TaxTMI 
TaxTMI 
2026 (7) TMI 1152
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....said order, the assessee has preferred this appeal before us on several grounds, the substance of which is as follows: (i) To the extent they are adverse to the appellant, the orders of the authorities below are contrary to law, equity, evidence on record, probabilities, and the facts and circumstances of the case. (ii) The appellant denies liability to be assessed on a total income of Rs. 220,838,930, as against the business loss of Rs. 418,505,428 reported by the appellant, on the facts and circumstances of the case. (iii) On the facts and in the circumstances of the case, the learned NFAC erred in confirming the disallowance of Rs. 38,473,364 made under section 40(a)(ia) of the Income-tax Act, 1961. (iv) The learned CIT(A) ought to have appreciated that the appellant had obtained Form No. 26A from the payees to whom interest was payable and therefore could not be treated as an assessee in default under the first proviso to section 201(1), read with the second proviso to section 40(a)(ia), of the Act. Consequently, no disallowance was called for. (v) The learned CIT(A) ought to have appreciated that the appellant's inability to upload ....
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....955, which requires authorities to grant all admissible reliefs and benefits even if not claimed in the return. Accordingly, the addition of Rs. 233,332,982 on account of ICDS adjustments ought not to have been made. (xv) The learned CIT(A) erred in sustaining the addition of Rs. 818,012, being creditors' balances outstanding as on 31 March 2022, as unexplained credit under section 68 of the Act. (xvi) The learned CIT(A) ought to have appreciated that mere non-response by sundry creditors to summons issued under section 133(6) of the Act cannot justify treating the amounts shown as payable as unexplained credits under section 68. (xvii) Without prejudice, the learned CIT(A) erred in sustaining the addition of the opening balance of Rs. 493,395 as on 31 March 2021 out of the total closing payable balance of Rs. 818,012, as the opening balance could not be added under section 68 of the Act. (xviii) The additions and disallowances sustained by the learned CIT(A) are contrary to law, arbitrary, and based on suspicion, surmises, conjectures, and presumptions. They therefore deserve to be deleted. (xix) The learned CIT(A) ought to have appreci....
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....account of notional interest charged, amounting to Rs. 366,720,000. III. Disallowance relating to the computation of decreased profit under ICDS, amounting to Rs. 233,332,982. IV. Addition under section 68 of the Income-tax Act, 1961, in respect of creditors' balances amounting to Rs. 818,012, along with application of section 115BBD of the Act. V. Disallowance of set-off of losses against income. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). The National Faceless Appeal Centre, Delhi [the learned CIT(A)], by order dated 7 July 2025,dismissed the appeal on all grounds. The assessee has therefore preferred the present appeal before us. 6. Ground Nos. 1 and 2 are general in nature. In the absence of any specific arguments on these grounds, they are dismissed. 7. Ground No. 3 relates to the disallowance of Rs. 38,473,364 under section 40(a)(ia) of the Act. On examining the financial statements, the learned Assessing Officer found that the assessee had paid interest of Rs. 128,244,548 to related parties, comprising Rs. 10,292,401 to Propcare Mall Management India Private Limited, Rs. 46,388,232 to M....
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....d had issued Form No. 26A in respect of interest of Rs. 46,388,230. He further referred to page 123, where Propcare Mall Management India Private Limited had issued Form No. 26A for Rs. 10,292,411, and to page 127 concerning another Form No. 26A issued by Propcare Mall Management India Private Limited. He submitted that each recipient had furnished Form No. 26A, which had also been accepted by the Revenue. These certificates were issued in accordance with Rule 31ACB of the Income-tax Rules as accountant's certificates under the first proviso to section 201(1) of the Income-tax Act, 1961, certifying that the payees had fulfilled all conditions prescribed under that proviso. He further submitted that there was no dispute regarding the interest amounts payable by the assessee or the amounts covered by the certificates, and each payee had also furnished the acknowledgement of its return of income. The learned authorized representative explained that the assessee could not upload the forms within time because of technical glitches on the income-tax portal. In support, he referred to page 138 of the paper book and to grievance acknowledgement No. 10448687 dated 10 January 2023, filed ....
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....turn of income under section 139, included the relevant income in that return, paid the tax due thereon, and the payer furnishes a prescribed certificate from a chartered accountant to that effect. Consequently, once the first proviso to section 201 is complied with, the payer cannot be treated as an assessee in default and no disallowance under section 40(a)(ia) can be made. In the present case, the assessee produced accountant's certificates in Form No. 26A in respect of the payments in question. There is no dispute that the forms were complete and available before the Assessing Officer. The only objection is that, under Rule 31ACB of the Income-tax Rules, the forms were required to be filed online by 31 May 2022, whereas the assessee uploaded them on 10 January 2023. The assessee explained that the delay occurred because technical glitches on the income-tax portal prevented timely uploading, and it supported this explanation by referring to the grievance lodged, which remained unresolved. Thus, the assessee could not file Form No. 26A within time only because of technical difficulties on the portal. 14. Thus, the assessee substantially complied with the first proviso to secti....
