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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM
O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 07.11.2023 for Assessment Year (AY) 2015-16.
Brief facts of the case are that the assessee is partnership firm engaged in the business of civil construction. The return of income for AY 2014-16 was filed on 11.09.2015 declaring Nil income. Against the said return of income, the assessment was completed by the Income Tax Officer, Wrd -2, Tiruvalla (hereafter “the AO”) accepting the returned income vide order dated 21.12.2017 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act).
BTECH Builders Subsequently the AO issued notice u/s. 154 of the Act dated 26.09.2018 proposing to rectify the assessment order to compute the eligible book profit u/s. 40(b) of the Act for the purpose of computing the eligible remuneration of the partners and also proposing to disallow the interest on Karur Vysya Bank loan availed for the office building during the period the building was not put to use, i.e., the building was put to use only on 07.10.2024. In response to the notice u/s. 154 the assessee contended that the interest on loan availed for the office building is eligible in view of the judgements of the Hon'ble Supreme Court in the case of DCIT vs. Core Health Care Ltd. 298 ITR 194 and the Hon'ble Madras High Court in the case of CIT vs. Thambi Modern Spinning Mills 341 ITR 229. However the AO rejected the above contentions and passed order u/s. 154 of the Act vide order dated 30.08.2019 disallowing the above two payments.
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order merely confirmed the action of the AO without adverting to the facts of the case and law governing the issues raised in the grounds of appeal. Hence, the appellant is in appeal before us in the present appeal.
When the appeal was called nobody attended despite due service of notice of hearing. Therefore after hearing the learned Sr. DR, I proceeded to dispose of the appeal on merits.
I heard the learned Sr. DR and perused the material available on record. The issue in the present appeal is with regard to the validity of the order passed by the AO u/s. 154 of the Act. The AO by invoking the provisions of section BTECH Builders 154 of the Act disallowed the interest on loan borrowed for the purpose of office building and also disallowed the excess remuneration to the partners. The assessee has contended the eligibility of interest on office building loan placing reliance on judgements of Hon'ble Supreme Court in Core Health Care Ltd. (supra) and Hon'ble Madras High Court in Thambi Modern Spinning Mills (supra). On appeal before the CIT(A) the appellant has made a detailed submission which is extracted by the CIT(A) at pages 2 to 4 of his order, challenging the addition as well as the validity of the proceedings u/s. 154 and also the jurisdiction of the AO to make the impugned addition. The CIT(A), without adverting to the facts and the written submission, merely confirmed the additions. The approach adopted by the CIT(A) is unreasonable and contrary to the principles of natural justice. Therefore, the order of the CIT(A) is set aside and remanded back to the CIT(A) with the direction to dispose the appeal on merits by passing a speaking order after affording opportunity of hearing to the assessee.
In the result, the appeal filed by the assessee stands allowed for statistical purposes.