SHRI ASHOK KUMAR GOYAL, BEAWAR V. ITO, WARD-1, BEAWAR

ITA 1219/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4959 (ITAT-JAIPUR)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 29-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANCHAL MEENA CIT DHK
• Keywords: Reopening of assessment; Business income; Business expenditure; Audit objection; Period of limitation; Proportionate interest; Question of law; Difference of opinion; Reason to believe; Change of opinion; Set aside
• Section: 143(3); 143(2); 139(1); 13; 153; 22; 147; 148; 54; 56; 154; 15

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH VC SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 1219/JP/2019 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14. SHRI ASHOK KUMAR GOYAL, 34, LAXMI MARKET, BEAWAR, AJMER. CUKE VS. THE INCOME TAX OFFICER, WARD 1, BEAWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABDPG 9626 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI PC PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. CHANCHAL MEENA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 14.10.2020. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 15/10/2020. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 13.11.2018 OF LD. CIT (A)-2, JAIPUR ARISING FROM THE ORDER PASSED UNDER SECTION 154 OF THE IT ACT FOR THE ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE VALIDITY OF THE ORDER PASSED BY AO U/S 147 OF IT AC T, 1961. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES OF RS. 2,62,636/- CLAIMED BY THE ASSESSEE AGAINST THE BUSINESS INCOME BY INCORRE CTLY HOLDING THAT ASSESSEE COULD NOT PROVE THAT INTEREST BEARING BORROWED FUNDS WAS UTILIZED FOR BUSINESS PURPOSE. 2 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. 3. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 4. NECESSARY COST BE AWARDED TO THE ASSESSEE. THE HEARING OF THE APPEAL IS CONCLUDED THROUGH VIDE O CONFERENCE DUE TO PREVAILING CONDITION OF COVID 19 PANDEMIC. GROUND NO. 1 IS REGARDING VALIDITY OF REASSESSMENT ORDER PASSED UNDER SECTION 147 OF THE IT ACT. 2. THE ASSESSEE FILED HIS RETURN OF INCOME UNDER SE CTION 139(1) ON 27.08.2013 DECLARING TOTAL INCOME OF RS. 7,47,850/-. THE ASSE SSMENT WAS COMPLETED UNDER SECTION 143(3) AT A TOTAL INCOME OF RS. 8,23,430/- ON 30 TH JANUARY, 2016. THEREAFTER, THE AO REOPENED THE ASSESSMENT BY ISSUING A NOTICE UNDER SECTION 148 ON 23 RD FEBRUARY, 2018 TO ASSESS THE INCOME ON ACCOUNT OF E XCESS DEDUCTION OF INTEREST PAID UNDER SECTION 57(3) OF THE IT ACT. THE REASSESSMEN T WAS COMPLETED ON 26 TH NOVEMBER, 2018 WHEREBY THE AO HAS DISALLOWED INTERE ST OF RS. 2,64,318/- BEING AN EXCESS AMOUNT CLAIMED AGAINST THE INCOME FROM OTHER SOURCES. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT (A) AND ALSO CHALLENGED THE VALIDITY OF REOPENING AS WELL AS REASSESSMENT ORDER PASSED UNDER SECTION 147. THE LD. CIT (A) HAS DISMISSED THE GROUND RAISED BY THE ASSESSEE AGAINST THE VALIDITY OF REOPENING OF THE ASSESSMENT. HOWEVER, NO FINDING I S GIVEN IN RESPECT OF THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE VALID ITY OF THE REASSESSMENT ORDER PASSED BY THE AO. 3 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. 