplained cash credit. The Ld. AO has 31.03.2015 and 31.03.2016 as unexplained cash credit. The Ld. AO has 31.03.2015 and 31.03.2016 as unexplained cash credit. The Ld. AO has simply stated that the assessee had not fu simply stated that the assessee had not furnished any details and rnished any details and added the said amount u/s 68. On perusal of the audit report in form CD added the said amount u/s 68. On perusal of the audit report in form CD added the said amount u/s 68. On perusal of the audit report in form CD filed by the appellant it is noted that at Item No. 31(a) [particulars of each filed by the appellant it is noted that at Item No. 31(a) [particulars of each filed by the appellant it is noted that at Item No. 31(a) [particulars of each loan accepted during the previous yearl details of the parties along with loan accepted during the previous yearl details of the parties along with loan accepted during the previous yearl details of the parties along with address and PAN from whom the appellant had taken loans during the and PAN from whom the appellant had taken loans during the and PAN from whom the appellant had taken loans during the ITA Nos. 809 & 836/MUM/2024 & 836/MUM/2024 6 Nanubhai N Desai year are mentioned. As per the said details in form CD the appellant had mentioned. As per the said details in form CD the appellant had mentioned. As per the said details in form CD the appellant had taken Rs. 18,44,95,335/ taken Rs. 18,44,95,335/- as loan during the year. As already mentioned as loan during the year. As already mentioned at para 6 supra, the appellant had also disclosed at at para 6 supra, the appellant had also disclosed at item no. 31(b) item no. 31(b) [particulars of repayment of loan made during the previous year]. The [particulars of repayment of loan made during the previous year]. The [particulars of repayment of loan made during the previous year]. The total loan repaid during the year was Rs.15,86,13,448/ total loan repaid during the year was Rs.15,86,13,448/- -. The details required by the Assessing Officer were already available in the audit required by the Assessing Officer were already available in the audit required by the Assessing Officer were already available in the audit report filed by the Appellant report filed by the Appellant-Assessee. The Assessing Officer had not ssessee. The Assessing Officer had not conducted any inquiry with the lenders as disclosed in form CD. In fact conducted any inquiry with the lenders as disclosed in form CD. In fact conducted any inquiry with the lenders as disclosed in form CD. In fact the Assessing Officer does not even mention the details disclosed in the the Assessing Officer does not even mention the details disclosed in the the Assessing Officer does not even mention the details disclosed in the audit report. Whereas as per the audit report the appellant had taken audit report. Whereas as per the audit report the appellant had taken audit report. Whereas as per the audit report the appellant had taken loans of Rs.18,44,95,335/ ans of Rs.18,44,95,335/- and also repaid loans of Rs.15,86,13,448/ and also repaid loans of Rs.15,86,13,448/- during the year. The Assessing Officer had taken the difference of during the year. The Assessing Officer had taken the difference of during the year. The Assessing Officer had taken the difference of unsecured loan as on 31.03.2015 and 31.03.2016 and simply stating unsecured loan as on 31.03.2015 and 31.03.2016 and simply stating unsecured loan as on 31.03.2015 and 31.03.2016 and simply stating that the assessee had not furnished any details added t that the assessee had not furnished any details added the amount as he amount as unexplained cash credit u/s 68. It is to be noted that the books of unexplained cash credit u/s 68. It is to be noted that the books of unexplained cash credit u/s 68. It is to be noted that the books of account of the appellant are audited and the requisite information as account of the appellant are audited and the requisite information as account of the appellant are audited and the requisite information as certified by an accountant is filed in the audit report in form CD. As certified by an accountant is filed in the audit report in form CD. As certified by an accountant is filed in the audit report in form CD. As stated supra, the details necessar stated supra, the details necessary for conducting an investigation were y for conducting an investigation were already available with the Ld. AO. However, the Assessing Officer had already available with the Ld. AO. However, the Assessing Officer had already available with the Ld. AO. However, the Assessing Officer had made a summary addition without conducting any inquiry and therefore, made a summary addition without conducting any inquiry and therefore, made a summary addition without conducting any inquiry and therefore, the same is bad in law. Therefore, the Assessing Officer is directed to the same is bad in law. Therefore, the Assessing Officer is directed to the same is bad in law. Therefore, the Assessing Officer is directed to delete the addition of Rs.2,58,34,686/ e the addition of Rs.2,58,34,686/-. Accordingly, the appeal on this . Accordingly, the appeal on this ground is allowed. ground is allowed.” 