Madras High Court
Uma Shankar vs Income Tax Officer. on 23 November, 1995
Equivalent citations: (1996)56TTJ(MAD)596
ORDER
P. I. MOHAN SINGH, J. M. :
This appeal of the assessee relates to the asst. yr. 1993-94 and arise out of the order of Dy. CIT(A), Coimbatore, dt. 28th June, 1994.
2. The assessee contests the appeal on the ground that the Dy. CIT(A) is not justified in confirming the assessment order passed under s. 143(1)(a) of the Act, as his order is opposed to the facts of the case. The brief facts of the case are as under.
3. For the assessment year under consideration, the assessee filed return of income admitting a total income of Rs. 39,770. The assessment was completed under s. 143(1) of that Act. While processing the return of income, the AO disallowed the assessees claim for deduction of Rs. 13,920 as interest on monies borrowed and stated to have been utilised for the construction of a shopping complex at Hosur. The total income was fixed at Rs. 53,690, and the assessment was completed on 18th Aug., 1993. The assessee objected to this disallowance and by a petition dt. 2nd Sept., 1993, filed under s. 154 of the Act requested the AO to rectify the assessment and allow the claim for interest payment. The AO by his order dt. 4th Oct., 1993, rejected the assessees petition on the ground that there was no material filed along with their return of income to come to the conclusion that the amount of Rs. 13,920 was the interest payment on monies borrowed for the purpose of construction of the shopping complex. As against this order of the AO, the assessee appealed before the Dy. CIT(A), before whom the learned counsel for the assessee contended that disallowing of interest does not come under prima facie adjustments to be made while processing the return under s. 143(1). He contended that the AO should have taken the case for scrutiny if he doubted the genuineness of the interest payment. He further contended that the claim of the assessee in the earlier assessment years was allowed. It was accordingly urged that the addition made to the income returned be deleted.
4. After hearing the learned counsel for the assessee, the Dy. CIT(A), for the reasons stated by him in his appellate order, has confirmed the order of the AO. As against this order of the Dy. CIT(A), the assessee is in appeal before the Tribunal.
5. The learned counsel for the assessee relied upon the Boards Circular No. 689, dt. 24th Aug., 1994 , wherein the Board has given specific instances in which the adjustments could be made by the AO while passing an order under s. 143(1)(a) of the IT Act, 1961. He contended that since the disallowance of interest claimed by the assessee will not come under any of the instances cited in the said circular, the AO was not justified in disallowing the assessees claim in an order passed under s. 143(1) of the Act. He relied upon the decision of the Bombay High Court in the case of Khatau Junkar Ltd. & Anr. vs. CIT (1992) 196 ITR 55 (Bom), wherein it was held by their Lordships that the ITO cannot make prima facie disallowance on a point which is debatable without giving an opportunity of hearing to the assessee. If the ITO felt it necessary to prove a particular claim to be inadmissible, he has to issue a notice under s. 143(2). The assessees counsel also contended that the very same claim of the assessee has been allowed by the Department for the earlier asst. yr. 1992-93 and subsequent asst. yr. 1994-95. Since the point in issue according to the assessee is debatable in nature, the ITO is not justified in disallowing the claim of the assessee and adding the same to the income of the assessee in the assessment completed under s. 143(1)(a) of the Act. The learned Departmental Representative, on the other hand, supported the orders passed by the authorities below.
6. I have carefully considered the rival submissions. Whether the particular claim is to be allowed or not, is to be decided by the AO only by issue of a notice under s. 143(2) to the assessee and giving an opportunity to the assessee of being heard. Since the AO has disallowed the assessees claim under s. 143(1)(a) of the Act in the present case, I am of the opinion that he is not justified in disallowing the claim of the assessee.
7. The appeal filed by the assessee is accordingly allowed.