AI Insights
The case involves Shri Kapil Taneja, who appealed against the order of the CIT(A) concerning the assessment year 2016-17. The primary disputes were related to the disallowance of interest expenses, additions under section 68 of the Income Tax Act for unsecured loans, and other minor disallowances. The Assessing Officer (AO) had disallowed certain interest expenses and added amounts as undisclosed income due to insufficient evidence of the genuineness of the loans. The CIT(A) upheld these decisions, leading to the appeal before the Tribunal. The Tribunal's decision partially overturned the CIT(A)'s order, allowing some of the assessee's claims while restoring others for further verification.
Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 35364 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
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 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 13/JPR/2025 fu/kZkj.k o\"kZ@Assessment Years : 2016-17 Shri Kapil Taneja 58, Cosmo Colony, Vaishali Nagar, Jaipur. cuke Vs. The ACIT, Circle-3, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACRPT2364B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Tarun Mittal, C.A. jktLo dh vksj ls@ Revenue by : Mrs. Swapnil Parihar, JCIT-DR lquokbZ dh rkjh[k@ Date of Hearing : 19/02/2025 mn?kks\"k.kk dh rkjh[k@Date of Pronouncement : 07/03/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of present appeal the above named assessee- appellant challenges the finding so recorded in an order passed on 13.12.2024 by National Faceless Appeal Centre [ for short CIT(A) ]. The dispute relates to assessment year 2016-17. The order of ld. CIT(A) arise because the assessee challenged the assessment order dated 25.12.2018 passed under section 143(3) of the Income Tax Act,1961 [ for short “Act” ] by the ACIT, Circle-3, Jaipur [ for short AO]. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 2 2. The assessee has marched this appeal on the following grounds:- “1. On the facts and in the circumstances of the case and in law, ld. CIT(A) has erred in deciding the appeal without affording assessee with adequate opportunity of being heard. Appellant prays that order so passed is against the principle of natural justice and deserves to be quashed. 2. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in passing the order without considering the evidences adduced and solely on the basis of observations made by ld.AO in assessment order, arbitrarily. 3. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in confirming the disallowance of Rs.47,74,320/- made by ld.AO, out of interest expenses claimed by assessee, arbitrarily. 3.1 That, ld.CIT(A) has further erred in confirming the disallowance of interest expenses made by ld.AO, on his own presumptions that part of the loans were utilised for making investment in personal assets and without considering the fact that loans taken by assessee were wholly and exclusively utilised for the purpose of business and interest paid thereon was allowable business expenditure. 4. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in confirming the addition of Rs.82,00,000/- made by ld.AO u/s 68 of the Income Tax Act, arbitrarily. 4.1 That, ld.CIT(A) has further erred in confirming the addition of Rs. 82,00,000/- made by ld.AO by alleging the loans received by assessee from various parties as undisclosed income of the assessee. Appellant prays that all the loans taken by assessee are absolutely genuine and addition so confirmed deserves to be deleted. 5. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in confirming the disallowance of Maintenance expenses of Rs.20,000/- made by ld.AO, arbitrarily. 6. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in confirming disallowance of Interest on TDS of Rs.1,44,519/- made by ld.AO arbitrarily. Appellant prays that interest on late payment of TDS being compensatory in nature and therefore deserves to be allowed. 7. On the facts and in the circumstances of the case and in law, ld.CIT(A) has erred in confirming disallowance of trading loss of Rs.1,50,529/- arbitrarily. 8. The appellant craves leave to add alter amend substitute one or more grounds of appeal as and when necessary.” ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 3 3. The fact as culled out from the record is that the assessee – appellant has efiled his return of income declaring total income of Rs.54,30,550/- on 17.10.2016. After filling of ITR the case of the assessee was selected under CASS for complete scrutiny. Notice u/s 143(2) of the IT Act was issued through ITBA on 03.07.2017. On 06.08.2018 notice u/s 142(1) of the IT Act was issued through ITBA along with the query letter, the assessee submitted reply online through ITBA. As the assessee-appellant has not submitted complete details even though passing of a long time, therefore, ld. AO on 20.12.2018 issued a show cause notice to the assessee requiring to show cause on some issues and furnishing clarification on some other issues. The assessee was asked to furnish a reply on 21.12.2018 but on 21.12.2018 no reply was furnished. On 24.12.2018 and 25.12.2018 various confirmations of unsecured loans and a reply to the show cause was uploaded on ITВА. 3.1 During the year under consideration the assessee has shown income under the head income from Salary, Business and Profession, Capital gain and other sources. As per the submission of the assessee, he is engaged in the business of trading and investment in shares and also earned income from interest, cargo handling charges, clearing and forwarding agent service, ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 4 transportation service etc. Along with the details, the assessee submitted profit & loss account by the heading 'Kapil Taneja' and other P&L account of \"Pinc Freight Movers\". 3.2 On perusal of the audit report ld. AO observed that assessee has taken huge unsecured loans during the year under consideration. As per the details available in col. 31(a) of the audit report and as it is evident that he has taken loan from 259 persons. The closing balance of these unsecured loans as per balance sheet filed was Rs.28,60,02,040/-, he also observed that in the details given in the audit report regarding unsecured loans, PAN No. of lenders were not given. In the query letter issued on 06.08.2018, the assessee was required to furnish confirmation of all unsecured loans, whether squared up or not. As is evident from the order of the assessment that the assessee was given an opportunity in the matter vide notice dated 12.09.2018, 25.10.2018, 01.11.2018, 12.11.2018, 06.12.2018 and on 20.12.2018. Thus ld. AO noted that despite various notices given for furnishing the details, on two occasions the assessee furnished confirmation of unsecured loans from some of the lenders, which are placed on record. After issue of show cause assessee uploaded copy of various confirmations on 24/25.12.2018. On ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 5 perusal of the details uploaded by the assessee he noted that, no confirmation for the unsecured loan taken from TK Films has been filed. After issue of show cause further time was allowed to the assessee. Inspite of providing time beyond the showcause date, confirmation of unsecured loans claimed to have been taken from M/s TK Films has not been filed. As the assessee has failed to discharge his basic onus of furnishing the confirmation from the lender, therefore, the genuineness of the transaction, identity of the person lending the money and creditworthiness of the lender is not proved. It is also pertinent to mention that even in the details given in the audit report regarding unsecured loans, PAN No. and address of lenders is not given. Therefore, the amount of Rs.3,00,000/- shown to have received from M/s T K Films is treated as income of the assessee from undisclosed sources with the meaning of section 68 of the IT Act to be taxed u/s 115BBE of the IT Act. Further ld. AO noted that in case of other five case the addition of Rs. 79,00,000/- was made because the PAN number and address was not mentioned in the confirmation and the audit report filed, therefore, ld. AO treated as non-genuine transaction and was added as income of the assessee u/s. 68 of the Act. