Tirupati Procon Private Limited, Faridabad V. ITO ward-25(3), New Delhi

ITA 8224/DEL/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 8478 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2016-2017
• Appeal Filed On: 16-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency; Set aside
• Section: 131; 10; 143(3); 133(6); 37(1); 192; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC-1: DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.8224/DEL./2019 ASSESSMENT YEAR 2016-17 TIRUPATI PROCON PVT. LTD. 231, 2 ND FLOOR, VARDHMAN STAR SHOP MALL, SECTOR-19, MATHURA ROAD, FARIDABAD, HARYANA. PAN NO. AADCT4513D VS. ITO WARD 25(3) NEW DELHI. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI KAPIL GOEL, ADV. FOR REVENUE : SHRI PRAKASH DUBEY, SR. DR DATE OF HEARING : 0 4 .01.2021 DATE OF PRONOUNCE MENT : 14 .01.2021 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST T HE ORDER OF LD. CIT(APPEALS)-9, NEW DELHI DATED 09.08. 2019 FOR AY 2016-17, CHALLENGING THE ADDITION OF RS. 23,77,8 33/- MADE BY AO U/S 37(1) OF THE IT ACT BY DISALLOWING INTERE ST PROVIDED ON LOAN AND THAT THE LD. CIT(A) HAS EXCEEDED HIS JU RISDICTION EVEN IN GIVING DIRECTIONS U/S 150 OF THE IT ACT. 2. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. 2 ITA.NO 8224/DEL./2019 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY FILED RETURN OF INCOME DECLARING ZERO INCOM E. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT ON MANY R EASONS INCLUDING, WHETHER DEDUCTION CLAIMED ON ACCOUNT OF INTEREST EXPENSES IS ADMISSIBLE? THE AO ASKED FOR THE DETAI LS FROM THE ASSESSEE WITH REGARD TO UNSECURED LOANS, EXPENSES E TC. WHICH WERE PROVIDED BY THE ASSESSEE. THE AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY W AS ENGAGED IN REAL ESTATE BUSINESS (I.E. SALE AND PURC HASE OF PROPERTY/UNDER CONSTRUCTION PROPERTY), PROPERTY DEV ELOPERS, INVESTMENT BUSINESS, CIVIL CONSTRUCTION AND REAL ES TATE AGENT BUSINESS INVESTMENT. DURING THE YEAR UNDER CONSIDE RATION, ASSESSEE COMPANY HAS SHOWN INTEREST EXPENSES OF RS. 1,75,267/- AND RS. 22,02,566/- PAID TO M/S RAJNIGAN DHA MANAGEMENT PRIVATE LIMITED AND M/S RANISATI MANAGEM ENT PRIVATE LIMITED RESPECTIVELY ON THE RESPECTIVE OUTS TANDING UNSECURED LOANS OF RS. 1.57 LAKHS AND RS. 2.50 CROR E FOR AY 2016-17 UNDER APPEAL. THE ASSESSEE WAS ASKED TO FI LE COMPLETE DETAILS OF THE OUTSTANDING LOANS ALONG WIT H DOCUMENTARY EVIDENCES OF LOAN AGREEMENT/SANCTION OF LOAN ALONG WITH PAST BUSINESS HISTORY AND ANY OTHER RELE VANT EVIDENCE TO PROVE GENUINENESS OF THE INTEREST EXPEN SES SHOWN TO HAVE BEEN PAID TO THESE ENTITIES IN ASSESSMENT Y EAR UNDER APPEAL. THE ASSESSEE SUBMITTED LEDGER ACCOUNT OF B OTH THESE LOANERS ALONG WITH THEIR ADDRESSES. THE ASSESSEE C OMPANY 3 ITA.NO 8224/DEL./2019 EXPLAINED THAT IT HAS AVAILED LOANS ON THE MUTUAL UNDERSTANDING OF INTEREST RATE PREVAILING IN THE MA RKET WITH SOME PERSONAL RELATION WITH THE DIRECTOR OF THE COM PANY AND IT HAS