2013 (10) TMI 116 - HC - Income Tax

Whether assessee has incurred any expenses for the previous year, is required to be taken into consideration while passing the order of assessment Held that - Assessing Officer has to consider the same in accordance with law and pass an order on merits after providing an opportunity to the assessee to explain the expenditure incurred by him for the previous assessing year - The matter is remanded to the Assessing Officer for fresh consideration in accordance with law.

Summary

Issues:
- Appeal against the order passed by the Income Tax Appellate Tribunal for the assessment year 2003-2004.
- Dispute regarding additions made by the Assessing Officer.
- Appeal filed by the assessee before the Income Tax Appellate Tribunal.
- Consideration of substantial question of law related to unexplained investment, expenses, and interest.
- Whether the assessee adequately explained the investment, expenses, and interest incurred.

Analysis:
The appeal before the Karnataka High Court stemmed from the Income Tax Appellate Tribunal's order for the assessment year 2003-2004. The assessee, engaged in the transport business, had filed a return of income declaring Rs.1,83,90,075. Subsequently, the Assessing Officer made certain additions leading to an order of assessment on 29/03/2006. An appeal was filed before the Commissioner of Income Tax(Appeals), Bangalore, which was dismissed on 28/12/2007, affirming the Assessing Officer's order. The assessee then appealed to the Income Tax Appellate Tribunal, Bangalore, which allowed the appeal, prompting the revenue to file the present appeal.

The High Court admitted the appeal to consider the substantial question of law regarding the deletion of additions made by the Assessing Officer as unexplained investment, expenses, differences in building costs, and interest. The primary issue for consideration was whether the assessee adequately explained the investment, expenses, and interest incurred. The court heard arguments from both parties and concluded that the matter required fresh consideration by the Assessing Officer. It was noted that the question of whether the assessee had incurred expenses for the previous year was a factual matter that needed proper consideration during assessment. The court held that the Assessing Officer should reevaluate the matter in accordance with the law and provide the assessee with an opportunity to explain the expenditure incurred for the previous assessing year.

In light of the above analysis, the High Court allowed the appeal, setting aside the orders passed by the Assessing Officer, Commissioner of Income Tax(Appeals), Bangalore, and the Income Tax Appellate Tribunal. The matter was remanded to the Assessing Officer for fresh consideration in adherence to the legal provisions.