Asst. Commissioner of Income Tax, Mumbai V. Nanubhai N Desai, Mumbai

ITA 836/MUM/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2014 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2024
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 27-05-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 22-02-2024
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: TUSHARKUMAR DESAI
• Keywords: Unexplained cash credit; Set aside
• Section: 131; 68; 271(1)(c); 144; 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA Nos. 809 & 836/MUM/2024 Assessment Year: 2016-17 Asst. CIT-32(1), 202, 2 nd floor, Kautilya Bhavan, BKC, Bandra (E) Mumbai-400051. Vs. Nanubhai N Desai, 3, Aashirwad 51, Vallabh Nagar N.S. Road No. 2, JVPD Scheme Vile Parle (West), Mumbai-400056. PAN NO. ADNPD 9241 N Appellant Respondent Assessee by : Dr. Tusharkumar Desai Revenue by : Mr. Ashok Kumar Ambastha, Sr. DR Date of Hearing : 28/05/2024 Date of pronouncement : 30/05/2024 ORDER PER OM PRAKASH KANT, AM These appeals by the Revenue are directed against two separate orders dated 27.12.2023 and 28.12.2023, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2016-17 related to quantum of addition made in assessment proceedings and penalty levied by the Asse corresponding to the quantum additions 2. Both the appeals being connected to the same dispute, therefore, same way of this consolidated order for convenience. The ground by the Revenue in ITA No. 809/Mum/2024 for quantum of addition are reproduced as under: 1. "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,05,81,181/ as unexplained cash unsecured loans which werc taken from Nanu Bhai Desai HUF ignoring the fact that no such advances appeared in the balance sheet Nanubhai Desai HUF." 2. "Whether on the fact and in the circumstances CIT(A) erred in deleting the addition of Rs. 2,58,34,686/to total income as unexplained cash credits u/s 68 of the IT. Act, 1961 being differential amount of closing balance of unsecured loans as on 31.03.2015 and 31.03.2016 despite th documentary evidence to establish the creditworthiness of the parties and genuineness of the transaction." 3. "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the ad on account of disallowance of interest expenses claimed in the P & L account and the same been set off against management fees even though there exist no nexus between interest expenses claimed and management fee 4. The appellant craves leave to amend or alter or add a new ground which may be necessary. 3. Briefly stated facts of the case are that for the year under consideration, the assessee e 16.10.2016 declaring total loss of Rs.( income filed by the assessee was selected for scrutiny and notice u/s 143(2) of the Income ITA Nos. 809 & 836/MUM/2024 proceedings and penalty levied by the Asse corresponding to the quantum additions, respectively. Both the appeals being connected to the same dispute, therefore, same were heard together and disposed off by way of this consolidated order for convenience. The ground by the Revenue in ITA No. 809/Mum/2024 for quantum of addition are reproduced as under: 1. "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,05,81,181/- to total income as unexplained cash credits us 68 of the IT. Act, 1961 made in respect of unsecured loans which werc taken from Nanu Bhai Desai HUF ignoring that no such advances appeared in the balance sheet Nanubhai Desai HUF." 2. "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,58,34,686/to total income as unexplained cash credits u/s 68 of the IT. Act, 1961 being differential amount of closing balance of unsecured loans as on 31.03.2015 and 31.03.2016 despite the fact that the assessee had not submitted any documentary evidence to establish the creditworthiness of the parties and genuineness of the transaction." "Whether on the fact and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 4,27,86,117/- to total income on account of disallowance of interest expenses claimed in the P & L account and the same been set off against management fees even though there exist no nexus between interest expenses claimed and management fees earned." 4. The appellant craves leave to amend or alter or add a new ground which may be necessary. Briefly stated facts of the case are that for the year under consideration, the assessee e-filed its return of income on 16.10.2016 declaring total loss of Rs.