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TMI Blog2013 (6) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... [2004 (2) TMI 270 - ITAT AGRA] AO having made the assessment after enquiry, as admitted by the CIT in his notice as well as in his order u/s. 263, he was not justified in setting aside the assessment on the ground that the AO had failed to make "proper enquiry". Thus the order passed u/s. 263 quashed. In favour of assessee. - ITA No. 570/Hyd/2012, SA No. 121/Hyd/2012 - - - Dated:- 7-3-2013 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Appellant : Sri B. Ramakrishnan For the Respondent : Sri M. Ravinder Sai ORDER Per Chandra Poojari, AM:- This appeal by the assessee is directed against the order of the CITII, Hyderabad dated 27.3.2012 passed u/s. 263 of Income-tax Act, 1961 for assessment year 2007-08. The assessee also filed a Stay Application seeking stay of outstanding demand of tax. 2. The assessee primarily raised the following grounds: 1. The order of the learned CIT u/s. 263 is barred by limitation. 2. The order of the learned CIT u/s. 263 is contrary to law, facts and circumstances of the case and in opposed to the principles of natural justice, equity and fair play and in any case the order of the learned CIT is erroneous as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee itself had advanced amounts i.e., Rs. 49.15 crore to the holding company. No enquiry was made into advances by the assessee of Rs. 135.56 crores avowedly for land development charges. (iii) It is seen from the Balance Sheet as at 31/03/2007 that the assessee company had raised unsecured loans from the Directors and other Corporates etc., amounting to Rs. 1,40,91,402/- during the year with the condition that these unsecured loans were interest free. However, the company claimed huge amount of Rs. 2,02,98,803/- towards interest on these unsecured loans, which was prima-facie inadmissible but allowed by the AO. (iv) It is seen from the Balance Sheet Schedule-8 Loans and Advances that the assessee had made Deposits (Others) of Rs. 15,50,00,000/-. However, no interest income on these deposits had been offered to tax. The assessing officer has not enquired into/examined this aspect. 4. (a) With reference to the first issue, the CIT observed that the assessee wrongly capitalised interest relating to redeemable nonconvertible debentures at Rs. 7,28,54,242 instead of Rs. 4,45,23,058. Thus there was excess capitalisation of interest at Rs. 2,83,41,184. (b) Regarding the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to advance given to M/s. SPR Infrastructure Ltd. shown in assessee's books of account as work-in-progress. According to the assessee's counsel the CIT cannot extend the scope of notice issued earlier u/s. 263 of the Act through subsequent letters that the issues raised through subsequent letters cannot be subject matter of revision proceedings u/s. 263 of the Act. 6. Regarding capitalisation of interest, the learned AR submitted that the assessee was in pre-commencement stage and interest had been charged from the date of debenture subscription agreement till the closing date of financial year, but the CIT is not justified in computing the interest from the date of allotment of debentures. More so, he submitted that whatever interest claimed in the books of account of the assessee has been treated as income in the hands of the holding company M/s. PVP Ventures Pvt. Ltd., and the Department having accepted the same in the recipient hand the same cannot be questioned in the assessee's hand. According to the AR there was no income gone out of computation of income and the assessee has never claimed any expenditure on this count in the assessment year under consideration and it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... give reply to the notice issued by the ITO (Hq.) and the CIT formed his opinion only after giving opportunity of hearing to the assessee. According to the DR booking of excess interest during the course of pre-commencement period will also result in claiming of excess expenditure or allowance/ depreciation in subsequent assessment years and it has to be corrected in this assessment year only. Further he submitted that the assessee is engaged in the business of multiple ring entries so as to show that the apparent is real. According to the DR any number of ring entries cannot make the non-genuine as genuine. He entirely relied on the order of the CIT. 11. We have heard both the parties and perused the material on record. First we will adjudicate the legality of invoking the provisions of section 263 of the Act. In this case original assessment was completed u/s. 143(3) of the Act vide order dated 18.9.2009. It is also an admitted fact that the assessee is in pre-operative stage and it has not commenced its commercial activities. It is also an admitted fact that the assessee has not prepared Profit and Loss A/c. for the financial year relevant to the A.Y. 2007-08. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order is erroneous that itself would not be enough to vest the Commissioner with the power of suo moto revision because the first requirement of Section, namely, the order is "prejudicial to the interest of revenue" is lacking. Even assuming that the enquiries made by the Assessing Officer are inadequate, the jurisdiction under Sec. 263 of Income Tax Act, 1961 cannot be assumed as it was only in the cases of lack of enquiries that the jurisdiction under Sec. 263 of Income Tax Act, 1961 can be assumed. Reliance in this regard is placed on the following decisions: 1. CIT v. Anil Kumar Sharma - 335 ITR 83 (Delhi); 2. CIT v. Sunbeam Auto Ltd. 332 ITR 167 (Delhi); 3. CIT v. Gabriel India Ltd. 203 ITR 108 (Bom) 13. From reading of sub-section (1) of section 263, it is clear that the power of suo moto revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous in so far as it is prejudicial to the interests of the Revenue'. It is not an arbitrary or unchartered power; it can be exercised only on fulfilment of the requirements laid dow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 15. In our opinion, in the present case, the learned Assessing Officer after duly considering the explanation and information filed in response to the notice issued u/s. 143(2) of the Act, on being satisfied with such explanation chose not to make any further enquiry. Endless enquiry is not possible and it is for the learned Assessing Officer to decide when to end the enquiry. The learned CIT cannot transgress the jurisdiction under Section 263 of I.T. Act, 1961 by mentioning that no proper enquiry was made. Reliance in this regard is placed on the decision of Hon'ble Agra Bench of ITAT in the case of Rishi Kumar Gupta v. CIT, 90 TTJ 645 wherein held that the Assessing Officer having made the assessment after enquiry, as admitted by the CIT in his notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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