Jaiswal Rice Mill Vs ITO (ITAT Lucknow)
The Income Tax Appellate Tribunal (ITAT), Lucknow Bench, partly allowed the assessee’s appeal and restored the issue relating to the disallowance of interest expenses amounting to Rs. 6,00,000 to the file of the Assessing Officer (AO) for fresh examination. The Tribunal held that the matter required reconsideration as there was no material on record establishing that interest-bearing funds had been diverted for non-business purposes, and the basis for adopting an interest rate of 12% was not adequately explained.
The assessee had challenged the appellate order dated 20.01.2026 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [CIT(A)/NFAC] for Assessment Year 2020-21. Among the grounds raised were objections to the ex-parte disposal of the appeal, the validity of reassessment proceedings, and the addition of Rs. 6,00,000 on account of interest expenses. The assessee also contended that interest-free loans had been received from various parties and, therefore, the advances granted could not automatically be presumed to have originated from interest-bearing funds.
The assessment order under Section 147 of the Income Tax Act had determined the assessee’s total income at Rs. 14,22,140. The addition of Rs. 6,00,000 was made by the Assessing Officer by disallowing interest expenses. The Assessing Officer computed this amount by applying an interest rate of 12% per annum on an interest-free loan of Rs. 50,00,000 allegedly given by the assessee to Smt. Sunita Jaiswal. According to the Assessing Officer, the amount represented “deemed interest received” on the loan.
