Income Tax Reference v. The Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICGTION INCOME TAX REFERENCE NO. 413 of 1988M/s. Conart Builders (P) Ltd... Applicant. vs. The Commissioner of Income Tax .... Respondent Ms. Asifa Khan for Applicant. Mr. Ashok Kotangale, Sr. Counsel for Respondent. AND A. S. AGUIAR JJ. Date: 14th July, 2005. P. C.: 1. By this reference under section 256 (1) of the Income Tax Act , 1961, arising out ofI.T.ANo. 5102(Bom)/1984 for the AssessmentYear 1980-81, the Income Tax Appellate Tribunal has referred thefollowing question of law for the opinion of this court: “Whether on the facts and circumstances ofthe case, the Tribunal was justified in law inupholding the dis-allowance of Rs.20,478/- u/s. 2 40A (8) of the Income Tax Act 1961? 2. The facts of the case are that the assessee filed return of income which was accompanied by the computation of income. On thatbasis the Income Tax Officer computed the total income of theassessee before adjustment of carry forward of loss at Rs.97,475/-which was rounded off to Rs.97,480/-. In doing so, the Income TaxOfficer added back Rs.20,478/- being 15% of interest ofRs.1,36,525/- under section 40A(8) of the Income Tax Act. Theassessee went in appeal before the Commissioner of Income Tax(Appeals) against the order of the Income Tax Officer and contendedthat the Income Tax Officer was not justified in making a dis-allowance of Rs.20,478/- without any discussion in that regard. Thelearned Commissioner of Income-tax (Appeals) considered the claimof the assessee and deleted the addition to the finding that thedeposits were in fact in the nature of current account and, therefore,provisions of sec. 40A(8) are not applicable as per the decisions inthe case of M. E. P. Ltd., for the Assessment Year 1976-77. 3. Aggrieved by the said order, the Revenue took up the matter inappeal before the Tribunal and the Tribunal allowed the appeal asfollows:appeal before the Tribunal and the Tribunal allowed the appeal asfollows: “3. On careful consideration of the rival submissions, inthe light of the material placed on our record, we seethe light of the material placed on our record, we see merit in the appeal of the Revenue. Firstly, theassessment was made and the computation of theincome was done on the basis of the income was doneon the basis of the assessee's computation. In such acase, there need not be any discussion and in fact, theassessee cannot be aggrieved by such assessmentorder. Even in any case, the amount has been treatedby the assessee as covered by the provisions of sec.40A(8) of the Income Tax Act and automaticdisallowance was made at 15% of such interestpayment. When the matter was brought in appealbefore the CIT (A), a claim was made that the depositswere in the nature of current account and the learnedCIT (A) allowed the claim in that light. In such a case,we cannot appreciate the contention of the assesseethat the deposits were in the nature of loans secured bythe creation of mortgage etc., in terms of Explanation (b)(ix) to sec. 40A(8). Since this matter has not beenagitated before the first appellate authority nor beforethe I. T. O., at the assessment stage, we cannot takeinto account these evidences particularly when theassessee has current liability to the tune of Rs.19,29,262/- towards sundry creditors over and above the loans and advances shown at Rs.4,87,000/- whichincluded unsecured loans of Rs.1,09,000/-. We,therefore, set aside the order of the CIT (A) and restorethat of the I. T. O. In doing so, we respectfully follow thereasoning given by the Special Bench in the case ofNaloomal Shorimal Sachdev Rangwalla Pvt. Ltd. (14 I.T.D.248)”. Rs.19,29,262/- towards sundry creditors over and above the loans and advances shown at Rs.4,87,000/- whichincluded unsecured loans of Rs.1,09,000/-. We,therefore, set aside the order of the CIT (A) and restorethat of the I. T. O. In doing so, we respectfully follow thereasoning given by the Special Bench in the case ofNaloomal Shorimal Sachdev Rangwalla Pvt. Ltd. (14 I.T.D.248)”. 4. On the above factual matrix at the instance of the assessee theTribunal has sought adjudication from this court on the questionmentioned in the opening part of this order. Tribunal has sought adjudication from this court on the questionmentioned in the opening part of this order. 5. The factual matrix referred to herein-above go to show that theIncome Tax Officer applying the provisions of section 40A(8) of theIncome Tax Act applicable at the relevant time disallowed 15%interest on Rs.1,36,525/- . This dis-allowance was not challenged bythe assessee before the first appellate court, with the result, theorder of dis-allowance became final against the assessee. Theassessee sought to challenge the dis-allowance before the Tribunalfor the first time, that too, in the appeal filed by the revenue. In thatappeal objection was raised on behalf of the revenue contendingthat the assessee cannot be said to be an aggrieved person as theassessment was made on the computation of the income made by the assessee itself. The Tribunal upheld the contention of therevenue and recorded a positive finding that the objection at theinstance of the assessee cannot be allowed. In other-words, theTribunal held that the assessee could not be said to be an aggrievedperson. In that view of the matter it was not necessary for theTribunal to revolve on the issue involved. If the appeal was notmaintainable, in that event no reference would arise from the orderof the Tribunal. 6. In this view of the matter we hold that no reference could have beenmade by the Tribunal under section 256(1) of the Income Tax Act,and return this reference un-answered. This reference standsdisposed of with no order as to costs. (V. C. DAGA J. ) -x- (A. S. AGUIAR J.)