ORDER
B.S. Saluja, J.M.
1. The assessee has filed these appeals against consolidated order of CIT(A), V, New Delhi dt. 4th February, 1993 mainly on the ground of rejection of application under s. 154 whereby the assessee sought deletion of deemed interest of Rs. 36,000 in the asst. yrs. 1982-83 to 1984-85.
2. In this case, the AO referred to the assessment order for asst. yr. 1981-82 wherein it was noted that the assessee-company’s interest bearing funds of Rs. 2 lakh was utilised in acquiring shareholding of another company, namely, Ravi Containers Pvt. Ltd. Such payment was held to be capital expenditure and not incurred for the purposes of assessee’s own business. For the reasons, given in the aforesaid assessment order for 1981-82, the AO disallowed the claim of the assessee for interest of Rs. 36,000 in each of the 3 assessment years under consideration.
3. The assessee moved an application under s. 154 for rectification of the said mistake by relying on the order of the Tribunal for asst. yr. 1981-82 whereby the disallowance of interest of Rs. 6,000 was deleted. The AO, however, observed that “since the decision of the learned Tribunal is in respect of asst. yr. 1981-82 only, it is not applicable to subsequent years automatically. Hence, there is no mistake apparent from record which could be rectified”. He, therefore, rejected the application under s. 154.
4. On first appeal the learned CIT(A) observed that the order of the Tribunal was made after the assessment order for asst. yrs. 1982-83 to 1984-85 were passed. He also noted that on receipt of the order of the Tribunal the assessee moved an application under s. 154 to the AO praying for rectification of the assessment orders on the ground that the basis on which the addition was made in subsequent years was the same as in asst. yr. 1981-82, which was not approved by the Tribunal. He also noted the plea of the assessee that the mistake regarding the disallowance of interest being apparent from record should be rectified under s. 154 for subsequent years under appeal. The learned CIT(A) held that the action of the AO was justified and that the principle of res judicata was not applicable to income-tax proceedings. He also observed that the assessee could have sought the aforesaid relief by filing appeals against the assessment orders made in respect of asst. yrs. 1982-83 to 1984-85. He further observed that the mistake could have been said to have been apparent from record if the decisions given by the Supreme Court or Delhi High Court were on the same facts. He also observed that, on the other hand, the decision of the Tribunal given on certain facts in an earlier assessment year will not become the law as it can be challenged under s. 256(1) or 256(2) before the higher Courts. He, therefore, confirmed the orders of the AO.
5. The learned counsel for the assessee invited our attention to the order of the Tribunal dt. 16th January, 1990 in ITA No. 1013/Del/1987 in the case of the assessee for asst. yr. 1981-82, wherein the Tribunal noted that the assessee had paid an amount of Rs. 2 lakhs to acquire 67 per cent. shareholding of the other company. The Tribunal also noted that according to the IAC the assessee had diverted its funds to the extent of Rs. 2 lakhs on which it had paid interest to the banks. The Tribunal also noted that the IAC had also observed that interest was related to non-commercial activity of the assessee-company and, therefore, it was not allowed as deduction. It was argued before the Tribunal that the loans raised from the banks were for particular purposes and that no loan had been directly raised from the bank for purposes of paying the aforesaid amount of Rs. 2 lakhs. It was also argued that the IAC had not established any co-relation between the amounts raised as loans and the amount of Rs. 2 lakhs paid by the assessee. The Tribunal considered the rival submissions and held that “the assessee has demonstrated before us that it had not raised any loan from the bank specifically for the purchase of shareholding of the other companies. It has also pointed out that the assessee-company had its own capital and reserves amounting to more than Rs. 2 lakhs and that no nexus had been established between the loans raised from the bank and the amount so paid by the assessee”. The Tribunal, therefore, deleted the addition of Rs. 6,000. The learned counsel emphasised that since the orders of the AO disallowing interest of Rs. 36,000 in each of the assessment years under consideration were based on the assessment orders for asst. yr. 1981-82 and the same amount of Rs. 2 lakhs was involved in all the 3 years, the orders of the Tribunal were binding on the IT Department and that the application moved by the assessee under s. 154 ought to have been allowed. On a query from the Bench, the learned counsel was fair enough to mention that the assessee had not filed any appeals on the said issue and that instead the assessee moved application under s. 154 for getting the assessment orders rectified on the basis of the order of the Tribunal. In view of the foregoing, the learned counsel urged that the assessee deserved relief in the light of the aforesaid order of the Tribunal whereby it was clearly held that no nexus had been established by the lower authorities with reference to the loans raised from the bank and the amount of Rs. 2 lakhs paid by the assessee. He again emphasised that the decision of the Tribunal was sufficient ground for allowing relief to the assessee under s. 154.
6. The learned Departmental Representative relied heavily on the orders of the first appellate authority and submitted that there was no mistake apparent from record and that the assessee should have filed appeals, in case it was aggrieved.
7. We have carefully considered the rival submissions on the issue involved in these appeals in the light of the aforesaid decision of the Tribunal. It is observed that the Tribunal gave a clear finding that there was no nexus between the amount of Rs. 2 lakhs paid by the assessee for acquiring shareholding of Ruvi Containers Pvt. Ltd. and the bank loans raised by the assessee and that the assessee had enough surplus funds of its own capital and reserves amounting to more than Rs. 2 lakhs. It is also observed that the AO had rejected the application under s. 154 by observing that the decision of the Tribunal was only in respect of asst. yr. 1981-82 and was not applicable to subsequent years automatically. We feel that since the disallowance of Rs. 36,000 in each of the 3 assessment years was based on the assessment order for asst. yr. 1981-82, the said plea of the AO was not well founded as the amount involved in all the 3 assessment years remained the same and the ground on which the disallowance had been made was also similar. Similarly, we feel that the observations of the learned CIT(A) in para 1.2 of his orders that “the decision of Tribunal given on certain facts in an earlier assessment year will not become law as it can be challenged under s. 256(1) or under s. 256(2) before the higher Courts” are not correct. It is not disputed that the facts in the assessment years under consideration remained the same as in the asst. yr. 1981-82. Further, it has not been brought to our notice as to whether any reference application was filed with reference to the aforesaid relief allowed by the Tribunal in asst. yr. 1981-82. On the facts and circumstances of the case and taking a pragmatic view of the entire case we feel that the assessee deserves relief. Accordingly, we delete the disallowance of Rs. 36,000 on account of interest in relation to all the 3 assessment years and direct the AO to allow relief to the assessee on the said basis.
8. In the result, the appeals are allowed.