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TMI Blog2021 (1) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... em of accounting regularly followed by assessee. Therefore, there is no question to consider genuineness of the loan outstanding in assessment year under appeal coming up from the earlier years in assessment year under appeal. Assessee received loan in earlier years on which interest is also paid which have not been disputed by the Income tax authorities, therefore, Income tax authorities cannot depart from the fact that assessee received loan in earlier years and as such, on outstanding loan amount, no disallowance of interest could be made. The Income tax authorities shall have to follow rule of consistency and definiteness of approach in dealing with the matter. When loans have not been disputed as loan genuine in earlier year, same could not be considered as bad loan in assessment year under appeal in which the loan was merely coming up as outstanding from the previous years. In the present case, assessee company borrowed funds from these two companies in earlier years and invested in shares of other company for business purposes, therefore, provisions of section 36(1)(iii) are satisfied in the present case. The authorities below have however, applied general provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 377; 2.50 crore for AY 2016-17 under appeal. The assessee was asked to file complete details of the outstanding loans along with documentary evidences of loan agreement/sanction of loan along with past business history and any other relevant evidence to prove genuineness of the interest expenses shown to have been paid to these entities in assessment year under appeal. The assessee submitted ledger account of both these loaners along with their addresses. The assessee company explained that it has availed loans on the mutual understanding of interest rate prevailing in the market with some personal relation with the Director of the company and it has utilized part of the borrowed funds for investment in shares of M/s Om Shubham Housing and Construction Company Pvt. Ltd., a subsidiary company of M/s Pivotal Infrastructure Pvt. Ltd. with whom the assessee company has done the regular and continuous business activity during the year. However, no documentary evidence was filed with regard to sanction of the loan or showing terms and condition of the loan. The AO noticed from the detail submitted on record that assessee had received ₹ 25 lakhs on 24.06.2013 from M/s Rajnigandha Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against these two parties for their production and assessee may be given opportunity to crossexamine the directions to these companies. 5. The AO, however, did not accept the contention of the assessee because the parties did not make any compliance to the notice u/s 133(6) and further it was noted that utilization of the funds borrowed from these two parties is secondary issue because the assessee shall have to prove the genuineness of the unsecured loans. The AO also noted that assessee did not prove the terms of the loan through documentary evidence because only verbal agreement was claimed for loan and payment of the interest. The AO also noted that both the above companies are assessed to tax and the record also shows that the assessee company though have filed return of income for earlier year but it is not assessed in scrutiny u/s 143(3) of the IT Act for preceding financial years 2012-13 2013-14, therefore, assessee failed to establish genuine transaction of receiving loans, therefore, AO applying provisions of section 37(1) of the IT Act disallowed the interest payment of ₹ 23,77,833/-. 6. The assessee challenged the addition before Ld. CIT(A). The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SS)A No. 88/Indore/2013 dated 04.06.2019 in which it was held that the Ld. CIT(A) has exceeded jurisdiction in giving direction to the AO to reopen the assessment for other years i.e. 2010-11 which is not within the powers of the Ld. CIT(A) as he was dealing with the appeals for AY 2009-10 only, therefore, there was no need to issue any direction in the matter. 8. On the other hand, Ld. DR relied upon the orders of the authorities below and submitted that addresses of the loaner were not correct and they have not replied to the notice u/s 133(6) of the IT Act. No actual interest has been paid, therefore, authorities below were justified in disallowing the interest claimed by assessee. 9. I have considered the rival submission and perused the material on record. It is not in dispute that assessee has taken loan from both the above loaner company in preceding financial years 2012-13 and 2013-14. The assessee also paid interest in preceding assessment years which have not been disputed by the authorities below. The assessee on the outstanding unsecured loans coming up from the preceding assessment year has also paid interest on the same outstanding loans in assessment year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of approach by the Revenue is necessary in the matter of recognizing the nature of an account maintained by the assessee so that the basis of a concluded assessment would not be ignored without actually reopening the assessment. The principle is similar to the cases where it has been held that a debt which had been treated by the Revenue as a good debt in a particular year cannot subsequently be held by it to have become bad prior to that year. Sri K.R. Prasad, Ld. Counsel for the assessee, referred to a decision of this court in Bit Tul (P) Ltd. Vs. CIT (ITRC 141 of 1977 dated 29.07.1980) wherein it was held that there should be material to justify the conclusion that any borrowed money by the assessee in a year to which interest had been paid had been diverted for non business purpose. For the purpose of this reference, it is unnecessary to apply the said principle. Accordingly, we answer the question referred to us in the affirmative and against the Revenue. Answered accordingly. 10. The above facts when considered in the light of the judgment in the case of Sri Dev Enterprises (supra) it is clear that assessee received loan in earlier years on which interes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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