UTILIZED PART OF THE BORROWED FUNDS FOR INVESTM ENT IN SHARES OF M/S OM SHUBHAM HOUSING AND CONSTRUCTION COMPANY PVT. LTD., A SUBSIDIARY COMPANY OF M/S PIVO TAL INFRASTRUCTURE PVT. LTD. WITH WHOM THE ASSESSEE COM PANY HAS DONE THE REGULAR AND CONTINUOUS BUSINESS ACTIVITY D URING THE YEAR. HOWEVER, NO DOCUMENTARY EVIDENCE WAS FILED W ITH REGARD TO SANCTION OF THE LOAN OR SHOWING TERMS AND CONDIT ION OF THE LOAN. THE AO NOTICED FROM THE DETAIL SUBMITTED ON RECORD THAT ASSESSEE HAD RECEIVED RS. 25 LAKHS ON 24.06.2013 FR OM M/S RAJNIGANDHA MANAGEMENT PVT. LTD. AND THEREAFTER, CR EDITED THE INTEREST AMOUNTS ANNUALLY TILL 02.12.2015, HOWE VER, NO ACTUAL BANK PAYMENT HAS BEEN MADE ON THE LOAN. SIM ILARLY, IT WAS ALSO NOTICED THAT THE ASSESSEE COMPANY RECEIVED DIFFERENT AMOUNTS, AMOUNTING TO TOTAL RS. 2.50 CRORES FROM M/ S RANISATI MANAGEMENT PVT. LTD. SINCE 17.10.2012 AND THEREAFTER, CREDITED THE INTEREST AMOUNTS ANNUALLY TILL 29.03.2016, HOWEVER, NO ACTUAL BANK PAYMENT IS MADE BY IT ON THE OUTSTANDING LOAN DURING THIS PERIOD. THE AS SESSEE FILED ITR AND ACKNOWLEDGMENT OF THE LOANER FROM WHERE AO NOTICED THAT BOTH THESE COMPANIES ARE ASSESSED TO TAX AND H AVE SHOWN INCOME. THE AO IN ORDER TO VERIFY THE GENUIN ENESS AND CREDITWORTHINESS OF THE UNSECURED LOAN AND TRANSACT IONS TAKEN 4 ITA.NO 8224/DEL./2019 BY THE ASSESSEE COMPANY FROM THESE TWO ENTITIES ISS UED NOTICE U/S 133(6) OF THE ACT BUT NO REPLY HAS BEEN RECEIVE D. THE AO FURTHER NOTED THAT IN ASSESSMENT YEAR UNDER APPEAL NO UNSECURED LOAN WAS RECEIVED BY THE ASSESSEE FROM TH ESE TWO PARTIES TO WHOM THE INTEREST HAS BEEN PAID. THE AS SESSEE FURTHER EXPLAINED THAT LOAN AMOUNT RECEIVED FROM TH ESE TWO PARTIES HAVE BEEN UTILIZED FOR INVESTMENT IN SHARES OF M/S OM SHUBHAM HOUSING AND CONSTRUCTION COMPANY PVT. LTD. HOWEVER, NO DOCUMENTARY EVIDENCES WERE FILED. THE AO ISSUED SHOW CAUSE NOTICE AS TO WHY THE INTEREST EXPENSES O F RS. 23,77,833/- BE NOT DISALLOWED U/S 37(1) OF THE IT A CT. 4. THE ASSESSEE SUBMITTED THE DETAILED REPLY WHICH IS REPRODUCED IN THE ASSESSMENT ORDER IN WHICH THE ASS ESSEE REITERATED THE SAME FACTS THAT ASSESSEE PRODUCED AL L THE LEDGER ACCOUNT OF BOTH THE PARTIES ALONG WITH THEIR ITR AN D THAT ASSESSEE RECEIVED LOANS IN EARLIER YEAR IN WHICH IN TEREST IS ALSO PAID IN EARLIER YEAR. THE ASSESSEE MADE INVESTMENT OF THE BORROWED FUNDS IN SHARES OF M/S OM SHUBHAM HOUSING AND CONSTRUCTION COMPANY PVT. LTD. WHICH IS A SUBSIDIAR Y COMPANY OF M/S PIVOTAL INFRASTRUCTURE PVT. LTD. WIT H WHOM ASSESSEE HAS A BUSINESS ACTIVITY. THE INVESTMENTS MADE BY ASSESSEE FOR BUSINESS PURPOSE HAVE PROVIDED MORE BU SINESS TO THE ASSESSEE AND FINANCIAL STATUS OF THE ASSESSEE H AVE ENHANCED. IT WAS SUBMITTED THAT ASSESSEE IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, EVEN IF ACTUAL 5 ITA.NO 8224/DEL./2019 INTEREST IS PAID OR NOT IS NOT RELEVANT. THE ASSES SEE ALSO REQUESTED THAT IN CASE BOTH THE PARTIES HAVE NOT RE SPONDED TO THE NOTICES U/S 133(6) OF THE IT ACT, SUMMONS U/S 1 31 OF THE ACT MAY BE ISSUED AGAINST THESE TWO PARTIES FOR THE IR PRODUCTION AND ASSESSEE MAY BE GIVEN OPPORTUNITY TO CROSS- EXAMINE THE DIRECTIONS TO THESE COMPANIES. 