7.1 We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has relevant material on record. We find that the Ld. CIT(A) has relevant material on record. We find that the Ld. CIT(A) has adjudicated the issue without taking into adjudicated the issue without taking into consideration the details consideration the details of the party-wise unsecured loan at the beginning of the year under wise unsecured loan at the beginning of the year under wise unsecured loan at the beginning of the year under consideration as well as the loan outstanding at the closing of the consideration as well as the loan outstanding at the closing of the consideration as well as the loan outstanding at the closing of the relevant previous year. In the circumstances, we feel it appropriate relevant previous year. In the circumstances, we feel it appropriate relevant previous year. In the circumstances, we feel it appropriate to restore this issue ba to restore this issue back to the file of the Assessing Officer with the ck to the file of the Assessing Officer with the direction to the assessee to provide all the necessary details in direction to the assessee to provide all the necessary details in direction to the assessee to provide all the necessary details in respect of unsecured loan outstanding at the beginning of the respect of unsecured loan outstanding at the beginning of the respect of unsecured loan outstanding at the beginning of the previous year as well as at the closing of the previous year. The previous year as well as at the closing of the previous year. The previous year as well as at the closing of the previous year. The Assessing Officer is directed to decide the issue after verification of icer is directed to decide the issue after verification of icer is directed to decide the issue after verification of the amount of loan taken during the year under consideration for the amount of loan taken during the year under consideration the amount of loan taken during the year under consideration the purpose of invoking section 68 of the Act. The ground No. 2 of the purpose of invoking section 68 of the Act. The ground No. 2 of the purpose of invoking section 68 of the Act. The ground No. 2 of ITA Nos. 809 & 836/MUM/2024 & 836/MUM/2024 7 Nanubhai N Desai the appeal of the Revenue is accordingly allowed for statistical the appeal of the Revenue is accordingly allowed for statistical the appeal of the Revenue is accordingly allowed for statistical purposes.
As far as the ground No. 3 of the appeal of disallowance of the As far as the ground No. 3 of the appeal of disallowance of the As far as the ground No. 3 of the appeal of disallowance of the interest of Rs.4,27,86,117/ interest of Rs.4,27,86,117/- for interest of expenditure claimed interest of expenditure claimed against the management fee is concerned, the Assessing Officer against the management fee is concerned, the Assessing Officer against the management fee is concerned, the Assessing Officer held that there was no link between the interest expenditure held that there was no link between the interest e held that there was no link between the interest e incurred for borrowing funds and the management fee. However, incurred for borrowing funds and the management fee. However, incurred for borrowing funds and the management fee. However, the Ld. CIT(A) deleted the addition observing as under: the Ld. CIT(A) deleted the addition observing as under: the Ld. CIT(A) deleted the addition observing as under:
“8. Ground No. 4: In this ground 8. Ground No. 4: In this ground the appellant is contesting the the appellant is contesting the disallowance of Rs.4,27,86, 117/ disallowance of Rs.4,27,86, 117/- being the interest expenditu being the interest expenditure debited to P&L account. As stated at para 2 supra, the appellant along with his to P&L account. As stated at para 2 supra, the appellant along with his to P&L account. As stated at para 2 supra, the appellant along with his wife are Directors and Share Holders in M/s Anoushka Medicare and wife are Directors and Share Holders in M/s Anoushka Medicare and wife are Directors and Share Holders in M/s Anoushka Medicare and Diagnostic Pvt. Ltd. The appellant had availed loan of Rs.27,60,00,000/ Diagnostic Pvt. Ltd. The appellant had availed loan of Rs.27,60,00,000/ Diagnostic Pvt. Ltd. The appellant had availed loan of Rs.27,60,00,000/- from M/s Cosmos Co from M/s Cosmos Co-operative Bank for purchase of the building for the for purchase of the building for the hospital. The appellant receives management fee of Rs. 1,95,22,000/ The appellant receives management fee of Rs. 1,95,22,000/- The appellant receives management fee of Rs. 1,95,22,000/ from the