SHRI. MAHENDRA HARICHAND SHAH,MUMBAI V. INCOME TAX OFFICER - WARD 5(1)(1), AAYAKAR BHAVAN, MUMBAI

ITA 4371/MUM/2025

AI Insights

The case involves Shri Mahendra Harichand Shah, who appealed against the order of the Commissioner of Income Tax (Appeals) which upheld the disallowance of interest expenses claimed on loans taken from entities considered to be providing bogus entries. The loans were scrutinized over multiple assessment years, with varying outcomes. The Tribunal noted that a similar disallowance for a loan taken in AY 2012-13 had been deleted in a previous ruling, and thus, the corresponding interest disallowance for that loan should also be deleted. However, the status of loans from other entities remained unresolved, contingent on future decisions regarding those loans.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 825295 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 02-07-2025
• Other Referred Cases: ITA No. 6892/Mum/2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSHIL BHAGWAT SHENDGE; LD.
• Assessee Lawyers: VIMAL PUNMIYA; LD
• Keywords: Bogus

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “SMC” BENCH : MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL MEMBER ITA No. 4371/Mum/2025 Assessment Year: 2013-14 Shri Mahendra Harichand Shah, 175, Kika Street, Mumbai-400004. PAN : AAFPS0929R vs. Income Tax Officer, Ward-5(1)(1), Room No. 568, Aayakar Bhavan, M.K. Road, Mumbai-400020. (Appellant) (Respondent) For Assessee : Shri Vimal Punmiya, Ld. CA For Revenue : Shri Sushil Bhagwat Shendge, Ld. Sr.DR Date of Hearing : 19-11-2025 Date of Pronouncement : 30-12-2025 O R D E R This appeal has been preferred by the assessee against the order dated 26-06-2025 impugned herein passed by the ADDL/JCIT(A)-1, Kolkata/Ld. Commissioner of Income Tax (appeals) (in short “Ld. Commissioner”) u/s. 250 of the Income Tax Act, 1961 (in short „the Act‟). 2. In the instant case, the assessee had declared total income at Rs. 5,24,780/- by his filing return of income on dt. 31-03- 2014,which was initially processed u/s. 143(1) of the Act, without making any variation in the income returned, however, Printed from counselvise.com 2 ITA No. 4371/Mum/2025 subsequently, selected for scrutiny through Computer Assisted Scrutiny Selection (CASS) and accordingly statutory notices were issued calling for various details which were filed from time to time by the assessee. 3. On perusing the details filed, the AO noticed that the assessee has claimed interest payment of Rs. 8,52,594/- (being part of gross interest of Rs.15,00,000/-) made on loan taken from the entities, who were allegedly engaged in providing bogus entries to various parties. During the AYs. 2011-12 and 2012-13, the said loan was considered as unproved loan from bogus parties involving in providing bogus entries and, therefore, the AO show caused the assessee to provide the details and justification of claim of deduction u/s. 57(iii) of the Act. 4. The assessee in response to the same submitted that loan taken in earlier assessment years were genuine loan transactions, accordingly interest paid on such loans, is claimed deductible from interest income u/s. 57(iii) of the Act. 5. Though the AO considered the aforesaid claim of the assessee, however, found the same to be untenable in the light of the findings of the DCIT (Investigation) and ultimately disallowed being interest on unproved loans claimed u/s. 57(iii) of the Act. The assessee being aggrieved, challenged the said addition/disallowance by filing first appeal before the Ld. Commissioner, however, could not get any relief, as the Ld. Printed from counselvise.com 3 ITA No. 4371/Mum/2025 Commissioner by dismissing the appeal of the assessee, affirmed the aforesaid addition/disallowance. 6. Thus, the assessee being aggrieved has challenged the impugned order. 