Lalit C. Jobanputra Vs DCIT (ITAT Mumbai)
No Addition for Notional Interest: ITAT Deletes ₹93 Lakh Addition Based Solely on Seized Working Sheet
The Mumbai Bench of the Income Tax Appellate Tribunal deleted an addition of ₹93.06 lakh made towards alleged undisclosed interest income, holding that a mere seized calculation sheet showing interest at 24% cannot justify taxation unless the Revenue proves that such interest actually accrued or was received by the assessee.
In this case, the assessee had advanced ₹5.50 crore to one Rajeev Bhale. During a search, a seized document contained a detailed interest working at 24% per annum, based on which the Assessing Officer treated ₹93.06 lakh as undisclosed interest income. The assessee admitted advancing the loan but consistently maintained that no such interest was received, as the borrower was facing severe financial difficulties and was unable even to repay the principal amount in cash. Eventually, part of the loan was adjusted against the purchase of another property belonging to the borrower.
The Tribunal noted that despite a specific remand direction in the earlier round to verify from the borrower whether interest had actually been paid, the Assessing Officer failed to bring any evidence on record proving payment or receipt of interest. The borrower’s statement also did not establish actual payment of interest. The Tribunal observed that when the borrower was struggling to settle even the principal amount, the presumption that he paid interest at 24% was unrealistic. Mere calculations found in seized papers, without corroborative evidence of accrual or receipt, cannot result in taxable income.
Accordingly, the ITAT held that the addition was based on assumptions and surmises rather than evidence and directed deletion of the entire addition of ₹93.06 lakh. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)-47, Mumbai (‘Ld. CIT(A)’ for short), dated 18/08/2025 for the Assessment Year 2011-12.
