Ghanshyam Arjanbhai Patel Vs ITO (ITAT Ahmedabad)
This order addresses an appeal filed by the assessee, Ghanshyam Arjanbhai Patel, against the order of the National Faceless Appeal Centre (NFAC), Delhi, for the Assessment Year (A.Y.) 2020-21. The central issue was the confirmation of an addition of ₹21,98,647/-, representing interest paid and claimed as a deduction under Section 57 of the Income Tax Act.
I. Background and Addition by the AO
The assessee, an individual, filed a return declaring a total income of ₹24,71,050/-, earning income from salary, house property, capital gain, and income from other sources. During the scrutiny assessment, the Assessing Officer (AO) noted that the assessee claimed interest expenses of ₹55,54,000/- under Section 57 against income from other sources. The total receipts of the assessee were ₹76,58,253/-, which included interest income of ₹57,33,580/- under other sources. The assessee also received a salary as a director of M/s. Accent Microcell Pvt. Ltd.
The AO questioned the deduction because the rate of interest claimed (9% per annum on loans taken) contradicted the ledger entries provided, which showed varied interest rates ranging from 6% to 18% paid to six parties. Furthermore, the assessee provided a list of 16 persons to whom interest was paid but failed to file ITRs or bank statements (or both) for 8 of those persons. The AO concluded that the assessee had “barely fulfilled” the requirement to establish the genuineness of the loan transactions and thus held the transactions remained unexplained. Consequently, the AO disallowed the interest paid to the 8 unverified parties, making an addition of ₹21,98,647/- as unexplained creditors.