hospital. Therefore, there is a direct nexus between the from the hospital. Therefore, there is a direct nexus between the from the hospital. Therefore, there is a direct nexus between the management fee received from the hospital and the interest paid towards management fee received from the hospital and the interest paid towards management fee received from the hospital and the interest paid towards the loan taken for purchase of property to run the hospital. Therefore, the en for purchase of property to run the hospital. Therefore, the en for purchase of property to run the hospital. Therefore, the Assessing Officer is directed to delete the addition of Rs.4,27,86,117/ Assessing Officer is directed to delete the addition of Rs.4,27,86,117/ Assessing Officer is directed to delete the addition of Rs.4,27,86,117/- being the interest expenditure debited to P&L account. Accordingly, the being the interest expenditure debited to P&L account. Accordingly, the being the interest expenditure debited to P&L account. Accordingly, the appeal on this ground is allowed. appeal on this ground is allowed.” 8.1 We have heard rival submission of the parties and perused the heard rival submission of the parties and perused the heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has not relevant material on record. We find that the Ld. CIT(A) has not relevant material on record. We find that the Ld. CIT(A) has not justified as how the receiving of the management fee is connected to justified as how the receiving of the management fee is connected to justified as how the receiving of the management fee is connected to the interest loan taken towards purchase the property to run the interest loan taken towards purchase the property to run the interest loan taken towards purchase the property to run hospital. Therefore, we set aside the finding of the Ld. CIT(A) on the l. Therefore, we set aside the finding of the Ld. CIT(A) on the l. Therefore, we set aside the finding of the Ld. CIT(A) on the issue in dispute and restore and restore the matter back to the file of the the matter back to the file of the Assessing Officer with the direction to the assessee to furnish Assessing Officer with the direction to the assessee to furnish Assessing Officer with the direction to the assessee to furnish necessary evidence in support of claim that interest expenditure necessary evidence in support of claim that interest expenditure necessary evidence in support of claim that interest expenditure was incurred towards earning of management fee. The ground of was incurred towards earning of management fee. The ground of was incurred towards earning of management fee. The ground of ITA Nos. 809 & 836/MUM/2024 & 836/MUM/2024 8 Nanubhai N Desai appeal of the Revenue is accordingly allowed for statistical appeal of the Revenue is accordingly allowed for statistical appeal of the Revenue is accordingly allowed for statistical purposes.
The appeal in is in respect of penalty The appeal in ITA No. 836/Mum/2024 is in respect of penalty The appeal in ITA No. 836/Mum/2024 is in respect of penalty levied u/s 271(1)(c) of the Act in respect of additions which we have levied u/s 271(1)(c) of the Act in respect of additions wh levied u/s 271(1)(c) of the Act in respect of additions wh already restored to the file of the Ld. Assessing Officer while already restored to the file of the Ld. Assessing Officer while already restored to the file of the Ld. Assessing Officer while adjudicating the appeal in ITA No. 809/Mum/2024 , ,therefore, since we have already set aside the additions made by the Assessing we have already set aside the additions made by the Assessing we have already set aside the additions made by the Assessing Officer, the penalty levied in respect of those additions cannot Officer, the penalty levied in respect of those addi Officer, the penalty levied in respect of those addi survive and therefore, all the grounds raised by the Revenue in survive and therefore, all the grounds raised by the Revenue in survive and therefore, all the grounds raised by the Revenue in respect of appeal filed against penalty levied u/s 271(1)(c) of the Act respect of appeal filed against penalty levied u/s 271(1)(c) of the Act respect of appeal filed against penalty levied u/s 271(1)(c) of the Act are also restored to the file of the Assessing Officer. The Assessing also restored to the file of the Assessing Officer. The Assessing also restored to the file of the Assessing Officer. The Assessing Officer may consider initiating penalty proceedings in the quantum Officer may consider initiating penalty proceedings in the quantum Officer may consider initiating penalty proceedings in the quantum assessment proceedings in accordance with law. assessment proceedings in accordance with law.
In the result, both the appeals of the Revenue are allowed for In the result, both the appeals of the Revenue are allowed for In the result, both the appeals of the Revenue are allowed for statistical purposes.