GHANSHYAM ARJANBHAI PATEL,AHMEDABAD V. THE ITO, WARD-3(3)(1), AHMEDABAD

ITA 829/AHD/2025

AI Insights

This case involves an appeal by Ghanshyam Arjanbhai Patel against the order of the National Faceless Appeal Centre (NFAC), Delhi, which confirmed the addition of Rs. 21,98,647 as unexplained creditors for the assessment year 2020-21. The addition was initially made by the Assessing Officer due to insufficient evidence provided by the assessee regarding the interest paid on loans. The CIT(A) upheld this decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, after considering the additional evidence and submissions made by the assessee, concluded that the interest paid was indeed eligible for deduction under Section 57, thereby allowing the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793575 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Appeal Filed On: 21-04-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAMAL DEEP SINGH
• Assessee Lawyers: DHINAL SHAH
• Keywords: Unexplained cash credit; Salary income; Tax effect

Judgement Text

"THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before Dr. BRR Kumar, Vice President And Ms. Suchitra Kamble, Judicial Member Ghanshyam Arjanbhai Patel, A-404, Kala Residency, Near Radio Mirchi Tower, Satellite, Ahmedabad-380015 PAN: AKWPP0337R (Appellant) Vs The ITO, Ward-3(3)(1) Ahmedabad (Respondent) Assessee by: Shri Dhinal Shah, A.R. Revenue by: Shri Kamal Deep Singh, Sr. D.R. Date of hearing : 09-07-2025 Date of pronouncement : 25-09-2025 आदेश/ORDER Per Suchitra Kamble, Judicial Member: This is an appeal filed against the order dated 23-02- 2024 passed by National Faceless Appeal Centre(NFAC), Delhi for assessment year 2020-21. 2. The grounds of appeal are as under:- “1.The learned CIT(A) has erred in confirming the addition of Rs. 21,98,647/- being interest paid and claimed as deduction under Section 57 on the ground that the appellant has not enclosed the Assessment Order under dispute with Form No. 35 and that there are internal contradiction in Form No. 35 versus documents attached with Form No. 35 in as much as: ITA No. 829/Ahd/2025 Assessment Year 2020-21 Printed from counselvise.com I.T.A No. 829/Ahd/2025 Ghanshyam Arjanbhai Patel, A.Y. 2020-21 2 i) the appellant had attached the Assessment Order and Demand Notice alongwith Grounds of Appeal with Form No. 35 [ARN from the income tax portal is attached]; (ii) alternatively, this is a curable defect and the CIT(A) should have issued a notice to cure the defect; (iii) the CIT(A) should have adjudicated the appeal based on submissions made and material available on record. 1.1 The appellant says and submits that the interest paid is eligible for deduction under Section 57. Total tax effect Rs. 6,59,592/-” 3. The assessee is an individual and filed his return of income u/s. 139(1) on 06-01-2021 declaring total income at Rs. 24,71,050/- for assessment year 2020-21. The assessee earned income from salary, house property, capital gain and income from other sources. The assessee’s case was selected for scrutiny. As regards the deduction u/s. 57 of the Act against income from other sources, the Assessing Officer observed that the assessee claimed interest expenses for borrowing money at Rs. 55,54,000/- u/s. 57 of the Income Tax Act, 1961. After issuing statutory notices, the assessee filed the reply dated 29-08-2022. After going through the said reply, the Assessing Officer observed that the assessee has claimed that rate of interest at 9% per annum on loan taken, however as per ledger provided interest rate was shown at varied rate @ 6% to 18% to six parties. The assessee filed the list of 16 persons to whom interest has been paid, however in the case of 8 persons, the assessee has neither filed ITR nor bank statement or both. After issuing show cause notice and taking cognizance of Printed from counselvise.com I.T.A No. 829/Ahd/2025 Ghanshyam Arjanbhai Patel, A.Y. 2020-21 3 the assessee’s reply, the Assessing Officer observed that the total receipts of the assessee are to the tune of Rs. 76,58,253/- which included interest income under OS at Rs. 5733,580/-. The assessee received salary in the capacity of director in the company of M/s. Accent Microcell Pvt. Ltd. The assessee has not declared any income from other sources or profession but shown only from salary. However, on the issue of rate of interest charged at the loans and advance given and rate of interest paid on the loan taken, the assessee has given explanation. Since the assessee has not given any plausible explanation, the Assessing Officer held that the assessee has barely fulfilled to establish the genuineness of the transaction in loan and thus it remained unexplained. The Assessing Officer therefore disallowed the interest paid to 8 parties which were unverified and made addition as unexplained creditors amounting to Rs. 21,98,647/-. 4. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee. 5. The ld. A.R. submitted that as per the letter dated 17- 02-2024 thereby giving reply to notice to the CIT(A), the assessee has given the details related to copy of ledger confirmation, ITR, PAN and bank statement attached and the internet paid by the parties except 5 parties. The overall interest at the average of 12% was received and was paid by the assessee as per the submissions of the ld. A.R.. Printed from counselvise.com I.T.A No. 829/Ahd/2025 Ghanshyam Arjanbhai Patel, A.Y. 2020-21 4 At the time of hearing, the ld. A.R. also submitted the bank statements, ledger account and other details along with confirmations of the other 8 persons. 6. The ld. D.R. relied upon the assessment order and the order of the CIT(A). 7. We have heard both the parties and perused all the relevant material available on record. There is a delay of 356 days which was explained by the assessee. The delay is condoned. The assessee has earned almost Rs. 60 lakhs as interest and paid the interest expenditure of Rs. 55 lakhs approximately and therefore an overall of 12% was received as regards interest received and interest paid. The CIT(A) has categorically ignored these facts. The ld. A.R. further explained that the parties whose details were not filed has been the parties from whom no loans were taken during the present assessment year and there was an opening balance which clearly shows that 12% of interest was paid. Therefore, the onus related to the interest paid and claimed as deduction u/s. 57 of the Act was proved by the assessee. Therefore, the appeal of the appeal is allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 25-09-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 25/09/2025 Printed from counselvise.com I.T.A No. 829/Ahd/2025 Ghanshyam Arjanbhai Patel, A.Y. 2020-21 5 आदेश क\u0006 \u0007\bत ल प अ\u000fे षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील\u0012य अ\u0013धकरण, अहमदाबाद Printed from counselvise.com "