TMI Blog2020 (10) TMI 716X X X X Extracts X X X X X X X X Extracts X X X X ..... t deduction under section 57(3) of the Act. Once the part of the borrowed fund is utilized for the purpose of business being introduction of capital in the proprietorship concern and partnership firm from where the assessee has earned the business income and offered to tax then the proportionate interest expenditure is an allowable business expenditure. Thus it is only an error of claiming the deduction under correct head but the entire interest was claimed against the income from other sources. As relying on disallowance made by the AO in respect of interest expenditure is deleted. - ITA No. 1219/JP/2019 - - - Dated:- 15-10-2020 - Shri Vijay Pal Rao, Judicial Member For the Assessee : Shri PC Parwal (CA) For the Revenue : Smt. Chanchal Meena (Addl. CIT) ORDER PER VIJAY PAL RAO, JM : This appeal by the assessee is directed against the order dated 13.11.2018 of ld. CIT (A)-2, Jaipur arising from the order passed under section 154 of the IT Act for the assessment year 2012-13. The assessee has raised the following grounds :- 1. The ld. CIT (A) has erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of IT Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 Order dated 26.02.2020 (Jaipur Trib.) 4. On the other hand, the ld. D/R has submitted that the assessee has not raised any objection before the AO regarding non disposal of the objections and only after completion of the reassessment, the assessee has raised this issue. Further, non complying the law as laid down by the Hon ble Supreme Court in the case of GKN Driveshaft, 259 ITR 19 (SC) is only a procedural irregularity which would not render the assessment null and void but the same can be rectified. She has relied upon the decision of Hon ble Madras High Court in case of Home Finders Housing Ltd. vs. ITO, 404 ITR 611 (Madras) and the SLP filed by the assessee against the said decision was also dismissed by the Hon ble Supreme Court in 256 Taxman 59 (SC). She has relied upon the order of the ld. CIT (A). 5. I have considered the rival submissions as well as the relevant material on record. The ld. CIT (A) though reproduced the objections raised by the assessee against the validity of the reopening of the assessment as well as validity of the assessment order passed by the AO. The summary of the contentions and the finding of the ld. CIT (A) at page 9 of the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections against the notice under section 148 prior to the reassessment order passed by the AO. At the outset, I note that this Tribunal in case of Manoj Dubey vs. ITO (supra) has considered an identical issue in para 8 to 11 as under :- 8. We have heard the rival contentions and perused the material available on record. In this case, notice U/s 148 of the Act was issued by the Assessing officer on 03.03.2017 which was duly served on the assessee on 04.03.2017. In response, the assessee submitted that return of income filed by the assessee on 19.05.2017 may be treated as return of income filed in response to the notice U/s 148 of the Act. The assessee further requested for the reasons on the basis of which the matter has been reopened by the AO. Thereafter the reasons were supplied to the assessee and thereafter the assessee filed a letter dated 24.08.2017 with the Assessing officer objecting to the reasons so recorded by him and the contents of the said letter reads as under:- The assessee is dealing in the business of purchase and sale of fish aquariums allied products. The assessee filed its return of income for assessment year 2010-2011 on 30/07/2011 declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s 148, the assessee filed his return of income, the reasons were requested to be supplied to him which were duly supplied by the Assessing officer and thereafter, the assessee filed his objections on 24.08.2017 to the said reasons giving detail justification of source of cash deposits in his bank account. On the same date, the notice U/s 143(2) was issued and the matter was fixed for hearing on 12.09.2017, thereafter after consideration of the submissions of the assessee, the assessment was completed U/s 143(3) r.w.s. 147 of the Act vide order dated 22.12.2017. Further, from perusal of the records as well as the assessment order, we find that the Assessing Officer has proceeded with the assessment proceedings and passed the order U/s 143(3) r.w.s. 147 without disposing off the objections so raised by the assessee through a separate order. Further, there is no narration even in the assessment order that before completing the assessment proceedings, the objections were disposed off. Disposing off the objections raised by the assessee against the reasons recorded before issuance of notice u/s 148 though not part of statutory requirement as prescribed under the Income Tax Act, howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the objections of the appellant. This impugned order holds the Assessing Officer is obliged to do in terms of the Apex Court's decision in GKN Driveshafts (India) Ltd., v/s ITO 259 ITR 19. In the aforesaid circumstances, the order of the CIT(A) and the Assessing Officer were quashed and set aside. However, after having set aside the orders, it restored the Assessment to the Assessing Officer to pass fresh order after disposing of the objections to reopening notice dated 28th March, 2008, in accordance with law. 8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary haras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court has considered the decision of Hon ble Madras High Court in case of Home Finders Housing limited vs ITO(supra) as relied upon by the ld DR and has followed the decision of the Hon ble Supreme Court in case of KSS Petron Private ltd. vs. ACIT (supra). In light of above and respectfully following the decision of the Hon ble Jurisdictional High Court which is binding on this Tribunal, the reassessment proceedings completed without disposing off the objection raised by the assessee cannot be sustained and consequent reassessment order u/s 147 r/w 143(3) is hereby quashed and set aside. 11. Therefore, the other contentions advanced by both parties as well as grounds on merit have become academic, are not adjudicated upon and are left open. In the result, the appeal of the assessee is allowed. Though there are divergent views of different High Courts on the issue whether non disposal of the objections before passing the reassessment order would render the reassessment order invalid or it is only a procedural irregularity. Since the decision of the Hon ble Jurisdictional High Court is binding on the Tribunal, therefore, this Tribunal in the said case of Shri Manoj Dubey (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving considered the rival submissions as well as the relevant material on record, it is noted that the interest expenditure claimed by the assessee against the income from other sources is towards the borrowed fund taken by the assessee in the preceding year and not in the year under consideration. The AO has not made any disallowance in respect of the interest expenditure in the preceding year. Further, the order of the AO itself reveals the fact that the borrowed fund was not fully utilized for giving the loans on which the assessee has earned the interest income under section 56 of the IT Act and claimed the interest deduction under section 57(3) of the Act. Once the part of the borrowed fund is utilized for the purpose of business being introduction of capital in the proprietorship concern and partnership firm from where the assessee has earned the business income and offered to tax then the proportionate interest expenditure is an allowable business expenditure. Thus it is only an error of claiming the deduction under correct head but the entire interest was claimed against the income from other sources. The Coordinate Bench of this Tribunal in case of Govind Sharan Gupta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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