SHRI LALIT YASHWANT KANUNGO, MUM V. ITO-19(2)(1), MUM

ITA 31/MUM/2023

AI Insights

This case involves an appeal by Shri Lalit Yashwant Kanungo against the order of the CIT(A)/NFAC, Delhi, which disallowed a deduction claim of Rs.12,78,517/- for interest paid on a housing loan to Punjab National Bank (PNB) during the Assessment Year 2016-17. The AO initially disallowed the claim citing the Supreme Court's decision in Goetze (India) Pvt. Ltd. Vs. CIT, which restricts the introduction of new issues during the assessment proceedings unless through a valid return of income. The CIT(A) upheld the AO's decision due to the assessee's non-compliance with notices. The Tribunal, however, noted the procedural inadequacies and the lack of a proper hearing for the assessee, leading to the restoration of the matter to the AO for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300095 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 04-01-2023
• Other Referred Cases: Goetze (India) Pvt. Ltd. Vs. CIT 284 ITR 323 (SC), Tin Box Company Vs. CIT (249 ITR 216) (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Revised return; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No.31/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2016-17) Shri Lalit Yashwant Kanungo 94, Savitri Sadan, Mumbai- 400004. बिधम/ Vs. ITO-19(2)(1) 2 nd Floor, Matru Mandir, Mumbai-400007. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AIRPK6683L (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 28/02/2023 घोषणा की तारीख /Date of Pronouncement: 31/03/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. CIT(A)/NFAC, Delhi dated 15.12.2022 for AY. 2016-17. 2. The ground raised by the assessee is against the action of the Ld. CIT(A) disallowing the interest of Rs.12,78,517/- (housing loan paid to PNP). 3. Brief facts noted by the AO are that the assessee had filed return of income (ROI) on 28.05.2016 declaring total income at Rs.15,46,072/-. Thereafter, he filed revised return of income on 28.05.2016 declaring total income at Rs.15,33,760/- and then, again he revised return of income on 22.08.2016 declaring total income at Rs.4,54,940/. Then, the ROI was selected for scrutiny. According to the AO, the assessee has filed twice (2) revised return (within a short span of three (3) months) and reduced the returned income of Assessee by: None Revenue by: Shri Anil Gupta ITA No.31/Mum/2023 A.Y. 2016-17 Lalit Yashwant Kanungo 2 Rs.15,46,072/- to Rs.4,54,940/-. Therefore, assessee’s claim of deduction in respect of interest expense to the tune of Rs.12,78,517/- incurred on account of housing loan paid to the Punjab National Bank (PNB) was not entertained by the AO citing the decision of the Hon’ble Supreme Court in the case of Goetze (India) Pvt. Ltd. Vs. CIT 284 ITR 323 (SC). Thereafter, he disallowed the claim of deduction in respect of interest of Rs.12,78,517/- and added it to the income of the assessee and re-computed the total income at Rs.17,33,460/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who noted that the despite notices issued on four (4) occasions, the assessee neither submitted any submissions nor complied with the notices. Therefore, according to him, assessee has nothing more to state except raising the ground. Therefore, he confirmed the action of the AO. Aggrieved, the assessee has preferred this appeal before this Tribunal. 4. After hearing the Ld. DR and having perused the records, it is noted that the Ld. CIT(A) has not adjudicated the grounds of appeal as per section 250(6) of the Income Tax Act, 1961 (hereinafter “the Act”) which reads as under’; Procedure in appeal. 250. (1) The [Commissioner (Appeals)] shall fix a day and place for the hearing of the appeal, and shall give notice of the same to the appellant and to the [Assessing] Officer against whose order the appeal is preferred. (2) The following shall have the right to be heard at the hearing of the appeal – ITA No.31/Mum/2023 A.Y. 2016-17 Lalit Yashwant Kanungo 3 (a) the appellant, either in person or by an authorized representative; (b) the [Assessing] Officer, either in person or by a representative. (3)...................... (4)...................... (5)...................... (6) The order of the [Commissioner (Appeals)] disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for decision. (6A)....................[Emphasis by me] 5. Be that as it may, as noted above, the AO has not adjudicated the claim of the assessee in respect of interest expenses by citing the decision of the Hon’ble Supreme Court in the case of Goetze (India) Pvt. Ltd. (supra). In this context, it is noted that even though, the restriction to entertain a new issue during assessment proceedings other than by way of preferring a valid return of income is only on the AO and this position has been made clear in that order itself by the Hon’ble Supreme Court that the aforesaid restriction was only on AO and will not impinge upon the power of the Tribunal to admit such a claim before it. Taking note of the in-action of AO & Ld. CIT(A), the issue (claim of interest to the tune of Rs. 12,78,517/-) is admitted by this Tribunal; and since the AO has not adjudicated the claim, the impugned order of the Ld. CIT(A) is set-aside and the issue is restored back to the file of the AO as held by the Hon’ble Supreme Court in the ITA No.31/Mum/2023 A.Y. 2016-17 Lalit Yashwant Kanungo 4 case of Tin Box Company Vs. CIT (249 ITR 216) (SC) wherein it has been held that if the assessee has not got proper opportunity before the AO, then it should be restored back to the AO for denovo assessment. The Hon’ble Supreme Court held in the case of Tin Box Company (supra) as under:- “ It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : "We will straightway agree with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard." That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard. 2. Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee ?" ITA No.31/Mum/2023 A.Y. 2016-17 Lalit Yashwant Kanungo 5 In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the assessee. 3. The appeals are allowed. The order under challenge is set aside. The assessment orders, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.” 5. Therefore, the claim of deduction of interest expenditure claimed by the assessee to the tune of Rs.12,78,517/- (paid as housing loan to PNB) is admitted and restored to the file of the AO for de-novo assessment. The assessee is at liberty to file documents/material, written-submission before the AO to substantiate its claim. And the assessee to be diligent during the proceedings before the AO. With this observation, the appeal of the assesse is allowed for statistical purpose. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 31/03/2023. Sd/- (ABY T. VARKEY) JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 31/03/2023. Vijay Pal Singh, (Sr. PS) ITA No.31/Mum/2023 A.Y. 2016-17 Lalit Yashwant Kanungo 6 आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai