PRINCIPAL COMMISSIONER OF INCOME TAX - CIRCLE-3 vs. SH. SHYAM SUNDER JINDAL

After hearing counsel for the parties, we held that the question proposed by the appellant/revenue concerning the power of rectification exercised by the Income Tax Appellate Tribunal [in short “Tribunal”], under Section 254(2) of the Income-tax Act, 1961 [in short, “Act”], did not arise for consideration, for the reasons given therein. 4. Thus, we confined the above-captioned appeals to the second question proposed by the appellant/revenue. For convenience, the relevant parts of the order dated 26.03.2021 are extracted hereafter: “2. Issue notice to the respondent-assessee.

Mr. Rohit Jain accepts service on behalf of the respondent-assessee.

The captioned appeals have been filed by the revenue. Via these appeals, challenge is laid to the common order dated 20.12.2019 passed by the Income Tax Appellate Tribunal (in short 'Tribunal') in exercise of its powers under Section 254(2) of the Income Tax Act, 1961. The order concerns the assessment years (in short AYs) 2008-2009 to 2011-2012.

The record shows that the Tribunal, in an earlier round, had dealt with the AYs 2007-2008 to 2011-2012. These were the appeals which had been filed by the assessee.

It is in this background that a rectification application was filed by the assessee which was disposed of by the Tribunal via the impugned order dated 20.12.2019.

Ms. Vibhooti Malhotra, who appears on behalf of the revenue, says that the Tribunal ought not to have reversed, albeit partially, its order dated Digitally Signed By:VAISHALI CHAUHAN Signing Date:03.01.2024 17:24:40 Signature Not Verified 03.09.2019 concerning notional interest in exercise of powers under Section 254(2) of the Act as this was not an error apparent on the face of the record.

We have perused the order of the Tribunal which is indicative of the fact that the issue regarding notional interest was not the subject matter of assessment year 2007-2008. This issue arose only in AYs 2008-2009 to 2011-2012.

The Tribunal, therefore, took a view that since it had not ruled on this aspect of the matter, the direction concerning remand could not apply to the said issue. It is on this basis that the rectification application was allowed and the matter was decided on merits. On merits, the Tribunal ruled in favour of the assessee by applying its own decision in the case of Krishna Kumar Modi dated 05.07.2019 passed in ITA No.2892/Del/2017. The Tribunal was of the view that since no material was available on record as to the interest received by the assessee, the same could not be added to his taxable income, albeit, on a notional basis. Based on this rationale, the issue with regard to the notional interest was decided in favour of the assessee.

Having regard to our discussion above, in our opinion, the Tribunal exercised its powers, correctly, under Section 254(2) of the Act. Since the issue regarding notional interest is not adverted to in the order dated 03.09.2019, they were entitled to recall the order qua the said issue.

Therefore, in our view, the first question of law does not arise for our consideration. The prayer made, in that behalf, is declined.

Insofar as the second question of law is concerned, we will consider the same along with assessee's appeal i.e. ITA No.612/2017 whereby the direction of remand qua the existence of the bank deposits has been assailed. This appeal, i.e. ITA No.612/2017, we are told, was Digitally Signed By:VAISHALI CHAUHAN Signing Date:03.01.2024 17:24:40 Signature Not Verified admitted by this Court vide order dated 13.11.2017 which was corrected on 01.08.2019.

Accordingly, list the captioned appeal on 05.08.2021 along with ITA No.612/2017.” [Emphasis is ours] 5. As would be evident on a perusal of the extract of the order dated 26.03.2021, insofar as the proposed second question was concerned, we had directed that it would be heard with the respondent’s/assessee’s appeal i.e., ITA 612/2017. That appeal i.e., ITA 612/2017 was listed on our board today. 6. We have heard arguments in the appeal, and for the reasons provided in that order, ruled in favour of the respondent/assessee. 7. With the consent of the counsel for the parties, the above-captioned appeals are taken up for hearing today itself. The following second proposed question of law is admitted for consideration: “B. Whether on facts and in the circumstances of the case and also on the prevailing law, Hon'ble ITAT was legally justified in holding the interest income added by the AO as notional whereas the outstanding balance in HSBC account was interest bearing and there was no materials before Ld. ITAT to hold such interest as notional?” 8 Mr Abhishek Maratha, learned senior standing counsel, who appears on behalf of the appellant/revenue cannot but accept that the result of these appeals is inextricably linked with the result of ITA 612/2017. 9. Since we have concluded in ITA 612/2017 that the impugned addition would have to be deleted as no incriminating material was found during the search, in our opinion, the AO could not have calculated notional interest on Digitally Signed By:VAISHALI CHAUHAN Signing Date:03.01.2024 17:24:40 Signature Not Verified the addition originally made by him. 10. Therefore, the aforementioned question of law is answered in favour of the respondent/assessee and against the appellant/revenue. 11. The appeals are, accordingly, disposed of in the aforesaid terms.