Abhaykumar Sevantilal Sanghavi Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that additions under section 68 of the Income Tax Act is not sustainable since assessee established identity, genuineness and creditworthiness of the lenders. Accordingly, addition u/s. 68 deleted.
Facts- The cases of the assessee were selected for scrutiny under CASS. The assessments were completed by passing orders u/s 143(3) of the Act with some additions. CIT(A) dismissed the appeal by sustaining all additions and disallowances made by the AO. The primary basis for the decisions was the lack of adequate evidence and justification provided by the assessee.
Being aggrieved, the present appeal is filed.
Conclusion- Held that the assessee had sufficient interest-free funds in the form of owned capital and unsecured loans, exceeding the alleged investments in personal assets and interest-free advances for both assessment years. Following the principles established in South Indian Bank Ltd. vs. CIT (2021) 438 ITR 1 (SC) and the decision of the Co-ordinate Bench in Shreyans S. Sanghavi vs. ACIT (ITA No. 520/AHD/2020), it must be presumed that the investments were made from interest-free funds in the absence of a direct nexus between borrowed funds and the investments. Thus, proportionate disallowance of interest expenses amounting to Rs.38,36,692/- for AY 2016-17 and Rs.44,06,456/- for AY 2017-18 is unjustified and liable to be deleted.