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 6 3.3 On perusal of Profit & Loss account submitted by the assessee ld. AO noted that two profit & loss accounts have been submitted. On one of the P&L. account heading is \"Pinc Freight Movers\". This P&L account shows income relating to transportation charges, clearing & forwarding agent service charges and other related income and consequently on debit side transportation charges and related charges have been claimed. Thus, this P&L account seems to be related to assessee's transportation and related work. In the other P&L account bearing the heading of assessee's name, in the trading account portion, sale and intraday income with closing stock has been shown on the credit side and the debit side bears detail of opening stocks, purchases and direct expenses. As no further details were provided it seems that this account is related to the share trading activities of the assessee. The P&L portion of this account is having interest and other income, shown in the credit side and various expenses under the head indirect expenses has been shown in debit side, including interest payment of Rs. 3,60,43,574/-. 3.4 On perusal of P&L account ld. AO observed that maintenance charges of Rs. 20,000/- has been debited in the P&L ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 7 account. As no details have been furnished it is not clear for what purpose these expenses have been claimed. The nature of these expenses cannot be known in absence of any clarification/justification by the assessee. As no justification for the claim of these expenses has been furnished and even the nature of expenses cannot be explored suo moto, the claim of these expenses cannot be allowed. In view of these facts, the claim of maintenance expenses of Rs. 20,000/- was disallowed and added back to the income of the assessee. 3.5 In the P&L account the assessee has shown trading loss of Rs. 1,50,529/-, The assessee was required to furnish separate details of each business, but no such details were filed by the assessee. On perusal of P&L account it is observed that on the trading account part, total purchases and sales and direct expenses of share trading were given by the assessee. Therefore, if the trading loss would have been related to share transactions, it would have been reflected in the trading account part. As trading loss has been claimed in the P&L portion and nature of this loss has not been appraised by the assessee and no reply to the show cause, even after being asked specifically, has been filed, the ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 8 trading loss claimed by the assessee in the P&L. account was not allowed by the ld. AO. 3.6 In the P&L account the assessee has claimed locker rent of Rs. 2,584/- and NSC charges of Rs. 73,553/-, By the heading of these expenses, these seem to be of personal nature. As no details of these expenses have been provided by the assessee even after asking specifically, the claim of these expenses are disallowed taking them to be personal expenses of the assessee. This will result in an addition of Rs. 76,137/- to the income of the assessee. 3.7 On perusal of details appearing in P&L account it is observed that assessee has claimed Rs. 1,44,519/- on account of interest on TDS. In the reply filed on 25.12.2018 the assessee submitted that the nature of the payment was not penal but compensatory as decided in the decision of Kolkatta ITAT in the case of DCTT vs. Narayani Ispat (Pvt.) Ltd. The reply of the assessee has been considered and is not tenable. These expenses are related to payment of interest for late deposition of TDS amount deducted by the assessee, as these expenses are penal in nature, they cannot be allowed as expenditure. In view of these facts, claim of the ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 9 assessee of Rs. 1,44,519/- made on account of interest on TDS was disallowed and added back to the income of the assessee. 3.8 On perusal of the details in the profit & loss account it is noticed that the assessee has claimed house property tax of Rs. 21,725/- as deduction. In the reply filed on 25.12.2018, the assessee submitted that on account of some legal & statutory requirements the amount was paid. In the reply the assessee has not uttered any word on how this expenditure can be treated as business expenditure. In both the Profit & Loss accounts filed by the assessee there is no income arising from the property business. The assessee has shown income from sale of property only under the head capital gain. Moreover, there is no detail of any stock in trade of business of the assessee. In view of these facts, the claim of the assessee for deduction of house property tax was disallowed and added back to the income of the assessee. 3.9 On perusal of P&L account in the name of 'Kapil Taneja' it was observed by the ld. AO that in this P&L account assessee has credited interest income of Rs. 3,31,86,010/- and debited interest payment of Rs. 3,60,43,574/-. In the query letter issued on 06.08.2018 the assessee was required to furnish justification for ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 10 claim of interest payment of Rs. 3,60,43,574/- giving details of use of unsecured loan amount. No such details were furnished by the assessee. On 16.11.2018 the assessee submitted that main purpose and justification of accepting and use of loan for business purposes only where they claimed interest of R.s 3,60,43,574/- in P & L Account for business purposes and for justification of the claim the copy of the ledger of interest paid was placed on record. On 20.12.2018 the assessee was again requested to furnish specific justification for claim of interest expenditure specifying the details where the unsecured loan has been invested. He was also requested to give specific details of each business and the amount invested therein. In response the assessee vide submission dated 25.12.2018 submitted that all the unsecured are of general use of the business of the assessee and interest income and expenditure both duly recorded in the books of accounts and thus related to the business of the assessee. Ld. AO considered the reply filed by the assessee but was not accepted based on the following reasoning given by him:-- 1. As per the copy of balance sheet the assessee was having personal assets amounting to Rs. 6,50,49,551/- and investment of Rs. 2,98,66,450/- in shares of various companies and firms. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 11 2. In the balance sheet loans and advances of Rs. 24,81,18,305/- has been shown. 3. As per the balance sheet total unsecured loans of the assessee were of Rs. 28,60,02,040/- 4. As per balance sheet the assessee was having capital balance of Rs. 4,15,88,484/-. 5. The assessee has not given any details of using the unsecured loans. 6. Total interest payment of Rs. 3,60,43,574/- has been claimed on total unsecured loans of Rs. 28,60,02,040/-. 