3. BEFORE THE TRIBUNAL, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE FILED THE OBJECTIONS AGAINST THE NOTICE IS SUED UNDER SECTION 148 VIDE LETTER DATED 14 TH MARCH, 2018 PLACED AT PAGES 23 AND 24 OF THE PAPER BOOK. HOWEVER, THE AO HAS NOT DISPOSED OFF THE OBJECTIONS RAISED BY TH E ASSESSEE BEFORE PASSING THE REASSESSMENT ORDER. THUS THE LD. A/R HAS SUBMITTED THAT THE ORDER PASSED BY TYE AO WITHOUT DISPOSING OFF THE OBJECTIONS IS BAD IN L AW AND LIABLE TO BE QUASHED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE F OLLOWING DECISIONS :- M/S. K.C. MERCANTILE LTD. VS. DCIT DB IT APPEAL NO. 292/2016 (RAJ. HC) SHRI MANOJ DUBEY VS. ITO ITA NO. 332 TO 334/JP/2019 ORDER DATED 26.02.2020 (JAIPUR TRIB.) 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE ASSESSEE HAS NOT RAISED ANY OBJECTION BEFORE THE AO REGARDING NON DI SPOSAL OF THE OBJECTIONS AND ONLY AFTER COMPLETION OF THE REASSESSMENT, THE ASSESSEE HAS RAISED THIS ISSUE. FURTHER, NON COMPLYING THE LAW AS LAID DOWN BY THE HONBLE S UPREME COURT IN THE CASE OF GKN DRIVESHAFT, 259 ITR 19 (SC) IS ONLY A PROCEDURA L IRREGULARITY WHICH WOULD NOT RENDER THE ASSESSMENT NULL AND VOID BUT THE SAME CA N BE RECTIFIED. SHE HAS RELIED UPON THE DECISION OF HONBLE MADRAS HIGH COURT IN C ASE OF HOME FINDERS HOUSING LTD. VS. ITO, 404 ITR 611 (MADRAS) AND THE SLP FILE D BY THE ASSESSEE AGAINST THE SAID DECISION WAS ALSO DISMISSED BY THE HONBLE SUP REME COURT IN 256 TAXMAN 59 (SC). SHE HAS RELIED UPON THE ORDER OF THE LD. CIT (A). 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE LD. CIT (A) THOUGH REPRODUCED THE OBJE CTIONS RAISED BY THE ASSESSEE 4 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. AGAINST THE VALIDITY OF THE REOPENING OF THE ASSESS MENT AS WELL AS VALIDITY OF THE ASSESSMENT ORDER PASSED BY THE AO. THE SUMMARY OF THE CONTENTIONS AND THE FINDING OF THE LD. CIT (A) AT PAGE 9 OF THE IMPUGNE D ORDER ARE AS UNDER :- SUMMARY : 1. (A) WE SUBMIT THAT REGULAR ASSESSMENT WAS COMPLETED AFTER THOROUGH EXAMINATION OF ALL BOOKS OF ACCOUNTS, VOUC HER DETAILS, PAPERS AND EVIDENCE AND SPECIFIC QUERIES WERE REPLI ED AND EVIDENCES GIVEN AND AFTER APPLICATION OF MIND, THE REGULAR ASSESSMENT WAS COMPLETED. THEREFORE, RE-OPENING OF ASSESSMENT U/SEC. 147/148 IS BAD IN LAW AND CHANGE OF OPINION IS NOT VALID AND BAD IN LAW B ASED ON VARIOUS JUDICIAL DECISIONS AS SUMMARIZED ABOVE. HENCE RE-OPENED ASSESSMENT IS BAD IN LAW AND DESERV ES TO BE QUASHED. (B) THAT THE ASSESSMENT WAS RE-OPENED ON THE BASIS OF AUDIT OBJECTION BY AUDIT PARTY AS CLEAR FROM RECORD OF TH E ASSESSEE. (C) THAT THE INTEREST PAID IN NEXUS WITH INTEREST I NCOME EARNED AND INTEREST IS FULLY ALLOWABLE AND THE ADDITION DESERV ES TO BE DELETED. (D) THAT THE OBJECTION OF RE-ASSESSMENT WAS NOT REJ ECTED BY SPEAKING ORDER THEN THE ORDER U/SEC 147 IS NOT A VA LID ORDER AND DESERVES TO BE REJECTED. THEREFORE, IT IS CLEAR THAT RE-OPENED ASSESSMENT IS BAD IN LAW, ILLEGAL, UNJUSTIFIED AND DESERVES TO BE CANCELLED. SO THE INTEREST PAID IS FULLY ALLOWED AND NO DISALL OWANCES TO BE MADE OF THE SAME. 4.