Vinit Vishwasrao Hingankar Vs ACIT (ITAT Nagpur)
The assessee, a medical professional, filed an appeal challenging an order dated 13 January 2025 issued by the Additional/Joint Commissioner of Income Tax (Appeals), Bhubaneswar, under sections 143(3) and 250 of the Income Tax Act for the assessment year 2015–16. The two issues raised concerned the disallowance of interest under section 40(a)(ia) for non-deduction of tax at source under section 194A and the addition of estimated interest income on interest-free advances given to friends and relatives.
The assessee had filed the return of income for the relevant year on 29 September 2015, reporting ₹26,07,200. The case was selected for scrutiny under CASS, and notices were issued under sections 143(2) and 142(1) on 17 August 2016. During scrutiny, the Assessing Officer examined the financial statements and observed that the assessee had paid interest of ₹5,400 and ₹7,317 to two unsecured creditors without deducting TDS under section 194A. The Assessing Officer disallowed the entire amount of ₹12,717 under section 40(a)(ia).
Regarding the second issue, the Assessing Officer noted that the assessee had debited interest to secured and unsecured creditors while also showing interest-free advances to friends and relatives in the balance sheet. The assessee explained that interest-free funds were used for professional purposes. However, the Assessing Officer concluded that a major portion of interest-bearing funds came from unsecured loans and also observed that the assessee had received an interest-free deposit from a private company for using an open plot. Not satisfied with the explanation, the Assessing Officer estimated notional interest income at 12.75%—the rate paid by the assessee to loan creditors—on the interest-free advances of ₹1,51,78,000, resulting in an addition of ₹19,35,195. The total income was assessed at ₹45,55,110 under section 143(3) on 12 December 2017.
