KAPIL TANEJA,JAIPUR V. ACIT CIRCLE 3, JAIPUR

ITA 13/JPR/2025

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 17089 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017

Judgement Text

"vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj \nIN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR \n \n Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k \nBEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM \n \nvk;dj vihy la-@ITA. No. 13/JPR/2025 \nfu/kZkj.k o\"kZ@Assessment Years : 2016-17 \n \n Shri Kapil Taneja \n58, \nCosmo Colony, \nVaishali \nNagar, Jaipur. \ncuke \nVs. \nThe ACIT, \nCircle-3, \nJaipur. \n \nLFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACRPT2364B \nvihykFkhZ@Appellant \n \nizR;FkhZ@Respondent \n \n fu/kZkfjrh dh vksj ls@ Assessee by : Shri Tarun Mittal, C.A. \njktLo dh vksj ls@ Revenue by : Mrs. Swapnil Parihar, JCIT-DR \n \nlquokbZ dh rkjh[k@ Date of Hearing : 19/02/2025 \nmn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 07/03/2025 \n \nvkns'k@ ORDER \n \n \nPER: RATHOD KAMLESH JAYANTBHAI, AM \nBy way of present appeal the above named assessee-\nappellant challenges the finding so recorded in an order passed on \n13.12.2024 by National Faceless Appeal Centre [ for short CIT(A) \n]. The dispute relates to assessment year 2016-17. The order of ld. \nCIT(A) arise because the assessee challenged the assessment \norder dated 25.12.2018 passed under section 143(3) of the Income \nTax Act,1961 [ for short “Act” ] by the ACIT, Circle-3, Jaipur [ for \nshort AO]. \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n2 \n2. \nThe assessee has marched this appeal on the following \ngrounds:- \n“1. On the facts and in the circumstances of the case and in law, ld. \nCIT(A) has erred in deciding the appeal without affording assessee with \nadequate opportunity of being heard. Appellant prays that order so \npassed is against the principle of natural justice and deserves to be \nquashed. \n2. On the facts and in the circumstances of the case and in law, \nld.CIT(A) has erred in passing the order without considering the \nevidences adduced and solely on the basis of observations made by \nld.AO in assessment order, arbitrarily. \n3. On the facts and in the circumstances of the case and in law, \nld.CIT(A) has erred in confirming the disallowance of Rs.47,74,320/-\nmade by ld.AO, out of interest expenses claimed by assessee, \narbitrarily. \n3.1 That, ld.CIT(A) has further erred in confirming the disallowance of \ninterest expenses made by ld.AO, on his own presumptions that part of \nthe loans were utilised for making investment in personal assets and \nwithout considering the fact that loans taken by assessee were wholly \nand exclusively utilised for the purpose of business and interest paid \nthereon was allowable business expenditure. \n4. On the facts and in the circumstances of the case and in law, \nld.CIT(A) has erred in confirming the addition of Rs.82,00,000/- made by \nld.AO u/s 68 of the Income Tax Act, arbitrarily. \n4.1 That, ld.CIT(A) has further erred in confirming the addition of Rs. \n82,00,000/- made by ld.AO by alleging the loans received by assessee \nfrom various parties as undisclosed income of the assessee. Appellant \nprays that all the loans taken by assessee are absolutely genuine and \naddition so confirmed deserves to be deleted. 5. On the facts and in the \ncircumstances of the case and in law, ld.CIT(A) has erred in confirming \nthe disallowance of Maintenance expenses of Rs.20,000/- made by \nld.AO, arbitrarily. \n6. On the facts and in the circumstances of the case and in law, \nld.CIT(A) has erred in confirming disallowance of Interest on TDS of \nRs.1,44,519/- made by ld.AO arbitrarily. Appellant prays that interest on \nlate payment of TDS being compensatory in nature and therefore \ndeserves to be allowed. \n7. On the facts and in the circumstances of the case and in law, \nld.CIT(A) has erred in confirming disallowance of trading loss of \nRs.1,50,529/- arbitrarily. \n8. The appellant craves leave to add alter amend substitute one or more \ngrounds of appeal as and when necessary.” \n \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n3 \n3. \nThe fact as culled out from the record is that the assessee – \nappellant has efiled his return of income declaring total income of \nRs.54,30,550/- on 17.10.2016. After filling of ITR the case of the \nassessee was selected under CASS for complete scrutiny. Notice \nu/s 143(2) of the IT Act was issued through ITBA on 03.07.2017. \nOn 06.08.2018 notice u/s 142(1) of the IT Act was issued through \nITBA along with the query letter, the assessee submitted reply \nonline through ITBA. As the assessee-appellant has not submitted \ncomplete details even though passing of a long time, therefore, ld. \nAO on 20.12.2018 issued a show cause notice to the assessee \nrequiring to show cause on some issues and furnishing clarification \non some other issues. The assessee was asked to furnish a reply \non 21.12.2018 but on 21.12.2018 no reply was furnished. On \n24.12.2018 and 25.12.2018 various confirmations of unsecured \nloans and a reply to the show cause was uploaded on ITВА. \n3.1 \n During the year under consideration the assessee has \nshown income under the head income from Salary, Business and \nProfession, Capital gain and other sources. As per the submission \nof the assessee, he is engaged in the business of trading and \ninvestment in shares and also earned income from interest, cargo \nhandling charges, clearing and forwarding agent service, \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n4 \ntransportation service etc. Along with the details, the assessee \nsubmitted profit & loss account by the heading 'Kapil Taneja' and \nother P&L account of \"Pinc Freight Movers\". \n3.2 \n On perusal of the audit report ld. AO observed that \nassessee has taken huge unsecured loans during the year under \nconsideration. As per the details available in col. 31(a) of the audit \nreport and as it is evident that he has taken loan from 259 persons. \nThe closing balance of these unsecured loans as per balance \nsheet filed was Rs.28,60,02,040/-, he also observed that in the \ndetails given in the audit report regarding unsecured loans, PAN \nNo. of lenders were not given. In the query letter issued on \n06.08.2018, the assessee was required to furnish confirmation of \nall unsecured loans, whether squared up or not. As is evident from \nthe order of the assessment that the assessee was given an \nopportunity in the matter vide notice dated 12.09.2018, \n25.10.2018, \n01.11.2018, \n12.11.2018, \n06.12.2018 \nand \non \n20.12.2018. Thus ld. AO noted that despite various notices given \nfor furnishing the details, on two occasions the assessee furnished \nconfirmation of unsecured loans from some of the lenders, which \nare placed on record. After issue of show cause assessee \nuploaded copy of various confirmations on 24/25.12.2018. On \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n5 \nperusal of the details uploaded by the assessee he noted that, no \nconfirmation for the unsecured loan taken from TK Films has been \nfiled. After issue of show cause further time was allowed to the \nassessee. Inspite of providing time beyond the showcause date, \nconfirmation of unsecured loans claimed to have been taken from \nM/s TK Films has not been filed. As the assessee has failed to \ndischarge his basic onus of furnishing the confirmation from the \nlender, therefore, the genuineness of the transaction, identity of the \nperson lending the money and creditworthiness of the lender is not \nproved. It is also pertinent to mention that even in the details given \nin the audit report regarding unsecured loans, PAN No. and \naddress of lenders is not given. Therefore, the amount of \nRs.3,00,000/- shown to have received from M/s T K Films is \ntreated as income of the assessee from undisclosed sources with \nthe meaning of section 68 of the IT Act to be taxed u/s 115BBE of \nthe IT Act. Further ld. AO noted that in case of other five case the \naddition of Rs. 79,00,000/- was made because the PAN number \nand address was not mentioned in the confirmation and the audit \nreport filed, therefore, ld. AO treated as non-genuine transaction \nand was added as income of the assessee u/s. 68 of the Act. \n \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n6 \n3.3 \nOn perusal of Profit & Loss account submitted by the \nassessee ld. AO noted that two profit & loss accounts have been \nsubmitted. On one of the P&L. account heading is \"Pinc Freight \nMovers\". \nThis \nP&L \naccount \nshows \nincome \nrelating \nto \ntransportation charges, clearing & forwarding agent service \ncharges and other related income and consequently on debit side \ntransportation charges and related charges have been claimed. \nThus, this P&L account seems to be related to assessee's \ntransportation and related work. In the other P&L account bearing \nthe heading of assessee's name, in the trading account portion, \nsale and intraday income with closing stock has been shown on \nthe credit side and the debit side bears detail of opening stocks, \npurchases and direct expenses. As no further details were \nprovided it seems that this account is related to the share trading \nactivities of the assessee. The P&L portion of this account is \nhaving interest and other income, shown in the credit side and \nvarious expenses under the head indirect expenses has been \nshown in debit side, including interest payment of Rs. \n3,60,43,574/-. \n3.4 \nOn perusal of P&L account ld. AO observed that \nmaintenance charges of Rs. 20,000/- has been debited in the P&L \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n7 \naccount. As no details have been furnished it is not clear for what \npurpose these expenses have been claimed. The nature of these \nexpenses \ncannot \nbe \nknown \nin \nabsence \nof \nany \nclarification/justification by the assessee. As no justification for the \nclaim of these expenses has been furnished and even the nature \nof expenses cannot be explored suo moto, the claim of these \nexpenses cannot be allowed. In view of these facts, the claim of \nmaintenance expenses of Rs. 20,000/- was disallowed and added \nback to the income of the assessee. \n3.5 \nIn the P&L account the assessee has shown trading loss of \nRs. 1,50,529/-, The assessee was required to furnish separate \ndetails of each business, but no such details were filed by the \nassessee. On perusal of P&L account it is observed that on the \ntrading account part, total purchases and sales and direct \nexpenses of share trading were given by the assessee. Therefore, \nif the trading loss would have been related to share transactions, it \nwould have been reflected in the trading account part. As trading \nloss has been claimed in the P&L portion and nature of this loss \nhas not been appraised by the assessee and no reply to the show \ncause, even after being asked specifically, has been filed, the \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n8 \ntrading loss claimed by the assessee in the P&L. account was not \nallowed by the ld. AO. \n3.6 \nIn the P&L account the assessee has claimed locker rent of \nRs. 2,584/- and NSC charges of Rs. 73,553/-, By the heading of \nthese expenses, these seem to be of personal nature. As no \ndetails of these expenses have been provided by the assessee \neven after asking specifically, the claim of these expenses are \ndisallowed taking them to be personal expenses of the assessee. \nThis will result in an addition of Rs. 76,137/- to the income of the \nassessee. \n3.7 \nOn perusal of details appearing in P&L account it is observed \nthat assessee has claimed Rs. 1,44,519/- on account of interest on \nTDS. In the reply filed on 25.12.2018 the assessee submitted that \nthe nature of the payment was not penal but compensatory as \ndecided in the decision of Kolkatta ITAT in the case of DCTT vs. \nNarayani Ispat (Pvt.) Ltd. The reply of the assessee has been \nconsidered and is not tenable. These expenses are related to \npayment of interest for late deposition of TDS amount deducted by \nthe assessee, as these expenses are penal in nature, they cannot \nbe allowed as expenditure. In view of these facts, claim of the \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n9 \nassessee of Rs. 1,44,519/- made on account of interest on TDS \nwas disallowed and added back to the income of the assessee. \n3.8 \nOn perusal of the details in the profit & loss account it is \nnoticed that the assessee has claimed house property tax of Rs. \n21,725/- as deduction. In the reply filed on 25.12.2018, the \nassessee submitted that on account of some legal & statutory \nrequirements the amount was paid. In the reply the assessee has \nnot uttered any word on how this expenditure can be treated as \nbusiness expenditure. In both the Profit & Loss accounts filed by \nthe assessee there is no income arising from the property \nbusiness. The assessee has shown income from sale of property \nonly under the head capital gain. Moreover, there is no detail of \nany stock in trade of business of the assessee. In view of these \nfacts, the claim of the assessee for deduction of house property tax \nwas disallowed and added back to the income of the assessee. \n3.9 \nOn perusal of P&L account in the name of 'Kapil Taneja' it \nwas observed by the ld. AO that in this P&L account assessee has \ncredited interest income of Rs. 3,31,86,010/- and debited interest \npayment of Rs. 3,60,43,574/-. In the query letter issued on \n06.08.2018 the assessee was required to furnish justification for \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n10\nclaim of interest payment of Rs. 3,60,43,574/- giving details of use \nof unsecured loan amount. No such details were furnished by the \nassessee. On 16.11.2018 the assessee submitted that main \npurpose and justification of accepting and use of loan for business \npurposes only where they claimed interest of R.s 3,60,43,574/- in \nP & L Account for business purposes and for justification of the \nclaim the copy of the ledger of interest paid was placed on record. \nOn 20.12.2018 the assessee was again requested to furnish \nspecific justification for claim of interest expenditure specifying the \ndetails where the unsecured loan has been invested. He was also \nrequested to give specific details of each business and the amount \ninvested therein. In response the assessee vide submission dated \n25.12.2018 submitted that all the unsecured are of general use of \nthe business of the assessee and interest income and expenditure \nboth duly recorded in the books of accounts and thus related to the \nbusiness of the assessee. Ld. AO considered the reply filed by the \nassessee but was not accepted based on the following reasoning \ngiven by him:-- \n1. As per the copy of balance sheet the assessee was having personal \nassets amounting to Rs. 6,50,49,551/- and investment of Rs. \n2,98,66,450/- in shares of various companies and firms. \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n11\n2. In the balance sheet loans and advances of Rs. 24,81,18,305/- has \nbeen shown. \n3. As per the balance sheet total unsecured loans of the assessee \nwere of Rs. 28,60,02,040/- \n4. As per balance sheet the assessee was having capital balance of \nRs. 4,15,88,484/-. \n5. The assessee has not given any details of using the unsecured \nloans. \n6. Total interest payment of Rs. 3,60,43,574/- has been claimed on \ntotal unsecured loans of Rs. 28,60,02,040/-. \n \n \n3.10 Ld. AO thus noted that the assessee was having personal \ninvestment of Rs. 6,50,49,551/- and personal capital of Rs. \n4,15,88,484/-. Thus, it is sure that some portion of unsecured loans \nwere used by the assessee in acquisition of personal assets. \nMoreover, the assessee has made investment of Rs. 2,98,66,450/- \nin shares of various companies and investment in firms from where \nassessee has not earned any income. The assessee was \nspecifically required to furnish the details of business-wise \ninvestment of unsecured loans but no such details were filed by \nthe assessee in spite of providing ample opportunity. However, in \nabsence of any