MEHUL PAREKH ,BANGALORE V. INCOME TAX OFFICER, WARD-2(2)(1), BANGALORE

ITA 2306/BANG/2025

AI Insights

This case involves an appeal by Shri Mehul Parekh against the order of the National Faceless Appeal Centre (NFAC), Delhi, concerning the assessment year 2018-19. The primary contention revolves around the disallowance of excess interest paid on loans, which the assessee argued was necessary for business operations and thus an eligible expense for earning income. The AO had initially disallowed these expenses, leading to an appeal that was dismissed by the CIT(A) due to non-responsiveness from the assessee. The Tribunal found merit in re-evaluating the AO's decision and remitted the matter back to the AO for a fresh assessment, provided the assessee complies with the stipulated cost payment.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 837515 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2018-2019
• Appeal Filed On: 14-10-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRAMANIAN S
• Assessee Lawyers: MOHIT ASHOK PARMAR
• Section: 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE – PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 2306/Bang/2025 Assessment Year : 2018-19 Shri Mehul Parekh, No. 6, Sukhi, Kempanna Block, Kumarapark West, Bangalore – 560 020. PAN: BCZPP2462H Vs. The Income Tax Officer, Ward – 2(2)(1), Bangalore. APPELLANT RESPONDENT Assessee by : Shri Mohit Ashok Parmar, CA Revenue by : Shri Subramanian .S, JCIT-DR Date of Hearing : 11-02-2026 Date of Pronouncement : 17-02-2026 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 06/08/2025 in respect of the A.Y. 2018-19. 2. The brief facts of the case are that the assessee is an individual and filed his return of income on 04/10/2018. Thereafter the case was selected for complete scrutiny and notice u/s. 143(2) as well as u/s. 142(1) were issued to the assessee. The assessee also submitted their reply and thereafter the AO sought for some more details about the interest paid and the interest received. The assessee also submitted their reply and explained that the assessee had obtained loans from individuals at 7% for the Printed from counselvise.com Page 2 of 3 ITA No. 2306/Bang/2025 business purpose after setting off the interest obtained from the debtors and therefore there is a loss and therefore the said excess interest paid is an eligible expense for the purpose of earning the income and therefore the said difference could not be added to the income of the assessee. The AO had not accepted the submissions. As against the said order, the assessee filed an appeal before the Ld.CIT(A). The Ld.CIT(A) sent six hearing notices and on three occasions, the assessee filed an application for adjournment and not filed any response to the other notices and therefore the Ld.CIT(A) had decided the appeal based on the materials available before him and finally dismissed the appeal. 3. The assessee is before this Tribunal against the said ex-parte order of the Ld.CIT(A). 4. At the time of hearing, the Ld.AR submitted that the assessment order is bad in law and submitted that in spite of furnishing the various documents before the AO, the AO had confirmed the disallowance being the difference between the interest paid and the interest received on the reason that the expenses are not for earning the income. The Ld.AR submitted that the assessee had by oversight not followed up the appeal filed before the Ld.CIT(A) and prayed an opportunity to appear before the AO along with the records to establish that the expenses are incurred for earning the income only. 5. The Ld.DR submitted that the assessee had not furnished the details before the AO as well as before the Ld.CIT(A) and therefore prayed to dismiss the appeal. 6. We have heard the arguments of both sides and perused the materials available on record. 7. We have perused the assessment order and from the said order, we found that the AO had not allowed the excess interest paid on the ground that it was not correlated that the said expenses are incurred towards Printed from counselvise.com Page 3 of 3 ITA No. 2306/Bang/2025 earning the income. This aspect has to be considered again by the AO and even though the appeal has been filed by the assessee against the ex-parte order of the Ld.CIT(A), we are inclined to remit this issue to the AO for fresh adjudication on terms. We therefore direct the assessee to pay a sum of Rs. 10,000/- towards the cost in the account of Prime Minister’s National Relief Fund and produce the receipt before the AO before the AO is adjudicating the matter. If the assessee had not paid the cost, it is deemed that we are not giving the benefit of redoing the assessment by the AO and the order dated 26/03/2021 of the AO would revive automatically, without any further notice to this Tribunal. The assessee is also permitted to produce the documents in support of their case at the time of adjudication. With these directions, we are setting aside the orders of both the authorities and remit this issue to the file of the AO. 8. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 17th February, 2026. Sd/- Sd/- (PRASHANT MAHARISHI) (SOUNDARARAJAN K.) Vice – President Judicial Member Bangalore, Dated, the 17th February, 2026. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Bangalore Printed from counselvise.com "