2012 (8) TMI 1203 - AT - Income Tax

Summary

Issues Involved: Challenge to the maintainability of the order passed u/s 263 of the Income Tax Act.

Summary:

Issue 1: Maintainability of the order u/s 263 of the Act

The assessee challenged the order passed u/s 263 of the Act, primarily concerning the disallowance of interest expenditure. The ld. CIT contended that interest funds were diverted for non-business purposes, citing the decision in the case of CIT V. Abhishek Industries. The assessee argued that surplus funds were available from sister concerns, thus interest disallowance was not warranted. Reference was made to the decision in CIT V. Winsome Textile Industries Ltd. The ld. CIT disagreed, emphasizing a credit balance from associate concerns was not in cash but goods. The Tribunal's decision in a similar case was cited. The assessee presented evidence of credit balances from sister concerns, asserting that the Assessing Officer had not erred in his view, as per the decision in CIT V. Max India Ltd.

Issue 2: Proper Enquiries by Assessing Officer

The ld. DR for the revenue contended that the Assessing Officer's lack of enquiry rendered the order erroneous and prejudicial to revenue interests. The Tribunal found merit in the assessee's submissions, noting that proper enquiries were made and credit balances from sister concerns were sufficient to justify the interest expenditure. The Tribunal emphasized that the Assessing Officer's view was valid, as supported by the decision in CIT V. Max India Ltd.

Conclusion:

After careful consideration, the Tribunal upheld the assessee's appeal, ruling in favor of the assessee and quashing the order passed u/s 263 of the Act. The decision was pronounced on 30.08.2012.