ACIT Vs Girish Shamji Chheda (ITAT Mumbai)
Mixed Funds Presumption Saves Interest Disallowance; Loans u/s 68 Found Genuine – ITAT Mumbai; Consistency Prevails – ITAT Upholds CIT(A) in Deleting ₹5 Cr Additions; ₹5 Crore Additions Overturned: ITAT Confirms Mixed Funds & Verified Loan Genuineness
Revenue appealed against the order of CIT(A) deleting two additions made in the case of Assessee, proprietor of M/s. Viraj Highway Inn, engaged in lending & investment activities. AO had completed assessment u/s 143(3) r.w.s. 144B at ₹5.43 crore against returned income of ₹93.62 lakh, making two major additions—(i) ₹1.47 crore u/s 36(1)(iii) towards interest disallowance, and (ii) ₹3.61 crore u/s 68 as unexplained cash credits.
Interest Disallowance (u/s 36(1)(iii)):
AO noted that assessee had advanced ₹51.23 crore to M/s Shivam Megastructure Pvt. Ltd. earning 5.52% interest, while paying 15% interest on borrowed funds, & treated the differential 9.48% as disallowable. CIT(A) deleted the addition holding that assessee possessed substantial own capital of ₹43.35 crore forming part of mixed funds, hence presumption applies that advances were from own funds. Even assuming partial use of borrowed funds (~₹8 crore), the net result was positive as the assessee earned ₹2.82 crore & paid only ₹1.20 crore interest. CIT(A) held that AO’s conclusions were not supported by facts & that the limited scrutiny scope under section 57 was wrongly exceeded.
