Recently, the Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) set aside an enhancement of Rs. 90.52 crores made by the Commissioner of Income Tax (Appeals) CIT(A) holding that the CIT(A) had erred in treating the loan amount as income from undisclosed sources under sections 69A and 69B of the Income-tax Act, 1961.
A & A Capital Services Pvt. Ltd., a Delhi-based company, filed its income tax return for the 2017-18 assessment year. The tax authorities subsequently scrutinized the company due to interest expenditure of Rs. 5,47,39,150 on a loan of Rs. 90.52 crores, which was disallowed under section 69C of the Income-tax Act, 1961. The assessee-company contended that the loan was genuine and had been repaid, providing all relevant details and documents to support its claim.
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However, the AO disallowed the interest expenditure of Rs. 5,47,39,150, arguing that the assessee failed to provide a satisfactory explanation regarding the corresponding loan amount of Rs. 90.52 crores. Consequently, the AO treated the interest expenditure as unexplained expenditure under section 69C of the Income-tax Act, 1961. The case was then appealed to the CIT(A)/NFAC, who upheld the AO’s decision.
Representing the assessee, the counsel argued before the ITAT that the AO had erred in disallowing the interest expenditure of Rs. 5,47,39,150 under section 69C, and the CIT(A)/NFAC had further erred in upholding the same and adding the principal loan amount of Rs. 90.52 crores under sections 69A&69B. The counsel further pointed out that the assessee had provided all necessary details and documents to prove the genuineness of the loan transactions and repayment.
Upon review, the ITAT Bench comprising Satbeer Singh Godara ( Judicial Member ) and Shi M. Balaganesh ( Accountant Member ) observed that the CIT(A) had erred in upholding the AO’s disallowance of interest expenditure of Rs. 5,47,39,150 under section 69C and adding the principal loan amount of Rs. 90.52 crores under sections 69A/69B. The tribunal noted that the CIT(A) enhancement relied heavily on the AO’s initial doubts, without robust factual backing.
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Thus, the ITAT ruled that the CIT(A) had erred in upholding the disallowance of interest expenditure of Rs. 5,47,39,150 and adding the principal loan amount of Rs. 90.52 crores. Consequently, the tribunal reversed the enhancement of the principal amount and restored the interest expenditure issue back to the assessing authority.
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