TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 865
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....Income-tax Act, 1961 (hereinafter referred to as "the Act") dated 15.02.2021 (hereinafter referred to as "the assessment order"), as erroneous and prejudicial to the interest of the revenue. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law; 2. The Pr. CIT failed to appreciate that the Assessing Officer after due application of mind as regard allowability of deduction claimed u/s 36(1)(ii) framed the assessment order without making any disallowance on the said count; 3. Assuming without admitting that the present case was a case of inadequate enquiry, the Pr. CIT failed to appreciate that the power of revision envisaged under section 263 of the Act and the Explanation 2 thereto can be exercised only where no enquiry as required under the law is done and that it is not open to invoke the said provisions in cases of inadequate enquiry, 4. The Pr. CIT erred in holding that the interest expense of Rs 37,10,63,373/- is disallowable without appreciating that the corresponding borrowed funds have been utilized for business purpose and therefore the same is allowable under section 36(1)(iii) of the Act. The conclus....
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....that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your submission from the e-filing portal using the link: Incometaxindiaefiling.gov.in You have filed the return of income for AY 2018-19 on 25.09.2018 declaring total income of Rs. (-) 37,22,61,114/- under normal provisions of the Act. The assessment was completed u/s 143(3) on 15.02.2021 accepting the returned income as such. 2. On perusal of assessment order u/s 143(3) dated 15.02.2021, it is observed that the order is erroneous and prejudicial to the interest of revenue for the following reasons: 2.1 On verification of the records, it is seen that an amount of Rs. 9369.28 lakh has been debited as "interest expenses" in the Profit & Loss Account. It is also observed that only an amount of Rs. 5.52 lakh has been credited to the P & L A/c against which an amount of Rs. 5658.64 lakh has been disallowed u/s. 36(1)(iii) in the computation of income suo-moto as the borrowed capital was used for non business purposes. 2.2 It has been further obse....
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....rrowed capital was used for non business purposes. 2.2 It has been further observed that the loss from business is mainly on account of payment of interest of Rs9369.28 lakh on borrowed capital Since the borrowed capital has not been used for earning any taxable income, the entire amount of Rs. 9369.28 lakh ought to have been disallowed in the order passed u/s. 143(3) dated 15.02.2021 as against the suo moto disallowance of Rs. 5658.64 lakh. Hence, the assessment order suffers from an under assessment of Rs 3710.64 lakh..." 6. Whereas in compliance to notices, the assessee has filed the information referred at Para 6 of the revision order as under: "6. In In response, Shri. Jay Bhansali, CA & A/R of the assessee attended and furnished written submissions which have been perused carefully and placed on record. The submissions of the assessee are briefly summarized as under; 1. The assessee company is in the business of infrastructure activities 2. During the year under consideration, the assessee has debited interest expenses of Rs. 93,69,28,205/- 3 The assessee has credited Rs. 3,00,000/- as "Revenue from Operations" and Rs. 2,51,507/- as "Other Income" aggregating ....
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....e. 8. The order u/s 263 of the Income Tax Act, 1961 is passed accordingly." 8. Finally the Pr.CIT has passed order u/sec 263 of the Act dated 30.03.2023. Aggrieved by the order of the Pr.CIT, the assessee has filed an appeal before the Honble Tribunal. 9. At the time of hearing, the Ld. AR submitted that the Pr.CIT has erred in considering the order passed by the AO is erroneous and prejudicial to the interest of the revenue, irrespective of the fact that the assessee has complied with the information and the notices and the A.O. having verified and examined the facts has accepted the same. The Ld.AR submitted that the assessee has obtained loans and has justified the deduction u/s 36(1)(iii) of the Act and these facts were also brought on record. The assessee has submitted voluminous details in compliance to notice U/sec 142(1) of the Act and were examined and verified. The observations of the Pr.CIT is without merits and whereas the AO has applied the mind and taken the view. The Ld.AR has substantiated the submissions with the paper book and judicial decisions and prayed for allowing the assessee appeal. 10. Per Contra, the Ld.DR Submitted that the AO has not considered a....
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....e advances 7,16,05,000 B. Investments 935,56,66,708 Investments in unquoted equity shares 195,85,37,419 Investments in LLP as parter 66,71,29,289 Investments in compulsory convertible debentures (CCDs) 673,00,00,000 Total (A+B) 942,72,71,708 1.3 Break-up of interest bearing and interest free funds are as under: Particulars Amount Amount Amount Share capital 5,07,088 Reserve & surplus 286,59,35,489 Optionally convertible debentures Arrow Media & Broadband Pvt Ltd Pan India Network Ltd 170,21,00,000 208,90,00,000 379,11,00,000 Inter corporate deposits Pan India Infraprojects 96,31,39,553 Pvt ltd Pan India Utilities Distribution 96,37,85,553 6,46,000 Current account with limited liability Partnership Essel Properties LLP Mod Silica LLP Churu Enterprises 27,09,111 18,266 95,87,83,942 96,15,11,319 Other current liabilities 88,08,44,573 Other noncurrent liabilities 1,05,000 Total interest free funds 373,12,72,044 Interest bearing funds Borrow....
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....scope of the revisionary proceedings initiated under sec 263 of the Act and the observations are read as under: "Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an ....
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....of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/ssie to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer t....
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....an elaborate discussion - Held, no - Whether provisions of section 263 were applicable to instant case and Commissioner was justified in setting aside assessment order - Held, no 14. We Considering the overall facts, circumstances, ratio of the judicial decision and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the order cannot implied that there is no application of mind and the A.O. has applied one of the possible view. Hence, the action of the Pr.CIT cannot be acceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the grounds of appeal in favour of the assessee. 15. In the result, the appeal filed by the assessee is allowed. ITA No. 1207/Mum/2023, A.Y 2018-19 16. The assessee has raised following grounds of appeal: 1 On the facts and circumstances of the case and in law, the Principal Commissioner Income-tax - 6, Mumbai ("the PrCIT") erred in assuming jurisdict....