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....nd submitted that notional interest could not be taxed in its hands. The assessee contended that the learned Assessing Officer made the addition only because interest-free advances had been given to a company with a weak financial position. The learned CIT(A), however, rejected the assessee's explanation, holding that the assessee had failed to establish commercial expediency or business rationale for granting interest-free advances. He further held that the Assessing Officer's estimate of interest at 12% was reasonable, considering prevailing market rates and the absence of contrary evidence, and that the addition was consistent with settled principles relating to real income and misuse of borrowed funds. Accordingly, the learned CIT(A) confirmed the addition of Rs.36,67,20,000 as notional interest income. 18. The learned authorized representative strongly submitted that there is no concept of notional interest being chargeable to tax as income of the assessee. Referring to page 140 of the paper book, being the ledger account of M/s. Abhishek Prop Build Private Limited in the assessee's books, he pointed out that the assessee had advanced Rs. 305,60,00,000 to that company. He s....
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....High Court held that notional interest cannot be added merely because the assessee ought to have charged interest, unless there is a finding that interest had in fact accrued or been collected but was not recorded in the accounts. Similar principles were followed by the Hon'ble Gujarat High Court in CIT v. Arihant Avenue and Credit Ltd. [2013] 36 taxmann.com 14 (Gujarat), after considering the decision of the Hon'ble Supreme Court in CIT v. Shoorji Vallabhdas & Co. [1962] 46 ITR 144 and the decision of the Hon'ble Gauhati High Court in B&A Plantations and Industries Ltd. v. CIT [2000] 242 ITR 22. The Hon'ble Delhi High Court in Shivnandan Buildcon Pvt. Ltd. v. CIT [2015] 60 taxmann.com 347 (Delhi) has also held that, in the absence of a specific statutory provision, notional interest on interest-free advances cannot be treated as income where there is neither a contractual right to receive interest nor evidence of actual receipt. Applying these principles, we hold that the impugned addition is unsustainable. There is no clause in the agreements providing for interest, no evidence that interest accrued or was received, and no provision in the Act enabling taxation of such notional i....
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....ee had neither revised its return nor filed a valid rectification request in the prescribed manner. On that basis, he confirmed the addition. 25. The assessee is in appeal before us on this issue under Ground No. 5. The learned authorized representative submitted that, while filing the return of income, the appellant inadvertently entered the amount in column 4(e) of Part A-OI, relating to other information, instead of column 3B of the same part. He submitted that this was merely a human and clerical error, and that the learned Assessing Officer and the learned CIT(A) ought not to have used it as the basis for making an addition of Rs. 23,33,32,982. He further submitted that there was no error in the computation of total income; the amount was entered in one column instead of another, and both columns had the same effect. The assessee should not be penalized merely for placing the figure in a different column. He also stated that, by the time the issue was brought to the assessee's notice, the time limit for revising the return had expired. Therefore, the Assessing Officer and the learned CIT(A) should not have taken advantage of an inadvertent mistake, particularly when they ac....
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....ated the outstanding balance as unexplained credit under section 68. He noted that Sign Time Display Systems [shivMurthy Mani], having PAN AGIPM3104H, had an outstanding balance of Rs. 8,18,012 but had not confirmed the same in response to the notice. The verification unit also reported that the address was newly constructed, that the party did not reside there, and that neighbours had not heard of the said person or concern. The Assessing Officer therefore issued a show-cause notice. In response, the assessee explained that Sign Time Display Systems had provided advertisement services worth Rs. 3,84,617 during the year, against which Rs. 60,500 had been paid, leaving an outstanding balance of Rs. 8,18,012, including an opening balance of Rs. 4,93,395. The assessee also furnished the ledger account and invoice copies. However, the Assessing Officer rejected the explanation, relying on the non-response to the notice under section 133(6) and the verification-unit report, and accordingly made the addition of Rs. 8,18,012. 29. The assessee challenged the addition before the learned CIT(A). The learned CIT(A) confirmed the action of the Assessing Officer, holding that the assessee ha....
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....ce at pages 267 to 281 further shows that the party suppliedand installed external signage for the Mantri logo at the Mantri Serenity Project, Phase 2. The assessee also paid Rs. 60,500to the party during the year. The party's tax invoice contains its address, contact number, e-mail ID, website address, and GST number. Thus, the assessee discharged its burden by establishing the nature of work performed, the payment made, and the complete identification and contact details of the supplier. As regards the verification-unit report, the same was not furnished to the assessee. Moreover, it is unclear what findings were recorded by the verification unit and at which address the enquiry was conducted. In any event, the addition has been made under section 68 of the Income-tax Act, which applies only where a sum is credited in the assessee's books during the relevant year. Here, the record shows an opening balance of Rs. 4,93,395, which could not have been added under section 68. The assessee had produced invoices, furnished the supplier's permanent account number, and explained the nature of work performed. The Assessing Officer did not disallow the advertisement expenditure itself. Ther....