3.10 Ld. AO thus noted that the assessee was having personal investment of Rs. 6,50,49,551/- and personal capital of Rs. 4,15,88,484/-. Thus, it is sure that some portion of unsecured loans were used by the assessee in acquisition of personal assets. Moreover, the assessee has made investment of Rs. 2,98,66,450/- in shares of various companies and investment in firms from where assessee has not earned any income. The assessee was specifically required to furnish the details of business-wise investment of unsecured loans but no such details were filed by the assessee in spite of providing ample opportunity. However, in absence of any specific details or justification given by the assessee, the amount on which interest is to be allowed/disallowed cannot be specifically calculated. As mentioned above, the amount ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 12 of unsecured loans of assessee are of Rs. 28,60,02,040/- and advances are of Rs. 24,81,18,305/- only. As per assessee himself the total cost of taking unsecured loans of Rs. 28,60,02,040/- is Rs. 3,60,43,574/-. As the total unsecured loans were not used for advancing the money therefore, interest in proportion to the money advanced was only allowed and the remaining amount was disallowed. Accordingly, an amount of Rs.3,12,69,254/- of interest expenditure is allowed and the remaining amount of Rs.47,74,320/- was disallowed and added back to the income of the assessee. 4. Aggrieved by the above order of the Assessing Officer the assessee preferred an appeal before the ld. CIT(A). After perusing the submissions of the assessee, the ld. CIT(A) has dismissed the appeal of the assessee. The relevant finding of the ld. CIT(A) is as under:- “4. Decision: I have carefully considered the relevant and material facts on record, in respect of this ground of appeal, as brought out in the assessment order. On perusal of the audit report it was noticed by the Assessing Officer that the assessee took huge unsecured loans. The assessee during the assessment proceedings furnished confirmation of unsecured loans from some of the lenders but on perusal on the details provided by the assessee it was found that no confirmation of unsecured loan from T.K Films was filed by the assessee. It was also noticed that PAN No of the lenders was not provided in the confirmation filed by the assessee. Fruther, on perusal of the P & L account the Assessing Officer found a ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 13 total of five discrepancies namely false claim of the maintenance expences of Rs. 20,000/-, false trading loss of Rs. 1,50,529/-, false claim of locker rent and NSC charges, false claim of Interest on TDS of Rs. 1,44,519/- as expenditure, false claim of house property tax of Rs. 21,725/- as deduction and false claim of interest payment of Rs. 3,60,43,574/-. 4.1 The A.O has briefly pointed the discrepancies found in the audit report and P&L account of the assessee, Hence the onus lies on the assessee to prove the genuineness of the transactions related to the alleged bogus unsecured loans and discrepancies in P & L account, during the appellate proceedings the assessee failed to provide any evidence in his written submission that explains the genuineness of the transactions related to unsecured loans and no evidences were provided by the assessee weakens the findings of the Assessing Officer regarding the false claims of the assesse of the maintenance expences of Rs. 20,000/-, false trading loss of Rs. 1,50,529/-, false claim of locker rent and NSC charges, false claim of Interest on TDS of Rs. 1,44,519/- as expenditure, false claim of house property tax of Rs. 21,725/- as deduction and false claim of interest payment of Rs. 3,60,43,574/-. The onus lies on the appellant to support any claim by bringing in cogent documentary evidence 4.2 In absence of any substantial documentary evidence in support of its grounds of appeal, I have no basis to take a contrary view in the appellate proceedings as I have no reason to interfere with the assessment order As such, I do not find any infirmity in the order of Assessing Officer. Therefore, Addition of Rs. 1,88,17,780/- is hereby sustained on merits. Accordingly, Grounds No.1 to 4 are dismissed. Ground No.5 is general in nature and does not call for specific adjudication. 7. In the result, the appeal is Dismissed.” 5. Feeling dissatisfied with the above finding of the ld. CIT(A) the assessee filed the present appeal before this tribunal on the grounds as reiterated herein above. To support the grounds so raised the ld. AR appearing on behalf of the assessee has placed ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 14 reliance on the written submission which is extracted herein below:- “Brief facts of the case are that assessee is an individual and is engaged in the business of trading and investment in shares and also earned income from interest, cargo handling charges, clearing and forwarding agent service, transportation service etc. Return of Income for the year under consideration was filed by assessee on 17.10.2016 declaring total income at Rs. 54,30,550/- . The case of assessee was selected for complete scrutiny under CASS. Various details and information as sought by ld.AO were furnished and assessment was concluded after making following additions: S.No Addition Made on account of Amount (Rs.) 1. Interest Expenses Rs. 47,74,320/- 2. Addition u/s 68 of unsecured loans Rs. 82,00,000/- 3. Interest on TDS Rs. 1,44,519/- 4. Trading loss Rs. 1,50,529/- 5. Locker Rent and NSC charges Rs. 76,127/- 6. House Property Tax Rs. 21,725/- 7. Maintenance expenses Rs. 20,000/- Aggrieved of the additions made by ld.AO, (except enumerated at serial no. 5 and 6), assessee preferred appeal before ld.CIT(A), which stood dismissed vide order dated 13.12.2024. Present appeal has been filed by assessee against the order so passed by ld. CIT(A). With this background, ground-wise submission is made as under: Grounds of Appeal No. 1 & 2: In these grounds of appeal, assessee has challenged the action of ld. CIT(A) in deciding the appeal solely on the basis of observations drawn by ld.AO during the assessment proceedings and without appreciating submission made and evidences adduced by assessee during appellate proceedings. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 15 Appellant prays that ld.CIT(A) ought to have decided appeal after taking into consideration submission made and evidences adduced by assessee and order passed without considering the same is not in accordance with law. Grounds of Appeal No. 3 & 3.1: In these grounds of appeal, assessee has challenged the action of ld.CIT(A) in confirming disallowance of interest to the tune of Rs.47,74,320/- out of interest expenses claimed by assessee. Facts pertaining to the grounds of appeal are that during the year under consideration, assessee has debited interest expenditure of Rs.3,60,43,574/- to profit & loss account. On the other hand, assessee had credited interest income worth Rs.3,31,86,010/- to profit & loss account. During the course of assessment proceedings, ld.AO sought clarification as to utilization of funds, in respect of which interest was paid by assessee. Ld.AO, on the observation that assessee had given advances worth Rs.24,81,18,305/- as against unsecured loans taken of Rs.28,60,02,040/-, computed proportionate interest in respect of unsecured loans, which was utilized for making advances at Rs.3,12,69,254/- and thus disallowed balance interest cost of Rs.47,74,320/-. In this regard, at the outset, it is submitted that it was explained by assessee throughout the assessment proceedings that borrowed funds were utilized for common business purposes and for making advances, however submission of assessee was not accepted by ld.AO. At this juncture, kind attention of your honours is invited to profit & loss account of assessee (page 10 - 11 of WS), from perusal of which, it is apparent that assessee has traded in shares as well as made certain advances, on which interest income of Rs.3,31,86,010/- has been received and has also earned other income of Rs.1,08,97,120/-. However, ld.AO has presumed that funds borrowed were solely utilized either for making advances or for making personal investments, which interpretation is absolutely arbitrary. Ld.AO has simply compared figure of unsecured loans taken of Rs. 28,60,02,040/- with advances made of Rs. 24,81,18,305/- and has inferred that remaining funds were not utilized for business purpose. Your honours would appreciate that in the case of running business, funds borrowed form part of common pool and thus are parked in a number of assets, which may be in the shape of current assts, i.e. stock/debtors/ TDS/ cash/bank balance etc. and in fixed assets as well and which also keep changing due to realization/sale of assets and it is thus not possible to show direct nexus between funds borrowed and utilized. Your honours would appreciate that gross profit of assessee is Rs 1,93,069.82/- whereas assessee has eventually earned net profit to the tune of Rs 15,71,139.83/- and it is not the case that assessee has debited interest to reduce his income. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 16 Ld.AO has further observed that assessee has personal assets worth Rs.6,50,49,551/- and investment of Rs.2,98,66,450/- in shares of various companies. In this regard, kind attention of your honours is invited to Balance sheet, from perusal of which it is evident that assets worth Rs. 6,50,49,551/- includes property situated at “B 62, Hanuman Nagar, Vaishali Nagar” shown at Rs. 2,52,34,120/-, which was acquired by assessee by obtaining loan worth Rs. 1.4t Crores from Financial Institution appearing in Financial Statement of assessee. Also, Fixed assets include “Office premises at Time Square” shown at Rs. 1,04,91,000/- as well as “Showroom at Barmer” shown at Rs.70,37,330/- and assessee has shown gross rental income worth Rs. 12,61,668/- and Rs.18,00,000/- from these rented properties, which has been subject to tax. Moreover, ld. AO himself has stated that assessee was having capital worth Rs. 4,15,88,484/-, thus observation of ld.AO that borrowed funds were utilized for acquisition of Personal Assets is not correct so far as there is no diversion of funds and assessee has duly paid taxes on income earned on such assets. It is further pertinent to note here that the mechanism followed by ld.AO to disallow part of the interest shows that ld.AO has simply compared loans taken and loans given and has completely brushed aside other current/ fixed assets generated in the course of business and it appears that disallowance has been made as per section 57(iii), though provisions of section 57(iii) have not been invoked specifically. Even w.r.t. section 57(iii), Hon’ble Supreme Court in the case of CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 held that: \"the plain natural construction of the language of section 57(iii) of the Act irresistibly leads to the conclusion that to bring a case within that section it is not necessary that any income should in fact have been earned as a result of the expenditure. What section 57(iii) of the Act requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. The section does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction: it does not say that the expenditure shall be deductible only if any income is made or earned.\" The Supreme Court went on to hold that \"it is true that the language of section 37(1) of the Act is a little wider than that of section 57(iii) of the Act but we do not see how that can make any difference in the true interpretation of section 57(iii) of the Act. The language of section 57(iii) of the Act is clear and unambiguous and it has to be construed according to its plain natural meaning and merely because a slightly wider phraseology is employed in another section which may take in something more, it ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 17 does not mean that section 57(iii) of the Act should be given a narrow and constricted meaning not warranted by the language of the section and, in fact, contrary to such language.\" In view of above, it is submitted that interest expenditure incurred by assessee during the course of business deserves to be allowed as claimed. Grounds of Appeal No. 4 & 4.1: In these grounds of appeal, assessee has challenged the action of ld.AO in making addition of Rs. 82,00,000/- u/s 68 of the Income Tax Act. Facts pertaining to the grounds of appeal are that during the year under consideration, assessee had taken certain unsecured loans from various parties. During assessment proceedings, ld.AO directed to furnish details including confirmations etc. of such loans, which were duly furnished by assessee except in one case, i.e. T K Films from whom assessee had taken unsecured loan worth Rs.3,00,000/-. Accordingly, ld.AO issued show cause notice dated 20.12.2018 (page 12-13 of WS), whereby it was proposed that:”As substantial time has passed still confirmation of all unsecured loans have not been filed. You are therefore, showcaused as to why the amount of unsecured loans shown by you, for which no confirmation has been filed, may not be treated as your undisclosed income for the year under consideration.” Apart from this, no further query was raised w.r.t. unsecured loans, whose confirmations were already filed by assessee. It was thus presumed by assessee that confirmations already filed were found in order. However, while passing assessment order, ld.AO w.r.t. unsecured loans worth Rs.79,00,000/-(as tabulated at page 3 of Assessment order) observed that “No PAN in confirmation and no PAN in audit report”. Ld.AO further observed that since address of lenders were also not mentioned in confirmations, their identity remained unproved and thus doubted creditworthiness and genuineness of such parties. In this regard, it is submitted that first of all, there was no whisper in the show cause notice regarding intention of ld.AO of making addition in respect of unsecured loans worth Rs.79,00,000/-. Your honours would appreciate that issuance of show cause notice is not a mere technical formality and is rather very important part of assessment proceedings as the same is issued as a compliance of principle of natural justice, according to which an assessee must be afforded with adequate opportunity of being heard and to give explanation, prior to taking any adverse view in his case. In the present case, ld.AO, in the show cause notice has nowhere specified any discrepancy in confirmations already filed by assessee and has not expressed his intention of making addition w.r.t. unsecured loans, in respect of which assessee had filed ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 18 confirmations and has merely proposed addition in respect of loan for which no confirmation was filed by assessee, i.e. M/s T.K.Films, from whom assessee had taken loan worth Rs.3,00,000/-. Whereas to utter surprise of assessee, eventually ld.AO has made addition to the tune of Rs.82,00,000/- by alleging unsecured loans taken by assessee as unexplained cash credit u/s 68 of the Income Tax Act. Your hobours would appreciate that such action of ld.AO is contrary to the principle of natural justice. So far as merits of the issue are concerned, as stated above, ld.AO has basically made addition by alleging that no PAN /address was mentioned in confirmations furnished by assessee. In this regard, it is submitted that in aggregate interest to the tune of Rs. 3,60,43,754/- was paid by assessee in respect of unsecured loans, out of which interest of Rs. 3,59,62,334/- was subject to TDS and during the course of assessment proceedings, vide notice dated 30.11.2018 (Page 14 of WS), assessee was directed to furnish details of expenses on which TDSs deducted, which