Anand Kumar v. Commissioner Of Income Tax-Viii, New Delhi And Anr

* IN THE HIGH COURT OF DELHI AT NEW DELHI + Decided on: 17.02.2014 ITA 284/2013 ANAND KUMAR …..Appellant Through: None. Versus COMMISSIONER OF INCOME TAX-VIII, NEW DELHI AND ANR. …..RespondentsThrough:Sh.KamalSawhney,Sr.StandingCounsel. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE R.V. EASWAR MR. JUSTICE S. RAVINDRA BHAT (OPEN COURT) %1.Even after second call, no one has appeared for the appellant.Learned counsel for the Revenue is present. The matter has been takenup for hearing. 2.This is an appeal under Section 260A of the Income Tax Act,1961 (“the Act”), against an order of the Income Tax AppellateTribunal (“ITAT”) dated 22.10.2012 for the Assessment Year 1998-99. 3.Anand Kumar, the assessee in this case, filed a return of incomefor the AY 1998-99 declaring an income of `7,66,512/- claiminginterest on Fixed Deposit Receipts (“FDRs”) which were pledged withbanks to avail credit export facilities as “business income”, thusclaiming a deduction for the entire interest under Section 80HHC ofthe Act, claiming to be a 100% exporter. The Assessing Officer(“AO”) passed an order under Section 143(3) of the Act dated28.2.2001, assessing the income of interest from the FDRs as “income from other sources” under Section 56. On appeal, this order wasconfirmed by the CIT (Appeals) by an order dated 24.1.2002. TheITAT reversed this finding, holding that the interest was “businessincome”. The Revenue appealed to the High Court under Section260A, and this Court restored the matter to the file of the AO for theexercise to be re-done in view of the ruling of the Court in CIT v. ShriRam Honda Power Equipment Ltd., 289 ITR 475 (Delhi), which washeld to cover the substantial question of law said to arise in the case.Subsequently, on remand, the AO, by an order under Section 143(3) ofthe Act, dated 27.10.2008, held that the interest on FDRs was “incomefrom other sources” and not “business income”. Aggrieved by thisorder, the assessee appealed to the CIT (Appeals), which upheld theorder of the AO. This was again carried in appeal to the ITAT, leadingto the impugned order. 4.The gist of the assessee’s contentions is that in the precedingAY, 1997-98, the interest on the FDRs pledged with the banks wasconsidered by the AO to be “income from business”. However, in thecourse of that assessment, although the interest was held to be“business income”, netting was disallowed. The CIT (Appeals) in thatyear allowed netting of interest. The matter subsequently went inappeal to the ITAT and finally this Court. This Court, in its orderdated 19.1.2007, held that: “[i]t was correctly noted by the ITAT that the AO havingaccepted the interest income as business income, the onlyquestion that required consideration was whether deductionshould be of 90% of the gross interest or net interest. TheCourt also confined the question of law only to this issue.” 5.The assessee’s argument – in the appeal memorandum – is thatsince the AO, and the subsequent authorities, in the previous AY hadheld, on the same facts, the income from interest to be “businessincome”, consistency must be maintained and income, in the AYunder consideration, too, is to be considered as “business income”.6.The ITAT, in the present AY 1998-99, in the impugned order,considered these arguments as to the previous assessment in AY 1997- 98, and held as follows: “[i]t was correctly noted by the ITAT that the AO havingaccepted the interest income as business income, the onlyquestion that required consideration was whether deductionshould be of 90% of the gross interest or net interest. TheCourt also confined the question of law only to this issue.” 5.The assessee’s argument – in the appeal memorandum – is thatsince the AO, and the subsequent authorities, in the previous AY hadheld, on the same facts, the income from interest to be “businessincome”, consistency must be maintained and income, in the AYunder consideration, too, is to be considered as “business income”.6.The ITAT, in the present AY 1998-99, in the impugned order,considered these arguments as to the previous assessment in AY 1997- 98, and held as follows: “4… a confusion has been created by stating that thedecision rendered in the assessee’s own case pertaining toassessment year 1997-98, has been followed by Hon’bleHigh Court in assessment year 1998-99 i.e. assessment yearunder consideration. Since the assessee failed to representhis case before the Asessing Officer but (sic) verily thematterwasdiscussedatlengthbeforethelearnedCIT(Appeals). But in the interest of justice, we find itjustifiable to restore the matter back to the file of theAssessing Officer so that he can reconsider the decision ofHon’ble High Court dated 27.7.2007 for assessment year1998-99 and the judgment/order dated 19.1.2007 renderedin ITA No. 596/2004 allegedly pertaining to the assessmentyear 1997-98 and the decision in the case of Shri RamHondaPowerEquipment(supra)andthereafterre-determinetheissueinquestion.Withtheaboveobservations, we restore the entire appeal to the file of thelearned Assessing Officer and allow the same for statisticalpurposes. We are refraining from making any observationon the legal fact whether the decision of Shri Ram Honda(supra) covers and (sic) don’t cover the facts and issues ofthe case.” 7.The ITAT, therefore, has not gone into the merits of the case,nor the issue of consistency as alleged by the assessee or the applicability of the decision in Shri Ram Honda (supra). The AO had– in the second round of assessment – in the order under Section143(3) dated 27.10.2008 not discussed the applicability of the decisionin Shri Ram Honda (supra), as required by the terms of the remand inthe first round of litigation, albeit due to the assessee’s failure torepresent before the AO. While the CIT (Appeals) did deal with theapplication of the judgment in Shri Ram Honda, the ITAT has taken aliberal and beneficial view of the matter by remanding the case to theAO to reconsider the assessment in light of that decision and theconclusions reached as regards interest income in previous years, asthe order dated 27.10.2008 was silent on that question. The ITAT hasnot made any findings in the impugned order, let alone determined ordiscussed any issue of fact or law (one way or the other) relevant tothe assessment of interest income in this case.8.For the above reasons, the Court finds that no substantialquestion of law arises, and ITA 284/2013 is accordingly dismissed. S. RAVINDRA BHAT(JUDGE) FEBRUARY 17, 2014 R.V. EASWAR(JUDGE)