(-)2,23,30,022/ income filed by the assessee was selected for scrutiny and notice u/s 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was ITA Nos. 809 & 836/MUM/2024 2 Nanubhai N Desai proceedings and penalty levied by the Assessing Officer respectively. Both the appeals being connected to the same matter of were heard together and disposed off by way of this consolidated order for convenience. The grounds raised by the Revenue in ITA No. 809/Mum/2024 for quantum of addition 1. "Whether on the fact and in the circumstances of the case, the Ld. to total income credits us 68 of the IT. Act, 1961 made in respect of unsecured loans which werc taken from Nanu Bhai Desai HUF ignoring that no such advances appeared in the balance sheet of of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 2,58,34,686/to total income as unexplained cash credits u/s 68 of the IT. Act, 1961 being differential amount of closing balance of unsecured loans as on 31.03.2015 and e fact that the assessee had not submitted any documentary evidence to establish the creditworthiness of the parties "Whether on the fact and in the circumstances of the case, the Ld. to total income on account of disallowance of interest expenses claimed in the P & L account and the same been set off against management fees even though there exist no nexus between interest expenses claimed and 4. The appellant craves leave to amend or alter or add a new ground Briefly stated facts of the case are that for the year under filed its return of income on )2,23,30,022/-. The return of income filed by the assessee was selected for scrutiny and notice tax Act, 1961 (in short ‘the Act’) was issued on 11.07.2017 and was served electronically upon the assessee. Thereafter, the Assessing Officer issued notice u/s 142(1) of the Act dated 17.09.2018 and 21.11.2018 complied. The Assessing Officer further issued summon u/s 131 dated 03.12.2018 asking the assessee to appear before him however same remain non-complied. Thereafter, the Assessing Officer issued specific show cause notice proposing the additions u/s 68 of as well as for disallowance of interest expenses. But in view of the non-compliance on the part of the assessee, the Assessing Officer passed the assessment order u/s 144 of the Act i.e. best judgment order whereby he made addition 2,05,81,181/- from M/s Nanu Bhai Desai, Rs.2,58,34,686/- between closing unsecured loan and opening unsecured loan invoking section 68 of the Act and disallowance of interest expenses of Rs.4,27,86,170/ 4. On further appeal, the Ld. CIT(A) deleted all the three additions. 5. Aggrieved, the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. 6. We have heard submission of the parties and perused the relevant material on concerned, the fact qua the issue in dispute are that the Assessing Officer observed from the return of income filed by Nanu Bhai Desai ITA Nos. 809 & 836/MUM/2024 issued on 11.07.2017 and was served electronically upon the assessee. Thereafter, the Assessing Officer issued notice u/s 142(1) of the Act dated 17.09.2018 and 21.11.2018 , which complied. The Assessing Officer further issued summon u/s 131 dated 03.12.2018 asking the assessee to appear before him however complied. Thereafter, the Assessing Officer issued specific show cause notice proposing the additions u/s 68 of as well as for disallowance of interest expenses. But in view of the compliance on the part of the assessee, the Assessing Officer passed the assessment order u/s 144 of the Act i.e. best judgment order whereby he made additions, firstly, for unsecured loan from M/s Nanu Bhai Desai, secondly between closing unsecured loan and opening invoking section 68 of the Act and disallowance of interest expenses of Rs.4,27,86,170/ On further appeal, the Ld. CIT(A) deleted all the three the Revenue is in appeal before the Tribunal by way of raising grounds as reproduced above. We have heard submission of the parties and perused the record. As far as ground No. 1 of the appeal is the fact qua the issue in dispute are that the Assessing Officer observed from the return of income filed by Nanu Bhai Desai ITA Nos. 809 & 836/MUM/2024 3 Nanubhai N Desai issued on 11.07.2017 and was served electronically upon the assessee. Thereafter, the Assessing Officer issued notice u/s 142(1) , which remain non- complied. The Assessing Officer further issued summon u/s 131 dated 03.12.2018 asking the assessee to appear before him however complied. Thereafter, the Assessing Officer issued specific show cause notice proposing the additions u/s 68 of the Act as well as for disallowance of interest expenses. But in view of the compliance on the part of the assessee, the Assessing Officer passed the assessment order u/s 144 of the Act i.e. best judgment nsecured loan of secondly, difference of between closing unsecured loan and opening invoking section 68 of the Act and thirdly disallowance of interest expenses of Rs.4,27,86,170/-. On further appeal, the Ld. CIT(A) deleted all the three the Revenue is in appeal before the Tribunal by way We have heard submission of the parties and perused the record. As far as ground No. 1 of the appeal is the fact qua the issue in dispute are that the Assessing Officer observed from the return of income filed by Nanu Bhai Desai HUF for assessment year under consideration i.e. AY 2016 found that no unsecured loan assessee, whereas