Ita/155/2012 Of Vallabh Yarns, Ludhiana Thru Vijay Jain v. Commissioner Of Income Tax, Ludhiana

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Commissioner of Income Tax, Ludhiana..... Respondent CORAMHON5BLE MR. JUSTICE S.J. VAZIFDAR,ACTING CHIEF JUSTICE BBBBBBB S.J. VAZIFDAR, A.C.J. (Oral) This is an appeal against the order of the Tribunal, dismissingthe appellant/assessee's appeal against the order of the CIT (Appeals)Which in turn dismissed the appellant's appeal against the assessmentorder to the extent that the same refused a deduction under Section 36(1)(111) of the Income Tax Act, 1961. The appeal pertains to the assessmentyear 2007-08. ? The appellant has raised the following substantial questions of law: - (1)Whether under the facts and circumstances of the case,the Tribunal's order is perverse while recording findingscontrary to the respondent department's stand toraccepting the claim of the appellant qua the allowancethe Tribunal's order is perverse while recording findingscontrary to the respondent department's stand toraccepting the claim of the appellant qua the allowance of deduction for interest on unsecured loans against theincome under head ‘income from other sources? (ii) Whether under the facts and circumstances of the casethe 'Netting Off of the interest income against interestexpenses can be declined on the true and correctinterpretation of the provisions of Section 57(i11) of theIncome lax Act, 19612the 'Netting Off of the interest income against interestexpenses can be declined on the true and correctinterpretation of the provisions of Section 57(i11) of theIncome lax Act, 19612 (111) Whether under the facts and circumstances of the casethe claim for allowance of the ‘direct expenses'attributable to earning of the ‘income from other sources’can be declined on the true and correct interpretation ofthe provisions of section 57(i11) of the Income Tax Act,196] 2the claim for allowance of the ‘direct expenses'attributable to earning of the ‘income from other sources’can be declined on the true and correct interpretation ofthe provisions of section 57(i11) of the Income Tax Act,196] 2 onIt is sufficient to consider this appeal only with respect to thefirst question. 4 The assessee claims to have secured loans for the purchase ofbuilding and machinery. The assessee further claims to have given theSaid building and machinery on rent. The assessee claimed a deductionunder Section 36(1)(ii1) of the Act in respect of the loans availed by it. 5.The assessment order was passed on 18.12.2009 againstwhich the appellant filed an appeal to the CIT (Appeals). During thependency of this appeal on 21.01.2010 the appellant filed an applicationunder Section 154 of the Act for rectification. The assessment order wasrectified by reducing the assesssed income to _ Rs.46,11,250/-.Consequently, the demand was also reduced to Rs.18,33,054. Thereafterthe assessee moved another application under Section 154 dated10.08.2010. This application was disposed of by an order dated 12.08.2010. The Assessing Officer upheld the appellant's contention.The Assessing Officer observed that the disallowance to the extent ofRs.22,77,739/- was not called for. The balance taxable income wasassessed at Rs.22,96,464/-. 6.The CIT (Appeals) dismissed the appellant's appeal againstassessment order dated 18.12.2009 on 30.09.2011. The Tribunaldismissed the appeal against that order on 08.02.2012. |.The order of the Tribunal as well as the order of the CIT(Appeals) have not considered the said orders passed under Section 154.The Income Tax Officer by a letter dated 04.01.2011 brought the orderdated 12.08.2010 under Section 154 to the attention of the CIT (Appeals).Mr.Pankaj Jain, the learned senior counsel appearing on behalf of theappellant referred to various other letters also addressed to the CIT(Appeals) in support of his contention that even the Department hadsupported the appellant. 6.The CIT (Appeals) dismissed the appellant's appeal againstassessment order dated 18.12.2009 on 30.09.2011. The Tribunaldismissed the appeal against that order on 08.02.2012. |.The order of the Tribunal as well as the order of the CIT(Appeals) have not considered the said orders passed under Section 154.The Income Tax Officer by a letter dated 04.01.2011 brought the orderdated 12.08.2010 under Section 154 to the attention of the CIT (Appeals).Mr.Pankaj Jain, the learned senior counsel appearing on behalf of theappellant referred to various other letters also addressed to the CIT(Appeals) in support of his contention that even the Department hadsupported the appellant. 8 We do not wish to express any opinion at this stage in respectof either the correctness or the effect of the orders under Section 154 orthe communications addressed by the Department to the CIT (Appeals).It is possible that at the hearing itself the same may not have beenbrought to the attention of the CIT (Appeals) or the Tribunal. Suffice itto state that these are orders and documents which ought to have beentaken into consideration by the CIT (Appeals) as well as by the Tribunal.Be that as it may. The orders, the documents and the effect thereto oughtto have heen taken into consideration. | QO For instance, it would be open for the appellant to contend that the appeals before the CIT (Appeals) and the Tribunal ought to beallowed to be withdrawn or dismissed as infructuous in view of the orderspassed under Section 154. In the event of the appellant's being satisfiedand accepting the revisional orders under Section 154, they may well notbe interested in pursuing the appeal. If such an application is made it isfor the Tribunal to decide the same. 10,The appeal is, therefore, disposed of by setting aside theimpugned order and remanding the matter to the Tribunal. All thecontentions of the parties on merit are kept open. | S.J. VAZIFDAR |ACTING CHIEF JUSTICE 12.07.2016 sShamshe | DEEPAK SIBAL | JUDGE