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER, STATE MENT OF FACTS, GROUNDS OF APPEAL AND WRITTEN SUBMISSION CAREFULLY. IT IS SEEN THAT AO HAD IN HIS POSSESSION, THE INFORMATION THAT THE EXC ESS INTEREST OF RS. 2,64,318/- WAS ALLOWED BY THE AO WHILE COMPLETING T HE ASSESSMENT U/S 143(3) ON 30.01.2016. IT IS NOT A CASE OF CHANGE OF OPINION. THEREFORE, IT IS HELD THAT THE AO HAD SUFFICIENT MATERIAL WITH HIM TO FORM THE BELIEF THAT EXCESS DEDUCTION OF THE INTEREST OF RS. 2,64,318/- WAS ALLOWED BY THE AO WHILE COMPLETING THE ASSESSMENT U /S 143(3) ON 30.01.2016. ACCORDINGLY, THE REOPENING OF ASSESSMEN T U/S 147 AND 5 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. ISSUE OF NOTICE U/S 148 FOR THE A.Y. 2013-14 BY THE AO ARE HELD TO BE VALID AND IN ACCORDANCE WITH THE PROVISIONS OF LAW. HENCE, THIS GROUND OF APPEAL IS DISMISSED. THUS THE ASSESSEE HAS RAISED A SPECIFIC OBJECTION T HAT WHEN THE OBJECTIONS OF THE ASSESSEE WAS NOT REJECTED BY A SPEAKING ORDER, THEN THE ORDER PASSED UNDER SECTION 147 IS NOT VALID AND DESERVES TO BE QUASHED. THE L D. CIT (A) THOUGH GIVEN A BRIEF FINDING ON THE ISSUE OF VALIDITY OF REOPENING, HOWE VER, HE HAS NOT DEALT WITH THE SPECIFIC OBJECTION RAISED BY THE ASSESSEE AGAINST T HE REASSESSMENT ORDER FOR WANT OF DISPOSING OFF THE OBJECTIONS AGAINST THE NOTICE UND ER SECTION 148 PRIOR TO THE REASSESSMENT ORDER PASSED BY THE AO. AT THE OUTSET , I NOTE THAT THIS TRIBUNAL IN CASE OF MANOJ DUBEY VS. ITO (SUPRA) HAS CONSIDERED AN IDENTICAL ISSUE IN PARA 8 TO 11 AS UNDER :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THIS CASE, NOTICE U/S 148 O F THE ACT WAS ISSUED BY THE ASSESSING OFFICER ON 03.03.2017 WHICH WAS DU LY SERVED ON THE ASSESSEE ON 04.03.2017. IN RESPONSE, THE ASSESSEE S UBMITTED THAT RETURN OF INCOME FILED BY THE ASSESSEE ON 19.05.201 7 MAY BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. THE ASSESSEE FURTHER REQUESTED FOR THE REASONS ON T HE BASIS OF WHICH THE MATTER HAS BEEN REOPENED BY THE AO. THEREAFTER THE REASONS WERE SUPPLIED TO THE ASSESSEE AND THEREAFTER THE ASSESSE E FILED A LETTER DATED 24.08.2017 WITH THE ASSESSING OFFICER OBJECTI NG TO THE REASONS SO RECORDED BY HIM AND THE CONTENTS OF THE SAID LETTER READS AS UNDER:- THE ASSESSEE IS DEALING IN THE BUSINESS OF PURCHAS E AND SALE OF FISH AQUARIUMS & ALLIED PRODUCTS. 6 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. THE ASSESSEE FILED ITS RETURN OF INCOME FOR ASSESSM ENT YEAR 2010-2011 ON 30/07/2011 DECLARING AN INCOME OF RS. 1,06,435/- ALONG WITH ITS RETURN OF INCOME. THE ASSESSEE ALSO FILED A STATEME NT OF COMPUTATION OF INCOME. THE ASSESSEEE RECEIVED A NOTICE DT. 04/03/2017 ISSU ED UNDER SECTION 148 OF THE ACT. INTER ALIA, STATING THAT THE AO HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 20 10-11 HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT AND CONSEQUENTLY, HE PROPOSED TO REASSESS THE ASSESSEE' S INCOME FOR THE SAID YEAR. THE ASSESSEE FILED A RETURN ON DT. 19/05/2017 ACKNO WLEDGMENT NUMBER 777637460190517 IN RESPONSE TO YOUR ABOVE RE FERRED NOTICE U/S 148. THE ASSESSEE REQUESTED FOR THE REASONS FOR REOPENIN G AND PURSUANT TO ITS REQUEST, YOUR HONOUR PROVIDED THE REASONS AS RE CORDED. THE ASSESSEE WANTS TO OBJECT THE REASONS WHICH WERE RECORDED FOR RE- OPENING OF ASSESSMENT. THE REASON ARE AS UNDER :- 'THE ASSESSEE HAS FILED HIS RETURN OF INCOME FOR TH E YEAR UNDER CONSIDERATION ON 30/07/2011 DECLARING TOTAL I NCOME OF RS. 106440/-. THE ITO, JAIPUR CONDUCTED ENQUIRY IN THIS CASE. IT IS GATHERED THAT THE ASSESSEE HAS DEPOSITE D CASH IN HIS BANK ACCOUNT AMOUNTING TO RS. 297000/-. SOURCE OF WHICH WAS FOUND UNVERIFIABLE. IN VIEW OF THE ABOVE AND ON THE BASIS OF MATERIAL AVAILABLE ON REC ORD I HAVE REASON TO BELIEVE THAT, INCOME OF RS. 2,97,000 /- HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE IT ACT 1961'. 