SATISH CHANDRA, J. - (1.) BOTH the appeals have been filed by the revenue under Section 260 -A of the Income Tax Act, against the consolidated judgment and order dated 17.10.2008 passed by the Income Tax Appellate Tribunal in ITA No. 281/Luc/2004 and 372/Luc/2005 for the assessment years 2000 -01 and 2001 -02.
(2.) A coordinate Bench of this Court on 23.03.2009 had admitted the appeals on the following substantial questions of law: 1. "Whether the deletion of interest payment amounting to Rs.20,67,959.00 by the Income Tax Appellate Tribunal is proper and justified especially when the conditions as stipulated u/s 40A(2) (a) of the Income Tax Act for dis -allowance of such interest are present in the case. 2. Whether the deletion of interest payment by the Income Tax Appellate Tribunal is justified on the ground that the same has been allowed in the earlier years and more so when it is well settled that principles of res judicata and estoppal are not applicable under Income Tax Act." The brief facts of the case are that for the assessment years under consideration, the assessee has filed loss returns in the status of company. During scrutiny, the A.O. observed that the assessee has claimed the deduction of interest which include major part of the interest at23 percent paid to M/s Gemini Financer. The assessing officer invoke the provision of section 40 -A (2) (a) of the Act, by observing that interest at23 percent was excessive while fair market rate by conservative estimates was not more than 18 percent. He also pointed out that the assessee was having cash in hand of Rs.20 lacs and bank balance in the current account was also Rs.12 lacs approximately. So, it could not be said that the above loan was for legitimate needs of the business. Finally, the A.O. has disallowed the interest 23 percent -18 percent = 5 percent and made the addition for each assessment year under consideration. For both the assessment years, the CIT (A) has upheld the orders passed by the A.O. Being aggrieved, the assessee has filed the appeals before the Tribunal who has deleted the additions. Not being satisfied, the department has filed the present appeals.
(3.) WITH this background, Sri D. D. Chopra, learned counsel for the revenue at the strength of written note submits that the interest paid to M/s Gemini Financer is in excess. On specific query from the Bench, he admits that in earlier assessment year (1999 -2000), the same rate of interest was accepted by the department. For this purpose, he submits that each assessment year is independent and principal of res -judicata is not applicable as per the ratio laid down in the case of J. K. Oil Mills v. CIT; 105 ITR 53 Allahabad. According to him, principle of estoppal/res -judicata is not applicable in the income tax matters as per the ratio laid down in the case of CIT vs. Brij Lal Lohiya; 84 ITR 273 SC. Lastly, he made a request to set aside the impugned order passed by the Tribunal and restored the order passed by the lower income tax authority.;