7. Heard the parties and perused the material available on record. Admittedly, the assessee during the AY. 2011-12 had taken loan of Rs. 1 crore from M/s. Nakshatra Business Pvt. Ltd. and M/s. Viraj Mercantile Pvt. Ltd., which resulted into making the addition by the AO pertaining to AY. 2011-12, against which, the appeal is still pending before the Ld.CIT(A). 8. Subsequently, the assessee during the AY. 2012-13 has also taken the loan amount of Rs. 25 lakhs from M/s. Josh Trading Pvt. Ltd., which also resulted into making the addition by the AO and affirmation of the same by the then Ld.CIT(A), however, the Hon‟ble Co-ordinate Bench of the Tribunal vide order dt. 27-09-2021 in assessee‟s own case for the AY. 2012-13 being ITA No. 6892/Mum/2018, deleted the said addition of Rs. 25 lakhs. 9. However, subsequently in the assessment year under consideration, the AO disallowed the interest expenses claimed to the tune of Rs. 8,52,594/- being part of the gross interest paid to the tune of Rs. 15 lakhs on the loans taken from the aforesaid parties to the tune of Rs. 1,25,00,000/- in the previous years and, therefore, the assessee preferred first appeal before the Ld. Commissioner, Printed from counselvise.com 4 ITA No. 4371/Mum/2025 however, the Ld. Commissioner dismissed the appeal of the assessee. 10. It is also a fact that during the subsequent assessment year, the Ld.CIT(A) by taking cognizance of the order dt. 27-09- 2021passed by the Hon‟ble Co-ordinate Bench of the Tribunal in assessee‟s own case for the AY. 2012-13 wherein the Bench deleted the addition of Rs. 25,00,000/-, vide order dt. 18-02- 2025deleted the identical disallowance with regard to interest paid to M/s. Josh Trading Pvt. Ltd., on such loan amount of Rs. 25 lakhs which is not in existence now. However, the Ld. CIT(A) in the said order, noted that in case the addition of loan from other two parties, would be deleted by the higher authorities in AY. 2011-12 or the year when such loans were taken, then the disallowance of interest paid to these two entities would also get deleted. Otherwise, the disallowance of interest will sustain. 11. Before this court, the assessee has claimed that the addition of Rs. 25 lakhs made qualoan taken during AY. 2012-13 on the basis of which partaddition on account of disallowance of interest has been made in this case, has already beendeletedby the Hon‟ble Co-ordinate Bench of the Tribunal in the assessee‟s case for the AY. 2012-13. Thus, the proportionate disallowance quainterest paidonthe said amount of loan, may be deleted and rest of the disallowance be directed to be deleted on finalization Printed from counselvise.com 5 ITA No. 4371/Mum/2025 of appeal and/or deletion of the aforesaid addition of Rs. 1 crore by the CIT or the Tribunal in future. 12. As observed above that the Ld. CIT(A) in the order 18-02- 2025 not only deleted the identical disallowance with regard to interest paid to M/s. Josh Trading Pvt. Ltd., on loan amount of Rs. 25 lakhs, however, in the order, also noted that in case of deletion of addition of loan amount of Rs. 1 Crores taken from other two parties, by the higher authorities in AY. 2011-12 or the year, when such loans were taken, then the disallowance of interest paid to these two entities, would also get deleted, otherwise, the disallowance of interest will sustain. 13. Thus in view of the order of the then CIT(A) (supra), no further order is required, as the order of the Ld. CIT(A) is loud and clear. 14. With regard to disallowance in respect of loan amount of Rs. 25 lakhs, which has already been deleted by the Hon‟ble Co- ordinate Bench of the Tribunal in the case referred to above, thus the addition made on account of disallowance of interest paid to extent, on such loan amount of Rs. 25 Lakhs, is deleted. 15. Thus, the AO is accordingly directed to re-compute the income by deleting the proportionate disallowance, as directed above. Printed from counselvise.com 6 ITA No. 4371/Mum/2025 16. In the result, appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 30-12-2025 Sd/- [NARENDER KUMAR CHOUDHRY] JUDICIAL MEMBER TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai Printed from counselvise.com "