5. THE AO, HOWEVER, DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE BECAUSE THE PARTIES DID NOT MAKE ANY COMPL IANCE TO THE NOTICE U/S 133(6) AND FURTHER IT WAS NOTED THAT UTILIZATION OF THE FUNDS BORROWED FROM THESE TWO PARTIES IS SEC ONDARY ISSUE BECAUSE THE ASSESSEE SHALL HAVE TO PROVE THE GENUINENESS OF THE UNSECURED LOANS. THE AO ALSO NO TED THAT ASSESSEE DID NOT PROVE THE TERMS OF THE LOAN THROUG H DOCUMENTARY EVIDENCE BECAUSE ONLY VERBAL AGREEMENT WAS CLAIMED FOR LOAN AND PAYMENT OF THE INTEREST. THE AO ALSO NOTED THAT BOTH THE ABOVE COMPANIES ARE ASSESSED TO TAX AND THE RECORD ALSO SHOWS THAT THE ASSESSEE COMPANY THO UGH HAVE FILED RETURN OF INCOME FOR EARLIER YEAR BUT IT IS N OT ASSESSED IN SCRUTINY U/S 143(3) OF THE IT ACT FOR PRECEDING FIN ANCIAL YEARS 2012-13 & 2013-14, THEREFORE, ASSESSEE FAILED TO ES TABLISH GENUINE TRANSACTION OF RECEIVING LOANS, THEREFORE, AO APPLYING PROVISIONS OF SECTION 37(1) OF THE IT ACT DISALLOWE D THE INTEREST PAYMENT OF RS. 23,77,833/-. 6. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A). THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEFORE LD. 6 ITA.NO 8224/DEL./2019 CIT(A). IT WAS ALSO EXPLAINED THAT ASSESSEE HAS RE CEIVED LOANS FOR BUSINESS PURPOSES WHICH WERE UTILIZED FOR BUSIN ESS PURPOSE. THE ARTICLE CLAUSE OF THE ASSESSEE COMPAN Y ALSO SHOWS THAT IT MAY LEND THE ADVANCE MONEY OUT OF OWN SURPLUS FUND TO ANY OTHER PERSON UPON SUCH TERMS AND CONDIT ION AS THE COMPANY MAY THINK FIT. AS PER THE ARTICLE CLAU SE OF THE COMPANY, THE LENDER COMPANY IS AUTHORIZED TO LEND A NY ADVANCE MONEY WITHOUT ANY SECURITY AND OWN TERMS AN D CONDITION DEEMED FIT TO UTILIZE ITS SURPLUS FUND. ASSESSEE ALSO EXPLAINED THAT LOANS WERE RECEIVED THROUGH BANKING CHANNEL AND ARE NOT RELATED TO ASSESSMENT YEAR UNDER APPEAL . THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF T HE ASSESSEE BECAUSE ASSESSEE FAILED TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION WITH REGARD TO THESE LOANS AND, ACCORDINGLY, DISMISSED T HE APPEAL OF THE ASSESSEE. LD. CIT(A) ALSO DIRECTED THE AO U/S 150 OF THE ACT TO TAKE NECESSARY REMEDIAL ACTION FOR OBTAINING THE LOANS FROM THE ABOVE TWO PARTIES. 7. LD. COUNSEL FOR ASSESSEE REITERATED THE SUBMISSI ONS MADE BEFORE AUTHORITIES BELOW. HE HAS SUBMITTED THA T ADMITTEDLY THE LOANS WERE TAKEN IN EARLIER YEARS AN D ASSESSEE HAS ALSO PAID INTEREST IN EARLIER YEAR WHICH HAVE N OT BEEN DISALLOWED BY THE AUTHORITIES BELOW. LOANS WERE TA KEN THROUGH BANKING CHANNEL IN EARLIER YEARS. HE HAS R EFERRED TO LEDGER ACCOUNT, LOAN ACCOUNT AND CONFIRMATIONS FILE D BY BOTH 7 ITA.NO 8224/DEL./2019 THE PARTIES FOR TAKING AND GIVING LOAN IN EARLIER Y EARS. BOTH THE LOANER COMPANIES ARE ASSESSED TO TAX AND ADMITT EDLY