specific details or justification given by the \nassessee, the amount on which interest is to be allowed/disallowed \ncannot be specifically calculated. As mentioned above, the amount \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n12\nof unsecured loans of assessee are of Rs. 28,60,02,040/- and \nadvances are of Rs. 24,81,18,305/- only. As per assessee himself \nthe total cost of taking unsecured loans of Rs. 28,60,02,040/- is \nRs. 3,60,43,574/-. As the total unsecured loans were not used for \nadvancing the money therefore, interest in proportion to the money \nadvanced was only allowed and the remaining amount was \ndisallowed. Accordingly, an amount of Rs.3,12,69,254/- of interest \nexpenditure \nis \nallowed \nand \nthe \nremaining \namount \nof \nRs.47,74,320/- was disallowed and added back to the income of \nthe assessee. \n4. \nAggrieved by the above order of the Assessing Officer the \nassessee preferred an appeal before the ld. CIT(A). After perusing \nthe submissions of the assessee, the ld. CIT(A) has dismissed the \nappeal of the assessee. The relevant finding of the ld. CIT(A) is as \nunder:- \n“4. Decision: \nI have carefully considered the relevant and material facts on record, in \nrespect of this ground of appeal, as brought out in the assessment order. \nOn perusal of the audit report it was noticed by the Assessing Officer that \nthe assessee took huge unsecured loans. The assessee during the \nassessment proceedings furnished confirmation of unsecured loans from \nsome of the lenders but on perusal on the details provided by the \nassessee it was found that no confirmation of unsecured loan from T.K \nFilms was filed by the assessee. It was also noticed that PAN No of the \nlenders was not provided in the confirmation filed by the assessee. \nFruther, on perusal of the P & L account the Assessing Officer found a \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n13\ntotal of five discrepancies namely false claim of the maintenance \nexpences of Rs. 20,000/-, false trading loss of Rs. 1,50,529/-, false claim \nof locker rent and NSC charges, false claim of Interest on TDS of Rs. \n1,44,519/- as expenditure, false claim of house property tax of Rs. \n21,725/- as deduction and false claim of interest payment of Rs. \n3,60,43,574/-. \n4.1 The A.O has briefly pointed the discrepancies found in the audit \nreport and P&L account of the assessee, Hence the onus lies on the \nassessee to prove the genuineness of the transactions related to the \nalleged bogus unsecured loans and discrepancies in P & L account, \nduring the appellate proceedings the assessee failed to provide any \nevidence in his written submission that explains the genuineness of the \ntransactions related to unsecured loans and no evidences were provided \nby the assessee weakens the findings of the Assessing Officer regarding \nthe false claims of the assesse of the maintenance expences of Rs. \n20,000/-, false trading loss of Rs. 1,50,529/-, false claim of locker rent \nand NSC charges, false claim of Interest on TDS of Rs. 1,44,519/- as \nexpenditure, false claim of house property tax of Rs. 21,725/- as \ndeduction and false claim of interest payment of Rs. 3,60,43,574/-. The \nonus lies on the appellant to support any claim by bringing in cogent \ndocumentary evidence \n4.2 In absence of any substantial documentary evidence in support of its \ngrounds of appeal, I have no basis to take a contrary view in the \nappellate proceedings as I have no reason to interfere with the \nassessment order As such, I do not find any infirmity in the order of \nAssessing Officer. Therefore, Addition of Rs. 1,88,17,780/- is hereby \nsustained on merits. Accordingly, Grounds No.1 to 4 are dismissed. \nGround No.5 is general in nature and does not call for specific \nadjudication. \n7. In the result, the appeal is Dismissed.” \n \n5. \nFeeling dissatisfied with the above finding of the ld. CIT(A) \nthe assessee filed the present appeal before this tribunal on the \ngrounds as reiterated herein above. To support the grounds so \nraised the ld. AR appearing on behalf of the assessee has placed \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n14\nreliance on the written submission which is extracted herein \nbelow:- \n“Brief facts of the case are that assessee is an individual and is engaged in \nthe business of trading and investment in shares and also earned income \nfrom interest, cargo handling charges, clearing and forwarding agent service, \ntransportation service etc. Return of Income for the year under consideration \nwas filed by assessee on 17.10.2016 declaring total income at Rs. 54,30,550/-\n. The case of assessee was selected for complete scrutiny under CASS. \nVarious details and information as sought by ld.AO were furnished and \nassessment was concluded after making following additions: \nS.No Addition Made on account of \n \nAmount \n(Rs.) \n1. Interest Expenses \nRs. \n47,74,320/- \n2. Addition u/s 68 of unsecured loans \nRs. \n82,00,000/- \n3. Interest on TDS \nRs. \n1,44,519/- \n4. Trading loss \nRs. \n1,50,529/- \n5. Locker Rent and NSC charges \nRs. \n76,127/- \n6. House Property Tax \nRs. \n21,725/- \n7. Maintenance expenses \nRs. \n20,000/- \n \nAggrieved of the additions made by ld.AO, (except enumerated at serial no. 5 \nand 6), assessee preferred appeal before ld.CIT(A), which stood dismissed \nvide order dated 13.12.2024. Present appeal has been filed by assessee \nagainst the order so passed by ld. CIT(A). \nWith this background, ground-wise submission is made as under: \nGrounds of Appeal No. 1 & 2: \nIn these grounds of appeal, assessee has challenged the action of ld. CIT(A) \nin deciding the appeal solely on the basis of observations drawn by ld.AO \nduring the assessment proceedings and without appreciating submission \nmade and evidences adduced by assessee during appellate proceedings. \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n15\nAppellant prays that ld.CIT(A) ought to have decided appeal after taking into \nconsideration submission made and evidences adduced by assessee and \norder passed without considering the same is not in accordance with law. \nGrounds of Appeal No. 3 & 3.1: \nIn these grounds of appeal, assessee has challenged the action of ld.CIT(A) \nin confirming disallowance of interest to the tune of Rs.47,74,320/- out of \ninterest expenses claimed by assessee. \nFacts pertaining to the grounds of appeal are that during the year under \nconsideration, assessee has debited interest expenditure of Rs.3,60,43,574/- \nto profit & loss account. On the other hand, assessee had credited interest \nincome worth Rs.3,31,86,010/- to profit & loss account. During the course of \nassessment proceedings, ld.AO sought clarification as to utilization of funds, \nin respect of which interest was paid by assessee. Ld.AO, on the observation \nthat assessee had given advances worth Rs.24,81,18,305/- as against \nunsecured loans taken of Rs.28,60,02,040/-, computed proportionate interest \nin respect of unsecured loans, which was utilized for making advances at \nRs.3,12,69,254/- and thus disallowed balance interest cost of Rs.47,74,320/-. \nIn this regard, at the outset, it is submitted that it was explained by assessee \nthroughout the assessment proceedings that borrowed funds were utilized for \ncommon business purposes and for making advances, however submission of \nassessee was not accepted by ld.AO. At this juncture, kind attention of your \nhonours is invited to profit & loss account of assessee (page 10 - 11 of WS), \nfrom perusal of which, it is apparent that assessee has traded in shares as \nwell as made certain advances, on which interest income of Rs.3,31,86,010/- \nhas been received and has also earned other income of Rs.1,08,97,120/-. \nHowever, ld.AO has presumed that funds borrowed were solely utilized either \nfor making advances or for making personal investments, which interpretation \nis absolutely arbitrary. Ld.AO has simply compared figure of unsecured loans \ntaken of Rs. 28,60,02,040/- with advances made of Rs. 24,81,18,305/- and \nhas inferred that remaining funds