was duly furnished by assessee vide letter dated 03.12.2018 (Page 15 of WS), wherein complete details of tax deducted and deposited (Page 16 of WS) was furnished. In fact, in Tax audit report also (Page 19 – 34 of WS), at clause 34(a) and 34(b), complete details of TDS alongwith details of TDS Returns filed by assessee were duly reported, however ld.AO has not even considered the same and has drawn adverse inference from list of loans mentioned, and confirmations, wherein PANs were omitted to be mentioned inadvertently. Moreover, as stated above, in final show cause notice dated 20.12.2018, no doubt was raised w.r.t. unsecured loans worth Rs.79,00,000/- for which assessee had already furnished confirmations (Page 35 - 39 of WS), which also implied that loans worth Rs.79,00,000/- were treated as explained. In view of above, it is submitted that addition made in respect of loans to the tune of Rs.79,00,000/- are fully explained and deserve to be deleted outrightly. Similarly, w.r.t. addition of Rs.3,00,000/- made in respect of loan taken from M/s T.K. Films, it is submitted that loan was taken through banking channels and interest paid to this party was also subject to TDS, which was duly mentioned in TDS Return filed by assessee and therefore identity, creditworthiness and genuineness of this loan was also proved beyond doubt and it is submitted that loan so taken is fully explained and addition made on this account also deserve to be deleted. Ground of Appeal No. 5: In this ground of appeal, assessee has challenged the action of ld.AO in making disallowance of Rs.20,000/- being repairs and maintenance expenses debited by assessee to P & L account. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 19 In this regard, it is submitted that during the course of assessment proceedings, various details/information was sought, however no query whatsoever was made w.r.t. repairs and maintenance expenses. Even in show cause notice dated 20.12.2018 issued prior to completion of assessment, no disallowance was proposed in this regard and disallowance was made directly in assessment order. Your honours would appreciate that such action of ld.AO in making addition without affording assessee with adequate opportunity tantamounts to violation of principle of natural justice. It is therefore requested that disallowance so made is not in accordance with law and deserves to be deleted. Ground of Appeal No.6: In this ground of appeal, assessee has challenged the action of ld.AO in making addition of Rs.1,44,519/- on account of Interest on TDS debited to Profit & loss account. Brief facts of the case are that during the year under consideration, assessee has debited interest on TDS amounting to Rs.1,44,519/- to P/L a/c. Ld. AO issued show cause notice seeking explanation as to why the same should not be disallowed. In response to such notice, it was submitted the Interest on TDS being compensatory in nature and not penal in nature deserves to be allowed. However, submission of assessee was brushed aside and interest on TDS claimed by assessee was disallowed. In this regard, kind attention of your honours is invited to section 40(a)(ii), which reads as under: Amounts not deductible 40. Notwithstanding anything to the contrary in sections 30 to [38], the following amounts shall not be deducted in computing the income chargeable under the head \"Profits and gains of business or profession\",— (a) in the case of any assessee— (ii) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. [Explanation 1.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 20 included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian income-tax payable under section 91.] [Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes any sum eligible for relief of tax under section 90A;] A bare perusal of above makes it amply clear that any rate or tax on profit or gains of business or profession, shall not be allowable under section 40(a)(ii) of the Income Tax Act. Further, explanations have been inserted to clarify that any taxes paid by assessee abroad in respect of income taxable out of India also shall also be construed as “tax or levy” in accordance with this section. Thus, intention of Law in this regard is quite clear not to allow “tax on income of assessee” as deductible expenditure as the same is appropriation of income towards a statutory liability and not an expense. Further, tax on income, cannot be in any way construed as expenditure incurred wholly and exclusively for the purpose of business, which is pre condition for allowability of any expenditure. In the instant case, disallowance is made of “Interest on TDS”, which is paid in respect of late payment of TDS. Such TDS is not made from income of deductor, rather it is the income tax liability of the deductee being discharged by deductor because of the vicarious liability cast upon him by the statute. It is further submitted that such liability of deductor to deduct tax at source is not computed as a percentage of or on the basis of profits or gains of his business or profession, rather it is at the rates prescribed under the Act, from the payment due/ made by him of a particular expense. In fact, TDS itself is nothing more than a portion of expense, which is retained by payer and deposited in Government account in order to fulfil liability cast upon him as payer by statue. Thus, once a particular business expense to which TDS provisions are attracted and duly fulfilled by assessee, TDS is also allowed as deduction being part of such expense. Your honour would appreciate that once principal amount i.e. TDS is allowable, then interest thereon should also be allowable. Accordingly, the same cannot be treated to be covered within the ambit of section 40(a)(ii). It is a settled position of law that interest on purchase tax/ sales tax is deductible in view of the fact that those taxes are also deductible. Following the same analogy, interest on TDS should also be allowable as TDS itself is deductible being portion of respective expenditure. In this regard, reliance is placed on: ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 21 [2023] 151 taxmann.com 322 (Delhi - Trib.) Delhi Cargo Service Center v. ACIT Section 37(1) of the Income-tax Act, 1961- Business expenditure - Allowability of (Interest)-Assessment year 2015-16- Assessee-company was engaged in cargo handling services -For assessment year 2015-16, it e-filed its return - Assessing Officer made disallowance on account of interest payment on late deposit of TDS on ground that same was penal in nature- Whether since interest paid on late payment of TDS being compensatory in nature was an allowable deduction under section 37(1) and therefore, impugned disallowance was to be deleted - Held, yes [Paras 8 and 9] [In favour of assessee] D.V. Properties (P.) Ltd. vs. Principal Commissioner of Income-tax [2023] 155 taxmann.com 119 (Surat-Trib.)/[2023] 203 ITD 283 (Surat-Trib.)[29-08- 2023] IV. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Late payment of TDS) - Whether amount of TDS is not income tax for assessee but it is amount of income tax deducted and paid by assessee on behalf of third party - Held, yes - Whether thus, said expenditure incurred by assessee is wholly and exclusively for purpose of business and delay in making payment of TDS late, is not like a penalty, and it does not amount to payment for breach of law or illegal act or prohibited act, thus interest on late payment of TDS is allowable - Held, yes [Para 18] [In favour of assessee] Ground of Appeal No.7: In this ground of appeal, assessee has challenged the action of ld.AO in making disallowance of Rs.1,50,529/- on account of Trading loss declared by assessee. In this regard, as stated above, assessee is engaged in the business of trading and investment in shares, during the course of which assessee suffered above loss. During the course of assessment proceedings, ld.AO vide notice dated 30.11.2018 sought “Scrip wise details of profit/ loss on F & O transactions”, in response to which assessee furnished complete details of share transactions including Client Global account (Page 17 - 18 of WS). Apart from this, no details whatsoever were sought w.r.t. share transactions. In fact, at no stage of assessment proceedings, any specific details were sought regarding trading loss of Rs.1,50,529/- as shown in profit & loss account Also, prior to completion of assessment proceedings, show cause notice dated 20.12.2018 was issued by ld.AO, wherein no ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 22 addition/disallowance was proposed in respect of trading loss of Rs.1,50,529/- shown by assessee in profit & loss account. It is thus submitted that addition of Rs.1,50,529/- has been made by ld.AO without affording adequate opportunity and is thus against the principle of natural justice and deserve to be deleted.” 6. The ld. AR of the assessee in addition to the written submission so filed vehemently argued that vide show cause notice it was proposed to make the addition as no confirmation was filed. The assessee filed the confirmation but the same does not bear the PAN number and therefore the same was added and therefore, the addition were made beyond the scope of the show cause notice and therefore addition of unsecured loans so made is required to be deleted as the assessee provided all the details but has not been appreciated even as regards the observation for TDS not deducted on the Interest the same is recorded in the Tax audit report and the assessee filed a detailed break up of the same and was placed on record vide page 16 of the paper book filed. As regard the disallowance of interest ld. AO has not discussed that why the same is disallowable and under which provision of the Act, i.e. 36(1)(iii), 37(1) or 57(iii). Not only that on the aspect of the claim of interest specific details were called for vide point no. 6 of notice dated 20.12.2018 wherein the assessee submitted profit and loss account (page 10 of paper book) wherein the interest ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 23 income of Rs. 3,31,80,010/- was offered with other income of Rs. 1,08,97,120/- and against that income claim of Rs. 3,60,43,574/- remains justified when the same is appearing the profit and loss account which are audited. As regards the addition of Rs. 1,50,529/- there is no whisper in the show cause notice (SCN) and therefore, the same remain beyond the scope of SCN not addition can be sustained. As regards interest on TDS ld. AR relied upon the decision cited in the written submission and prayed to allow the same being compensatory in nature. 7. Per contra, ld. DR supported the order of the ld. CIT(A) and submitted that the interest has rightly been disallowed after giving detailed reasoning and as regards the addition made for unsecured loans same being made based on the reasons given in the orders of the lower authorities. As regards the interest on TDS same being related to tax payment same is not allowable. 8. We have heard both the parties and perused the materials available on record. The bench noted that ground no 1 & 2 being general in nature and therefore the same is not required to be adjudicated. Ground no. 5 raised by the assessee was not pressed ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 24 and therefore, the same is treated as dismissed. Ground no. 8 is also general and does not require our adjudication. 9. Vide ground no. 3 and 3.1 the assessee challenges the finding of the lower authority for disallowance of claim of interest expenses for an amount of Rs. 47,74,320/-. The brief facts related to the issue on hand are that the assessee in the P&L account credited interest income of Rs. 3,31,86,010/- and debited interest payment of Rs. 3,60,43,574/-. In the query letter issued on 06.08.2018 the assessee was required to furnish justification for claim of interest payment of Rs. 3,60,43,574/- giving details of use of unsecured loan amount. On 16.11.2018 the assessee submitted that main purpose and justification of accepting and use of loan for business purposes only where they claimed interest of Rs. 3,60,43,574/- in P & L Account for business purposes and for justification of the claim by filling the copy of the ledger of interest paid was placed on record. On 20.12.2018 the assessee was again requested to furnish specific justification for claim of interest expenditure specifying the details where the unsecured loan has been invested. He was also requested to give specific details of each business and the amount invested therein. In response the assessee vide submission dated 25.12.2018 submitted that all the ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 25 unsecured are of general use of the business of the assessee and interest income and expenditure both duly recorded in the books of accounts which are audited and placed on record and thereby the claim of interest is relates to their business only. Ld. AO considered the reply filed by the assessee but was not accepted because the assessee was having personal investment of Rs. 6,50,49,551/- and personal capital of Rs. 4,15,88,484/-. Thus, it is sure that some portions of unsecured loans were used by the assessee in acquisition of personal assets. Moreover, the assessee has made an investment of Rs. 2,98,66,450/- in shares of various companies and investment in firms from where assessee has not earned any income. Ld. AO noted that in absence of any specific details or justification given by the assessee, the amount on which interest is to be allowed/disallowed cannot be specifically calculated. As the total unsecured loans were not used for advancing the money therefore, interest in proportion to the money advanced was only allowed and the remaining amount was disallowed. Accordingly, an amount of Rs.3,12,69,254/- of interest expenditure was allowed and the remaining amount of Rs.47,74,320/- was disallowed and added back to the income of the assessee. When the matter was taken ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 26 up before the ld. CIT(A) he has not specific dealt with the issue and simply given the following finding; In absence of any substantial documentary evidence in support of its grounds of appeal, I have no basis to take a contrary view in the appellate proceedings as I have no reason to interfere with the assessment order As such, I do not find any infirmity in the order of Assessing Officer. Therefore, Addition of Rs. 1,88,17,780/- is hereby sustained on merits. Accordingly, Grounds No.1 to 4 are dismissed. In support of the ground taken before this tribunal the ld. AR of the assessee argued that the challenged the action of ld.CIT(A) in confirming disallowance of interest to the tune of Rs.47,74,320/- out of interest expenses claimed by assessee. He stated that it was explained by assessee throughout the assessment proceedings that borrowed funds were utilized for common business purposes and for making advances, however submission of assessee was not accepted by ld.AO. He drawn our attention to profit & loss account of assessee (page 10 - 11 of WS), from perusal of which, it is apparent that assessee has traded in shares as well as made certain advances, on which interest income of Rs.3,31,86,010/- has been received and has also earned other income of Rs.1,08,97,120/- so that income was more then the claim of interest expenses. Thus, the presumption of lower authority that funds borrowed were solely utilized either for making advances or for making personal