No Disallowance can be made in the Absence of Interest Received on Debit: ITAT deletes Addition [Read Order]

The Jodhpur bench of the Income Tax Appellate Tribunal held that when the interest is not received no disallowance can be made.

The assessee marched the appeal on the ground that on the facts and in the circumstances of the case,  the CIT(A) had erred in sustaining the disallowance of interest for Rs. 13,23,694/- made by  AO.

The fact as culled out from the records is that in this case return was filed on 18.10.2004 declaring total income at Rs. 20,51,390/-. Assessment under section 143(3) was completed on 29.12.2006 by then AO, ACIT 14(2), Mumbai at total income of Rs. 40,54,590/- by making some additions.

Against the above additions so made the appeal filed by the assessee before the CIT(A) against these additions. The said appeal was dismissed. Thereafter the assessee filed second appeal before the ITAT. The ITAT confirmed the addition on a/c of personal nature expenses amounting Rs. 1,56,776/-. To decide the issues afresh notice under section 143(2) was issued to the assessee on 07.11.2012.

Originally, appellant was being assessed at Mumbai, later, assessee got itself transferred to the jurisdiction of present AO. Now the assessee is before the tribunal in the second round of litigation. The only issue before was disallowance of interest which was earlier disallowed for an amount of Rs. 16,33,869/- which was reduced by the  AO and confirmed the addition to the extent of Rs. 13,23,694/-.

After hearing both the parties, the tribunal noted that there is no discussion in the order of the lower authorities on the direction given by the bench. The only relief that the assessee was given the relief to the extent of the current year net profit divided equally on that amount the relief was given to the assessee. There is no discussion in the order of the lower authority that the assessee till 31.03.2000 regular in charging the interest and has stopped because of the fact that the recovery of further interest becomes doubtful from 01.04.2000 on account of the fact that the company SIL become sick.

The two member bench consisting of Dr. S. Seethalakshmi (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that when the interest is not received, no disallowance can be made. The assessee was noted having sufficient funds which were interest free and therefore, the bench vacated the disallowance of Rs. 13,23,694/-.

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