were not utilized for business purpose. Your \nhonours would appreciate that in the case of running business, funds \nborrowed form part of common pool and thus are parked in a number of \nassets, which may be in the shape of current assts, i.e. stock/debtors/ TDS/ \ncash/bank balance etc. and in fixed assets as well and which also keep \nchanging due to realization/sale of assets and it is thus not possible to show \ndirect nexus between funds borrowed and utilized. Your honours would \nappreciate that gross profit of assessee is Rs 1,93,069.82/- whereas \nassessee has eventually earned net profit to the tune of Rs 15,71,139.83/- \nand it is not the case that assessee has debited interest to reduce his income. \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n16\nLd.AO has further observed that assessee has personal assets worth \nRs.6,50,49,551/- and investment of Rs.2,98,66,450/- in shares of various \ncompanies. In this regard, kind attention of your honours is invited to Balance \nsheet, from perusal of which it is evident that assets worth Rs. 6,50,49,551/- \nincludes property situated at “B 62, Hanuman Nagar, Vaishali Nagar” shown \nat Rs. 2,52,34,120/-, which was acquired by assessee by obtaining loan worth \nRs. 1.4t Crores from Financial Institution appearing in Financial Statement of \nassessee. Also, Fixed assets include “Office premises at Time Square” \nshown at Rs. 1,04,91,000/- as well as “Showroom at Barmer” shown at \nRs.70,37,330/- and assessee has shown gross rental income worth Rs. \n12,61,668/- and Rs.18,00,000/- from these rented properties, which has been \nsubject to tax. Moreover, ld. AO himself has stated that assessee was having \ncapital worth Rs. 4,15,88,484/-, thus observation of ld.AO that borrowed funds \nwere utilized for acquisition of Personal Assets is not correct so far as there is \nno diversion of funds and assessee has duly paid taxes on income earned on \nsuch assets. \nIt is further pertinent to note here that the mechanism followed by ld.AO to \ndisallow part of the interest shows that ld.AO has simply compared loans \ntaken and loans given and has completely brushed aside other current/ fixed \nassets generated in the course of business and it appears that disallowance \nhas been made as per section 57(iii), though provisions of section 57(iii) have \nnot been invoked specifically. Even w.r.t. section 57(iii), Hon’ble Supreme \nCourt in the case of CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 held \nthat: \n\"the plain natural construction of the language of section 57(iii) of \nthe Act irresistibly leads to the conclusion that to bring a case within \nthat section it is not necessary that any income should in fact have \nbeen earned as a result of the expenditure. What section 57(iii) of \nthe Act requires is that the expenditure must be laid out or \nexpended wholly and exclusively for the purpose of making or \nearning income. The section does not require that this purpose \nmust be fulfilled in order to qualify the expenditure for deduction: it \ndoes not say that the expenditure shall be deductible only if any \nincome is made or earned.\" The Supreme Court went on to hold \nthat \"it is true that the language of section 37(1) of the Act is a little \nwider than that of section 57(iii) of the Act but we do not see how \nthat can make any difference in the true interpretation of section \n57(iii) of the Act. The language of section 57(iii) of the Act is clear \nand unambiguous and it has to be construed according to its plain \nnatural meaning and merely because a slightly wider phraseology is \nemployed in another section which may take in something more, it \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n17\ndoes not mean that section 57(iii) of the Act should be given a \nnarrow and constricted meaning not warranted by the language of \nthe section and, in fact, contrary to such language.\" \nIn view of above, it is submitted that interest expenditure incurred by assessee \nduring the course of business deserves to be allowed as claimed. \nGrounds of Appeal No. 4 & 4.1: \nIn these grounds of appeal, assessee has challenged the action of ld.AO in \nmaking addition of Rs. 82,00,000/- u/s 68 of the Income Tax Act. \nFacts pertaining to the grounds of appeal are that during the year under \nconsideration, assessee had taken certain unsecured loans from various \nparties. During assessment proceedings, ld.AO directed to furnish details \nincluding confirmations etc. of such loans, which were duly furnished by \nassessee except in one case, i.e. T K Films from whom assessee had taken \nunsecured loan worth Rs.3,00,000/-. Accordingly, ld.AO issued show cause \nnotice dated 20.12.2018 (page 12-13 of WS), whereby it was proposed \nthat:”As substantial time has passed still confirmation of all unsecured \nloans have not been filed. You are therefore, showcaused as to why the \namount of unsecured loans shown by you, for which no confirmation has been \nfiled, may not be treated as your undisclosed income for the year under \nconsideration.” Apart from this, no further query was raised w.r.t. unsecured \nloans, whose confirmations were already filed by assessee. It was thus \npresumed by assessee that confirmations already filed were found in order. \nHowever, while passing assessment order, ld.AO w.r.t. unsecured loans worth \nRs.79,00,000/-(as tabulated at page 3 of Assessment order) observed that \n“No PAN in confirmation and no PAN in audit report”. Ld.AO further observed \nthat since address of lenders were also not mentioned in confirmations, their \nidentity remained unproved and thus doubted creditworthiness and \ngenuineness of such parties. \nIn this regard, it is submitted that first of all, there was no whisper in the show \ncause notice regarding intention of ld.AO of making addition in respect of \nunsecured loans worth Rs.79,00,000/-. Your honours would appreciate that \nissuance of show cause notice is not a mere technical formality and is rather \nvery important part of assessment proceedings as the same is issued as a \ncompliance of principle of natural justice, according to which an assessee \nmust be afforded with adequate opportunity of being heard and to give \nexplanation, prior to taking any adverse view in his case. In the present case, \nld.AO, in the show cause notice has nowhere specified any discrepancy in \nconfirmations already filed by assessee and has not expressed his intention of \nmaking addition w.r.t. unsecured loans, in respect of which assessee had filed \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n18\nconfirmations and has merely proposed addition in respect of loan for which \nno confirmation was filed by assessee, i.e. M/s T.K.Films, from whom \nassessee had taken loan worth Rs.3,00,000/-. Whereas to utter surprise of \nassessee, eventually ld.AO has made addition to the tune of Rs.82,00,000/- \nby alleging unsecured loans taken by assessee as unexplained cash credit \nu/s 68 of the Income Tax Act. Your hobours would appreciate that such action \nof ld.AO is contrary to the principle of natural justice. \nSo far as merits of the issue are concerned, as stated above, ld.AO has \nbasically made addition by alleging that no PAN /address was mentioned in \nconfirmations furnished by assessee. In this regard, it is submitted that in \naggregate interest to the tune of Rs. 3,60,43,754/- was paid by assessee in \nrespect of unsecured loans, out of which interest of Rs. 3,59,62,334/- was \nsubject to TDS and during the course of assessment proceedings, vide notice \ndated 30.11.2018 (Page 14 of WS), assessee was directed to furnish details \nof expenses on which TDSs deducted, which was duly furnished by assessee \nvide letter dated 03.12.2018 (Page 15 of WS), wherein complete details of tax \ndeducted and deposited (Page 16 of WS) was furnished. In fact, in Tax audit \nreport also (Page 19 – 34 of WS), at clause 34(a) and 34(b), complete details \nof TDS alongwith details of TDS Returns filed by assessee were duly \nreported, however ld.AO has not even considered the same and has drawn \nadverse inference