in the return of income filed by the assessee advance of Rs.2,05,81,181/ course of the assessment proceedings neither any kind of the explanation or any documentary evidence to explain the inconsistency between the advance of Rs.2,05,81,181/ Nanu Bhai Desai HUF to the assessee was explained and therefore, the Assessing Officer held the same as unexplained cash credit u/s 68 of the Act. The Ld. observing as under: “6. Ground No. 3(a) and (b): In this ground the appellant is contesting the addition of Rs.2,05,81,181/ Nanu Bhai Desai HUF as unexplained cash credits. audit report in form CD dated 13.10.2016 filed by the appellant, it is noted that at item no. 31(b) [particulars of repayment of loan made during the previous year the appellant had disclosed that the total loan from Nanu Bhai Desai HUF of repayment was Rs. 11,77,74,019/ loan at the end of the year was Rs.2,05,81, 181/ mistakenly construed that the loan from Nanu Bhai Desai HUF was taken during the year while the loan was taken in earlier year and is brought forward figure. The addition of the loan brought forward from earlier year cannot be added as cash credit u/s 68 in the current year. Therefore, the Assessing Officer is directed to dele Rs.2,05,81,181/ 6.1 We find that though the Ld. CIT(A) inferred from the statement of the facts that loan amount of Rs.2,05,81,181/ balance of the outstanding loan from however, the Ld. CIT(A) has ignored the contrary record by the Assessing Officer that said loan or advance appearing as debtor in the return of income filed by the Nanu Bhai ITA Nos. 809 & 836/MUM/2024 HUF for assessment year under consideration i.e. AY 2016 no unsecured loan was advanced by HUF to the whereas in the return of income filed by the assessee advance of Rs.2,05,81,181/- was appearing from HUF course of the assessment proceedings neither any kind of the any documentary evidence to explain the inconsistency between the advance of Rs.2,05,81,181/ Nanu Bhai Desai HUF to the assessee was explained and therefore, the Assessing Officer held the same as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) however has deleted the addition 6. Ground No. 3(a) and (b): In this ground the appellant is contesting the addition of Rs.2,05,81,181/- u/s 68 being the unsecured loan taken from Nanu Bhai Desai HUF as unexplained cash credits. On perusal of the audit report in form CD dated 13.10.2016 filed by the appellant, it is noted that at item no. 31(b) [particulars of repayment of loan made during the previous year the appellant had disclosed that the total loan from Nanu Bhai Desai HUF was Rs. 13,83,55,200/- against which the amount of repayment was Rs. 11,77,74,019/- Therefore, the balance outstanding loan at the end of the year was Rs.2,05,81, 181/- The Ld. AO had mistakenly construed that the loan from Nanu Bhai Desai HUF was ring the year while the loan was taken in earlier year and is brought forward figure. The addition of the loan brought forward from earlier year cannot be added as cash credit u/s 68 in the current year. Therefore, the Assessing Officer is directed to delete the addition of Rs.2,05,81,181/-. Accordingly, the appeal on these grounds is allowed. We find that though the Ld. CIT(A) inferred from the statement of the facts that loan amount of Rs.2,05,81,181/ balance of the outstanding loan from the Nanu Bhai Desai HUF however, the Ld. CIT(A) has ignored the contrary fact record by the Assessing Officer that said loan or advance appearing as debtor in the return of income filed by the Nanu Bhai ITA Nos. 809 & 836/MUM/2024 4 Nanubhai N Desai HUF for assessment year under consideration i.e. AY 2016-17 and advanced by HUF to the whereas in the return of income filed by the assessee, an from HUF. During the course of the assessment proceedings neither any kind of the any documentary evidence to explain the inconsistency between the advance of Rs.2,05,81,181/- by the Nanu Bhai Desai HUF to the assessee was explained and therefore, the Assessing Officer held the same as unexplained cash credit u/s CIT(A) however has deleted the addition 6. Ground No. 3(a) and (b): In this ground the appellant is contesting the u/s 68 being the unsecured loan taken from On perusal of the audit report in form CD dated 13.10.2016 filed by the appellant, it is noted that at item no. 31(b) [particulars of repayment of loan made during the previous year the appellant had disclosed that the total loan from against which the amount Therefore, the balance outstanding The Ld. AO had mistakenly construed that the loan from Nanu Bhai Desai HUF was ring the year while the loan was taken in earlier year and is brought forward figure. The addition of the loan brought forward from earlier year cannot be added as cash credit u/s 68 in the current year. te the addition of . Accordingly, the appeal on these grounds is allowed.” We find that though the Ld. CIT(A) inferred from the statement of the facts that loan amount of Rs.2,05,81,181/- was opening the Nanu Bhai Desai HUF fact brought on record by the Assessing Officer that said loan or advance was not appearing as debtor in the return of income filed by the Nanu Bhai Desai HUF. In the circumstances, without appreciation of the complete facts of the case and therefore, we set aside the said finding and restore the matter back to the file of the Assessing Officer for deciding afresh with the direction to the assessee to explain the queries raised by the Assessing Officer along with necessary documentary evidence. