ITO 1(3)(2), MUMBAI vs. SAMETA EXPORTS P. LTD, MUMBAI

The facts relating to the issue are that the Assessing Officer noticed that part of interest expenditure claimed by the assessee in A.Y. 2004-05 and 2006- 07 was disallowed for the reason that the assessee has diverted interest bearing funds to give interest free advance to sister concern. During the year under consideration, the Assessing Officer noticed that the assessee was having unsecured loan of ` 30.67 crores in the liability side and it has given loan and advance to other parties to the tune of ` 16.87 crores. Accordingly, the Assessing Officer disallowed a sum of ` 40,75,530/-, being interest of ` 39,85,530/- relating to the loan taken from Saraswat Cooperative Bank and 2 Sameta Exports P. Ltd.

Learned Departmental Representative submitted that the revenue has challenged the relief granted by the learned CIT(A) in A.Y. 2004-05 and 2006- 07 by filing appeals before the ITAT. Accordingly the Ld D.R submitted that this appeal may also be clubbed with those appeals.

When enquired about the status of those appeals, the Ld A.R submitted that the appeal relating to A.Y. 2004-05 has since been heard by the Tribunal and order is awaited. He further submitted that the appeal relating to A.Y. 2006-07 is still pending before the Tribunal.

The Learned AR, on the contrary, objected to the clubbing of the appeals by submitting that the facts pertaining to the interest disallowance are totally different during the year under consideration, even though the Assessing Officer has followed the order passed by him in A.Y. 2004-05 & 2006-07. Explaining further, learned AR submitted that the assessee had taken loan from two banks during the year relating to A.Y. 2004-05, viz., Saraswat Cooperative Bank and ING Vyasya Bank. The loan taken from Saraswat Cooperative Bank was given as advance to a sister concern named M/s Pallor Trading Pvt. Ltd. in the year relating to A.Y. 2004-05. Hence, the Assessing Officer in A.Y. 2004-05 & 2006-07 had disallowed the interest on the reasoning that the interest bearing loans have been diverted to give interest free advance to its sister concern.

Learned AR submitted that interest pertaining to ING Vyasya Bank loan has not been disallowed in the earlier years, i.e., the same has been accepted

In the rejoinder, learned Departmental Representative submitted that the assessee is brining on record certain new facts, which have not been examined by the Assessing Officer.

Having heard the rival submissions, we are of the view that this issue requires fresh examination at the end of the Assessing Officer, since the assessee is bringing on record certain new facts which have not been considered by the Assessing Officer. Perusal of the assessment order would also show that the Assessing Officer has simply followed the decision taken by him in A.Y. 2004-05 without examining the factual aspects. In the similar manner, the Ld CIT(A) has also simply followed his earlier order. Since it is the claim of the assessee that the facts are totally different in this year and since these new facts require examination, we deem it proper to restore this issue to the file of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with the direction to examine it afresh by duly considering the information/explanations that may be furnished by the assessee. After providing adequate opportunity of being heard to the assessee, the Assessing Officer may taken appropriate decision in accordance with law.

In the result, appeal filed by the Revenue is allowed for statistical purposes.