Itta/159/2003 Of M/S.janata Rolling Mills Vijayawada v. Income Tax Officer Vijayawada

THE HON’BLE SRI JUSTICE L. NARASIMHA REDDY AND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM I.T.T.A.Nos.159 & 162 of 2003 COMMON JUDGMENT: (Per the Hon’ble Sri Justice L. NarasimhaReddy) These two appeals are filed against the common order dated 07-09-2001, passed by the Visakhapatnam Bench of the Income TaxAppellate Tribunal (for short ‘the Tribunal’) in I.T.T.A.Nos.8 and9/V/2000. The facts in brief are that the appellant commenced thebusiness of steel re-rolling. Over the period, it has raised loans formaking construction of buildings within the factory premises. By theassessment year 1992-93, the activity of re-rolling was stopped andthe building and other infrastructure are used for the business in roadtransport, and the buildings were also given on rent. In the returnssubmitted for the assessment years 1992-93 to 1995-96, the incomewas shown from the house property and transport business of theappellant. It has also claimed deduction of interest paid on loans,borrowed for construction of the buildings. The Assessment Officer did not allow the same. In the appeals preferred before the Commissioner of Appeals, orderswere passed on 25-06-1999 and 23-07-1999, in relation to theassessment years 1992-93 and 1994-95, respectively, allowing suchdeductions. Following the same, the Assessing Officer allowed deductions for the assessment years 1993-94 and 1995-96 also. However, the Jurisdictional Commissioner re-opened the assessmentsfor those two years, in exercise of power under Section 263 of theIncome Tax Act (for short ‘the Act’) and passed orders dated 19-12-1999, disallowing the same. Challenging the same, the appellant filedI.T.A.Nos.8 and 9/V/2000 before the Tribunal by raising severalgrounds. The appeals were dismissed by the Tribunal. Hence, thesetwo appeals under Section 260 of the Act. Heard Sri A.V. Krishna Kaundinya, learned counsel for theappellant and Sri J.V. Prasad, learned Standing Counsel for therespondent. There is no denial of the fact that the appellant, which initiallywas undertaking the activity of steel re-rolling; switched over to the operation of trucks and giving buildings on lease. The loans for construction of the building were, no doubt, taken, whenthe activity of the appellant was of re-rolling of the steel. The fact, however, remains that the amount was borrowed for theconstruction of the building, and that in turn was given on lease, or is utilized for its transport business. The Tribunal tried to distinguishthe precedents, that were cited before it. The pointed distinction is notat all relevant for the facts of the case. Added to that, the deduction was permitted in respect of the assessments, for theyears 1992-93 and 1994-95. There cannot be any basis for denying afacility for the two assessment years, in between. We therefore allow the appeals and set aside the orders inI.T.T.A.Nos.8 and 9/V/2000, dated 07-09-2001. As a result, we setaside the order dated 19-12-1999, passed by the Jurisdictional Commissioner, under Section 263 of the Act against the appellant, inrespect of the assessment years 1993-94 and 1995-96. There shall be no order as to costs. __________________________ L. NARASIMHA REDDY, J. __________________________ CHALLA KODANDA RAM,J.Dt.08-10-2014KO Though several questions of law were framed in the memorandum of grounds, we find that the following questions of lawarise for consideration: 1)When the result of a search has the effect of only reducingthe losses for the block period, does there exist anoccasion to levy tax on the undisclosed income? andthe losses for the block period, does there exist anoccasion to levy tax on the undisclosed income? and Commissioner, under Section 263 of the Act against the appellant, inrespect of the assessment years 1993-94 and 1995-96. There shall be no order as to costs. __________________________ L. NARASIMHA REDDY, J. __________________________ CHALLA KODANDA RAM,J.Dt.08-10-2014KO Though several questions of law were framed in the memorandum of grounds, we find that the following questions of lawarise for consideration: 1)When the result of a search has the effect of only reducingthe losses for the block period, does there exist anoccasion to levy tax on the undisclosed income? andthe losses for the block period, does there exist anoccasion to levy tax on the undisclosed income? and 2)When there is unabsorbed depreciation available to anassessee in the previous assessment years, whether he isentitled to seek adjustment thereof against any amount of undisclosed income, noticed in the search? assessee in the previous assessment years, whether he isentitled to seek adjustment thereof against any amount of undisclosed income, noticed in the search?