The ITAT dismissed the appeal on merits due to the assessee's...

The ITAT dismissed the appeal on merits due to the assessee's failure to establish the requisite nexus between borrowed funds and amounts advanced for earning interest income under section 57. The assessee did not furnish the Balance Sheet, which was critical to demonstrate the deployment of funds and the composition of liabilities. However, considering the assessee's reliance on past assessments and the principle of judicial consistency, the ITAT set aside both the CIT(A)'s order and the assessment order on this limited issue. The matter was restored to the AO with directions to provide the assessee a reasonable opportunity to produce cogent evidence and explanations to establish the real nexus between borrowings and advances. The appeal was treated as allowed for statistical purposes.