Maharastra Aepx Corporation Ltd. vs The Commissioner of Income Tax and The Joint Commissioner of Income Tax (Assessments), Special Range

N.K. Patil, J.—This appeal by the assessee is arising out of the impugned order dated 21.2.2005 passed in Int. Tax Appeal No. 2/Bang/2001 by the Income Tax Appellate Tribunal, Bangalore, for consideration of the following substantial questions of law:

(i) Whether on the facts and in the circumstances of the case, the Tribunal is justified in upholding the levy of interest Tax of Rs. 1,18,67,952/- under the Interest Tax Act, 1974, without examining the specific plea raised by the appellant that the lease amount received by the appellant cannot be treated as ''Interest'' as defined u/s 2(7) of the Interest Tax Act, 1974?

(ii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in confirming the levy of Interest Tax of Rs. 1,18,67,952/- by merely referring to the findings given in the income Tax proceedings without examining the nature of the leasing transaction independently with reference to the provisions of the Interest Tax, 1974?

(iii) Whether on the facts and in the circumstances of the case, the Tribunal''s order should be considered as a non-speaking order and consequently held as bad in law?

The facts of the case in brief are, the assessee is a non-banking financial company doing Hire Purchase and Leasing business. The Assessee, filed a return of income on 30.11.1997 declaring a total income of Rs. 3,70.82,954/-. The said case was taken up for scrutiny by the Assessing Officer. The Assessing Officer, after issuing notice u/s 143(2) and 142(1) to the assessee after affording opportunity to the representative of the assessee and after considering the material available on file, has proceeded to pass the order by dis-allowing the depreciation claimed by the assessee. Assailing the correctness of the said order, the assessee had filed an appeal before the First Appellate Authority the Commissioner of Income Tax (Appeals)-I, Bangalore, in appeal No. Int. Tax Appeal No. 3/SR/MNG/CIT(A)-I/2000-2001. The First Appellate Authority, after hearing both sides and after considering the order passed by the Assessing Officer, has dismissed the said appeal and upheld the order passed by the Assessing Officer holding that the transactions are financial transactions and they have been upheld in income tax assessment order and therefore, the treatment of the interest portion in the so called ''lease rent'' as ''interest'' and part of chargeable interest is correct. Being aggrieved by the order of the First Appellate Authority and the Assessing Officer, the assessee had filed an appeal before the Income Tax Appellate Tribunal, Bangalore Bench, Bangalore, (Tribunal'' for short) in Int. T.A. No. 2/BANG/2001 for the Assessment Year 1997-98. The said matter came up for consideration before the Tribunal. The Tribunal, in turn, after going through the order passed by the Assessing Officer and the First Appellate Authority and after considering the relevant material available on file, has dismissed the appeal filed by the assessee. Against the said order passed by the Tribunal, the assessee has presented this appeal, raising the aforesaid substantial questions of law and seeking other reliefs.

We have heard the learned Senior counsel for the appellant and learned Counsel for the respondents at considerable length of time.

Learned Senior counsel appearing for the appellant at the outset submitted that, the order impugned passed by the Tribunal is not sustainable and it is liable to be set aside. Further, he submitted that, all the three authorities have passed the orders without assigning any reasons, without application of mind and only on the basis of the Income Tax Assessment Order passed by the Assessing officer against the assessee that the assessee is liable to pay the interest under the Interest Tax Act, because whatever the income he is getting is by way of business and not by way of lease and since it was a financial transaction. To substantiate his submission, he has taken us through the orders passed by all the authorities and submitted that, such orders cannot be sustained and they are liable to be set aside.

As against this, learned Counsel for the respondents, inter-alia, contended and substantiated the orders passed by all the authorities. However, he has not disputed that the said orders have been passed by the authorities placing reliance on the Income Tax Assessment order and are not speaking orders.

After having heard the learned Counsel for both the parties and after careful perusal of the orders passed by all the authorities, it is manifest on the face of the orders that, all the authorities have committed grave error, much less material irregularity in passing the said orders, as rightly pointed out by the learned Counsel for the appellant. No reasoning as such have been assigned by the authorities for passing such orders. Only placing reliance on the Income Tax Assessment order passed by the Officer, they have proceeded to conclude the proceedings. It is significant to note that as per the relevant provisions of the Act, it is duty cast on the authorities to pass orders in consonance with the relevant provisions of the Act, after affording reasonable opportunity to the assessee, after assigning valid reasons and after recording a finding as to how the assessee is not entitled for depreciation claimed by him. Therefore, without expressing any opinion on the merits and demerits of this case, it would suffice for this Court to set aside the orders passed by all the authorities and the matter requires reconsideration by the Assessing Officer.

Having regard to the facts and circumstances of the case as stated above, the instant appeal filed by appellant is allowed in part.

The impugned order dated 21.2.2005 passed by the Tribunal in No. Int. Tax Appeal No. 2/Bang/2001; the order dated 22.1.2001 passed by the Commissioner of Income Tax (Appeals)-I, Bangalore, in No. Int. Tax Appeal No. 3/SR/MNG/CITtA)-I/2000-01 and the Assessment order dated 31.3.2000 passed by the Assessing Officer, are hereby set aside and the matter stands remitted back to the Assessing Officer, for reconsideration afresh and to pass appropriate order, in accordance with relevant provisions of Interest Tax Act, after affording reasonable opportunity of hearing to the respective parties, either personally or through their counsel and dispose of the same, as expeditiously as possible.

In view of remanding the matter to the Assessing Officer for reconsideration, it is not necessary to answer the substantial questions of law raised in this appeal.