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2019 (4) TMI 271 - AT - Income TaxRevision u/s 263 by CIT(IT) - different interpretation of a decision of court relating to assessee - directing the AO to assessee the FD interest, which is in the name of Ferani Hotels Pvt. Ltd. as income and holding the assessment as erroneous and prejudicial to the interest of the Revenue - HELD THAT - AO had conducted enquiry before completion of assessment. The AO had issued notices u/s 133(6) of the Act to Ferani as well as Indian Bank and obtained required information. The AO had also examined the judgment of Hon ble Bombay High Court NUSLI NEVILLE WADIA AND OTHERS AND VICE-VERSA. 2012 (7) TMI 1088 - BOMBAY HIGH COURT and interpreted in her own way the directions. By interpreting the directions in her own way the AO had come to conclusion that the amounts collected by Ferani from Flat purchasers constituted assessee s income liable to be taxed in A.Y. 2013-14. Without going to the merits or demerits of the AO s interpretation of the High Court judgment, we are of the considered opinion that the evidence on record shows that the AO had applied her mind to the contents of Hon ble Bombay High Court judgment. Wherever the AO found that inference was required to be drawn against the assessee, such inference was drawn. The same judgment had directed Ferani to maintain account in respect of sums collected from Flat purchasers and further directed Ferani to invest the amounts collected in Fixed Deposits which would be governed by the final order of the Trial Court. If interpreting the said directions of the Court to mean that the deposits were made by Ferani and in that view, the AO did not include the interest in the assessed total income then it would only mean that the AO had followed one of the legal course permissible in law. Since in AO s opinion interest on FD was not assessable as assessee s income, the AO also did not allow the credit for taxes paid by way of TDS from interest on FD which by CIT s own admission was reported by the Bank in Statement-26AS. According to us, in such circumstances it was not a case where there was any failure on the part of the AO to conduct proper enquiries and gather relevant information. The AO had in fact gathered relevant material and information from Ferani & Indian Bank. CIT sought to interpret the directions of Hon ble Bombay High court in a manner different from the AO and has directed the AO to assess even the interest on FD as assessee s income. We also noted that the CIT has not brought on record any cogent & conclusive material which would prove or show that the course followed by the AO was unsustainable in law. When the AO after conducting the enquiries, which the circumstances demanded, had followed one of the course permissible in law, then it was not open for the CIT to treat the assessment order erroneous within the meaning of Sec. 263. See Malabar Industrial Company Vs CIT 2000 (2) TMI 10 - SUPREME COURT . Hence, we quash the revision order and allow the appeal of assessee.
Issues Involved:
1. Validity of the revision order passed under Section 263 of the Income Tax Act, 1961. 2. Taxability of Fixed Deposit (FD) interest in the name of Ferani Hotels Pvt. Ltd. 3. Interpretation of the judgment of Hon'ble Bombay High Court dated 19-07-2012. 4. Whether the interest on FDs constituted income chargeable to tax in the hands of the Estate of EFD for A.Y. 2013-14. 5. Whether the assessment order was erroneous and prejudicial to the interest of the Revenue. Detailed Analysis: 1. Validity of the revision order passed under Section 263 of the Income Tax Act, 1961: The assessee challenged the validity of the revision order passed by the Commissioner of Income Tax (International Taxation)-2, Mumbai under Section 263 of the Income Tax Act, 1961. The primary contention was that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue. The tribunal concluded that the Assessing Officer (AO) had conducted proper inquiries and gathered relevant information before passing the assessment order. Therefore, the revision order under Section 263 was quashed. 2. Taxability of Fixed Deposit (FD) interest in the name of Ferani Hotels Pvt. Ltd.: The CIT directed the AO to assess the FD interest of ?4,06,41,567/- in the name of Ferani Hotels Pvt. Ltd. as income of the assessee. The assessee argued that the FDs made by Ferani Hotels Pvt. Ltd. did not belong to the Estate of EFD, and thus, the interest on these FDs did not constitute the appellant's income. The tribunal found that the AO had examined the relevant facts and concluded that the interest on FDs was not assessable as the assessee's income, as the amounts were not accessible to the assessee. 3. Interpretation of the judgment of Hon'ble Bombay High Court dated 19-07-2012: The CIT interpreted the judgment of the Bombay High Court to conclude that the fixed deposits were made in favor of the Estate of EFD and, therefore, the interest on these FDs should be assessed as the appellant's income. However, the tribunal found that the High Court had directed Ferani to maintain accounts and invest the amounts collected in fixed deposits, which would abide by further orders of the Trial Judge. The tribunal concluded that the High Court's directions did not imply that the amounts could be appropriated by the Estate of EFD. 4. Whether the interest on FDs constituted income chargeable to tax in the hands of the Estate of EFD for A.Y. 2013-14: The tribunal examined whether the interest on FDs constituted income chargeable to tax in the hands of the Estate of EFD. It was noted that the amounts collected by Ferani and deposited in the designated account were under the custody of the court and not accessible to the Administrator. Therefore, the interest on these FDs did not constitute income chargeable to tax for the A.Y. 2013-14. 5. Whether the assessment order was erroneous and prejudicial to the interest of the Revenue: The CIT argued that the AO's failure to include the interest on FDs in the assessed income made the assessment order erroneous and prejudicial to the interest of the Revenue. However, the tribunal found that the AO had conducted proper inquiries and considered the relevant facts before concluding that the interest on FDs was not assessable as the assessee's income. Therefore, the tribunal held that the assessment order was not erroneous or prejudicial to the interest of the Revenue. Conclusion: The tribunal quashed the revision order passed under Section 263 of the Income Tax Act, 1961, and allowed the appeal of the assessee. The tribunal concluded that the interest on FDs did not constitute income chargeable to tax for the A.Y. 2013-14 and that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue.
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