2004 (10) TMI 273 - AT - Income Tax

Appeal allowed for deductions under Interest-tax Act 1974, emphasizing fair assessment and reassessment.

The Appellate Tribunal ITAT Chandigarh-A allowed the appeal of the assessee for statistical purposes, challenging the disallowance of deductions claimed ... - Issues:1. Disallowance of deduction of interest received from hire-purchase finance companies and miscellaneous finance companies, and discount on foreign usance bills under the Interest-tax Act, 1974.Detailed Analysis:The appeal before the Appellate Tribunal ITAT Chandigarh-A for the assessment year 1997-98 challenged the order of the CIT(A), Patiala, regarding the disallowance of deductions claimed by the assessee. The primary issue raised was the disallowance of deduction of interest amounting to Rs. 15,33,81,533 and Rs. 1,98,00,086 received from hire-purchase finance companies and miscellaneous finance companies, along with a discount on foreign usance bills of Rs. 66,20,036. The Revenue contended that these amounts did not fall within the definition of chargeable interest under section 5 of the Interest-tax Act, 1974.The relevant facts indicated that the assessee had initially declared chargeable interest of Rs. 4,93,61,95,250, following which a notice under section 7(2) of the Interest-tax Act, 1974, was issued. During the assessment proceedings, the assessee claimed certain mistakes in the taxable interest calculation, which the Assessing Officer (AO) rejected on the grounds of no revised return being filed. The assessee's appeal to the CIT(A) was also unsuccessful, leading to the current appeal.The counsel for the assessee argued that the AO should have assessed the interest liable to tax under the Interest-tax Act, 1974, despite the claims made by the assessee. Reference was made to a CBDT Circular directing AOs to allow due relief to assessees under the law irrespective of whether it was claimed or not. It was contended that the assessee had received incorrect information from branches, corrected it during assessment proceedings, but the AO did not consider it.On the other hand, the Departmental Representative highlighted section 7 of the Interest-tax Act, 1974, stating that the AO must base assessments on information gathered by them, not furnished by the assessee. The AO's denial of the claim was justified as the information was not requisitioned, and if the claim was to be considered, it should be remitted back to the AO for proper assessment.The Tribunal carefully considered the contentions and concluded that the AO was unjustified in rejecting the assessee's claim during assessment proceedings. The AO had scrutinized the books of account, and since the adjustments were based on these entries, the claim should have been considered. Referring to the CBDT Circular, the Tribunal emphasized that the AO must assess in accordance with the law and not take advantage of an assessee's ignorance. As the AO had not evaluated the claim on its merits, the Tribunal set aside the Revenue authorities' orders and remitted the issue back to the AO for proper consideration in accordance with the law, ensuring a fair opportunity for the assessee to be heard.In conclusion, the appeal of the assessee was allowed for statistical purposes.