SHYAM SUNDAR MURARKA,MAIN ROAD vs. ITO WARD3(1), MAIN ROAD
What did the Tribunal hold?
The tribunal held that notional interest cannot be added when the assessee has not received any interest and has used personal funds for the loan. However, the addition of Rs. 1,50,000 was upheld as the assessee could not substantiate its source.
What were the facts?
The assessee lent Rs. 1 crore to a friend, which was returned during the assessment year. The AO added notional interest on this loan, which was confirmed by the CIT(A). Separately, an addition of Rs. 1,50,000 was made.
What were the issues?
Whether notional interest on a loan given out of personal funds is taxable, and whether the assessee substantiated the source of Rs. 1,50,000.
Which sections of the Income-tax Act were involved?
Not explicitly mentioned, but relates to income from other sources and substantiation of expenses/loans.
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN, JM & SHRI RATNESH NANDAN SAHAY, AM
O R D E R Per Bench : This is an appeal filed by the assessee against the order passed by the ld.CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 28.08.2025 for the assessment year 2013-2014.
It was submitted by the Ld.AR that the assessment was reopened on the ground that the assessee has lent of Rs.1 crore and it was rotation of money. The assessee gave the explanation that it was not rotation and it had also proved the sources of money. The AO accepted and made no addition. It was the submission that subsequently the AO brought to tax the notional interest on the said loan of Rs.1 crore given by the assessee to Shree Madhusudan Shroff. It was submission that the assessee has not received any interest nor the assessee has any interest income. It was submission that the loan of Rs.1 Crore had been given to the assessee’s friend through banking channel/RTGS and the same has also been returned back during the impugned assessment year itself. It was submission that the addition as made by the AO and as confirmed by the Ld. CIT(A) is liable to be deleted.
In reply, the Ld. Sr.DR vehemently supported the order of the AO and the CIT(A).
We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the assessee is an individual. In the case of individual the income is to be assessed on the basis of cash. The assessee has given the loan out of his own personal fund. There is no evidence found to show that the assessee has received any interest. The details of the transaction between the assessee and his friend Shri Madhsudan Shroff has also been examined by the AO. Nothing has been found to show that the assessee has received any interest. This being so, notional interest cannot be added especially when the assessee has not borrowed the money but has used from his personal funds for giving the loan. In these circumstances, the addition has made by the AO and as confirmed by the Ld.CIT(A) stands deleted.
In regard of addition of Rs.1,50,000/- the assessee has not been able to substantiate that the same was out of his withdrawals or cash in hand. This being so, the addition made by the ld. AO and confirmed by the ld. CIT(A) stands upheld. Thus, this ground of the appeal of the assessee is dismissed.
Latest GST High Court judgments
Search GST case law →- R.K.Service Station, Balasore vs. Commissioner CT And GST Odisha, CuttackOrissa · 31 Oct 2026
- Tankala Soumya vs. Assistant Commissioner Of State Tax, CT And GST, Rayagada Circle, RayagadaOrissa · 31 Oct 2026
- M/S Pooja, Town Hallroad, Cuttack vs. State Tax Officer, Cuttack-I West Circle,CuttackOrissa · 31 Oct 2026
- M/S Chicvogue Fashions Lip, Ganjam vs. State Tax Officer Bhubaneswar- Ii CircleOrissa · 31 Oct 2026
- M/S Priya, Townhall Road, Cuttack vs. Superintendent Cuttack- I Range, CuttackOrissa · 31 Oct 2026