LOAN IS USED FOR BUSINESS PURPOSES, THEREFORE, PROVISION S OF SECTION 36(1)(III) CLEARLY APPLY IN CASE OF THE ASSESSEE. HE HAS SUBMITTED THAT ASSESSEE IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING AND SINCE INTEREST IS PAID IN ASSESSMENT YEAR UNDER APPEAL ALSO FOR BUSINESS PURPOSES, THEREFORE, AO SHOULD NOT HAVE APPLIED PROVISIONS OF SECTION 37(1) OF THE IT ACT WHICH IS A GENERAL SECTION. HE HAS SUBMITTED THAT IN VIE W OF THE ABOVE, SINCE NO APPEAL OF ASSESSEE WAS PENDING BEFO RE LD. CIT(A) FOR PRECEDING ASSESSMENT YEARS IN WHICH LOAN WAS TAKEN, THERE WAS NO NEED FOR THE LD. CIT(A) TO ISSU E ANY DIRECTION TO THE AO FOR TAKING ANY REMEDIAL ACTION IN THE MATTER. IN SUPPORT OF THE CONTENTION, HE HAS RELIE D UPON THE ORDER OF ITAT INDORE BENCH IN THE GROUP CASES OF ACIT VS. MUKESH SHARMA ETC. IT(SS)A NO. 88/INDORE/2013 DATED 04.06.2019 IN WHICH IT WAS HELD THAT THE LD. CIT(A) HAS EXCEEDED JURISDICTION IN GIVING DIRECTION TO THE AO TO REOPEN THE ASSESSMENT FOR OTHER YEARS I.E. 2010-11 WHICH I S NOT WITHIN THE POWERS OF THE LD. CIT(A) AS HE WAS DEALI NG WITH THE APPEALS FOR AY 2009-10 ONLY, THEREFORE, THERE WAS N O NEED TO ISSUE ANY DIRECTION IN THE MATTER. 8. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ADDRESSES OF T HE LOANER WERE NOT CORRECT AND THEY HAVE NOT REPLIED TO THE N OTICE U/S 8 ITA.NO 8224/DEL./2019 133(6) OF THE IT ACT. NO ACTUAL INTEREST HAS BEEN PAID, THEREFORE, AUTHORITIES BELOW WERE JUSTIFIED IN DISA LLOWING THE INTEREST CLAIMED BY ASSESSEE. 9. I HAVE CONSIDERED THE RIVAL SUBMISSION AND PERUS ED THE MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT ASSE SSEE HAS TAKEN LOAN FROM BOTH THE ABOVE LOANER COMPANY IN PR ECEDING FINANCIAL YEARS 2012-13 AND 2013-14. THE ASSESSEE ALSO PAID INTEREST IN PRECEDING ASSESSMENT YEARS WHICH HAVE N OT BEEN DISPUTED BY THE AUTHORITIES BELOW. THE ASSESSEE ON THE OUTSTANDING UNSECURED LOANS COMING UP FROM THE PREC EDING ASSESSMENT YEAR HAS ALSO PAID INTEREST ON THE SAME OUTSTANDING LOANS IN ASSESSMENT YEAR UNDER APPEAL I .E. AY 2016-17. THE AO DID NOT ACCEPT EXPLANATION OF THE ASSESSEE BECAUSE IN EARLIER YEARS NO SCRUTINY ASSESSMENTS HA VE BEEN MADE U/S 143(3) OF THE IT ACT. BUT IT IS A FACT TH AT IMPUGNED LOAN AMOUNTS WERE TAKEN IN EARLIER YEARS ON WHICH I NTEREST IS ALSO PAID IN EARLIER YEARS. THE ASSESSEE IS FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, WHETHER ASSESSEE ACTUALLY PAID INTEREST TO THE LOANER COMPANY OR NOT IS NOT R ELEVANT. SUCH A TREATMENT IS PERMISSIBLE UNDER MERCANTILE SY STEM OF ACCOUNTING REGULARLY FOLLOWED BY ASSESSEE. THEREFO RE, THERE IS NO QUESTION TO CONSIDER GENUINENESS OF THE LOAN OUT STANDING IN ASSESSMENT YEAR UNDER APPEAL COMING UP FROM THE EARLIER YEARS IN ASSESSMENT YEAR UNDER APPEAL. THE HONBLE 9 ITA.NO 8224/DEL./2019 KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRI DEV ENTERPRISES 192 ITR 165 CONSIDERED THE FOLLOWING QU ESTION: - WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL