Ravindra Madanlal Khandelwal Vs DCIT (ITAT Nagpur)
The assessee appealed against the CIT(A)’s order for AY 2018-19 affirming additions of ₹5,20,84,000 under Section 68, disallowance of interest expenditure of ₹97,66,308, and disallowance of interest of ₹74,32,292 claimed under Section 57.
During assessment, the Assessing Officer examined unsecured loans received from various individuals and entities and sought details including PAN, addresses, confirmations, bank statements, and income tax returns of the lenders. The assessee furnished the list of lenders, PANs, addresses, confirmations, ledger accounts, details of interest paid, TDS deducted, TDS returns, and explained that the lenders declined to provide their income tax returns and bank statements as they were personal documents. The assessee requested the Assessing Officer to verify such information through departmental records and also submitted lender-wise details showing that most loans had been repaid either during the relevant year or in the succeeding year. The Assessing Officer nevertheless treated ₹5,20,84,000 as unexplained cash credits under Section 68 on the ground that the lenders’ creditworthiness could not be verified. The CIT(A) upheld the addition.
Regarding the interest disallowances, the Assessing Officer disallowed ₹97,66,308 on the ground that the assessee failed to establish that borrowed funds were used wholly for business purposes. Separately, interest of ₹74,32,292 claimed under Section 57 was disallowed because it was not reflected in the Profit and Loss Account and the Assessing Officer was not satisfied that it had been incurred wholly and exclusively for earning income from other sources. The CIT(A) affirmed both disallowances.