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical purposes. 7. As far as the ground No. 2 of the appeal is concerned, the Assessing Officer treated the closing balance difference in closing balance and opening balance as unsecured loan as the loan introduced during the year under consideration and in absence of any documentary evidence to justify identity, creditworthiness and genuineness of the transaction in respect of treated the same as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) however referred to the statement of the facts filed wherein he referred to auditor report in Form No. 3CD for det loan provided during the year and loan repaid during the year under consideration. The relevant finding of the Ld. CIT(A) is reproduced as under: “7. Ground No. 3(c): In this ground the appellant is contesting the addition of Rs.2,58,34,686/ 31.03.2015 and 31.03.2016 as unexplained cash credit. The Ld. AO has simply stated that the assessee had not fu added the said amount u/s 68. On perusal of the audit report in form CD filed by the appellant it is noted that at Item No. 31(a) [particulars of each loan accepted during the previous yearl details of the parties along with address and PAN from whom the appellant had taken loans during the ITA Nos. 809 & 836/MUM/2024 Desai HUF. In the circumstances, the finding of the Ld. CIT(A) is without appreciation of the complete facts of the case and therefore, we set aside the said finding and restore the matter back to the file of the Assessing Officer for deciding afresh with the direction to the explain the queries raised by the Assessing Officer along with necessary documentary evidence. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical As far as the ground No. 2 of the appeal is concerned, the essing Officer treated the closing balance difference in closing balance and opening balance as unsecured loan as the loan introduced during the year under consideration and in absence of any documentary evidence to justify identity, creditworthiness and enuineness of the transaction in respect of that disffrence, treated the same as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) however referred to the statement of the facts filed referred to auditor report in Form No. 3CD for det provided during the year and loan repaid during the year under consideration. The relevant finding of the Ld. CIT(A) is reproduced as under: Ground No. 3(c): In this ground the appellant is contesting the addition of Rs.2,58,34,686/- u/s 68 being the difference of unsecured loan as on 31.03.2015 and 31.03.2016 as unexplained cash credit. The Ld. AO has simply stated that the assessee had not furnished any details and added the said amount u/s 68. On perusal of the audit report in form CD filed by the appellant it is noted that at Item No. 31(a) [particulars of each loan accepted during the previous yearl details of the parties along with and PAN from whom the appellant had taken loans during the ITA Nos. 809 & 836/MUM/2024 5 Nanubhai N Desai the finding of the Ld. CIT(A) is without appreciation of the complete facts of the case and therefore, we set aside the said finding and restore the matter back to the file of the Assessing Officer for deciding afresh with the direction to the explain the queries raised by the Assessing Officer along with necessary documentary evidence. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical As far as the ground No. 2 of the appeal is concerned, the essing Officer treated the closing balance difference in closing balance and opening balance as unsecured loan as the loan introduced during the year under consideration and in absence of any documentary evidence to justify identity, creditworthiness and that disffrence, he treated the same as unexplained cash credit u/s 68 of the Act. The Ld. CIT(A) however referred to the statement of the facts filed referred to auditor report in Form No. 3CD for details of provided during the year and loan repaid during the year under consideration. The relevant finding of the Ld. CIT(A) is Ground No. 3(c): In this ground the appellant is contesting the addition u/s 68 being the difference of unsecured loan as on 31.03.2015 and 31.03.2016 as unexplained cash credit. The Ld. AO has rnished any details