7 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. IN THE PRESENT CASE, THE PETITIONER QUESTIONS THE A SSUMPTION OF JURISDICTION TO REOPEN THE ASSESSMENT PRINCIPALLY O N THE GROUND THAT THERE HAS BEEN NO FAILURE ON THE PART OF THE PETITI ONER TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE PETITIONER HAS NOT FAILED TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT AND THAT THE REOPENING OF ASSESSMENT HAS BEEN OCCASIONED BY CHANGE IN OPINION, WHICH IS IMPERMISSIBLE. THE ASSESSEE HAS DEPOSITED CASH IN BANK ACCOUNT AMO UNTING TO RS. 2,97,000/. SOURCE OF WHICH WAS SALE PROCEEDS OF 22 KT PLAIN GOLD JEWELLERY AMOUNTING OF RS. 3,49,000/-. THE SOURCE OF BANK DEPOSITED IS VERIFIABLE AND FULL Y EXPLAINED. IN VIEW ABOVE FACTS YOUR HONOUR IS REQUESTED TO DRO P REASSESSMENT PROCEEDING AND DECIDE OBJECTION BY SPEAKING ORDER. 9. WE THEREFORE FIND THAT THE UNDISPUTED FACTS WHIC H ARE EMERGING FROM THE RECORDS ARE THAT IN RESPONSE TO NOTICE U/S 148, THE ASSESSEE FILED HIS RETURN OF INCOME, THE REASONS WERE REQUESTED TO BE SUPPLIED TO HIM WHICH WERE DULY SUPPLIED BY THE ASSESSING OFFICER A ND THEREAFTER, THE ASSESSEE FILED HIS OBJECTIONS ON 24.08.2017 TO THE SAID REASONS GIVING DETAIL JUSTIFICATION OF SOURCE OF CASH DEPOSITS IN HIS BANK ACCOUNT. ON THE SAME DATE, THE NOTICE U/S 143(2) WAS ISSUED AND THE MATTER WAS FIXED FOR HEARING ON 12.09.2017, THEREAFTER AFTER C ONSIDERATION OF THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSMENT WAS COM PLETED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 22.12 .2017. FURTHER, FROM PERUSAL OF THE RECORDS AS WELL AS THE ASSESSME NT ORDER, WE FIND THAT THE ASSESSING OFFICER HAS PROCEEDED WITH THE A SSESSMENT PROCEEDINGS AND PASSED THE ORDER U/S 143(3) R.W.S. 147 WITHOUT DISPOSING OFF THE OBJECTIONS SO RAISED BY THE ASSES SEE THROUGH A SEPARATE ORDER. FURTHER, THERE IS NO NARRATION EVE N IN THE ASSESSMENT ORDER THAT BEFORE COMPLETING THE ASSESSMENT PROCEED INGS, THE 8 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. OBJECTIONS WERE DISPOSED OFF. DISPOSING OFF THE OB JECTIONS RAISED BY THE ASSESSEE AGAINST THE REASONS RECORDED BEFORE IS SUANCE OF NOTICE U/S 148 THOUGH NOT PART OF STATUTORY REQUIREMENT AS PRESCRIBED UNDER THE INCOME TAX ACT, HOWEVER, THE SAME IS GUIDED BY THE DIRECTIONS ISSUED BY THE HONBLE SUPREME COURT IN CASE OF GKN DRIVESHAFTS (INDIA) LTD (SUPRA). THERE IS THUS A CLEAR VIOLATI ON OF THE DIRECTIONS ISSUED BY THE HONBLE SUPREME COURT. THE QUESTION THAT ARISES FOR CONSIDERATION IS WHETHER SUCH VIOLATION OF THE DIRE CTIONS ISSUED BY THE HONBLE SUPREME COURT IS A MERE TECHNICALITY AND BR EACH OF SUCH TECHNICALITY CAN BE MADE GOOD BY REMANDING THE MATT ER BACK TO THE FILE OF THE ASSESSING OFFICER. ALTERNATIVELY, WHETH ER THE SAME IS IN NATURE OF AN ILLEGALITY WHICH HAS PREJUDICED THE IN TEREST OF THE ASSESSEE TO CHALLENGE