AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1063
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...., notice u/s 143(2) of the Act was issued on 23.09.2019 and served through e-filing account of the assessee on the registered e-mail id of the assessee. The case of the assessee company was selected for complete scrutiny on various issues which are, (i) claim of any other amount allowable as deduction in Schedule BP; (ii) stock valuation; (iii) investments/advances/loans; (iv) business loss; and (v) unsecured loans. Subsequently, notices u/s 142(1) were issued from time to time, in reply the assessee had filed its replies. After verification of the submissions made by assessee, the assessment order was passed u/s 143(3) r.w.s. 144B of the Act vide order dated 01.06.2021wherein the total income of the assessee was assessed at INR 12,17,08,119/ -. 3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 20.11.2024, partly allowed the appeal of the assessee. 4. Aggrieved by the order of Ld. CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal :- 1. "Whether on facts and circumstance of the case and in law, Ld. CIT (A)-3, Noida has erred in deleting the addition of Rs. 22,37,89,198/- made on account of d....
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....e assessee has utilized interest bearing funds for making interest free advances to its sister concerns and other companies. Ld. CIT DR submits that the assessee has not received any interest on the advances/loans given however, paid interest on loans which was claimed as deduction in the P&L Account though there was a direct nexus between the borrowed funds and interest free loans given. Ld. CIT DR submits that assessee has failed to justify the business expediency of such interest free advances and therefore, the AO has invoked the provision of section 36(1)(iii) of the Act and computed the disallowance of INR 22,37,89,198/-however, the same was deleted by Ld. CIT(A) by not appreciating the fact that the assessee has failed to prove the nexus between the interest free funds and the interest free advances given and further failed to establish the commercial expediency in providing such loans therefore, Ld. CIT DR vehemently supports the order of AO and requested to confirm the order of AO. 6. On the other hand, Ld.AR for the assessee submits that during the year under appeal, assessee was having sufficient interest free funds/ low interest bearing funds in the shape of unsecure....
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.... was claimed in the P&L Account. He thus, submits that Ld. CIT(A) after considering these facts, deleted the additions made wherein Ld. CIT(A) has categorically held that the advances were given under commercial expediency and solely for the betterment and for the support of the business of the assessee thus, provisions of section 36(1)(iii) could not be invoked. 8. Ld.AR also placed reliance on the written submissions filed by the assessee which read as under :- 1. "That the respondent 'Bright Buidtech Private Limited' is a real estate developer primarily covering residential projects covering the aspects of real estate development, from the identification and acquisition of land, to the planning and marketing of the projects. 2. That the respondent has followed Ind AS for very first time during the FY 2017-18 and reinstated the financial statements for FY 2016-17. Please refer the submissions of the appellant reproduced by CIT(A) in para 3 and 3.1 page 9 of the CIT(A) Order. 3. The respondent was issued a notice under Section 143(2) of the Income Tax Act, 1961 on 23rd September 2019, in respect of various issues flagged during the course of s....
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....to conduct any independent verification or analysis of the actual fund trail, and has not established any nexus between the interest-bearing borrowed funds and the advances in question. Mere deposit of funds in a common bank account cannot lead to an automatic presumption that the advances were made out of interest-bearing loans. 8. Such approach is contrary to settled judicial principles, wherein it has been consistently held that in the absence of a direct nexus, no disallowance of interest under Section 36(1)(iii) can be sustained merely because funds were pooled in a common bank account. The commercial expediency and availability of interest-free funds have already been demonstrated and accepted by the CIT(A). The findings of the CIT(A) is dealt at page 38-54 of the CIT(A) order. 9. That the CIT(A) has granted relief to the appellant after a comprehensive evaluation of all relevant aspects, including :- ● The impact of notional interest both on income and expenditure, ● The actual source and trail of funds utilized for the advances made, and ● The existence of commercial and business expediency in relation to such a....
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....ch is reflected under Schedule 20 of the audited Profit & Loss Account. Please refer page 22 and 38 of the PB. b) Out of this amount, an adjustment of Rs.14.51 crores has already been made in the computation of income. Accordingly, the net interest income credited, after considering the computation adjustments, stands at Rs.16.94 crores. Refer page 132 of the PB. Refer page 40-41 of the CIT(A) Order. Notional interest credited in P/L 31.45 Less: Interest reduced by making adjustment in computation of income due to Ind AS effect (14.51) Total notional interest claimed in P/L 16.94 III Net notional interest income (II-I) 6.55 Thus, the assessee has effectively considered net interest income of Rs.6.55 crores, after adjusting the notional interest income of Rs.16.94 crores. 11. That the CIT(A) at para no. 'a', page 38 of the CIT(A) Order has discussed the issue of "notional interest income and notional interest expenditure" and finally concluded that the assessee has not claimed any interest but has considered for net interest income of Rs.6.55 Cr after adjustment of interest income. That the Ld. CIT(A) at page no. 41 of the CIT(A) Ord....
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....nfirmed the transaction by issuing a notice under section 133(6); however, no significance was to the outcome of the inquiry. Refer page 13 of the CIT(A) order. 6. Without prejudice to above the AO has wrongly applied hypothetical rate of 12% irrespective of the fact that 1% was only paid on NCD's. 2. Doyen Town Planner Pvt. Ltd. 5Cr 2013- 14 Non- interest bearing funds Business NA 1. The amount was advanced out of interest-free funds available with the assessee in FY 2013-14. The fund trail is reproduced at page 16 of the CIT(A) order, and the final findings are at page 52. Accordingly, the question of disallowing interest is merely hypothetical. 2. The amount was given for business, for purchase of land and the advance is appearing under the head 'Advances given for Land' in B/S filed for AY 2018-19. Refer page 35 of the PB and schedule 6 of the Audited Financial Statements. 3. The assessments for A.Y. 2014-15 and A.Y. 2016-17 were completed under section 147 (on 21.05.2024) and section 143(3) (on 30.12.2018) respectively. It is respectfully submitted that in both assessment years, no addition has been made on account of the business a....
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....lization have been reproduced. 3. The assessment for A.Y. 2016-17 was completed under section 143(3) (on 30.12.2018). It is respectfully submitted that no addition has been made on account of the business advance in question. Kindly refer to pages 103 to 111 of the PB for relevant details. 4. The advance to Ace Infracity Developers Put. Ltd. was supported by a formal agreement (refer page 116-126 of the PB) and disclosed under the head "Advance given for supply of goods." It was extended for development work. Refer page 25 & 52 of the CIT(A) Order. 5. The Assessing Officer confirmed the transaction by issuing a notice under section 133(6); however, no significance was to the outcome of the inquiry. Refer page 38 of the CIT(A) order. 6. Without prejudice to above the AO has wrongly applied hypothetical rate of 12% irrespective of the fact that 1% was only paid on NCD's. Refer page 17 of the CIT(A) Order where trail of advance has been submitted. 13. Lack of AO response despite multiple opportunities -Additions deleted by CIT(A) That the CIT(A) had provided an opportunity to the AO vide letter dated 23rd October 2024 and emails dated 2nd November 202....