आदेश / O R D E R

Per Paresh M Joshi, J.M.:

This is an Appeal filed by the Assessee under section 253 of the income tax Act 1961,[ herein after referred to as the Act for the sake of brevity] before this tribunal as & by way of a second Appeal. The Assessee is aggrieved by the order bearingNumber:-ITBA/NFAC/S/250/2025-26/1082612225 (1) dated 14.11.2025 passed by the Ld. CIT(A) u/s 250 of the Act, which is herein after referred to as the “Impugned order”. The Relevant Assessment year is 2022-23 and the corresponding previous year period is from 01.04.2021 to 31.03.2022.

2.

Factual Matrix

2.1 That as and by way of an assessment order made u/s 143(3) rws 144B of the act the total income of the assessee was computed and assessed at Rs. 9,47,165/-. Income as per the return of income filed was at Rs. 7,09,790/-. The addition/variation was made at Rs. 2,37,375/- as income from other sources. The aforesaid assessment order bears No. ITBA/AST/S/143(3)/2023-24/1063029443(1) & that the same is dated 20.03.2024, which is herein after referred to as the “Impugned Assessment Order”.

2.2 The Ld. AO in the “Impugned Assessment Order” has held as under with regard to the core issue of addition of Rs. 2,37,375/- in para 4.6.3 which is reproduced by us as below:-

“4.6.3 Collection of Information and variation proposed

To scrutinize the details available with the department and books of accounts of the assessee various notices were issued to assessee from time to time. In response to those notices the assessee has submitted submissions. On perusal of the submissions of the assessee, it is found that during the year the assessee has accounted Rs. 57,37,089/- as interest paid to others. On detailed perusal of these expenses, it is found that the assessee has taken loan of Rs. 2,10,00,000/- on 14.02.2022 from various persons and has paid Interest of Rs. 5,20,875/- to them. In this regard, as mentioned earlier, the interest against the amount of Rs. 2,10,00,000/- has to be Rs. 2,83,500/- only for the period from 14.02.2022 to 31.03.2022 (i.e. 45 days only) but the assessee has paid Rs. 5,20,875/- to them. It clearly shows that the assessee has claimed excess interest expenses for the year under consideration.

As per the mercantile system of accounting the interest amount paid for the year has to be claimed as expense for the relevant year, but in this case the assessee has claimed excess interest expenses. In other words, the assessee ought to have shown excess interest paid as deferred interest paid and must have claimed it in the next AY.

Therefore, as per the detailed discussion made in preceding paras, the excess interest expense of Rs. 2,37,375/- claimed by the assessee is being disallowed and added to the total income of the assessee.”

2.3 That the assessee being aggrieved by the aforesaid “Impugned Assessment Order” prefers the first appeal u/s 246A of the act before the Ld. CIT(A) who by the “Impugned Order” has dismissed the first appeal of the assessee on the grounds & reasons stated therein. The core grounds & reasons for the dismissal of the first appeal were as under:-

“6.1. Further, it can also be seen that the assessee has taken fresh loans from the parties amounting to Rs.2,10,00,000/- for which no satisfactory documentary evidences in support of the same has been submitted by the assessee during the assessment as well as appellate proceedings. It can be seen that the assessee had taken new loan from the parties amounting to Rs.2,10,00,000/- for which the assessee paid interest of Rs.5,20,875/-. However, the interest against the said amount of Rs.2,10,00,000/- had to be only Rs.2,83,500/- for the period from 14.02.2022 to 31.03.2022 (i.e. 45 days), but, the assessee claimed excess interest expenses amounting to Rs.2,37,375/- which is not acceptable and is excess. In view of this fact as per the mercantile system of accounting the interest amount paid for the year had to be claimed as expenses for the relevant year. However, the assessee c