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TMI Blog2016 (5) TMI 1370X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Appeals) directed to charge interest on account of delay in supplying the goods to the assessee. The ld. CIT(Appeals) noted in his findings that as per agreement, the delivery date for goods was between January,2005 to May,2005 which fact itself is mentioned in the agreement, copy of which is also filed at page 17 of the Paper Book. Therefore, M/s DLF International Ltd. could have delivered goods to the assessee during January,2005 to May,2005. Thus, no cause of action arises in favour of the assessee for charging any interest in financial year under appeal i.e. from January,2005 to March,2005. The findings of ld. CIT(Appeals) are absolutely incorrect and would not survive for making any addition on account of charging any interest duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2015 and appeal of the assessee was fixed for hearing on merit. 3. We have heard ld. Representatives of both the parties and perused the material available on record. 4. The ld. counsel for the assessee did not press ground Nos. 3 and 4 of the appeal. Same are, therefore, dismissed being not pressed. 5. On ground Nos. 1 and 2, assessee challenged the disallowance of part of proportionate interest u/s 36(1)(iii) of the Act. 6. Brief facts are that Assessing Officer noted that assessee had advanced interest free loan of ₹ 1.28 Cr to its sister concern M/s DLF International Ltd. The Assessing Officer also noted that assessee had incurred an interest expenditure of ₹ 63.93 lacs. The Assessing Officer asked the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , infact, a business advance, therefore, proportionate disallowance of interest on this advance for the period from 02.11.2004 to 31.03.2005 is not justified. The ld. CIT(Appeals), however, held that since there is a delay in supply of the goods to the assessee, therefore, assessee is entitled to charge interest and accordingly, directed to charge interest from January,2005 to March,2005 and partly allowed this ground of appeal of the assessee. His findings in para 3.3 of the impugned order are reproduced as under: 3.3 I have carefully considered the appellant's submissions and perused the documents filed by the appellant. As per the agreement between the appellant and M/s DFL International Ltd. the appellant placed an order for su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd any income due to the appellant for the year under reference should be accounted for during the year itself. In these circumstances, I hold that the income on account of interest on advance given to M/s DFL International Ltd. from January, 2005 to March, 2005 is taxable in the current year itself. Even if no interest was charged by the appellant for the period Jan 2005 to March 2005 in the subsequent year also, it would be case of income foregone and the same would be chargeable to tax in the current year. The AO is directed to compute the proportionate interest for this period and restrict the addition accordingly. These grounds of appeal are accordingly partly allowed. 9. After considering rival submissions, we are of the view l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) has changed the whole complexion of the addition as made by the Assessing Officer because Assessing Officer made disallowance under section 36(1)(iii) of the Act by disallowing proportionate interest. Thus, the ld. CIT(Appeals) enhanced the assessment in this way by making independent addition against the assessee in the impugned order. However, it is not clarified from the impugned order whether ld. CIT(Appeals) has given any notice for enhancing the assessment as per Section 251(2) of the Income Tax Act before issuing direction in this regard on new and independent issue. Therefore, in the absence of giving any opportunity to the assessee for making enhancement to the assessee, no addition could be made against the assessee. 10. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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