VELVET HOLDINGS P.LTD,MUMBAI vs. DCIT CEN CIR 4 (3 ), MUMBAI

The only common issue raised in these two appeals by assessee is as regards to the order of CIT(A) confirming the action of the AO in making disallowance of interest expenditure and charging of interest under section 234A, 234B and 234C of the Act.

At the outset, the learned Counsel for the assessee first of all drew my attrition to the additional ground raised. The relevant ground raised in both the years is common and the grounds raised read as under: - “2001-02

The learned Commissioner of income tax (Appeals) ought to have appreciated 3 | P a g e & 6964/Mum/2018 Velvet Holdings Pvt. Ltd. that the total income of the Appellant was incorrectly recorded by the Assessing Officer as ₹62,816/- instead of correct amount of ₹(-) 62,816/- as per order Giving effect to the order of the Ld. CIT(A) dated 09.5.2013.”

It was contended that assessee has earned income by way of interest and this was offered by assessee for assessment and assessment was completed on that very basis but the AO has incorrectly recorded total income as positive in both the years as against assessed loss as is evident from grounds raised above. Hence, assessee requested that for admission of the additional grounds and adjudication of the same. The facts and circumstances are exactly identical in both the years and hence, a common order in both the years is being passed.

In the present case, the assessment was originally completed on 18.03.2004 & 20.03.2006 for AY 2001-02 and 2002-03 respectively under section 144 r.w.s. 147 of the Act determining the total income of the assessee on estimated basis at ₹ 6,61,137 & ₹ 6,60,000/- for AY 2001-02 and 2002-03 respectively. In the first round of litigation, the issues were then assailed before the CIT(A) wherein various details and information were submitted. These details were later remanded by the CIT(A) for verification and determination of income on the basis of said details. The assessee submitted the computation of income disclosing the total income of ₹ (-) 11,54,021/- in AY 2002-03 & ₹ (-) 11,30,964 in AY 2001-02. However, in the above referred Remand Report, after 4 | P a g e & 6964/Mum/2018 Velvet Holdings Pvt. Ltd. verification of details and information, the Assessing Officer stated that the interest expenses and audit fees aggregating to ₹ 10,96,955/- & ₹ 10,91,205/- for AY 2001-02 & 2002-03 respectively were not allowable as deduction, Accordingly, the total income of the assessee was determined in the said Remand Report at ₹ (-) 34,009 & ₹ (-) 62,816/- for AY 2001-02 & 2002-03 respectively.

The ClT(A) upheld the working of the Assessing Officer and disposed off the appeal vide his order dated 20.02.2013 in both the years. The orders giving effect to the said appellate order was passed on 09.05.2013 by the AO. However, in the said order, inadvertently and due to oversight, the Assessing Officer determined the income of the assessee at ₹34,009 instead of ₹(-) 34,009/- in AY 2001-02 & ₹ 62,816/- instead of ₹ (-) 62,816/- in AY 2002-03. Since the issue of disallowance of interest expenses was decided against the assessee, the said issue was challenged in appeal before the Tribunal; who vide its order dated 24.12.2014 in had set aside the issue to the file of the Assessing Officer.