TaxTMI 
TaxTMI 
2019 (5) TMI 635
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....nces of the case, the Commissioner of Income-tax was right in exercising his powers under Section 263 (1) of the Income-tax Act, 1961?" 3. The Assessee filed its return, declaring a total loss of Rs. 14,45,87,240/- for the AY in question and a revised return on 28th March, 2002 showing income from business and profession as 'Nil'. 4. The return was picked up for scrutiny under Section 143 (3) of the Act. An assessment order dated 31st March 2003 was framed by the Assessing Officer ('AO'), after examining the details provided by the Assessee. The AO considered the following issues in the assessment order "i) Capitalization of interest for setting up of its new plant. ii) Allowability of deferred business expense claim....
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.... the nexus between the borrowed funds and the monies advanced as loan to its sister concerns; and (iv) The claim in regard to commission on sales. 8. The CIT accordingly cancelled the assessment order in regard to the above four issues and directed the AO to reframe the assessment after making necessary inquiries. He added that the AO will also be "free to examine any other issues which have not been covered in this order except those issues which have already been considered and decided by the CIT (Appeals)". 9. The Assessee assailed the above order of the CIT before the ITAT. By the impugned order the ITAT held that the CIT erred in proceeding on the basis that if necessary inquiries were not undertaken by the AO, the asses....
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....he Assessee and not as per the whims and fancies of the authorities, the CIT could not have formed an opinion whether certain investment could be termed as 'bad'. The Assessee's act of declaration of interest income of Rs. 12.94 crore on monies advanced to Hexa Securities could therefore not said to be prejudicial to the interest of the Revenue. The submission of the Assessee that all loans were earmarked and could not be utilized for investment or giving loans, was accepted. The ITAT also accepted the plea of the Assessee that it had interest free funds of Rs. 209.74 crore, which would take care of the investment in shares to the extent of Rs. 67.22 crore, and interest free lending of funds at lower rates. 12. As regards the issue under....
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.... "a substantial part of this investment was made by taking inter-corporate loans which increased from Rs. 22.91 crores as on 31st March,1994 to Rs. 110.85 crore as on 31.3.1995 (the relevant papers, which were filed by the Assessee during the assessment proceedings for that assessment year were shown to the Assessee's representatives during the hearing on 16th March, 2004). This investment included the investment in shares of Hexa Securities & Finance Co. Ltd., "subsidiary company, amounting to Rs. 25 crores and in shares of Jindal Vijaynagar Steel Ltd. amounting to Rs. 5 crores. Both these investments, acquired out of inter-corporate loans, have continued to remain with the Assessee during the previous year relevant to the assessment y....
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....e to a conclusion different from the one reached by the ITAT, which purely turned on facts. Indeed the CIT appears to have proceeded on surmises that the investment in shares was out of borrowed funds of the Assessee when plainly it was not. 18. The ITAT has also examined carefully the issue of disallowance of interest expenditure. This was not a case where the Assessee had advanced funds interest free. The details had been filed about the borrowings which showed that it was at 13 to 17.86% interest whereas the lending of the monies was @ 16%. The main lending was to Hexa Securities Finance Company Limited. Some money had also been lent to Padmini Holdings Pvt. Ltd. @ 15% and Equipment & Leasing Ltd., @13.2%. The ITAT importantly found t....