and added the said amount u/s 68. On perusal of the audit report in form CD filed by the appellant it is noted that at Item No. 31(a) [particulars of each loan accepted during the previous yearl details of the parties along with and PAN from whom the appellant had taken loans during the year are mentioned. As per the said details in form CD the appellant had taken Rs. 18,44,95,335/ at para 6 supra, the appellant had also disclosed at [particulars of repayment of loan made during the previous year]. The total loan repaid during the year was Rs.15,86,13,448/ required by the Assessing Officer were already available in the audit report filed by the Appellant conducted any inquiry with the lenders as disclosed in form CD. In fact the Assessing Officer does not even mention the details disclosed in the audit report. Whereas as per the audit report the appellant had taken loans of Rs.18,44,95,335/ during the year. The Assessing Officer had taken the difference of unsecured loan as on 31.03.2015 and 31.03.2016 and simply stating that the assessee had not furnished any details added t unexplained cash credit u/s 68. It is to be noted that the books of account of the appellant are audited and the requisite information as certified by an accountant is filed in the audit report in form CD. As stated supra, the details necessar already available with the Ld. AO. However, the Assessing Officer had made a summary addition without conducting any inquiry and therefore, the same is bad in law. Therefore, the Assessing Officer is directed to delete the addition of Rs.2,58,34,686/ ground is allowed. 7.1 We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has adjudicated the issue without taking into of the party-wise unsecured loan at the beginning of the year under consideration as well as the loan outstanding at the closing of the relevant previous year. In the circumstances, we feel it appropriate to restore this issue ba direction to the assessee to provide all the necessary details in respect of unsecured loan outstanding at the beginning of the previous year as well as at the closing of the previous year. The Assessing Officer is directed to decide the issue after verification of the amount of loan taken during the year under consideration the purpose of invoking section 68 of the Act. The ground No. 2 of ITA Nos. 809 & 836/MUM/2024 mentioned. As per the said details in form CD the appellant had taken Rs. 18,44,95,335/- as loan during the year. As already mentioned at para 6 supra, the appellant had also disclosed at item no. 31(b) [particulars of repayment of loan made during the previous year]. The total loan repaid during the year was Rs.15,86,13,448/- required by the Assessing Officer were already available in the audit report filed by the Appellant-Assessee. The Assessing Officer had not conducted any inquiry with the lenders as disclosed in form CD. In fact the Assessing Officer does not even mention the details disclosed in the audit report. Whereas as per the audit report the appellant had taken ans of Rs.18,44,95,335/- and also repaid loans of Rs.15,86,13,448/ during the year. The Assessing Officer had taken the difference of unsecured loan as on 31.03.2015 and 31.03.2016 and simply stating that the assessee had not furnished any details added the amount as unexplained cash credit u/s 68. It is to be noted that the books of account of the appellant are audited and the requisite information as certified by an accountant is filed in the audit report in form CD. As stated supra, the details necessary for conducting an investigation were already available with the Ld. AO. However, the Assessing Officer had made a summary addition without conducting any inquiry and therefore, the same is bad in law. Therefore, the Assessing Officer is directed to e the addition of Rs.2,58,34,686/-. Accordingly, the appeal on this ground is allowed.” We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has adjudicated the issue without taking into consideration the details wise unsecured loan at the beginning of the year under consideration as well as the loan outstanding at the closing of the relevant previous year. In the circumstances, we feel it appropriate to restore this issue back to the file of the Assessing Officer with the direction to the assessee to provide all the necessary details in respect of unsecured loan outstanding at the beginning of the previous year as well as at the closing of the previous year. The icer is directed to decide the issue after verification of the amount of loan taken during the year under consideration the purpose of invoking section 68 of the Act. The ground No. 2 of ITA Nos. 809 & 836/MUM/2024 6 Nanubhai N Desai mentioned. As per the said details in form CD the appellant had as loan during the year. As already mentioned item no. 31(b) [particulars of repayment of loan made during the