THE SAME BEFORE THE COURTS AS THE ASSE SSING OFFICER HAS ALREADY PASSED THE REASSESSMENT ORDER AND THUS CANN OT BE CURED AND WILL RESULT IN QUASHING OF THE REASSESSMENT ORDER. IN THIS REGARD, WE FIND THAT SIMILAR ISSUE HAS COME UP FOR CONSIDERATI ON BEFORE THE HONBLE RAJASTHAN HIGH COURT IN CASE OF M/S K.C. MERCANTILE VS. CIT (SUPRA) WHEREIN THE TRIBUNAL HAS REMANDED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DISPOSING OFF THE OBJECTIONS AND IN THAT CONTEXT, THE FOLLOWING SUBSTANTIAL QUESTION OF LAW WAS FRAMED BY THE HONBLE HIGH COURT WHICH READS AS UNDER: WHETHER UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD TRIBUNAL WAS JUSTIFIED IN NOT DECLARING THE REASSES SMENT PROCEEDINGS AND CONSEQUENTIAL ASSESSMENT ORDER PASSED THERETO A S NULLITY? AND THE RELEVANT FACTS AND FINDINGS ARE CONTAINED I N PARA 4, 4.1 AND 8 WHICH READS AS UNDER:- 4. COUNSEL FOR THE APPELLANT HAS CONTENDED THAT TH E PRESENT APPEAL IS ARISING OUT OF THE JUDGMENT AND ORDER OF THE TRI BUNAL WHEREBY 9 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. TRIBUNAL HAS UPHELD THE CONTENTION OF THE APPELLANT AND REMITTED BACK THE MATTER FOR REASSESSMENT WHICH WILL GIVE A SECOND INNING TO THE ASSESSING OFFICER WHO HAS TO DO REASSESSMENT WITHIN A PERIOD OF 9 MONTHS AND HE WILL GET EXTENDED TIME OF LIMITATION WHICH IS NOT THE OBJECT OF THE INCOME TAX ACT. WHEN THE COURT HAS ALREADY FIXED THE PERIOD, IT IS TO BE CONSTRUED IN A VERY STRICT SENSE AND HAS TO BE APPLIED. 4.1 IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPO N THE FOLLOWING DECISIONS: 1. KSS PETRON PRIVATE LTD. VS. ACIT, ITA NO. 227/2014, 03.10.2016 HOLDING AS UNDER:- 7. ON FURTHER APPEAL, THE TRIBUNAL PASSED THE IMP UGNED ORDER. BY THE IMPUGNED ORDER IT HELD THAT THE ASSESSING OFFICER W AS NOT JUSTIFIED IN FINALIZING THE ASSESSMENT, WITHOUT HAVING FIRST DIS POSED OF THE OBJECTIONS OF THE APPELLANT. THIS IMPUGNED ORDER HO LDS THE ASSESSING OFFICER IS OBLIGED TO DO IN TERMS OF THE APEX COURT 'S DECISION IN GKN DRIVESHAFTS (INDIA) LTD., V/S ITO 259 ITR 19. IN TH E AFORESAID CIRCUMSTANCES, THE ORDER OF THE CIT(A) AND THE ASSE SSING OFFICER WERE QUASHED AND SET ASIDE. HOWEVER, AFTER HAVING SET AS IDE THE ORDERS, IT RESTORED THE ASSESSMENT TO THE ASSESSING OFFICER TO PASS FRESH ORDER AFTER DISPOSING OF THE OBJECTIONS TO REOPENING NOTI CE DATED 28 TH MARCH, 2008, IN ACCORDANCE WITH LAW. 8. WE NOTE THAT ONCE THE IMPUGNED ORDER FINDS THE A SSESSMENT ORDER IS WITHOUT JURISDICTION AS THE LAW LAID DOWN BY THE AP EX COURT IN GKN DRIVESHAFTS (SUPRA) HAS NOT BEEN FOLLOWED, THEN THE RE IS NO REASON TO RESTORE THE ISSUE TO THE ASSESSING OFFICER TO PASS A FURTHER/FRESH ORDER. IF THIS IS PERMITTED, IT WOULD GIVE A LICENCE TO TH E ASSESSING OFFICER TO 10 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. PASS ORDERS ON REOPENING NOTICE, WITHOUT JURISDICTI ON (WITHOUT COMPLIANCE OF THE LAW IN ACCORDANCE WITH THE PROCEDURE), YET T HE ONLY CONSEQUENCE, WOULD BE THAT IN APPEAL, IT WOULD BE RESTORED TO TH E ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER FOLLOWING THE DUE PROCEDUR E. THIS WOULD LEAD TO UNNECESSARY HARASSMENT OF THE ASSESSEE BY REVIVING STALE/ OLD MATTERS. 