DCIT Vs Pawan Bhageria (ITAT Pune)
Interest Income from Debtors Cannot Be Treated as Unexplained Loans: ITAT Pune Upholds Deletion of Section 69B Addition
The Pune Bench of the ITAT dismissed the Revenue’s appeal for AY 2018-19 and upheld the order of the CIT(A) deleting an addition of ₹2.67 crore made u/s 69B on account of alleged unexplained loans and advances.
The assessee, engaged in wholesale trading of yarn and also acting as a commission/del credere agent, had disclosed interest income of ₹26.72 lakh. The Assessing Officer observed that no corresponding loans or advances appeared in the balance sheet and, by applying a notional interest rate of 10%, presumed undisclosed loans of ₹2.67 crore, which were added u/s 69B.
The CIT(A) deleted the addition after examining the agency model followed by the assessee. It was found that sales and debtors were recorded in the books of the principal companies, while the assessee’s books reflected only commission income and interest charged to debtors for delayed payments. Documentary evidence such as ledger extracts and debit notes supported this accounting treatment.
The Tribunal rejected the Revenue’s objection regarding violation of Rule 46A, holding that no fresh evidence had been admitted without AO’s knowledge. On merits, the ITAT held that interest income earned for delayed realization of debtors in an agency arrangement cannot automatically be equated with loans or advances, and that the AO’s addition was based on mere presumption without appreciating the true nature of business transactions.
Accordingly, the deletion of the addition u/s 69B was confirmed and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT PUNE
