2014 (6) TMI 1090 - AT - Income Tax

Characterization of income - income of interest on fixed deposit saving - addition under the head profit and gains of business of profession - HELD THAT - The perusal of the assessment order reveals that the AO has not only taxed the income said stated in the show cause notice but also taxed the other incidental income not covered in the show cause notice which also included interest on fixed deposit. The perusal of the order of the Ld. CIT (A) reveals that this particular aspect of procedural irregularity/violation of the principle of natural justice committed by the AO has not been adjudicated by the Ld. CIT (A) while confirming the addition made by the AO despite the fact that the assessee has filed the written submissions before the Ld. CIT(A). CIT (A) has not even adjudicated on merits the legality of various additions including the income of interest on fixed deposit saving while confirming the action of the AO in taxing the impugned income under the head profit and gains of business of profession. It is just and proper to set aside the appeal to the file of the Ld. CIT (A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee we order and direct accordingly. Appeal filed by the Assessee is allowed for statistical purpose.

Summary

In the case before the ITAT Mumbai, the Assessee contested the decision of the CIT(A)-1, Mumbai, which upheld the Assessing Officer's (AO) taxation of Rs. 2,17,15,044 as "profit and gains of business or profession" for the Assessment Year 2009-10. This amount included various income types, notably interest on fixed deposits totaling Rs. 1,38,42,996.The Tribunal noted procedural irregularities, specifically the AO's failure to address the principle of natural justice by taxing income not covered in the initial show cause notice. The CIT(A) also did not address these procedural issues or the legality of the AO's additions, including the interest income.Consequently, the Tribunal found it appropriate to remand the case back to the CIT(A) for a fresh adjudication, ensuring the Assessee is given a "reasonable opportunity of being heard." The appeal was allowed for statistical purposes, and the order was pronounced on June 18, 2014.