PMS EXPORTS PVT LTD,MUMBAI vs. INCOME TAX OFFICER CIRCLE 7(3)(3), MUMBAI

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.