TaxTMI 
TaxTMI 
2026 (1) TMI 1417
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....come-tax Act, 1961 for the Assessment Year 2017-18. 2. The solitary grievance raised by the assessee is against the addition of Rs.1,06,32,156 made by the Assessing Officer by disallowing deduction of interest expenditure claimed under the head "Income from Other Sources" under section 57(iii) of the Act. 3. The brief factual matrix qua the issue is that the assessee is an individual and is working as a partner in a partnership firm M/s Creative International. The assessee filed his return of income on 31/10/2017 declaring total income of Rs.1,13,74,120. The case of the assessee was selected for scrutiny primarily on the ground of large deduction claimed under section 57. It is an admitted position that there was no response by the as....
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....the assessment, the assessee filed additional evidences before the learned CIT(A) under Rule 46A, including confirmation letters from M/s Ariha Diamonds Jewellery Pvt. Ltd. as well as from the parties from whom loans and advances had been received and to whom interest had been paid. The learned CIT(A) admitted the additional evidences and called for a remand report from the Assessing Officer. However, despite these evidences and the explanation tendered by the assessee, the learned CIT(A) dismissed the claim of deduction after recording the following findings: "5.3.4 I have perused the assessment order, submission of the appellant, remand report and judicial precedents on this issue. It is observed that the case of the appellant fo....
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....rest income. Also, there must be a direct nexus between the borrowing and lending activity. However, in the instant case, the appellant has failed to furnish any documents regarding the usage of the borrowed funds. The burden of proof is on the appellant to prove the nexus between the expenditure (interest paid) and the Income (interest received). The appellant has not provided any evidence such as loan agreements, fund flow details, bank statements which could proof the usage of borrowings. The appellant failed to demonstrate a direct link between borrowed funds and the interest-earning loan. The Hon'ble Supreme Court in the case of CIT v. Rajendra Prasad Moody (SC) has held that "intention to earn income is sufficient. However, this does ....
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....ances given by the assessee to the said company. The assessee had funded these advances through loans and advances received from various persons, on which interest aggregating to Rs.1,06,30,156 was paid. The details of such interest payments were furnished before the appellate authority, along with copies of ledger accounts, confirmations and computation of income, which clearly demonstrated that the assessee had reduced the interest paid from the interest received and offered only the net income of Rs.71,72,238 as "Income from Other Sources". 4.2. Thus, the factual substratum unmistakably establishes that there existed a direct nexus between interest received and interest paid. Once the Assessing Officer has not doubted either the genui....