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2016 (5) TMI 1370 - AT - Income TaxDisallowance of part of proportionate interest u/s 36(1)(iii) - Held that:- CIT(Appeals) was not justified in directing to charge interest on advance given to M/s DLF International Ltd. from January, 2005 to March,2005 in assessment year under appeal. CIT(Appeals) held that advance of ₹ 1.28 Cr given to M/s DLF International Ltd. was business advance, therefore, no disallowance under section 36(1)(iii) of the Act should be made against the assessee. There is no departmental appeal against these findings of the ld. CIT(Appeals). Therefore, no disallowance remained under section 36(1)(iii) of the Act against the assessee. CIT(Appeals) directed to charge interest on account of delay in supplying the goods to the assessee. The ld. CIT(Appeals) noted in his findings that as per agreement, the delivery date for goods was between January,2005 to May,2005 which fact itself is mentioned in the agreement, copy of which is also filed at page 17 of the Paper Book. Therefore, M/s DLF International Ltd. could have delivered goods to the assessee during January,2005 to May,2005. Thus, no cause of action arises in favour of the assessee for charging any interest in financial year under appeal i.e. from January,2005 to March,2005. The findings of ld. CIT(Appeals) are absolutely incorrect and would not survive for making any addition on account of charging any interest during the financial year unless May,2005 has ended. The assessee could not charge any interest from M/s DLF International Ltd. till May,2005. Further, the ld. CIT(Appeals) has changed the whole complexion of the addition as made by the Assessing Officer because Assessing Officer made disallowance under section 36(1)(iii) of the Act by disallowing proportionate interest. Thus, the ld. CIT(Appeals) enhanced the assessment in this way by making independent addition against the assessee in the impugned order. It is not clarified from the impugned order whether ld. CIT(Appeals) has given any notice for enhancing the assessment as per Section 251(2) before issuing direction in this regard on new and independent issue. Therefore, in the absence of giving any opportunity to the assessee for making enhancement to the assessee, no addition could be made against the assessee. - Decided in favour of assessee.
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