Loading judgment…
Facts
The assessee's appeal is against the CIT(A)'s order confirming the disallowance of interest of Rs. 14,79,863/-. The original assessment framed under section 143(3) had additions for unsecured loans. A subsequent rectification order under section 154 disallowed the interest claimed on these loans, which was upheld by the CIT(A).
Held
The Tribunal held that the issue of allowability of interest cannot be decided unless the quantum addition for the unsecured loans is first decided. Therefore, the matter was restored to the CIT(A) for deciding the quantum addition first and then the allowability of interest.
Key Issues
Whether the CIT(A) erred in confirming the disallowance of interest on unsecured loans before deciding the primary issue of the quantum addition of the loans themselves.
Sections Cited
68, 143(3), 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI RAHUL CHAUDHARY
This appeal by the assessee is preferred against the order dated 22/12/2023 by National Faceless Appeal Centre, Delhi pertaining to A.Y.2012-13.
The sum and substance of the grievance of the assessee is that the learned CIT(A) erred in confirming disallowance of Interest of Rs.14,79,863/- without appreciating that the quantum additions on account of unsecured loan u/s 68 of the Income Tax Act, 1961 (hereinafter “the Act”) are still under dispute before him.
Brief facts of the case are that the assessment was framed u/s 143(3) of the Act vide order dated 27/03/2015 in which the return income of the assessee was assessed at Rs.22,32,667/-. After making an addition on account of unsecured loan of Rs.1.95 cr from M/s. API Industries Pvt. Ltd and Rs.1,66,68,454/- from M/s. Gujarat Packaging. The assessee preferred an appeal against this addition. However, the AO did not disallow the interest claimed on the aforementioned loans, therefore, by way of a rectification order framed u/s 154 of the Act interst of Rs.14,79,863/- was disallowed. The assessee preferred an appeal against this order but the same was dismissed by the learned CIT(A).
After carefully going through the orders of the authoriites below, we are of the considered view that unless the quarel in respect of quantum addition is decided the issue relating to the allowibility of interest cannot be decided. Therefore, in the interest of justice and fair play, we deem it fit to restore the impugned issued to the file of the learned CIT(A). The learned CIT(A) is directed to decide the appeal in respect of quantum addition first and then decide the appeal relating to the allowability of the interest expenses after affording a reasonable and adequate opportunity of being heard to the assessee.
In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 01/07/2024