previous year]. The -. The details required by the Assessing Officer were already available in the audit ssessee. The Assessing Officer had not conducted any inquiry with the lenders as disclosed in form CD. In fact the Assessing Officer does not even mention the details disclosed in the audit report. Whereas as per the audit report the appellant had taken and also repaid loans of Rs.15,86,13,448/- during the year. The Assessing Officer had taken the difference of unsecured loan as on 31.03.2015 and 31.03.2016 and simply stating he amount as unexplained cash credit u/s 68. It is to be noted that the books of account of the appellant are audited and the requisite information as certified by an accountant is filed in the audit report in form CD. As y for conducting an investigation were already available with the Ld. AO. However, the Assessing Officer had made a summary addition without conducting any inquiry and therefore, the same is bad in law. Therefore, the Assessing Officer is directed to . Accordingly, the appeal on this We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has consideration the details wise unsecured loan at the beginning of the year under consideration as well as the loan outstanding at the closing of the relevant previous year. In the circumstances, we feel it appropriate ck to the file of the Assessing Officer with the direction to the assessee to provide all the necessary details in respect of unsecured loan outstanding at the beginning of the previous year as well as at the closing of the previous year. The icer is directed to decide the issue after verification of the amount of loan taken during the year under consideration for the purpose of invoking section 68 of the Act. The ground No. 2 of the appeal of the Revenue is accordingly allowed for statistical purposes. 8. As far as the ground No. 3 of the appeal of disallowance of the interest of Rs.4,27,86,117/ against the management fee is concerned, the Assessing Officer held that there was no link between the interest e incurred for borrowing funds and the management fee. However, the Ld. CIT(A) deleted the addition observing as under: “8. Ground No. 4: In this ground disallowance of Rs.4,27,86, 117/ to P&L account. As stated at para 2 supra, the appellant along with his wife are Directors and Share Holders in M/s Anoushka Medicare and Diagnostic Pvt. Ltd. The appellant had availed loan of Rs.27,60,00,000/ from M/s Cosmos Co hospital. The appellant receives management fee of Rs. 1,95,22,000/ from the hospital. Therefore, there is a direct nexus between the management fee received from the hospital and the interest paid towards the loan taken for purchase of property to run the hospital. Therefore, the Assessing Officer is directed to delete the addition of Rs.4,27,86,117/ being the interest expenditure debited to P&L account. Accordingly, the appeal on this ground is allowed. 8.1 We have heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has not justified as how the receiving of the management fee is connected to the interest loan taken towards purchase the property to run hospital. Therefore, we set aside the finding of the Ld. CIT(A) on the issue in dispute and restore Assessing Officer with the direction to the assessee to furnish necessary evidence in support of claim that interest expenditure was incurred towards earning of management fee. The ground of ITA Nos. 809 & 836/MUM/2024 the appeal of the Revenue is accordingly allowed for statistical As far as the ground No. 3 of the appeal of disallowance of the interest of Rs.4,27,86,117/- for interest of expenditure claimed against the management fee is concerned, the Assessing Officer held that there was no link between the interest e incurred for borrowing funds and the management fee. However, the Ld. CIT(A) deleted the addition observing as under: 8. Ground No. 4: In this ground the appellant is contesting the disallowance of Rs.4,27,86, 117/- being the interest expenditu to P&L account. As stated at para 2 supra, the appellant along with his wife are Directors and Share Holders in M/s Anoushka Medicare and Diagnostic Pvt. Ltd. The appellant had availed loan of Rs.27,60,00,000/ from M/s Cosmos Co-operative Bank for purchase of the building for the The appellant receives management fee of Rs. 1,95,22,000/ from the hospital. Therefore, there is a direct nexus between the management fee received from the hospital and the interest paid towards en for purchase of property to run the hospital. Therefore, the Assessing Officer is directed to delete the addition of Rs.4,27,86,117/ being the interest expenditure debited to P&L account. Accordingly, the appeal on this ground is allowed.” heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has not justified as how the receiving of the management fee is connected to the interest loan taken towards purchase the property to run