2012 (10) TMI 1064 - AT - Income Tax

Summary

Issues Involved:
1. Treatment of loss as business loss and its carry forward.
2. Deduction of interest expenditure as business expenditure.
3. Validity of service of notice u/s 143(2).

Summary:

1. Treatment of Loss as Business Loss and its Carry Forward:
The AO challenged the CIT(A)'s direction to treat the loss of Rs. 6,41,470/- as business loss and allow it to be carried forward for set-off against future business income. The Tribunal upheld the CIT(A)'s decision, dismissing the AO's appeal.

2. Deduction of Interest Expenditure as Business Expenditure:
The AO contested the CIT(A)'s decision to allow the deduction of interest expenditure of Rs. 15,48,694/- as business expenditure, not speculative business. The Tribunal upheld the CIT(A)'s decision, dismissing the AO's appeal.

3. Validity of Service of Notice u/s 143(2):
For AY 2003-04, the assessee argued that the notice u/s 143(2) was not served at the correct address. The Tribunal initially set aside the FAA's order and directed the AO to reconsider the service of notice. Upon reassessment, the AO maintained the validity of the notice. However, the FAA and subsequently the Tribunal found that the notice was not validly served, as it was sent to an old address and received by an unauthorized person. The Tribunal upheld the FAA's decision, dismissing the AO's appeal and allowing the assessee's cross-objections.

For AY 2005-06, the AO's notice u/s 143(2) was also contested for being served late and improperly. The FAA found the service invalid, and the Tribunal upheld this decision, dismissing the AO's appeal.

Conclusion:
The Tribunal dismissed the AO's appeals for both AY 2003-04 and AY 2005-06, upholding the FAA's decisions on all contested grounds, including the treatment of losses, interest deductions, and the validity of notice service u/s 143(2). The Tribunal emphasized the importance of proper service of notice for the validity of assessment proceedings.