Case Number: ITA 988/DEL/2021
Appellant: Dev Priya Products Pvt. Ltd., New Delhi
Respondent: DCIT, CC, Meerut
Assessment Year: 2014-15
Result: 2014-15
Case Filed on: 2021-08-17
Order Type: Final Tribunal Order
Date of Order: 2022-11-24
Pronounced on: 2022-11-24
This case involves an appeal filed by Dev Priya Products Pvt. Ltd. (hereinafter referred to as ‘the Appellant’) against the order dated 16.06.2021 passed by the CIT(A)-4, Kanpur, pertaining to the assessment year 2014-15. The appeal centers on the disallowance of interest on unsecured loans.
The original return of income was filed on 22.09.2011, declaring a loss of Rs. 5,11,01,061/-. The assessment under section 143(3) of the Income Tax Act was completed on 06.02.2014, accepting the returned loss. On 01.03.2016, a search and seizure operation was conducted at the premises of Dev Priya Group, and a notice under section 153A was issued. In response, the Appellant filed its return of income declaring the same loss of Rs. 5,11,01,061/-. The assessment was completed on 30.12.2017, with an assessed income of Rs. 4,45,12,510/-.
The assessment included an addition of Rs. 50 lakhs as unsecured loans under section 68 of the Act, from V.R. Portfolio Ltd. Additionally, a disallowance of interest on unsecured loans amounting to Rs. 15,88,548/- was made, pertaining to the following parties:
The Appellant challenged the assessment order before the CIT(A), which provided partial relief but sustained the disallowance of interest on unsecured loans from Agrawal Alloys Steel Pvt. Ltd. and Yogya Shipping Pvt. Ltd., totaling Rs. 8,86,252/-. The CIT(A) held that the genuineness of these loans received in the assessment year 2010-11 could not be examined at the appellate stage due to the withdrawal of the appeal to avail the Vivad se Vishwas Act (VSV) 2020. As a result, the interest claim was disallowed.
The Tribunal, comprising N.K. Billaiya, Accountant Member, and Kul Bharat, Judicial Member, observed that the CIT(A) had been influenced by the Appellant’s decision to settle under the VSV Act, 2020. The Tribunal noted that the loans were originally taken in the assessment year 2009-10 and had been accepted as genuine. The disallowance was made on the basis that the loans in question were part of the settlement under the VSV Act, 2020.
The Tribunal referred to the explanation to section 5 of the VSV Act, 2020, which clarifies that making a declaration under the Act does not amount to conceding the tax position. Additionally, the Tribunal highlighted the clarification given by the CBDT in its Circular No. 7 dated 04.03.2020, which states that the result of the VSV does not apply to the same issues pending before the Assessing Officer.
Considering the facts and the explanations provided, the Tribunal concluded that the CIT(A) could not have sustained the disallowance of interest based on the VSV Act, 2020. The Tribunal directed the Assessing Officer to delete the impugned disallowances of interest for the assessment year 2014-15.
Order: The appeal of the Appellant is allowed.
Order Pronounced in the Open Court on 24th November, 2022.
-Sd/- (Kul Bharat, Judicial Member)
-Sd/- (N. K. Billaiya, Accountant Member)
Date: 24.11.2022
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
Dev Priya Products vs. DCIT: Disallowance of Interest on Unsecured Loans for Assessment Year 2014-15
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