l. Therefore, we set aside the finding of the Ld. CIT(A) on the and restore the matter back to the file of the Assessing Officer with the direction to the assessee to furnish necessary evidence in support of claim that interest expenditure was incurred towards earning of management fee. The ground of ITA Nos. 809 & 836/MUM/2024 7 Nanubhai N Desai the appeal of the Revenue is accordingly allowed for statistical As far as the ground No. 3 of the appeal of disallowance of the interest of expenditure claimed against the management fee is concerned, the Assessing Officer held that there was no link between the interest expenditure incurred for borrowing funds and the management fee. However, the Ld. CIT(A) deleted the addition observing as under: the appellant is contesting the being the interest expenditure debited to P&L account. As stated at para 2 supra, the appellant along with his wife are Directors and Share Holders in M/s Anoushka Medicare and Diagnostic Pvt. Ltd. The appellant had availed loan of Rs.27,60,00,000/- for purchase of the building for the The appellant receives management fee of Rs. 1,95,22,000/- from the hospital. Therefore, there is a direct nexus between the management fee received from the hospital and the interest paid towards en for purchase of property to run the hospital. Therefore, the Assessing Officer is directed to delete the addition of Rs.4,27,86,117/- being the interest expenditure debited to P&L account. Accordingly, the heard rival submission of the parties and perused the relevant material on record. We find that the Ld. CIT(A) has not justified as how the receiving of the management fee is connected to the interest loan taken towards purchase the property to run l. Therefore, we set aside the finding of the Ld. CIT(A) on the the matter back to the file of the Assessing Officer with the direction to the assessee to furnish necessary evidence in support of claim that interest expenditure was incurred towards earning of management fee. The ground of appeal of the Revenue is accordingly allowed for statistical purposes. 9. The appeal in ITA No. 836/Mum/2024 is in respect of penalty levied u/s 271(1)(c) of the Act in respect of additions wh already restored to the file of the Ld. Assessing Officer while adjudicating the appeal in ITA No. 809/Mum/2024 we have already set aside the additions made by the Assessing Officer, the penalty levied in respect of those addi survive and therefore, all the grounds raised by the Revenue in respect of appeal filed against penalty levied u/s 271(1)(c) of the Act are also restored to the file of the Assessing Officer. The Assessing Officer may consider initiating penalty proceedings in the quantum assessment proceedings in accordance with law. 10. In the result, both the appeals of the Revenue are allowed for statistical purposes. Order pronounced in the open Court on Sd/- (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 30/05/2024 Rahul Sharma, Sr. P.S. ITA Nos. 809 & 836/MUM/2024 appeal of the Revenue is accordingly allowed for statistical The appeal in ITA No. 836/Mum/2024 is in respect of penalty levied u/s 271(1)(c) of the Act in respect of additions wh already restored to the file of the Ld. Assessing Officer while adjudicating the appeal in ITA No. 809/Mum/2024 , we have already set aside the additions made by the Assessing Officer, the penalty levied in respect of those addi survive and therefore, all the grounds raised by the Revenue in respect of appeal filed against penalty levied u/s 271(1)(c) of the Act also restored to the file of the Assessing Officer. The Assessing Officer may consider initiating penalty proceedings in the quantum assessment proceedings in accordance with law. In the result, both the appeals of the Revenue are allowed for nced in the open Court on 30/05 RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER ITA Nos. 809 & 836/MUM/2024 8 Nanubhai N Desai appeal of the Revenue is accordingly allowed for statistical The appeal in ITA No. 836/Mum/2024 is in respect of penalty levied u/s 271(1)(c) of the Act in respect of additions which we have already restored to the file of the Ld. Assessing Officer while ,therefore, since we have already set aside the additions made by the Assessing Officer, the penalty levied in respect of those additions cannot survive and therefore, all the grounds raised by the Revenue in respect of appeal filed against penalty levied u/s 271(1)(c) of the Act also restored to the file of the Assessing Officer. The Assessing Officer may consider initiating penalty proceedings in the quantum In the result, both the appeals of the Revenue are allowed for /05/2024. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA Nos. 809 & 836/MUM/2024 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai ITA Nos. 809 & 836/MUM/2024 9 Nanubhai N Desai BY ORDER, (Assistant Registrar) ITAT, Mumbai