2019 (8) TMI 1827 - AT - Income Tax

Disallowance u/s 36(1)(iii) - partial relief was granted by the ld. CIT(A) after considering the additional evidence filed - HELD THAT - From the perusal of the assessment order, it is clear that the addition on account of interest was made on the ground that interest component was not included in the closing work in progress whereas from the order of the ld. CIT(A) relief was granted under the provisions of Section 36(1) (iii) - CIT(A) has granted relief on all together on different premises from that of the Assessing Officer. Therefore in such circumstances, the only recourse available to the ld. CIT(A) is to grant an opportunity of hearing to the Assessing Officer before deleting the addition. The matter should be remanded back to the file of the ld. CIT(A) to decide the issue in proper prospective in accordance with law. Thus, the ground of appeal No.2 raised by the Revenue is partly allowed for statistical purpose. Addition made u/s.56(2) (viia) - CIT(A) granted relief after considering the fact that the difference of fair market value and the value adopted by the Assessing Officer is less than 1% - HELD THAT - Nothing was brought to our notice controverting the findings of the ld. CIT(A). In these circumstances, we uphold the order of the ld. CIT(A) in this issue. Accordingly, grounds of appeal 3 4 raised by the Revenue stand dismissed.

Summary

Issues Involved:
Appeal against the common order of the CIT(A) for assessment years 2013-2014 & 2014-2015.

Analysis:

Issue 1: Disallowance under Section 36(1)(iii) without opportunity under Rule 46A:
The Revenue challenged the CIT(A)'s deletion of disallowance under Section 36(1)(iii) without providing the AO an opportunity under Rule 46A. The Tribunal noted that the relief granted by the CIT(A) was based on different premises than the AO's addition. As such, it was deemed necessary for the CIT(A) to allow the AO an opportunity to be heard before deleting the addition. The matter was remanded back to the CIT(A) for proper consideration in accordance with the law.

Issue 2: Deletion of deemed income under Section 56(2)(viia):
The Revenue contested the CIT(A)'s deletion of deemed income under Section 56(2)(viia) without any legal precedent or application of the law. The Tribunal upheld the CIT(A)'s decision, noting that the difference in fair market value and the value adopted by the AO was less than 1%. No evidence was presented to challenge the CIT(A)'s findings, leading to the dismissal of the Revenue's appeal on this issue.

Issue 3: Monetary limit for appeal under Circular No. 3/2018:
Regarding the appeal for the assessment year 2014-2015, the Tribunal considered the monetary limit set by Circular No. 3/2018 issued by the CBDT. As the tax effect was less than Rs.20 lakhs, falling within the limit specified in the circular, the appeal was deemed not maintainable. The Tribunal dismissed the appeal in line with the circular, leaving the issues raised open for future examination if necessary.

Conclusion:
The Tribunal partly allowed the appeal for the assessment year 2013-2014 due to the remand on the disallowance issue, while dismissing the appeal for the assessment year 2014-2015 based on the monetary limit set by Circular No. 3/2018. The judgments were pronounced on the 8th day of August 2019 in Chennai.