TaxTMI 
TaxTMI 
2024 (3) TMI 615
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.... of Income Tax (Appeals) has erred in upholding the action of the Ld. Assessing Officer in making addition of Rs. 10,62,534/- under section 69A in respect of the unsecured loans disregarding the legal/factual matrix of the case. 2. In the facts and circumstances of the case and in law, the Ld Commissioner of Income Tax (Appeals) has erred in upholding the action of the Ld. Assessing Officer in making addition of Rs. 4,62,944/- under section 69C in respect o the interest expenses claimed by the Appellant as business expenditure disregarding the legal/factual matrix of the case." 3. The brief facts are that assessee is an individual having business from income from profession as a proprietor of M/s. Om Shree Balaji Petroleum. The ....
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....e capital went in negative after the receipt of loans and how business went to losses after the receipt of loans. iii. On perusal of Balance Sheet, for A.Y. 2015-16, it is observed that there was a negative Capital balance of Rs. 4,63,11,659/- iv. Assessee has diverted interest bearing fund by making huge withdrawal of capital. 6. Accordingly, he disallowed the claim of financial expenses of Rs. 4,62,944/-. 7. Before the ld. CIT (A) the assessee has submitted as under:- "2. As regards disallowance of Rs 10,62.534/- unsecured loan received from Mr. Jignesh Soni Rs 7,00,000/- and Mr. Sanjay Sharma Rs 3,62,534/- we wish to state your appellant has been asked to prove the credit worthiness and genuineness of the....
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.... a period of time and accordingly, capital had become negative. Loans were taken to repay the earlier loans and these loans were utilized wholly for the purpose of business and the reason given by AO for disallowing the interest cannot be upheld. 9. We find that, the NFAC without even considering the written submissions which was filed and uploaded on portal before the ld. CIT (A) on 23/11/2021 for which acknowledgement has also been given and filed before us, the first appellate authority has dismissed the assessee's appeal holding that "assessee has not submitted any evidence or documents in this regard, hence, this ground of appeal fails." Such an insouciant remark without looking to materials and explanation placed before him or givi....
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....se are independent parties who have confirmed the loan transaction and also given their bank statements. 11. With respect to interest, he has filed additional evidences in its petition under Rule 29 of ITAT Rules, giving the ledger account of interest paid for overdraft account, bank statements, details of interest paid of secured loans and unsecured loans alongwith ledger of interest paid to various lenders both for secured and unsecured loans. Thus, he submitted all this was part of the books of accounts and audit report placed on the record before the ld. AO. Thus, interest could not have been disallowed as the same has been paid to the bank institution and to the lenders for the loans taken in the earlier years for which there is no ....
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....ne or parties did not have the creditworthiness. Accordingly, addition on account of loan of sum aggregating to Rs. 10,62,534/- is deleted. 14. In so far as disallowance of interest expenditure is concerned, the assessee before us has filed copy of ledger account and bank statement of the assessee and it is seen that these interests are duly reflected in the audited accounts as well as in the bank statements. From the perusal of the balance sheet it is seen that assessee had disclosed financial expenses in the following manner:- Financial Expenses Interest on Bank O.D 1,72,641.00 Interest on Unsecured Loans 2,26,744.00 Interest on Secured Loans 63,559.00 4,62,944.00 In so far as interest on bank....