Rakesh Gupta Family Trust Vs ACIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, in the case of Rakesh Gupta Family Trust Vs ACIT, allowed the assessee’s appeal, deleting the disallowance of {Rs.}3,00,000/- in interest expenditure claimed for the Assessment Year (AY) 2011-12. The Tribunal ruled that once the Assessing Officer (AO) accepted the genuineness of the underlying loan principal by not making an addition under Section 68 of the Income-tax Act, 1961, the disallowance of interest paid on those same loans cannot be sustained.
The case originated from the reopening of the assessment under Section 147, prompted by a search and seizure action on the Vidur Bhatt Group, which suggested the assessee was a beneficiary of bogus loans and claimed bogus interest. The AO’s reasons for reopening indicated that the Trust had allegedly obtained {Rs}13,50,000/- in accommodation entries during the relevant Financial Year (FY).
During the assessment proceedings, the assessee vigorously contested the claim, providing detailed documentary evidence for the loans and interest payments, including:
1. Affidavits and confirmations from the creditor parties.
2. Income Tax Return acknowledgments and bank statements of the parties.
3. Proof that the loans were received and repaid through banking channels.
Crucially, the assessee established that the loans on which the interest was paid ({Rs.}3,00,000/- on a total loan base of {Rs. }13,50,000/-) were old outstanding amounts taken in prior years (AY 2005-06 and 2006-07), not fresh loans taken during the year under consideration.
