AO can’t ignore ITAT order if its operation in appeal has not been suspended by the Competent Court

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AO can’t ignore ITAT order if its operation in appeal has not been suspended by the Competent Court

 

Despite ITAT ruling, the AO ignored and proceeded with the addition.

 

Here is one case wherein Assessee claimed interest income as capital receipt and didn’t pay the tax on the same.

 

The issue was pertaining to Section 28(i), read with section 264, of the Income-tax Act, 1961 regarding the Business income. The issue was whether it is Capital receipt or revenue receipt in the Assessment years 2012-13 to 2015-16.

 

The Assessing Officer disallowed the claim and made addition treating interest income as revenue receipt.

 

Even though the Tribunal deleted additions made by the Assessing Officer but department had not accepted the decision of the Tribunal and preferred appeal before the High Court.

 

Assessee made application under section 264 before Commissioner seeking relief in terms of decision of Tribunal but Commissioner rejected application on ground that various Courts held interest income to be revenue in nature chargeable to tax and, therefore, assessee did not have a case under section 264.

 

Whether mere fact that decision of Tribunal was not acceptable to the department and was subject matter of an appeal could not be a ground for not following it unless its operation had been suspended by Competent Court and thus matter was to be remanded to Commissioner for de novo consideration.

 

With this, the issue is decided in favour of the assessee.

 

The case is very much relevant for the taxpayer and the detail of the same is as under:

 

Karanja Terminal & Logistic (P.) Ltd.

 

[2022] 139 taxmann.com 159 (Bombay)

 

Conclusion:

  1. Where assessee claimed interest income as capital receipt and Assessing Officer disallowed claim and made addition treating interest income as revenue receipt and even though Tribunal deleted addition but department had not accepted Tribunal’s decision and preferred appeal before High Court, mere fact that decision of Tribunal was not acceptable to department and was subject matter of an appeal could not be a ground for not following it.
  1. The only way of not following the ITAT order is when its operation has been suspended by a competent court.

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