9 IN FACT, TO ENSURE THAT REOPENING NOTICES ARE DISPO SED OF, EXPEDITIOUSLY THE PARLIAMENT ITSELF HAS PROVIDED IN SECTION 153(2) OF THE ACT A PERIOD OF LIMITATION WITHIN WHICH THE ASSESSING OFFICER MUST PASS AN ORDER ON THE NOTICE OF REOPENING I.E. WITHIN ONE YEAR FROM THE E ND OF THE FINANCIAL YEAR IN WHICH THE NOTICE WAS ISSUED. IN FACT, SECTION 15 3 (2A) OF THE ACT AS IN FORCE AT THE RELEVANT TIME ITSELF PROVIDES THAT AN ORDER OF FRESH ASSESSMENT, CONSEQUENT TO THE ORDER OF TRIBUNAL UNDER SECTION 2 54 OF THE ACT, WOULD HAVE TO BE PASSED WITHIN ONE YEAR FROM THE END OF T HE FINANCIAL YEAR IN WHICH THE ORDER UNDER SECTION 254 OF THE ACT, WAS P ASSED BY THE TRIBUNAL AND RECEIVED BY THE COMMISSIONER OF INCOME TAX. THE HONBLE RAJASTHAN HIGH COURT, THEREAFTER, HAS G IVEN ITS FINDINGS AS UNDER: 8. BEFORE PROCEEDING WITH THE MATTER, IT IS NOT OU T OF PLACE TO MENTION THAT THE LAW DECLARED BY THE SUPREME COURT IN GKM D RIVESHAFTS (SUPRA) CLEARLY HELD THAT THE PRELIMINARY OBJECTION IS TO B E DECIDED AS THE FIRST, IT CANNOT BE DECIDED SUBSEQUENTLY. THE ARGUMENT WHI CH HAS BEEN CANVASSED BY THE ASSESSEE IS REQUIRED TO BE CONSIDE RED VERY SERIOUSLY MORE PARTICULARLY IN VIEW OF THE OBSERVATIONS MADE BY THE SUPREME COURT IN THE CASE OF KS PETRON PRIVATE LTD. (SUPRA) WHICH IS FOLLOWED IN HOTEL BLUE MOON (SUPRA), THE LAW DECLARED BY THE SU PREME COURT IS TAKEN IN TRUE SPIRIT WHETHER IT WILL OPEN A SECOND INNING IN HOW OWN. SECTION 153(3) IS TO BE READ VERY CAUTIOUSLY AS 153 POWERS ARE GIVEN TO THE DEPARTMENT, THE COURT HAS TO LOOK INTO WHETHER THE LAW DECLARED BY THE SUPREME COURT IS GIVEN AWAY OR PROTECTED. IN THE PRESENT CASE, AS THE ASSESSING OFFICER HAS CLEARLY IGNORED THE LA W DECLARED BY THE SUPREME COURT, IN THAT VIEW OF THE MATTER, THE ISSU ES WHICH ARE RAISED IN THE MATTER, THE TRIBUNAL OUGHT NOT TO HAVE REMIT TED BACK FOR 11 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. REASSESSMENT SINCE PERIOD OF LIMITATION HAS ALREADY EXPIRED AS THE AUTHORITY WILL GET EXTENDED TIME OF LIMITATION BEYO ND 9 MONTHS WHICH IS NOT THE OBJECT OF INCOME TAX ACT. 9. IN THAT VIEW OF THE MATTER, ON ISSUE NO. 1 AND 2, THE ORDER OF REASSESSMENT PASSED BY THE TRIBUNAL IS DECLARED NUL L AND VOID. THE QUESTIONS ARE ANSWERED IN FAVOUR OF ASSESSEE AND AG AINST THE DEPARTMENT. 10. THE APPEAL OF THE ASSESSEE IS ALLOWED. 10. WE FIND THAT IN THE AFORESAID DECISION, THE H ONBLE HIGH COURT HAS CONSIDERED THE DECISION OF HONBLE MADRAS HIGH COURT IN CASE OF HOME FINDERS HOUSING LIMITED VS ITO(SUPRA) AS RELIE D UPON BY THE LD DR AND HAS FOLLOWED THE DECISION OF THE HONBLE SUP REME COURT IN CASE OF KSS PETRON PRIVATE LTD. VS. ACIT (SUPRA). IN LI GHT OF ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT WHICH IS BINDING ON THIS TRIBUNAL, THE REASSE SSMENT PROCEEDINGS COMPLETED WITHOUT DISPOSING OFF THE OBJECTION RAISE D BY THE ASSESSEE CANNOT BE SUSTAINED AND CONSEQUENT REASSESSMENT ORD ER U/S 147 R/W 143(3) IS HEREBY QUASHED AND SET ASIDE. 