2023 (2) TMI 1331 - HC - Income Tax

ITAT non-adjudicating on the grounds raised by the assessees - Validity of reopening of assessment - disallowance of interest expenditure u/s 36(1)(iii) - HELD THAT - We find that the ground urged before the Tribunal was validity of reopening of assessment proceedings u/s 147 of the Act. However, we find from the order that instead of adjudicating on the grounds raised by the assessees before the Tribunal, Tribunal had remanded the appeals to the file of the assessing officer. In common order, Tribunal has held that assessing officer has to examine the assessee s fund position as well as the clinching issue as to whether the corresponding borrowings claimed to have been carrying no interest involving plotted land buyers, afresh and in light of all the evidence on wholesome basis only. We are afraid Tribunal was required to adjudicate on the grounds which were urged before it by the assessees/appellants. Remanding the matter in its entirety to the assessing officer has caused serious prejudice to the appellants in as much as even those reliefs which have been granted by the first appellate authority would now stand nullified in view of the Tribunal s direction to the assessing officer to re-do the whole exercise in its entirety. No cross-appeals were filed by the revenue against the order of the first appellate authority granting substantial relief to the assessees/ appellants. That being the position, we set aside the common order of the Tribunal 2022 (3) TMI 1422 - ITAT HYDERABAD and direct the Tribunal to hear the appeals before it on the limited grounds urged by the appellants, namely, disallowance of interest expenditure under Section 36(1)(iii) of the Act to the extent disallowed by the first appellate authority as well as the validity of the re-assessment proceedings. Questions framed answered in favour of the appellants/assessees and against the revenue.

Summary

Issues:
1. Validity of reopening of assessment proceedings under Section 147 of the Income Tax Act
2. Disallowance of interest expenditure under Section 36(1)(iii) of the Act

Analysis:
1. The judgment concerns a batch of income tax appeals filed under Section 260A of the Income Tax Act, 1961, challenging a common order passed by the Income Tax Appellate Tribunal, Hyderabad Bench 'A'. The main issues raised included the jurisdiction of the assessing officer in initiating reassessment under Section 147, misdirection by the Tribunal in dealing with certain contentions, failure to appreciate reasoning from related appeals, and the justification of remanding the matter for further examination.

2. The Senior Counsel for the appellant proposed substantial questions of law, including the correctness of the Tribunal's decision to uphold the assessing officer's jurisdiction for reassessment, the misdirection in dealing with specific contentions, and the failure to consider related appeal reasoning. The Tribunal's decision to remand the matter for re-examination regarding interest stipulation on borrowings and advances was also challenged.

3. The High Court found that the Tribunal had erred in remanding the appeals to the assessing officer instead of adjudicating on the grounds raised by the appellants. This action was deemed prejudicial to the appellants as it nullified reliefs granted by the first appellate authority. Notably, no cross-appeals were filed by the revenue against the first appellate authority's decision, which granted substantial relief to the appellants.

4. Consequently, the High Court set aside the Tribunal's order and directed it to hear the appeals on the limited grounds raised by the appellants, specifically focusing on the disallowance of interest expenditure under Section 36(1)(iii) and the validity of the reassessment proceedings. The questions framed were answered in favor of the appellants, leading to the allowance of the appeals without any order as to costs. Any pending miscellaneous applications in the appeal were also ordered to be closed.