from list of loans mentioned, and confirmations, wherein \nPANs were omitted to be mentioned inadvertently. Moreover, as stated above, \nin final show cause notice dated 20.12.2018, no doubt was raised w.r.t. \nunsecured loans worth Rs.79,00,000/- for which assessee had already \nfurnished confirmations (Page 35 - 39 of WS), which also implied that loans \nworth Rs.79,00,000/- were treated as explained. In view of above, it is \nsubmitted that addition made in respect of loans to the tune of Rs.79,00,000/- \nare fully explained and deserve to be deleted outrightly. Similarly, w.r.t. \naddition of Rs.3,00,000/- made in respect of loan taken from M/s T.K. Films, it \nis submitted that loan was taken through banking channels and interest paid \nto this party was also subject to TDS, which was duly mentioned in TDS \nReturn filed by assessee and therefore identity, creditworthiness and \ngenuineness of this loan was also proved beyond doubt and it is submitted \nthat loan so taken is fully explained and addition made on this account also \ndeserve to be deleted. \nGround of Appeal No. 5: \nIn this ground of appeal, assessee has challenged the action of ld.AO in \nmaking disallowance of Rs.20,000/- being repairs and maintenance expenses \ndebited by assessee to P & L account. \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n19\nIn this regard, it is submitted that during the course of assessment \nproceedings, various details/information was sought, however no query \nwhatsoever was made w.r.t. repairs and maintenance expenses. Even in \nshow cause notice dated 20.12.2018 issued prior to completion of \nassessment, no disallowance was proposed in this regard and disallowance \nwas made directly in assessment order. Your honours would appreciate that \nsuch action of ld.AO in making addition without affording assessee with \nadequate opportunity tantamounts to violation of principle of natural justice. It \nis therefore requested that disallowance so made is not in accordance with \nlaw and deserves to be deleted. \nGround of Appeal No.6: \nIn this ground of appeal, assessee has challenged the action of ld.AO in \nmaking addition of Rs.1,44,519/- on account of Interest on TDS debited to \nProfit & loss account. \nBrief facts of the case are that during the year under consideration, assessee \nhas debited interest on TDS amounting to Rs.1,44,519/- to P/L a/c. Ld. AO \nissued show cause notice seeking explanation as to why the same should not \nbe disallowed. In response to such notice, it was submitted the Interest on \nTDS being compensatory in nature and not penal in nature deserves to be \nallowed. However, submission of assessee was brushed aside and interest on \nTDS claimed by assessee was disallowed. \nIn this regard, kind attention of your honours is invited to section 40(a)(ii), \nwhich reads as under: \nAmounts not deductible \n40. \nNotwithstanding anything to the contrary in sections 30 to [38], the \nfollowing amounts shall not be deducted in computing the income \nchargeable under the head \"Profits and gains of business or \nprofession\",— \n \n(a) in the case of any assessee— \n \n \n(ii) \nany sum paid on account of any rate or tax levied on the profits \nor gains of any business or profession or assessed at a \nproportion of, or otherwise on the basis of, any such profits or \ngains. \n \n \n[Explanation 1.—For the removal of doubts, it is hereby declared \nthat for the purposes of this sub-clause, any sum paid on account of \nany rate or tax levied includes and shall be deemed always to have \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n20\nincluded any sum eligible for relief of tax under section 90 or, as the \ncase may be, deduction from the Indian income-tax payable under \nsection 91.] \n \n \n[Explanation 2.—For the removal of doubts, it is hereby declared \nthat for the purposes of this sub-clause, any sum paid on account of \nany rate or tax levied includes any sum eligible for relief of tax under \nsection 90A;] \nA bare perusal of above makes it amply clear that any rate or tax on profit or \ngains of business or profession, shall not be allowable under section 40(a)(ii) \nof the Income Tax Act. Further, explanations have been inserted to clarify that \nany taxes paid by assessee abroad in respect of income taxable out of India \nalso shall also be construed as “tax or levy” in accordance with this section. \nThus, intention of Law in this regard is quite clear not to allow “tax on income \nof assessee” as deductible expenditure as the same is appropriation of \nincome towards a statutory liability and not an expense. Further, tax on \nincome, cannot be in any way construed as expenditure incurred wholly and \nexclusively for the purpose of business, which is pre condition for allowability \nof any expenditure. \nIn the instant case, disallowance is made of “Interest on TDS”, which is paid in \nrespect of late payment of TDS. Such TDS is not made from income of \ndeductor, rather it is the income tax liability of the deductee being discharged \nby deductor because of the vicarious liability cast upon him by the statute. \nIt is further submitted that such liability of deductor to deduct tax at source is \nnot computed as a percentage of or on the basis of profits or gains of his \nbusiness or profession, rather it is at the rates prescribed under the Act, from \nthe payment due/ made by him of a particular expense. In fact, TDS itself is \nnothing more than a portion of expense, which is retained by payer and \ndeposited in Government account in order to fulfil liability cast upon him as \npayer by statue. Thus, once a particular business expense to which TDS \nprovisions are attracted and duly fulfilled by assessee, TDS is also allowed as \ndeduction being part of such expense. Your honour would appreciate that \nonce principal amount i.e. TDS is allowable, then interest thereon should also \nbe allowable. Accordingly, the same cannot be treated to be covered within \nthe ambit of section 40(a)(ii). \nIt is a settled position of law that interest on purchase tax/ sales tax is \ndeductible in view of the fact that those taxes are also deductible. Following \nthe same analogy, interest on TDS should also be allowable as TDS itself is \ndeductible being portion of respective expenditure. In this regard, reliance is \nplaced on: \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n21\n[2023] 151 taxmann.com 322 (Delhi - Trib.) Delhi Cargo Service Center v. \nACIT \nSection 37(1) of the Income-tax Act, 1961- Business expenditure - Allowability \nof (Interest)-Assessment year 2015-16- Assessee-company was engaged in \ncargo handling services -For assessment year 2015-16, it e-filed its return - \nAssessing Officer made disallowance on account of interest payment on late \ndeposit of TDS on ground that same was penal in nature- Whether since \ninterest paid on late payment of TDS being compensatory in nature was an \nallowable \ndeduction \nunder \nsection \n37(1) \nand \ntherefore, \nimpugned \ndisallowance was to be deleted - Held, yes [Paras 8 and 9] [In favour of \nassessee] \nD.V. Properties (P.) Ltd. vs. Principal Commissioner of Income-tax [2023] \n155 taxmann.com 119 (Surat-Trib.)/[2023] 203 ITD 283 (Surat-Trib.)[29-08-\n2023] \nIV. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - \nAllowability of (Late payment of TDS) - Whether amount of TDS is not income \ntax for assessee but it is amount of income tax deducted and paid by \nassessee on behalf of third party - Held, yes - Whether thus, said expenditure \nincurred by assessee is wholly and exclusively for purpose of business and \ndelay in making payment of TDS late, is not like a penalty, and it does not \namount to payment for breach of law or illegal act or prohibited act, thus \ninterest on late payment of TDS is allowable - Held, yes [Para 18] [In favour of \nassessee] \nGround of Appeal No.7: \nIn this ground of appeal, assessee has challenged the action of ld.AO in \nmaking disallowance of Rs.1,50,529/- on account of Trading loss declared by \nassessee. \nIn this regard, as stated above, assessee is engaged in the business of \ntrading and investment in shares, during the course of which assessee \nsuffered above loss. During the course of assessment proceedings, ld.AO \nvide notice dated 30.11.2018 sought “Scrip wise details of profit/ loss on F & \nO transactions”, in response to which assessee furnished complete details of \nshare transactions including Client Global account (Page 17 - 18 of WS). \nApart from this, no details whatsoever were sought w.r.t. share transactions. \nIn fact, at no stage of assessment proceedings, any specific details were \nsought regarding trading loss of Rs.1,50,529/- as shown in profit & loss \naccount Also, prior to completion of assessment proceedings, show cause \nnotice \ndated \n20.12.2018 \nwas \nissued \nby \nld.AO, \nwherein \nno \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n22\naddition/disallowance was proposed in respect of trading loss of Rs.1,50,529/- \nshown by assessee in profit & loss account. It is thus submitted that addition \nof Rs.1,50,529/- has been made by ld.AO without affording adequate \nopportunity and is thus against the principle of natural justice and deserve to \nbe deleted.” \n6. \nThe ld. AR of the assessee in addition to the written \nsubmission so filed vehemently argued that vide show cause \nnotice it was proposed to make the addition as no confirmation \nwas filed. The assessee filed the confirmation but the same does \nnot bear the PAN number and therefore the same was added and \ntherefore, the addition were made beyond the scope of the show \ncause notice and therefore addition of unsecured loans so made is \nrequired to be deleted as the assessee provided all the details but \nhas not been appreciated even as regards the observation for TDS \nnot deducted on the Interest the same is recorded in the Tax audit \nreport and the assessee filed a detailed break up of the same and \nwas placed on record vide page 16 of the paper book filed. As \nregard the disallowance of interest ld. AO has not discussed that \nwhy the same is disallowable and under which provision of the Act, \ni.e. 36(1)(iii), 37(1) or 57(iii). Not only that on the aspect of the \nclaim of interest specific details were called for vide point no. 6 of \nnotice dated 20.12.2018 wherein the assessee submitted profit \nand loss account (page 10 of paper book) wherein the interest \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n23\nincome of Rs. 3,31,80,010/- was offered with other income of Rs. \n1,08,97,120/- and against that income claim of Rs. 3,60,43,574/- \nremains justified when the same is appearing the profit and loss \naccount which are audited. As regards the addition of Rs. \n1,50,529/- there is no whisper in the show cause notice (SCN) and \ntherefore, the same remain beyond the scope of SCN not addition \ncan be sustained. As regards interest on TDS ld. AR relied upon \nthe decision cited in the written submission and prayed to allow the \nsame being compensatory in nature. \n7. \nPer contra, ld. DR supported the order of the ld. CIT(A) and \nsubmitted that the interest has rightly been disallowed after giving \ndetailed reasoning and as regards the addition made for \nunsecured loans same being made based on the reasons given in \nthe orders of the lower authorities. As regards the interest on TDS \nsame being related to tax payment same is not allowable. \n8. \nWe have heard both the parties and perused the materials \navailable on record. The bench noted that ground no 1 & 2 being \ngeneral in nature and therefore the same is not required to be \nadjudicated. Ground no. 5 raised by the assessee was not pressed \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n24\nand therefore, the same is treated as dismissed. Ground no. 8 is \nalso general and does not require our adjudication. \n9. \nVide ground no. 3 and 3.1 the assessee challenges the \nfinding of the lower authority for disallowance of claim of interest \nexpenses for an amount of Rs. 47,74,320/-. The brief facts related \nto the issue on hand are that the assessee in the P&L account \ncredited interest income of Rs. 3,31,86,010/- and debited interest \npayment of Rs. 3,60,43,574/-. In the query letter issued on \n06.08.2018 the assessee was required to furnish justification for \nclaim of interest payment of Rs. 3,60,43,574/- giving details of use \nof unsecured loan amount. On 16.11.2018 the assessee submitted \nthat main purpose and justification of accepting and use of loan for \nbusiness purposes only where they claimed interest of Rs. \n3,60,43,574/- in P & L Account for business purposes and for \njustification of the claim by filling the copy of the ledger of interest \npaid was placed on record. On 20.12.2018 the assessee was \nagain requested to furnish specific justification for claim of interest \nexpenditure specifying the details where the unsecured loan has \nbeen invested. He was also requested to give specific details of \neach business and the amount invested therein. In response the \nassessee vide submission dated 25.12.2018 submitted that all the \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n25\nunsecured are of general use of the business of the assessee and \ninterest income and expenditure both duly recorded in the books of \naccounts which are audited and placed on record and thereby the \nclaim of interest is relates to their business only. Ld. AO \nconsidered the reply filed by the assessee but was not accepted \nbecause the assessee was having personal investment of Rs. \n6,50,49,551/- and personal capital of Rs. 4,15,88,484/-. Thus, it is \nsure that some portions of unsecured loans were used by the \nassessee in acquisition of personal assets. Moreover, the \nassessee has made an investment of Rs. 2,98,66,450/- in shares \nof various companies and investment in firms from where \nassessee has not earned any income. Ld. AO noted that in \nabsence of any specific details or justification given by the \nassessee, the amount on which interest is to be allowed/disallowed \ncannot be specifically calculated. As the total unsecured loans \nwere not used for advancing the money therefore, interest in \nproportion to the money advanced was only allowed and the \nremaining amount was disallowed. Accordingly, an amount of \nRs.3,12,69,254/- of interest expenditure was allowed and the \nremaining amount of Rs.47,74,320/- was disallowed and added \nback to the income of the assessee. When the matter was taken \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n26\nup before the ld. CIT(A) he has not specific dealt with the issue \nand simply given the following finding; \nIn absence of any substantial documentary evidence in support of its \ngrounds of appeal, I have no basis to take a contrary view in the \nappellate proceedings as I have no reason to interfere with the \nassessment order As such, I do not find any infirmity in the order of \nAssessing Officer. Therefore, Addition of Rs. 1,88,17,780/- is hereby \nsustained on merits. Accordingly, Grounds No.1 to 4 are dismissed. \n \nIn support of the ground taken before this tribunal the ld. AR of the \nassessee argued that the challenged the action of ld.CIT(A) in \nconfirming disallowance of interest to the tune of Rs.47,74,320/- \nout of interest expenses claimed by assessee. He stated that it \nwas \nexplained \nby \nassessee \nthroughout \nthe \nassessment \nproceedings that borrowed funds were utilized for common \nbusiness purposes and for making advances, however submission \nof assessee was not accepted by ld.AO. He drawn our attention to \nprofit & loss account of assessee (page 10 - 11 of WS), from \nperusal of which, it is apparent that assessee has traded in shares \nas well as made certain advances, on which interest income of \nRs.3,31,86,010/- has been received and has also earned other \nincome of Rs.1,08,97,120/- so that income was more then the \nclaim of interest expenses. Thus, the presumption of lower \nauthority that funds borrowed were solely utilized either for making \nadvances or for making personal investments, which interpretation \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n27\n/ observation arrived without considering the over submission so \nmade by the assessee. While making the disallowance ld. AO \nsimply compared figure of unsecured loans taken of Rs. \n28,60,02,040/- with advances made of Rs. 24,81,18,305/- and has \ninferred that remaining funds were not utilized for business \npurposes. Ld. AR also submitted that funds borrowed were used in \na number of assets, which may be in the shape of current assts, \ni.e. stock/debtors/ TDS/ cash/bank balance etc. and in fixed assets \nas well and which also keeps changing due to realization/sale of \nassets and it is thus not possible to show direct nexus between \nfunds borrowed and utilized. The lower authority thus not \nappreciated that if the overall profit and loss account persuaded \nthen there is net profit to the tune of Rs 15,71,139.83/- and it is not \nthe case that assessee has debited interest to reduce his income. \nLd.AO has further observed that assessee has personal assets \nworth Rs.6,50,49,551/- and investment of Rs.2,98,66,450/- in \nshares of various companies. In this regard, kind attention of your \nhonours is invited to Balance sheet, from perusal of which it is \nevident that assets worth Rs. 6,50,49,551/- includes property \nsituated at “B 62, Hanuman Nagar, Vaishali Nagar” shown at Rs. \n2,52,34,120/-, which was acquired by assessee by obtaining loan \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n28\nworth Rs. 1.4 Crores from Financial Institution appearing in \nFinancial Statement of assessee. Also, Fixed assets include \n“Office premises at Time Square” shown at Rs. 1,04,91,000/- as \nwell as “Showroom at Barmer” shown at Rs.70,37,330/- and \nassessee has shown gross rental income worth Rs. 12,61,668/- \nand Rs.18,00,000/- from these rented properties, which has been \nsubject to tax. Moreover, ld. AO himself has stated that assessee \nwas having capital worth Rs. 4,15,88,484/-, thus observation of \nld.AO that borrowed funds were utilized for acquisition of Personal \nAssets is not correct so far as there is no diversion of funds proved \nby the ld. AO and ld. CIT(A) has not dealt this issue with the merits \nof the case. As it is also evident that the ld. AO has allowed the \npart of the interest and part of the same was disallowed while \ndoing so he has not considered it under provision of the Act i.e. \n36(1)(iii), 37(1) or 57(iii) of the Act. As submitted by the assessee \nthat ld.AO has simply compared loans taken and loans given and \nhas completely ignored other current/ fixed assets generated in the \ncourse of business and it appears that disallowance has been \nmade as per section 57(iii), though provisions of section 57(iii) \nhave not been invoked specifically. The assessee in support of the \nclaim relied upon the decision of the apex court in the case \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n29\nof CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 wherein the \nCourt held that: \n\"the plain natural construction of the language of section 57(iii) of \nthe Act irresistibly leads to the conclusion that to bring a case within \nthat section it is not necessary that any income should in fact have \nbeen earned as a result of the expenditure. What section 57(iii) of \nthe Act requires is that the expenditure must be laid out or \nexpended wholly and exclusively for the purpose of making or \nearning income. The section does not require that this purpose \nmust be fulfilled in order to qualify the expenditure for deduction: it \ndoes not say that the expenditure shall be deductible only if any \nincome is made or earned.\" The Supreme Court went on to hold \nthat \"it is true that the language of section 37(1) of the Act is a little \nwider than that of section 57(iii) of the Act but we do not see how \nthat can make any difference in the true interpretation of section \n57(iii) of the Act. The language of section 57(iii) of the Act is clear \nand unambiguous and it has to be construed according to its plain \nnatural meaning and merely because a slightly wider phraseology is \nemployed in another section which may take in something more, it \ndoes not mean that section 57(iii) of the Act should be given a \nnarrow and constricted meaning not warranted by the language of \nthe section and, in fact, contrary to such language.\" \nConsidering the facts and arguments as discussed and following \nthe binding precedent cited, we allow the ground no. 3 & 3.1 raised \nby the assessee and direct the ld. AO to delete the addition of Rs. \n47,74,320/-. \n10. \nVide ground no. 4 and 4.1 the assessee challenges the \naddition of Rs. 82,00,000/- made considering the loans taken from \nthe various parties as undisclosed income u/s. 68 of the Act. The \nbrief fact on the issue are that the assessee ld. AO on perusal of \nthe audit report observed that assessee has taken huge unsecured \nloans during the year under consideration. As per the details \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n30\navailable in col. 31(a) of the audit report and as it is evident that he \nhas taken loan from 259 persons. \nThe closing balance of these unsecured loans as per \nbalance sheet filed was Rs.28,60,02,040/-, he also observed that \nin the details given in the audit report regarding unsecured loans, \nPAN No. of lenders were not given. In the query letter issued on \n06.08.2018, the assessee was required to furnish confirmation of \nall unsecured loans, whether squared up or not. Ld. AO noted that \ndespite various notices given for furnishing the details, on two \noccasions the assessee furnished confirmation of unsecured loans \nfrom some of the lenders, which were placed on record. After issue \nof show cause assessee uploaded copy of various confirmations \non 24/25.12.2018. On perusal of the details uploaded by the \nassessee ld. AO noted that, no confirmation for the unsecured loan \ntaken from TK Films has been filed. After issue of show cause \nfurther time was allowed to the assessee. Inspite of providing time \nbeyond the show cause date, confirmation of unsecured loans \nclaimed to have been taken from M/s TK Films has not been filed. \nAs the assessee has failed to discharge his basic onus of \nfurnishing the confirmation from the lender, therefore, the \ngenuineness of the transaction, identity of the person lending the \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n31\nmoney and creditworthiness of the lender was not proved. It is also \npertinent to mention that even in the details given in the audit \nreport regarding unsecured loans, PAN No. and address of lenders \nis not given. Therefore, the amount of Rs.3,00,000/- shown to have \nreceived from M/s T K Films was treated as income of the \nassessee from undisclosed sources with the meaning of section 68 \nof the IT Act. Ld. AR of the assessee submitted that as is evident \nthat there were 259 parties and only in case it was left attention to \nfile the confirmation and other related details and therefore, the \nassessee be given on chance to represent the facts related to this \ndepositor before the ld. AO in the interest of justice. We consider \nthis fact that out of 259 depositors only in one case the details \nwere not placed on record and therefore, we consider this prayer \nof the assessee and thereby we restore the matter of making \naddition of Rs. 3 lac in the name of T K Films thereby establish the \ngenuineness of this loan taken by the assessee, while doing so we \nnote that this loan taken from M/s T.K. Films, was taken through \nbanking channels and interest paid to this party was also subject to \nTDS, which was duly mentioned in TDS Return filed by assessee \nand therefore identity, creditworthiness and genuineness of this \nloan cannot be doubted but the assessee has not filed any \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n32\nconfirmation therefore, assessee is directed to justify the claim by \nfilling necessary evidence to support the claim of unsecured loan. \nSo far as the other part of the addition in the case of other \nfive depositor addition for an amount