TaxTMI 
TaxTMI 
2025 (6) TMI 1760
X X X X Extracts X X X X
X X X X Extracts X X X X
....tional Bombay High Court and various Benches of Tribunals including the Jurisdictional Pune Bench. Since the assumption of jurisdiction is illegal and without jurisdiction the order passed by the Ld. Pr. CIT-3, Pune u/s 263 be cancelled. 2) On the facts and in the circumstances of the case and in law the quite elaborate submissions were made before Pr. CIT-3, Pune in response to the show-cause notice u/s 263 of the Act, pointing out that one of the plausible views was taken by the A.O. which was sustainable in law. The Ld. Pr. CIT-3 himself admitted in his order under S. 263 that various contrary contentions are available. In such circumstances and since the issue was highly debatable the same was beyond the purview of the Revisional Powers of the Ld. Pr. CIT under S. 263 of the Act. The action taken u/s 263 to set aside the order of assessment be cancelled. 3) On the facts and in the circumstances of the case and in law the Ld. Pr. CIT-3 was supposed to pass a final order under S. 263 and not simply set aside the assessment to the file of the A.O. for framing the assessment afresh. The action of the Ld. Pr. CIT taken under S. 263 is illegal and be not sustained a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see is not entitled for deduction u/s. 80P(2)(d) of the Act for the interest income from investments from Cooperative Banks; (2) Ld. AO has erred in allowing the proportionate expenditure; (3) Ld. AO ought to have verified the actual quantum of expenditure incurred for earning the interest income rather than allowing on proportionate basis; (4) Ld. AO was duty bound to determine by conducting specific enquiry as to whether any expenditure was incurred in earning the interest income. Assessee in reply to show cause notice stated that ld. AO has examined the issue in detail and during the assessment proceedings ld. AO firstly asked the assessee how the claim u/s. 80P(2)(d) can be allowed and thereafter without allowing the deduction u/s. 80P(2)(d) of the Act has only allowed the proportionate expenditure incurred for earning the interest income because the assessee borrowed the funds from the Members and applied the same for making investment with Cooperative Banks and therefore such expenditure including other indirect expenditure has been rightly allowed by ld. AO on proportionate basis. He further submitted that the additions made by ld. AO has been further appealed by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multifold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. 8.2. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f its reply received on 5.11.22 that - 7. Alternatively, if interest income is be assessed as "income from other sources", however deduction u/s. 57 is to be given in respect of expenditure for earning interest income. The amount of disallowance out of interest income is however subject to deduction of the amount permissible u/s 57 of the Act. No details of expenses are specifically provided by assessee. Therefore the proportion the interest income from investments in the total revenue is taken as the basis for computing the disallowance out of total 80P deduction and added back under the head income from other sources u/s 56 of the Income Tax Act, 1961. The disallowance will be recomputed as under :- 1. Total Revenue Rs.4,29,98,030/- 2. Interest on Investment Rs.30,72,697/- 3. Total Rs.4,60,70,727/ 4. Interest on Investment of Rs. 30,72,697/- to Total revenue of Rs. 4,60,70,727/-0 6.7% 5. Total deduction u/s. 80P claimed by the assessee Rs.114,64,984/- 6. Total disallowance u/s. 56 (11464984 x6.7%) Rs.7,68,150/- Total disallowance of Rs. 7,68,150/- I am satisfied that the assessee has under-reporte....