2013 (10) TMI 1065 - AT - Income Tax

Assessee Wins Appeals, Revenue Dismissed: Focus on Book Reliability & Interest Provisions

Outcome: The ITAT allowed the appeals filed by the assessee for statistical purposes, while dismissing those of the Revenue. The ITAT directed further ... Disallowance of interest as expense – Held that:- Not allowing the provisions of interest claimed by the assessee is that the books of accounts produced by the assessee during the assessment proceedings has been held to be unreliable - Issue is set aside to the file of the Ld.CIT(A) to adjudicate afresh on merits in respect of the issue pertaining to the rejection/reliability of the books of accounts produced by the assessee after giving due opportunity of being heard to the assessee – Decided in favor of Assessee for statistical purpose. Issues involved:1. Rejection of books of account by the Assessing Officer and subsequent adjudication by the Ld.CIT(A).2. Assessebility of income in the hands of the assessee when there is no income from attached assets.3. Confirmation of liabilities towards interest expenditure claimed by the assessee and its adjudication by the Ld.CIT(A).4. Chargeability of interest u/s 234A, 234B, and 234C to notified persons.Detailed Analysis:1. The first issue pertains to the rejection of books of account by the Assessing Officer during the assessment proceedings for the assessment years 2005-06 & 2006-07. The AO rejected the books of accounts as the accounts were not audited by the person appointed by the Special Court, and certain documents were under the control of the Custodian. The Ld.CIT(A) dismissed the ground of appeal as the income of the assessee was not under dispute, leading to an appeal by the assessee. The ITAT directed the issue to be set aside for fresh adjudication by the Ld.CIT(A) on merits, emphasizing the importance of the reliability of the books of accounts for determining the provisions of interest claimed by the assessee.2. The second issue raised was regarding the assessebility of income in the hands of the assessee when there was no income from the attached assets. This issue was not considered as it was raised for the first time during the second appeal, and it did not arise from the previous discussions by the AO or Ld.CIT(A). Therefore, the ITAT did not adjudicate on this issue.3. The third issue concerned the action of the Ld.CIT(A) in confirming the liabilities towards interest expenditure claimed by the assessee. Given the direction to adjudicate on the rejection/reliability of the books of accounts, the ITAT set aside this issue for fresh adjudication by the Ld.CIT(A) to ensure a comprehensive review of the liabilities in light of the books' reliability.4. The final issue revolved around the chargeability of interest u/s 234A, 234B, and 234C to notified persons. As the liability of the assessee under interest provisions depended on the proposed adjudication by the Ld.CIT(A) regarding the rejection of books of accounts, the ITAT deemed this issue premature and set it aside for future consideration. Consequently, the appeals filed by the assessee were allowed for statistical purposes, while those of the Revenue were treated as dismissed, with a direction for further adjudication on specific issues as discussed.