IS R IGHT IN LAW IN HOLDING THAT SINCE NO ADDITIONS HAVE BEEN MADE IN EARLIER YEARS, THE OPENING DEBIT BALANCE CANNOT BE CONSIDERED DURING THE CURRENT YEAR AND TH AT THE ENQUIRY HAS TO BE LIMITED TO THE INCREASE IN TH E CURRENT YEAR ONLY? THE FINDINGS OF THE HONBLE HIGH COURT ARE AS UNDER : - WE ARE IN AGREEMENT WITH THE VIEW EXPRESSED BY THE APPELLATE TRIBUNAL. THE STATUS OF THE AMOUN T OUTSTANDING FROM NALANDA ON THE FIRST DAY OF THE ACCOUNTING YEAR IS THE AMOUNT THAT STOOD OUTSTANDIN G ON THE LAST DAY OF THE PREVIOUS ACCOUNTING YEAR AND , THEREFORE, ITS NATURE AND STATUS CANNOT BE DIFFEREN T ON THE FIRST DAY OF THE CURRENT ACCOUNTING YEAR FROM I TS NATURE AND STATUS AS ON THE LAST DAY OF THE PREVIOU S ACCOUNTING YEAR. REGARDING THE PAST YEARS, THE ASSESSEES CLAIMS FOR DEDUCTION WERE ALLOWED IN RESPECT OF THE SUMS ADVANCED DURING THOSE YEARS ; THIS COULD BE ONLY ON THE ASSUMPTION THAT THOSE ADVANCES WERE NOT OUT OF BORROWED FUNDS OF THE ASSESSEE. THIS FINDING DURING THE PREVIOUS YEARS I S THE VERY BASIS OF THE DEDUCTIONS PERMITTED DURING T HE PAST YEARS, WHETHER A SPECIFIC FINDING WAS RECORDED OR NOT. A DEPARTURE FROM THAT FINDING IN RESPECT O F THE SAID AMOUNTS ADVANCED DURING THE PREVIOUS YEAR WOULD RESULT IN A CONTRADICTORY FINDING; IT WILL NO T BE EQUITABLE TO PERMIT THE REVENUE TO TAKE A DIFFERENT STAND NOW IN RESPECT OF THE AMOUNTS WHICH WERE THE SUBJECT-MATTER OF PREVIOUS YEARS ASSESSMENTS; CONSISTENCY AND DEFINITENESS OF APPROACH BY THE REVENUE IS NECESSARY IN THE MATTER OF RECOGNIZING T HE NATURE OF AN ACCOUNT MAINTAINED BY THE ASSESSEE SO 10 ITA.NO 8224/DEL./2019 THAT THE BASIS OF A CONCLUDED ASSESSMENT WOULD NOT BE IGNORED WITHOUT ACTUALLY REOPENING THE ASSESSMENT. THE PRINCIPLE IS SIMILAR TO THE CASES WHERE IT HAS BEEN HELD THAT A DEBT WHICH HAD BEEN TREATED BY THE REVENUE AS A GOOD DEBT IN A PARTICUL AR YEAR CANNOT SUBSEQUENTLY BE HELD BY IT TO HAVE BECOME BAD PRIOR TO THAT YEAR. SRI K.R. PRASAD, LD. COUNSEL FOR THE ASSESSEE, REFERRED TO A DECISION OF THIS COURT IN BIT TUL (P) LTD. VS. CIT (ITRC 141 OF 1977 DATED 29.07.1980) WHEREIN IT WAS HELD THAT THERE SHOULD BE MATERIAL TO JUSTIFY T HE CONCLUSION THAT ANY BORROWED MONEY BY THE ASSESSEE IN A YEAR TO WHICH INTEREST HAD BEEN PAID HAD BEEN DIVERTED FOR NON BUSINESS PURPOSE. FOR THE PURPOSE OF THIS REFERENCE, IT IS UNNECESSARY TO APPLY THE SAID PRINCIPLE. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO US IN THE AFFIRMATIVE AND AGAINST THE REVENUE. ANSWERED ACCORDINGLY. 10. THE ABOVE FACTS WHEN CONSIDERED IN THE LIGHT OF THE JUDGMENT IN THE CASE OF SRI DEV ENTERPRISES (SUPRA) IT IS CLEAR THAT ASSESSEE RECEIVED LOAN IN EARLIER YEARS ON WHI CH INTEREST IS ALSO PAID WHICH HAVE NOT BEEN DISPUTED BY THE INCOM E TAX AUTHORITIES, THEREFORE, INCOME TAX AUTHORITIES CANN OT DEPART FROM THE FACT THAT ASSESSEE RECEIVED LOAN IN EARLIE R YEARS AND AS SUCH, ON OUTSTANDING LOAN AMOUNT, NO DISALLOWANC E OF INTEREST COULD BE MADE. THE INCOME TAX AUTHORITIES SHALL HAVE TO FOLLOW RULE OF CONSISTENCY AND DEFINITENESS OF A PPROACH IN DEALING WITH THE MATTER. WHEN LOANS HAVE NOT BEEN DISPUTED AS LOAN GENUINE IN EARLIER YEAR, SAME COULD NOT BE CONSIDERED AS BAD LOAN IN ASSESSMENT YEAR UNDER APPEAL IN WHIC H THE 11 ITA.NO 8224/DEL./2019 LOAN WAS MERELY COMING UP AS OUTSTANDING FROM THE P REVIOUS YEARS. IT IS ALSO NOT DISPUTED THAT THE BORROWED F UNDS HAVE BEEN USED BY THE ASSESSEE FOR MAKING INVESTMENT IN SHARES OF M/S OM SHUBHAM HOUSING AND CONSTRUCTION COMPANY PVT . LTD. FOR BUSINESS PURPOSES. SECTION 36(1)(III) OF THE IT ACT PROVIDES FOR THE DEDUCTION, WHEN THE AMOUNT OF INTE REST IS PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN THE PRESENT CASE, ASSESSEE COMPA NY BORROWED FUNDS FROM THESE TWO COMPANIES IN EARLIER YEARS AND INVESTED IN SHARES OF OTHER COMPANY FOR BUSINESS PU RPOSES, THEREFORE, PROVISIONS OF SECTION 36(1)(III) ARE SAT ISFIED IN THE PRESENT CASE. THE AUTHORITIES BELOW HAVE HOWEVER, APPLIED GENERAL PROVISIONS OF SECTION 37(1) OF THE IT ACT F OR THE PURPOSE OF MAKING DISALLOWANCE AS AGAINST SPECIFIC PROVISIO N PROVIDED FOR DEDUCTION OF INTEREST U/S 36(1)(III) OF THE IT ACT, THEREFORE, THE ENTIRE APPROACH OF THE AUTHORITIES BELOW IS WHO LLY UNJUSTIFIED FOR THE PURPOSE OF DISALLOWING THE INTE REST ON IRRELEVANT CONSIDERATION. THE ASSESSEE IS NOT REQU IRED TO PROVE GENUINENESS OF THE OUTSTANDING BALANCE OF THE LOANS COMING UP FROM THE EARLIER YEARS. THEREFORE, THERE WAS NO JUSTIFICATION FOR THE AUTHORITIES BELOW TO DISALLOW THE INTEREST. IT MAY ALSO BE NOTED HERE THAT EVEN IF THE AUTHORITIES BELOW ON WRONG PREMISE PROCEEDED TO EXAMINE GENUINENESS OF THE OUT STANDING LOANS COMING UP FROM THE EARLIER YEARS, THE AO SHAL L HAVE TO ISSUE SUMMON U/S 131 OF THE IT ACT AS REQUESTED BY THE 12 ITA.NO 8224/DEL./2019 ASSESSEE COMPANY FOR THE PURPOSE OF EXAMINING THE T RUTH IN THE MATTER BUT THE AO DID NOT ISSUE SUMMON U/S 131 OF THE IT ACT FOR SUMMONING OF THE DIRECTORS OF THE LOANER CO MPANY, THEREFORE, NO FAULT COULD BE FOUND WITH THE EXPLANA TION OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, AND PAR TICULARLY WHEN OUTSTANDING LOAN WAS COMING UP FROM THE EARLIE R YEAR, THERE WAS NO JUSTIFICATION FOR THE AUTHORITIES BELO W TO DISALLOW INTEREST IN ASSESSMENT YEAR UNDER APPEAL CONSIDERIN G LOANS AS NON-GENUINE. 11. IN VIEW OF THE ABOVE, I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ENTIRE ADDITION OF RS. 23,77,833/-. I ALSO SET ASIDE THE ORDER OF THE LD. CIT(A) IN GIVING DIRECTION TO THE AO U/S 150 OF THE IT ACT FO R TAKING REMEDIAL ACTION IN EARLIER YEARS. 12. IN VIEW OF THE ABOVE, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.01.2021. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 14.01.2021 *KAVITA ARORA COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. 13 ITA.NO 8224/DEL./2019 // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.