11. THEREFORE, THE OTHER CONTENTIONS ADVANCED BY BO TH PARTIES AS WELL AS GROUNDS ON MERIT HAVE BECOME ACADEMIC, ARE NOT ADJUDICATED UPON AND ARE LEFT OPEN. IN THE RESULT, THE APPEAL O F THE ASSESSEE IS ALLOWED. THOUGH THERE ARE DIVERGENT VIEWS OF DIFFERENT HIGH COURTS ON THE ISSUE WHETHER NON DISPOSAL OF THE OBJECTIONS BEFORE PASSING THE REASS ESSMENT ORDER WOULD RENDER THE REASSESSMENT ORDER INVALID OR IT IS ONLY A PROCEDUR AL IRREGULARITY. SINCE THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IS BINDING ON THE TRIBUNAL, THEREFORE, THIS 12 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. TRIBUNAL IN THE SAID CASE OF SHRI MANOJ DUBEY (SUPR A) HAS FOLLOWED THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT BEING A BINDING P RECEDENT. ACCORDINGLY FOLLOWING THE EARLIER ORDER AS WELL AS THE DECISION OF HONBL E JURISDICTIONAL HIGH COURT, I DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CONSEQUENT LY THE ASSESSMENT ORDER IS QUASHED FOR WANT OF DISPOSAL OF THE OBJECTIONS RAIS ED BY THE ASSESSEE AGAINST THE NOTICE ISSUED UNDER SECTION 148 BEFORE PASSING THE REASSESSMENT ORDER. GROUND NO. 2 IS REGARDING DISALLOWANCE OF ADDITION OF RS.2,64,318/-. 6. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE ASSESSEE CLAIMED THE INTEREST PAYMENT OF RS. 4,50,147/- AGAINST THE INCO ME FROM OTHER SOURCES BEING THE INTEREST INCOME OF RS. 1,85,829/-. THE AO HAS DISA LLOWED THE PROPORTIONATE INTEREST ON THE GROUND THAT THE EXCESS INTEREST PAID OF RS. 2,64,318/- CANNOT BE ALLOWED UNDER SECTION 57(3) AS THIS IS NOT INCURRED FOR EAR NING THE INTEREST INCOME. THE LD. A/R HAS SUBMITTED THAT THE BORROWED FUND HAS BEEN U TILIZED BY THE ASSESSEE TOWARDS CAPITAL CONTRIBUTION IN PROPRIETORSHIP CONCERN AS W ELL AS PARTNERSHIP FIRM FROM WHICH THE ASSESSEE HAS DECLARED BUSINESS PROFIT OF RS. 14 ,96,823/-. THEREFORE, THE INTEREST EXPENDITURE IS AN ALLOWABLE BUSINESS EXPENDITURE AG AINST THE BUSINESS INCOME. THE ASSESSEE HAS COMMITTED AN ERROR BY CLAIMING THE ENT IRE INTEREST EXPENDITURE AGAINST THE INCOME FROM OTHER SOURCES INSTEAD OF BIFURCATIN G THE SAME AND CLAIMING PROPORTIONATE AMOUNT AGAINST THE BUSINESS INCOME AS WELL AS INCOME FROM OTHER SOURCES. THUS THE LD. A/R HAS SUBMITTED THAT AN ER ROR OF CLAIMING THE DEDUCTION UNDER ONE HEAD INSTEAD OF TWO SEPARATE HEADS WOULD NOT HAVE ANY REVENUE EFFECT BUT THE NET OUTCOME WILL REMAIN THE SAME. IN SUPPO RT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N CASE OF RAJASTHAN STATE 13 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. WAREHOUSING CORPORATION VS. CIT, 242 ITR 450 (SC) A S WELL AS THE DECISION OF THIS TRIBUNAL DATED 13 TH JANUARY, 2020 IN CASE OF GOVIND SHARAN GUPTA VS. A CIT IN ITA NO. 58/JP/2019. 7. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS TAKEN UP THIS I SSUE OF EXCESS CLAIM OF INTEREST AGAINST THE INCOME FROM OTHER SOURCES IN THE REASSE SSMENT PROCEEDINGS AND, THEREFORE, THE ALLOWABILITY OF THE CLAIM AS BUSINES S EXPENDITURE WAS NEITHER THE SUBJECT MATTER OF REASSESSMENT NOR WAS RAISED BY TH E ASSESSEE. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, IT IS NOTED THAT THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE AGAINST THE INCOME FROM OTHER SOURCES IS TOWARDS THE BORROWED F UND TAKEN BY THE ASSESSEE IN THE PRECEDING YEAR AND NOT IN THE YEAR UNDER CONSID ERATION. THE AO HAS NOT MADE ANY DISALLOWANCE IN RESPECT OF THE INTEREST EXPENDI TURE IN THE PRECEDING YEAR. FURTHER, THE ORDER OF THE AO ITSELF REVEALS THE FAC T THAT THE BORROWED FUND WAS NOT FULLY UTILIZED FOR GIVING THE LOANS ON WHICH THE AS SESSEE