Interest disallowance fails where creditor genuineness was already accepted in earlier assessment years.

Interest on loans could not be disallowed merely on the allegation that the creditors were not genuine, where the credits relating to the 29 persons had already been accepted in earlier assessment years. On those facts, the Assessing Officer could not reopen the settled genuineness of the credits or treat the creditors as non-existent for the purpose of denying the interest deduction. The disallowance was held unsustainable on the record, and the findings of the Commissioner of Income-tax (Appeals) and the Tribunal were upheld. No question of law arose from those factual findings.

---

---

Issues: Whether interest paid on loans was disallowable on the ground that the creditors were not genuine, when the genuineness of the credits had been accepted in earlier assessment years.

Analysis: The credits relating to the 29 persons were not introduced in the relevant assessment year. Once the genuineness of those credits had been accepted in an earlier year, the Assessing Officer could not disallow the interest on the footing that payment to the creditors was not established or that the creditors were non-existent. The disallowance was therefore unsustainable, and the findings of the Commissioner of Income-tax (Appeals) and the Tribunal were supported by the record. No question of law arose from those findings.

Conclusion: The disallowance of interest was not justified and the answer was in favour of the assessee.

---