2022 (10) TMI 969

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.... the view that the AO has not examined the issue of non-charging of interest on the loan of Rs. 16.42 crores given by the assessee. He also took the view that the AO ought to have charged interest @ 12% on the above said loan given by the assessee. Accordingly, the Ld. PCIT took the view that the AO has not carried out necessary enquiries on the above said issue and there was complete non-application of mind on the part of the Assessing Officer in not examining the above said issue. Accordingly, the Ld. PCIT initiated revision proceedings u/s. 263 of the Act. 3. Before Ld. PCIT, the assessee submitted that the AO has verified the loans received by the assessee as well as loans given by the assessee during the course of assessment proceedings. It was further submitted that all the details including the details of non-charging of interest on certain loans were furnished before the AO. Accordingly, it was contended that the AO has passed the assessment order after examining those details and hence the said assessment order cannot be considered to be erroneous and prejudicial to the interests of revenue. 4. The Ld. PCIT was not convinced with the explanations given by the assesse....

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....ssessee as on 31.3.2017 was Rs. 74.73 crores, while the interest free loans given by the assessee was only Rs. 16.42 crores. He submitted that own funds available with the assessee was far in excess of the amount of interest free loans given by the assessee. Accordingly he submitted that the interest free loan should be considered as given out of own capital available with the assessee as per the decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Reliance Utilities and Power Ltd. (313 ITR 340). In view of the binding decision of the jurisdictional High Court, there is no scope for making any disallowance out of interest expenditure. Since the impugned revision order has been passed by the learned PCIT without considering the binding decision of Hon'ble Bombay High Court, the same is liable to be quashed. 7. The Learned DR, on the contrary, submitted that the Assessing Officer has not raised any specific query with regard to non-charging of interest on the loans given by the assessee. The Learned DR further submitted that the AO has merely asked for the details of loans given by the assessee. She contended that, mere issuing of questionnaire aski....

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....n order passed in violation of the principles of natural justice or without application of mind, would be an order falling in that category. The expression "prejudicial to the interests of the Revenue", the Supreme Court held, it is of wide import and is not confined to a loss of tax. What is prejudicial to the interest of the Revenue is explained in the judgment of the Supreme Court (headnote): "The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." The principle which has been laid down in Malabar Industrial Co. Ltd. [2000] 2....

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....e case of CIT Vs. Amalgamations Ltd. (238 ITR 963 ). 10. The law interpreted by the High Courts would make it clear that the Ld. Pr. CIT, before holding an order to be erroneous, should conduct necessary enquiries or verification in order to show that the finding given by the assessing officer is erroneous or the Ld. Pr. CIT should show that the view taken by the AO is unsustainable in law. 11. In the instant case, we noticed that the Assessing Officer has called for the details of loan taken by the assessee as well as given by the assessee in a particular format which included a specific column for mentioning rate of interest charged. The Ld. A.R. submitted that the details called for by the Assessing Officer were duly furnished before him and hence the Assessing Officer is very much aware of the fact that the assessee has not charged interest on certain loans aggregating to Rs. 16.42 crores. According to learned AR, that the Assessing Officer has taken a conscious view of the matter after due application of mind and hence the assessment order cannot be considered as erroneous and prejudicial to the interest of revenue. On the contrary, it is the submission of learned DR tha....