HAS EARNED THE INTEREST INCOME UNDER SECTION 56 OF THE IT ACT AND CLAIMED T HE INTEREST DEDUCTION UNDER SECTION 57(3) OF THE ACT. ONCE THE PART OF THE BOR ROWED FUND IS UTILIZED FOR THE PURPOSE OF BUSINESS BEING INTRODUCTION OF CAPITAL I N THE PROPRIETORSHIP CONCERN AND PARTNERSHIP FIRM FROM WHERE THE ASSESSEE HAS EARNED THE BUSINESS INCOME AND OFFERED TO TAX THEN THE PROPORTIONATE INTEREST EXPE NDITURE IS AN ALLOWABLE BUSINESS EXPENDITURE. THUS IT IS ONLY AN ERROR OF CLAIMING THE DEDUCTION UNDER CORRECT HEAD BUT THE ENTIRE INTEREST WAS CLAIMED AGAINST THE INC OME FROM OTHER SOURCES. THE 14 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF GOVIND SHARAN GUPTA (SUPRA) HAS CONSIDERED THIS ISSUE IN PARA 6 AS UNDER :- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CASE OF THE ASSESSEE IS THAT THE BORROW ED FUNDS HAVE BEEN UTILIZED FOR ADVANCING TO THE PARTNERSHIP FIRM AND FOR ADVANCING TO THE OTHER PARTIES AND ON SUCH BORROWED FUNDS, IT HAS INCURRED INTEREST EXPENDITUR E OF RS 663,196 AND HAS EARNED INTEREST INCOME OF RS 13,64,848 AND THEREFORE, ONLY THE NET INTEREST INCOME CAN BE BROUGHT TO TAX AFTER ALLOWANCE OF WHOLE OF THE INTE REST EXPENDITURE. THE CASE OF THE REVENUE IS THAT THE INTEREST ON PARTNERSHIP FIRM HA S BEEN SHOWN UNDER THE HEAD BUSINESS INCOME AGAINST WHICH NO EXPENSES HAVE BE EN CLAIMED AND INTEREST FROM OTHER PARTIES HAVE BEEN SHOWN UNDER THE HEAD INCOM E FROM OTHER SOURCES AGAINST WHICH THE WHOLE OF INTEREST EXPENSE HAS BEEN CLAIME D. NO DOUBT, THERE APPEARS TO BE MISTAKE ON PART OF THE ASSESSEE IN TERMS OF CLAIMIN G THE WHOLE OF THE INTEREST EXPENDITURE AGAINST INCOME FROM OTHER SOURCES RATHE R THAN CLAIMING IT PROPORTIONALLY AGAINST INTEREST FROM PARTNERSHIP FIRM AND OTHER PA RTIES, HOWEVER, THE SUBSTANCE OF THE MATTER IS THAT WHERE THERE IS A NEXUS ESTABLISH ED BETWEEN THE BORROWED FUNDS AND LENDING THEREOF, AS IN THE INSTANT CASE, A PRIN CIPLE WHICH IS RELEVANT BOTH IN CONTEXT OF BUSINESS INCOME AND INCOME FROM OTHER SO URCES, THEREFORE, IN SUCH CIRCUMSTANCES, THERE IS NO BASIS FOR DISALLOWANCE O F INTEREST EXPENDITURE. THE FACT THAT THE ASSESSEE HAS WRONGLY CLAIMED THE SAME IN T HE RETURN OF INCOME UNDER ONE HEAD INSTEAD OF BOTH THE HEADS PROPORTIONALLY IS NO T A BAR AGAINST ALLOWANCE OF SUCH CLAIM OF EXPENDITURE UNDER RESPECTIVE HEADS WHEN TH E SUBSTANCE OF THE TRANSACTION THAT THE BORROWED FUNDS HAVE BEEN UTLISED FOR SUBSE QUENT LENDING HAS NOT BEEN DISPUTED BY THE REVENUE AND A SPECIFIC CONTENTION I TA NO. 58/JP/2019 SH. GOVIND SHARAN GUPTA VS. ACIT 5 WAS RAISED BEFORE THE LOWER AUTHORITIES. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED. 15 ITA NO. 1219/JP/2019 SHRI ASHOK KUMAR GOYAL, BEAWAR. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT AS WELL AS THE COORDINATE BENCH OF THIS TRIBUNAL, THE DISALLOWANCE MADE BY THE AO IN RESPECT OF INTER EST EXPENDITURE IS DELETED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 15/10/ 2020. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 15/10/2020. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI ASHOK KUMAR GOYAL, AJMER. 2. THE RESPONDENT THE ITO WARD 1, BEAWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1219/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR