2015 (3) TMI 1175 - HC - Income Tax

Rectification of mistake - Disallowance of interest claimed on the loans borrowed from the banks and other institutions - Held that - The Appellate Commissioner has considered the appeal filed by the assessee against the disallowance of interest claimed on the loans borrowed from the banks and other institutions and allowed the interest as claimed by the assessee after assigning reasons. With regard to the appeal filed under section 154 of the Act no reasons are assigned by the Appellate Commissioner. On this issue, the appeal was allowed with an observation that in view of the finding given in the main appellate order it becomes consequential in nature and, accordingly, the appeal as regards section 154 of the Act succeeds, against which appeals were filed by the Revenue before the Tribunal including the grounds of appeal on the issue of section 154 of the Act. Cross-objections were filed by the assessee on this issue. The Tribunal proceeded on a misconception that no challenge was made by the Revenue as regards the order of the Appellate Commissioner on the issue of section 154 of the Act ignoring the ground of appeal filed by the Revenue. Thus, it is manifest that the Appellate Commissioner and the Tribunal failed to adjudicate the matter in a right perspective. The order impugned is passed without the application of mind. The finding given on the proceedings under section 154 of the Act is perverse and not sustainable. We deem it proper to remand the matter back to the Appellate Commissioner to adjudicate on the issue of section 154

Summary

Issues:
Challenging order of Income-tax Appellate Tribunal for assessment year 2002-03.

Analysis:
1. The Revenue filed appeals against the order of the Income-tax Appellate Tribunal for the assessment year 2002-03. The issue arose from the incorrect claim made by the assessee under section 54 of the Income-tax Act, 1961, for the assessment year 2001-02. The Assessing Officer allowed the deduction under section 54 for the sale of shares, which was later found to be wrongly claimed. Consequently, a notice was issued under section 154 of the Act to rectify the mistake.

2. The assessee acknowledged the error and filed a revised computation claiming benefits under sections 54F and 54EC of the Act. The Assessing Officer partially allowed the investment claim, and the remaining amount was brought to tax. The assessee appealed against this decision, along with challenging the order under section 154. The Appellate Commissioner granted relief in the regular assessment appeal but did not consider the section 154 issue on its merits, deeming it consequential to the original assessment.

3. Subsequently, the Revenue appealed to the Income-tax Appellate Tribunal against the Appellate Commissioner's order. The Tribunal independently disposed of the appeal against the assessment order but rejected the Revenue's appeal on the section 154 issue. The Tribunal allowed the assessee's cross-objection on the jurisdiction of the Assessing Officer under section 154. The Revenue then filed appeals questioning the Tribunal's decisions on substantial legal questions.

4. Upon review, the High Court found that both the Appellate Commissioner and the Tribunal failed to properly address the section 154 issue. The Court deemed the Tribunal's decision as lacking proper consideration and unsustainable. Consequently, the Court set aside the Tribunal's order and remanded the matter back to the Appellate Commissioner for a lawful adjudication on the section 154 issue.

5. The High Court answered the substantial legal questions in favor of the Revenue and against the assessee. The appeals were allowed based on the Court's findings, emphasizing the need for a proper reconsideration of the section 154 matter by the Appellate Commissioner in accordance with the law after hearing all parties involved.