investments, which interpretation ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 27 / observation arrived without considering the over submission so made by the assessee. While making the disallowance ld. AO simply compared figure of unsecured loans taken of Rs. 28,60,02,040/- with advances made of Rs. 24,81,18,305/- and has inferred that remaining funds were not utilized for business purposes. Ld. AR also submitted that funds borrowed were used in a number of assets, which may be in the shape of current assts, i.e. stock/debtors/ TDS/ cash/bank balance etc. and in fixed assets as well and which also keeps changing due to realization/sale of assets and it is thus not possible to show direct nexus between funds borrowed and utilized. The lower authority thus not appreciated that if the overall profit and loss account persuaded then there is net profit to the tune of Rs 15,71,139.83/- and it is not the case that assessee has debited interest to reduce his income. Ld.AO has further observed that assessee has personal assets worth Rs.6,50,49,551/- and investment of Rs.2,98,66,450/- in shares of various companies. In this regard, kind attention of your honours is invited to Balance sheet, from perusal of which it is evident that assets worth Rs. 6,50,49,551/- includes property situated at “B 62, Hanuman Nagar, Vaishali Nagar” shown at Rs. 2,52,34,120/-, which was acquired by assessee by obtaining loan ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 28 worth Rs. 1.4 Crores from Financial Institution appearing in Financial Statement of assessee. Also, Fixed assets include “Office premises at Time Square” shown at Rs. 1,04,91,000/- as well as “Showroom at Barmer” shown at Rs.70,37,330/- and assessee has shown gross rental income worth Rs. 12,61,668/- and Rs.18,00,000/- from these rented properties, which has been subject to tax. Moreover, ld. AO himself has stated that assessee was having capital worth Rs. 4,15,88,484/-, thus observation of ld.AO that borrowed funds were utilized for acquisition of Personal Assets is not correct so far as there is no diversion of funds proved by the ld. AO and ld. CIT(A) has not dealt this issue with the merits of the case. As it is also evident that the ld. AO has allowed the part of the interest and part of the same was disallowed while doing so he has not considered it under provision of the Act i.e. 36(1)(iii), 37(1) or 57(iii) of the Act. As submitted by the assessee that ld.AO has simply compared loans taken and loans given and has completely ignored other current/ fixed assets generated in the course of business and it appears that disallowance has been made as per section 57(iii), though provisions of section 57(iii) have not been invoked specifically. The assessee in support of the claim relied upon the decision of the apex court in the case ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 29 of CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 wherein the Court held that: \"the plain natural construction of the language of section 57(iii) of the Act irresistibly leads to the conclusion that to bring a case within that section it is not necessary that any income should in fact have been earned as a result of the expenditure. What section 57(iii) of the Act requires is that the expenditure must be laid out or expended wholly and exclusively for the purpose of making or earning income. The section does not require that this purpose must be fulfilled in order to qualify the expenditure for deduction: it does not say that the expenditure shall be deductible only if any income is made or earned.\" The Supreme Court went on to hold that \"it is true that the language of section 37(1) of the Act is a little wider than that of section 57(iii) of the Act but we do not see how that can make any difference in the true interpretation of section 57(iii) of the Act. The language of section 57(iii) of the Act is clear and unambiguous and it has to be construed according to its plain natural meaning and merely because a slightly wider phraseology is employed in another section which may take in something more, it does not mean that section 57(iii) of the Act should be given a narrow and constricted meaning not warranted by the language of the section and, in fact, contrary to such language.\" Considering the facts and arguments as discussed and following the binding precedent cited, we allow the ground no. 3 & 3.1 raised by the assessee and direct the ld. AO to delete the addition of Rs. 47,74,320/-. 10. Vide ground no. 4 and 4.1 the assessee challenges the addition of Rs. 82,00,000/- made considering the loans taken from the various parties as undisclosed income u/s. 68 of the Act. The brief fact on the issue are that the assessee ld. AO on perusal of the audit report observed that assessee has taken huge unsecured loans during the year under consideration. As per the details ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 30 available in col. 31(a) of the audit report and as it is evident that he has taken loan from 259 persons. The closing balance of these unsecured loans as per balance sheet filed was Rs.28,60,02,040/-, he also observed that in the details given in the audit report regarding unsecured loans, PAN No. of lenders were not given. In the query letter issued on 06.08.2018, the assessee was required to furnish confirmation of all unsecured loans, whether squared up or not. Ld. AO noted that despite various notices given for furnishing the details, on two occasions the assessee furnished confirmation of unsecured loans from some of the lenders, which were placed on record. After issue of show cause assessee uploaded copy of various confirmations on 24/25.12.2018. On perusal of the details uploaded by the assessee ld. AO noted that, no confirmation for the unsecured loan taken from TK Films has been filed. After issue of show cause further time was allowed to the assessee. Inspite of providing time beyond the show cause date, confirmation of unsecured loans claimed to have been taken from M/s TK Films has not been filed. As the assessee has failed to discharge his basic onus of furnishing the confirmation from the lender, therefore, the genuineness of the transaction, identity of the person lending the ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 31 money and creditworthiness of the lender was not proved. It is also pertinent to mention that even in the details given in the audit report regarding unsecured loans, PAN No. and address of lenders is not given. Therefore, the amount of Rs.3,00,000/- shown to have received from M/s T K Films was treated as income of the assessee from undisclosed sources with the meaning of section 68 of the IT Act. Ld. AR of the assessee submitted that as is evident that there were 259 parties and only in case it was left attention to file the confirmation and other related details and therefore, the assessee be given on chance to represent the facts related to this depositor before the ld. AO in the interest of justice. We consider this fact that out of 259 depositors only in one case the details were not placed on record and therefore, we consider this prayer of the assessee and thereby we restore the matter of making addition of Rs. 3 lac in the name of T K Films thereby establish the genuineness of this loan taken by the assessee, while doing so we note that this loan taken from M/s T.K. Films, was taken through banking channels and interest paid to this party was also subject to TDS, which was duly mentioned in TDS Return filed by assessee and therefore identity, creditworthiness and genuineness of this loan cannot be doubted but the assessee has not filed any ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 32 confirmation therefore, assessee is directed to justify