2022 (11) TMI 891 - AT - Income Tax

Revision u/s 263 - Disallowance of interest expenditure - HELD THAT - It is not a case wherein the learned CIT set aside the assessment order and directed the AO to conduct de novo assessment on this issue. Rather in this case assessment order was set aside on the specific issue discussed by the learned CIT. Thus, the AO was under obligation to comply with the limited directions issued by CIT vide order passed under section 263 of the Act instead of going into aspects that are beyond the directions under the aforesaid order. The fact as noted by the CIT(A) in the impugned order that during the year under consideration, the assessee has shown Revenue/income from the sale of wind power to the tune of Rs.3,13,39,657, and Revenue of Rs. 1,88,11,508, in immediately preceding year also justifies the fact that windmills in respect of which loan was obtained by the assessee were already in operation since preceding years and the interest claimed during the year is post the commencement of the project. In view of the aforesaid findings, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 1 raised by the Revenue is dismissed. Addition u/s 68 - AR submitted that though in the submission before the AO it is mentioned that details of unsecured loans are enclosed, however, no such details form part of the submission - HELD THAT - We deem it appropriate to remand this issue to the AO for de novo adjudication. The assessee is directed to furnish all the details in support of its claim in respect of this issue. Needless to mention that no order shall be passed without affording reasonable opportunity of being heard to the assessee. As a result, ground No. 2 raised in Revenue s appeal is allowed for statistical purposes.

Summary

Issues Involved:

1. Deletion of disallowance of interest expenditure.
2. Deletion of addition made under section 68 of the Income Tax Act, 1961.
3. Acceptance of additional evidence/submission without giving an opportunity to the Assessing Officer (AO) in contravention of Rule 46A of the IT Rules.

Issue 1: Deletion of Disallowance of Interest Expenditure

The Revenue challenged the deletion of the disallowance of Rs. 1,38,19,802/- made by the AO on account of interest expenditure. The AO had disallowed the interest expenditure, questioning the use of loans for the business related to windmill projects. The learned Commissioner of Income Tax (Appeals) [CIT(A)] allowed the appeal by the assessee, stating that the interest was paid to IDBI Bank for loans taken for windmill installation, and the windmills were operational, generating revenue. The CIT(A) noted that the loans were used for business purposes, and there was no evidence that the loans were diverted for non-business purposes. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order and dismissing the Revenue's ground.

Issue 2: Deletion of Addition Made Under Section 68

The Revenue contested the deletion of an addition of Rs. 30,33,734/- made under section 68 of the Act, which pertains to unexplained cash credits. The AO had made the addition due to the absence of proof of the genuineness of the transaction and the creditworthiness of the loan creditors. The CIT(A) allowed the appeal by the assessee, observing that the loan creditors were close family members with independent sources of income and substantial balances in their bank accounts. The Tribunal, however, noted that the assessee had not provided sufficient details to prove the genuineness and creditworthiness of the loan creditors. Consequently, the Tribunal remanded the issue back to the AO for de novo adjudication, allowing the assessee to furnish the necessary details.

Issue 3: Acceptance of Additional Evidence/Submission Without AO's Opportunity

The Revenue raised the issue of the CIT(A) accepting additional evidence without giving the AO an opportunity to examine it, allegedly contravening Rule 46A of the IT Rules. The Tribunal did not make a separate ruling on this issue but implicitly addressed it within the context of the other issues.

Conclusion

The Tribunal upheld the CIT(A)'s decision regarding the deletion of disallowance of interest expenditure but remanded the issue of the addition made under section 68 back to the AO for further examination. The appeal by the Revenue was partly allowed for statistical purposes.