MR. JIGAR HEMANT SHAH ,MUMBAI V. ACIT, CIRCLE -27(1), MUMBAI

ITA 5082/MUM/2024

AI Insights

The case involves Mr. Jigar Hemant Shah, who appealed against the disallowance of interest expenditure claimed under Section 57 of the Income Tax Act for the assessment year 2016-17. The Assessing Officer (AO) disallowed the interest claim on the grounds that the appellant borrowed money from external sources and lent it to a company where he is a director. This decision was upheld by the CIT(A) due to the appellant's failure to respond to multiple opportunities provided for explanation. The ITAT, after hearing the arguments, decided to remit the case back to the CIT(A) for a decision on merits, providing the appellant another opportunity to present his case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471286 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Department Lawyers: AJAY SINGH
• Section: 271(1)(c); 234B; 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “F” Bench, Mumbai. Before Shri Rahul Chaudhary (JM) & Shri Omkareshwar Chidara (AM) I.T.A. No. 5082/Mum/2024 (A.Y. 2016-17) Mr. Jigar Hemant Shah A-23/89, Ambe Niwas Rajawadi CHS, Ghatloper East Mumbai-400 077. PAN : CMFPS8910Q Vs. ITO, Circle 27(1) 4th Floor, Tower No. 6, Vashi Railway Station Complex, Navi Mumbai-400703. (Appellant) (Respondent) Assessee by None Department by Shri Ajay Singh Date of Hearing 24.12.2024 Date of Pronouncement 28.01.2025 O R D E R Per Omkareshwar Chidara (AM) :- This appeal is directed against the order of Ld. CIT(A) dated 16.10.2023 which deals with disallowance of interest expenditure under section 57 of the Income Tax Act. This disallowance made by Ld. AO was upheld by Ld. CIT(A). Aggrieved by the orders of Ld. AO/Ld. CIT(A), an appeal was filed by the appellant with following grounds of appeal : 1. (a) The learned Assessing Officer has erred in making the addition of Rs. 30,29,225/- towards the disallowance of interest expenditure under Section 57 of the Act which is upheld by CIT (A). (b) The learned Assessing Officer has erred in considering the said disallowance merely on the ground that the appellant has borrowed funds from outside and infused into the company where the appellant is a Director, without considering the facts and circumstances that Private Limited Company belongs to the appellant and his family members and the appellant is a Director and only family members are directors of the company. 2. The learned Assessing Officer has erred in charging interest under Sections 234B and C of the Income Tax Act, 1961. Mr. Jigar Hemant Shah 2 3. The learned Assessing Officer has erred in initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. The Appellant craves leave and reserves his right to add, alter, amend and/or delete any of the above grounds of appeal as and when required.” 2. The only issue to be decided in this appeal is whether the appellant is entitled to the claim of interest. The Ld. AO disallowed the claim of interest of appellant as there was no proper response from the appellant and adjudicated that the appellant is not entitled to the interest because he borrowed the money from others and lent the same to the company. As the appellant is a director of company, the Ld. AO, disallowed the interest under section 57 of the Income Tax Act read with provisions of Explanation 1 of section 37 of the I.T. Act. 3. Aggrieved by the order of Ld. AO, the appellant filed an appeal before Ld. CIT(A) and this first appellate authority confirmed the addition as there is no response from the appellant. Actually, the Ld. CIT(A) has given three opportunities to the appellant and still there was no response from him. 4. The appellant filed an appeal to the ITAT with the grounds of appeal mentioned in page No. 1 of this order. The Ld. AR of the appellant has requested that one more opportunity may be given to explain the reasons for allowability of interest before the Ld. CIT(A). 5. The Ld. DR has opposed the argument of Ld. AR of the appellant and supported the order of Ld. AO and Ld. CIT(A). 6. After hearing both the parties, it is decided to give one more opportunity to the appellant to explain the reasons for allowability of interest and issue is remitted to Ld. CIT(A) to decide the issue on merits. Mr. Jigar Hemant Shah 3 7. The appellant’s appeal is allowed for statistical purposes. Order pronounced in the open court on 28th January, 2025. Sd/- Sd/- (Rahul Chaudhary) (Omkareshwar Chidara) Judicial Member Accountant Member Mumbai : 28.01.2025 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai. 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar ITAT, Mumbai PS "