the claim by filling necessary evidence to support the claim of unsecured loan. So far as the other part of the addition in the case of other five depositor addition for an amount of Rs. 79,00,000/- was made because the PAN number and address was not mentioned in the confirmation and the audit report filed, therefore, ld. AO treated as non-genuine transaction and was added as income of the assessee u/s. 68 of the Act. When the matter was carried before the ld. CIT(A) he has confirmed the addition by not dealing with the contention of the assessee has simply confirmed the view of the ld. AO. The relevant observation of the ld. CIT(A) is reproduced for the sake of brevity ; In absence of any substantial documentary evidence in support of its grounds of appeal, I have no basis to take a contrary view in the appellate proceedings as I have no reason to interfere with the assessment order As such, I do not find any infirmity in the order of Assessing Officer. Therefore, Addition of Rs. 1,88,17,780/- is hereby sustained on merits. Accordingly, Grounds No.1 to 4 are dismissed. In support of the ground so taken before us the ld. AR of the assessee submitted that ld.AO made addition by alleging that no PAN /address was mentioned in confirmations furnished by assessee. In this regard, it was submitted that in aggregate interest to the tune of Rs. 3,60,43,754/- was paid by assessee in respect of ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 33 unsecured loans, out of which interest of Rs. 3,59,62,334/- was subject to TDS and during the course of assessment proceedings, vide notice dated 30.11.2018 (Page 14 of WS), assessee was directed to furnish details of expenses on which TDSs deducted, which was duly furnished by assessee vide letter dated 03.12.2018 (Page 15 of WS), wherein complete details of tax deducted and deposited (Page 16 of WS) was furnished. In fact, in Tax audit report also (Page 19 – 34 of WS), at clause 34(a) and 34(b), complete details of TDS along with details of TDS Returns filed by assessee were duly reported, however ld.AO has not even considered the same and has drawn adverse inference from list of loans mentioned, and confirmations, wherein PANs were omitted to be mentioned inadvertently. Moreover, as stated above, in final show cause notice dated 20.12.2018, no doubt was raised w.r.t. unsecured loans worth Rs.79,00,000/- for which assessee had already furnished confirmations (Page 35 - 39 of WS), which also implied that loans worth Rs.79,00,000/- were treated as explained. The bench noted that the assessee filed the copy of confirmation in the paper book wherein the details of the TDS deducted has already been recorded this shows that since the assessee has submitted 258 confirmation out of 259 the mistake is inadvertent ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 34 and therefore, addition made in respect of loans to the tune of Rs.79,00,000/- stands fully explained and directed to be deleted as the same are subjected to TDS which were supported by PAN. Based on this information ground no. 4 and 4.1 stands partly allowed. 11. Vide ground no. 6 the assessee challenges the addition for interest on TDS of Rs. 1,44,519/- claimed as compensatory in nature we note that the assessee in support of the claim stated that the interest on TDS is not paid on the tax liability of the assessee but was for the obligation of other party and therefore, the same is compensatory in nature on this aspect of the matter. The issue is decided in favor of the assessee of assessee by the Karnataka High Court judgment in the case of COMMISSIONER OF INCOME TAX & ANR. vs. ORIENTAL INSURANCE CO. LTD. [315 ITR 102], wherein Honourabe High court held that interest for late payment of TDS is not in penal nature by observing as follows: “7. In the Mittal Steel case (supra), the proviso to s. 201 was under consideration. The said proviso empowers levy of penalty if the TDS deduction is not effected for any valid reason. However, s.201(1A) is a distinct provision to levy interest for delayed remittance. It is in the practice of Revenue that for belated payment of tax for any reasonable cause, the assessee is liable to pay interest @ 12 per cent per annum. Similarly, for refunds, Revenue pays interest to the assessee. ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 35 Therefore, the levy of interest under s. 201(1A) cannot at any rate be construed as a penalty………….” The Judgment of Karnataka High Court decision in the case of ORIENTAL INSURANCE CO. LTD. (supra) amply covers the current issue i.e, claim of interest expense on late payment of TDS as business expenditure, which is compensatory in nature, and respectfully following that finding we hold that interest on late payment of TDS is compensatory in nature as there is no contrary material on record brought by the revenue. In the result ground no. 6 raised by the assessee is allowed. 12. Ground no. 7 raised by the assessee challenges the action of the lower authority in holding that Rs. 1,50,529 being the loss on trading activity was not allowable. In this regard the bench noted from the submission placed on record stating that assessee is engaged in the business of trading and investment in shares, during the course of which assessee suffered the said loss. For this loss while assessment proceedings, ld.AO vide notice dated 30.11.2018 sought “Scrip wise details of profit/ loss on F & O transactions”,. In response to which assessee furnished complete details of share transactions including Client Global account (Page 17 - 18 of WS). Except that information no other information ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 36 whatsoever were sought for the said share transactions. In fact, at no stage of assessment proceedings, any specific details were sought regarding trading loss of Rs.1,50,529/- as shown in profit & loss account. Even while completing the assessment ld. AO did not deem, it fell to raise the issue in the show cause notice issued for the other addition so made vide notice dated 20.12.2018. We have seen the SCN dated 20.12.2018 therein no such reference was made. Whereas it is surprising to see that the ld. AO has observed as under while making the disallowance; “…. if the trading loss would have been related to share transactions, it would have been reflected in the trading account part. As trading loss has been claimed in the profit & loss portion and nature of this loss has not been appraised by the assessee and no reply to the show cause, even after being asked specially, has been filed, the trading loss claimed by the assessee in P & L account cannot be allowed. In view of these facts, trading loss of Rs. 1,50,529/- is disallowed an added to the income of the assessee. The bench noted that the finding of the ld. AO is contrary to the record placed on record. Even the ld. CIT(A) confirmed the view of the AO stating that it was false claim. But since the assessee has placed on record that details of share transactions including Client Global account (Page 17 - 18 of WS) and the same has not been ITA No. 13/JPR/2025 Sh. Kapil Taneja vs. ACIT 37 dealt contrary we see no reason to sustain that disallowance so made. Based on this observation ground no. 7 raised by the assessee stands allowed. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 07/03/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBkSM+ deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judcial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/03/2025 *Santosh vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Kapil Taneja, Jaipur. 2. izR;FkhZ@ The Respondent- ACIT, Circle-3, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File { ITA No. 13/JPR/2025} vkns'kkuqlkj@ By order lgk;d iathdkj@Asst. Registrar "