of Rs. 79,00,000/- was made \nbecause the PAN number and address was not mentioned in the \nconfirmation and the audit report filed, therefore, ld. AO treated as \nnon-genuine transaction and was added as income of the \nassessee u/s. 68 of the Act. When the matter was carried before \nthe ld. CIT(A) he has confirmed the addition by not dealing with the \ncontention of the assessee has simply confirmed the view of the ld. \nAO. The relevant observation of the ld. CIT(A) is reproduced for \nthe sake of brevity ; \nIn absence of any substantial documentary evidence in support of its \ngrounds of appeal, I have no basis to take a contrary view in the \nappellate proceedings as I have no reason to interfere with the \nassessment order As such, I do not find any infirmity in the order of \nAssessing Officer. Therefore, Addition of Rs. 1,88,17,780/- is hereby \nsustained on merits. Accordingly, Grounds No.1 to 4 are dismissed. \n \nIn support of the ground so taken before us the ld. AR of the \nassessee submitted that ld.AO made addition by alleging that no \nPAN /address was mentioned in confirmations furnished by \nassessee. In this regard, it was submitted that in aggregate interest \nto the tune of Rs. 3,60,43,754/- was paid by assessee in respect of \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n33\nunsecured loans, out of which interest of Rs. 3,59,62,334/- was \nsubject to TDS and during the course of assessment proceedings, \nvide notice dated 30.11.2018 (Page 14 of WS), assessee was \ndirected to furnish details of expenses on which TDSs deducted, \nwhich was duly furnished by assessee vide letter dated 03.12.2018 \n(Page 15 of WS), wherein complete details of tax deducted and \ndeposited (Page 16 of WS) was furnished. In fact, in Tax audit \nreport also (Page 19 – 34 of WS), at clause 34(a) and 34(b), \ncomplete details of TDS along with details of TDS Returns filed by \nassessee were duly reported, however ld.AO has not even \nconsidered the same and has drawn adverse inference from list of \nloans mentioned, and confirmations, wherein PANs were omitted \nto be mentioned inadvertently. Moreover, as stated above, in final \nshow cause notice dated 20.12.2018, no doubt was raised w.r.t. \nunsecured loans worth Rs.79,00,000/- for which assessee had \nalready furnished confirmations (Page 35 - 39 of WS), which also \nimplied that loans worth Rs.79,00,000/- were treated as explained. \nThe bench noted that the assessee filed the copy of confirmation in \nthe paper book wherein the details of the TDS deducted has \nalready been recorded this shows that since the assessee has \nsubmitted 258 confirmation out of 259 the mistake is inadvertent \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n34\nand therefore, addition made in respect of loans to the tune of \nRs.79,00,000/- stands fully explained and directed to be deleted as \nthe same are subjected to TDS which were supported by PAN. \nBased on this information ground no. 4 and 4.1 stands partly \nallowed. \n11. \nVide ground no. 6 the assessee challenges the addition for \ninterest on TDS of Rs. 1,44,519/- claimed as compensatory in \nnature we note that the assessee in support of the claim stated \nthat the interest on TDS is not paid on the tax liability of the \nassessee but was for the obligation of other party and therefore, \nthe same is compensatory in nature on this aspect of the matter. \nThe issue is decided in favor of the assessee of assessee by the \nKarnataka High Court judgment in the case of COMMISSIONER \nOF INCOME TAX & ANR. vs. ORIENTAL INSURANCE CO. LTD. \n[315 ITR 102], wherein Honourabe High court held that interest for \nlate payment of TDS is not in penal nature by observing as follows: \n“7. In the Mittal Steel case (supra), the proviso to s. 201 was under \nconsideration. The said proviso empowers levy of penalty if the TDS \ndeduction is not effected for any valid reason. However, s.201(1A) is a \ndistinct provision to levy interest for delayed remittance. It is in the \npractice of Revenue that for belated payment of tax for any reasonable \ncause, the assessee is liable to pay interest @ 12 per cent per annum. \nSimilarly, for refunds, Revenue pays interest to the assessee. \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n35\nTherefore, the levy of interest under s. 201(1A) cannot at any rate be \nconstrued as a penalty………….” \nThe Judgment of Karnataka High Court decision in the case of \nORIENTAL INSURANCE CO. LTD. (supra) amply covers the \ncurrent issue i.e, claim of interest expense on late payment of TDS \nas business expenditure, which is compensatory in nature, and \nrespectfully following that finding we hold that interest on late \npayment of TDS is compensatory in nature as there is no contrary \nmaterial on record brought by the revenue. In the result ground no. \n6 raised by the assessee is allowed. \n12. \nGround no. 7 raised by the assessee challenges the action of \nthe lower authority in holding that Rs. 1,50,529 being the loss on \ntrading activity was not allowable. In this regard the bench noted \nfrom the submission placed on record stating that assessee is \nengaged in the business of trading and investment in shares, \nduring the course of which assessee suffered the said loss. For \nthis loss while assessment proceedings, ld.AO vide notice dated \n30.11.2018 sought “Scrip wise details of profit/ loss on F & O \ntransactions”,. In response to which assessee furnished complete \ndetails of share transactions including Client Global account (Page \n17 - 18 of WS). Except that information no other information \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n36\nwhatsoever were sought for the said share transactions. In fact, at \nno stage of assessment proceedings, any specific details were \nsought regarding trading loss of Rs.1,50,529/- as shown in profit & \nloss account. Even while completing the assessment ld. AO did not \ndeem, it fell to raise the issue in the show cause notice issued for \nthe other addition so made vide notice dated 20.12.2018. We have \nseen the SCN dated 20.12.2018 therein no such reference was \nmade. Whereas it is surprising to see that the ld. AO has observed \nas under while making the disallowance; \n“…. if the trading loss would have been related to share transactions, it \nwould have been reflected in the trading account part. As trading loss \nhas been claimed in the profit & loss portion and nature of this loss has \nnot been appraised by the assessee and no reply to the show cause, \neven after being asked specially, has been filed, the trading loss claimed \nby the assessee in P & L account cannot be allowed. In view of these \nfacts, trading loss of Rs. 1,50,529/- is disallowed an added to the income \nof the assessee. \n \nThe bench noted that the finding of the ld. AO is contrary to the \nrecord placed on record. Even the ld. CIT(A) confirmed the view of \nthe AO stating that it was false claim. But since the assessee has \nplaced on record that details of share transactions including Client \nGlobal account (Page 17 - 18 of WS) and the same has not been \n\nITA No. 13/JPR/2025 \n Sh. Kapil Taneja vs. ACIT \n37\ndealt contrary we see no reason to sustain that disallowance so \nmade. Based on this observation ground no. 7 raised by the \nassessee stands allowed. \nIn the result, the appeal filed by the assessee is partly \nallowed. \n Order pronounced in the open Court on 07/03/2025. \n Sd/- Sd/- \n ¼ Mk0 ,l- lhrky{eh ½ \n ¼ jkBkSM+ deys'k t;UrHkkbZ ½ \n (Dr. S. Seethalakshmi) \n (Rathod Kamlesh Jayantbhai) \n U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member \nTk;iqj@Jaipur \n \nfnukad@Dated:- 07/03/2025 \n*Santosh \nvkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: \n1. \nvihykFkhZ@The Appellant- Kapil Taneja, Jaipur. \n2. \nizR;FkhZ@ The Respondent- ACIT, Circle-3, Jaipur. \n3. \nvk;dj vk;qDr@ CIT \n4. \nvk;dj vk;qDr@ CIT(A) \n5. \nfoHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. \n6. \nxkMZ QkbZy@ Guard File { ITA No. 13/JPR/2025} \n \n \n \n \n \n \n \n \n vkns'kkuqlkj@ By order \n \n lgk;d iathdkj@Asst. Registrar \n"