2014 (12) TMI 1372 - AT - Income Tax

Disallowance of interest expenditure - rejection of books of accounts as the books of account is the basis for computation of book profits u/s 115JA - HELD THAT - As Revenue Authorities as well as the order of the Tribunal in the case of Hitesh S. Mehta 2013 (10) TMI 1065 - ITAT MUMBAI Whether the interest liabilities constitutes ascertained one or not is also linked to the issue of rejection of books of accounts as the books of account is the basis for computation of book profits u/s 115JA of the Act. This is common issue qua the issue adjudicated in the case of the Hitesh S. Mehta (supra) and matter was set aside. Respectfully following the said order the issue raised in ground no. 4 should be set aside to the files of the CIT (A) for fresh adjudication. Charging of interest u/s 234A 234B - HELD THAT - As assessee submitted that the assessee being a notified person there is no change of interest. It is his further submission that the receipts of the assessee are subjected to TDS. On the contrary Special Counsel for the Revenue filed various decisions of the Tribunal in support of the change of interest. The judgment of the jurisdictional High Court in the case of CIT vs. Devine Holdings Pvt Ltd 2012 (4) TMI 100 - BOMBAY HIGH COURT was relied on by the Spl. Counsel for the Revenue. During the rebuttal time Ld Counsel submitted that this issue should also revisit the file of the AO for removal of certain inaccuracies in calculating the interest. We order accordingly. Thus ground is allowed for statistical purposes.

Summary

Issues:
- Appeal involving AYs 2003-2004 and 2004-2005
- Delay in filing appeals before ITAT
- Grounds raised in the appeals
- Condonation of delay
- Disallowance of interest expenditure
- Charging of interest u/s 234A & 234B
- Levy of penalty u/s 271(1)(c)

Analysis:
1. Delay in Filing Appeals: The appeals for AYs 2003-04 and 2004-05 were delayed by 63 days and 38 days, respectively. The assessee explained the reasons for the delay, citing issues beyond their control. The ITAT, considering the justifications provided, condoned the delay and proceeded to adjudicate the appeals on merits.

2. Grounds Raised in Appeals: The grounds raised by the assessee in the appeals included issues related to the order passed by the CIT (A), natural justice principles, income assessment from attached assets, interest expenditure disallowance, and levy of interest u/s 234A & 234B.

3. Disallowance of Interest Expenditure: The ITAT referred to a similar case where the issue of interest expenditure disallowance was set aside for fresh adjudication by the CIT (A). Following this precedent, the ITAT decided to set aside the issue of disallowance of interest expenditure to the files of the CIT (A) for a fresh decision after considering the previous case.

4. Charging of Interest u/s 234A & 234B: Regarding the charging of interest under these sections, the ITAT considered the submissions of both parties. The assessee claimed to be a 'notified person' with no change of interest, while the Revenue presented various tribunal decisions and a judgment from the jurisdictional High Court. The ITAT ordered a revisit of this issue to the AO for rectification of inaccuracies in calculating the interest.

5. Levy of Penalty u/s 271(1)(c): The ITAT noted that the penalty levied under this section was set aside in a previous quantum appeal for fresh adjudication by the CIT (A). Consequently, the ITAT decided to set aside the penalty issue to the file of the CIT (A) for a decision in accordance with the law.

6. Conclusion: The ITAT partly allowed the assessee's appeals for statistical purposes, setting aside certain issues for fresh adjudication by the CIT (A) based on previous judgments and considerations of law. The orders were pronounced on 18th December 2014.