ITAT sets aside CIT's jurisdiction under sec 263, directs re-computation of income. AO to re-examine per ITAT order.

The ITAT allowed the appeal, setting aside the CIT's order invoking jurisdiction under section 263 of the Income Tax Act and directing a re-computation of income. The ITAT found that the CIT had no basis to intervene as the issue of interest accrual was already under appeal. The Assessing Officer was given the opportunity to re-examine the principal and interest as per the previous ITAT order.

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Issues:
1. Jurisdiction of CIT under section 263 of the Income Tax Act
2. Levy of interest on advance amount

Jurisdiction of CIT under section 263 of the Income Tax Act:
The appeal was against the CIT's order invoking jurisdiction under section 263 of the Income Tax Act and setting aside the assessment order passed by the A.O. under section 143(3) for A.Y. 2008-09. The CIT invoked jurisdiction as there was an omission in the calculation of interest at 18% on the balance amount of the advance made by the assessee. The CIT directed a re-computation of the income after necessary verification.

Levy of interest on advance amount:
The assessee claimed interest on an advance made to a company and filed a suit for recovery at 18%. The A.O. brought to tax an amount of interest in the assessment. However, the CIT found that the A.O. had under-assessed the interest by not considering the total advance amount. The ITAT had previously dismissed a Revenue appeal related to the interest levy, stating that interest could only be taxed when the liability to repay the advance and the rate of interest were determined by the Civil Court. The ITAT directed the issue to be reconsidered by the Assessing Officer.

The assessee argued that the CIT could not invoke jurisdiction under section 263 as the basis of interest accrual was already under appeal. The ITAT found no basis for the CIT to invoke jurisdiction and set aside the CIT's order. The ITAT allowed the appeal of the assessee, giving the Assessing Officer the option to re-examine the principal and interest as directed in the previous ITAT order.

In conclusion, the ITAT allowed the appeal of the assessee, setting aside the CIT's order and providing the Assessing Officer with the opportunity to re-examine the principal and interest in accordance with the previous ITAT order.

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