1986 (12) TMI 84 - AT - Income Tax

Summary

Issues Involved:
1. Withdrawal of interest allowed under Section 244(1A) by the ITO.
2. Assessment of total income and tax liability.
3. Determination of annual value of the property and allowability of interest payments.
4. Procedural correctness of the ITO's orders and appellate orders.

Detailed Analysis:

1. Withdrawal of Interest Allowed Under Section 244(1A):
The primary objection raised by the Revenue was that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in holding that the Income Tax Officer (ITO) could not withdraw interest already allowed under Section 244(1A). The assessee, a Hindu Undivided Family (HUF), had initially received a refund of Rs. 14,542 as interest under Section 244(1A). The CIT(A) noted that the ITO had not provided any justification for withdrawing this interest and held that the ITO had no power to withdraw interest already allowed under Section 244(1A). The Tribunal agreed that the ITO's action lacked justification and upheld the CIT(A)'s decision.

2. Assessment of Total Income and Tax Liability:
The assessment was initially completed with a total income of Rs. 1,60,064, which was later reduced to Rs. 1,58,206 following the CIT(A)'s order. The Tribunal set aside issues related to the determination of the annual value of the house and the deductibility of interest paid to Sharma Estate Agency and Sharma Property Dealers. The ITO then reassessed the total income at Rs. 1,46,700, which was further reduced to Rs. 1,08,850 by the CIT(A). The final tax payable was Rs. 66,655 after considering TDS and other payments.

3. Determination of Annual Value of the Property and Allowability of Interest Payments:
The Tribunal had set aside the issues related to the determination of the annual value of the house in Greater Kailash, New Delhi, and the allowability of interest payments to Sharma Estate Agency and Sharma Property Dealers. These issues were remanded back to the ITO for fresh consideration. The reassessment by the ITO subsequently led to the revised total income and tax liability calculations.

4. Procedural Correctness of the ITO's Orders and Appellate Orders:
The Tribunal examined the procedural correctness of the ITO's orders and the appellate orders. The Tribunal found that the ITO had issued an order under Section 143(3)/254, which computed the total income and tax liability. However, the ITO's withdrawal of interest under Section 244(1A) was found to be unjustified as the ITO did not provide any reasons for this action. The Tribunal emphasized the need for a speaking order from the CIT(A) that considers the specific language and requirement of Section 244(1A). The Tribunal restored the matter to the CIT(A) for fresh consideration, directing the CIT(A) to hear both the assessee and the ITO and dispose of the issue in accordance with law.

Conclusion:
The appeal was deemed to be allowed for statistical purposes, with the Tribunal directing the CIT(A) to re-examine the issue of interest withdrawal under Section 244(1A) and issue a detailed speaking order after considering all relevant facts and legal provisions. The Tribunal did not express any final opinion on the legal or factual positions and remanded the matter for fresh consideration.