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TMI Blog2018 (8) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 initiated is required to be cancelled / annulled. d) The Learned PCIT fail to appreciate that the Assessment Order passed u/s 143(3) by AO is made after considering all the facts, and application of mind by AO in allowing the deduction of interest expenses, hence, order passed u/s 143(3), cannot be said to be erroneous. 2 a) Incorrectly observed that interest expenses amounted to Rs. 1,08,74,428/- borrowed is not used for construction / business, hence no amount of interest is required to be capitalized under the law. b) The Learned PCIT fail to appreciate that interest income earned on loan and interest expenses is deductible u/s 57(iii) of Income Tax Act, hence it cannot be capitalized. c) The Learned PCIT fail to appreciate the provision of Sec.36(1)(iii) of used for business and same is used for advancing loan to M/s B. Raheja Properties Ltd, hence interest expenses is deductible as it has direct nexus. d) The Learned fail to appreciate the basic condition of provision of Section 36(1)(iii) & 57(iii) of Income Tax Act. e) The Learned PCIT erred in directing AO to disallow interest expenses Rs. 2,79,72,158/- instead of Rs. 1,08,74,428/- as balance amount of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative (AR) of the assessee and the ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits that during the assessment, the Assessing Officer raised the proper queries related with the secured and unsecured loan and their utilization vide notice dated 08.07.2014 under section 142(1) of the Act. The Assessing Officer also required the name and address of the parties to whom the loan were advanced and amount of interest charged. The assessee vide its reply dated 03.02.2015 furnished all the details before the Assessing Officer. The Assessing Officer after considering the submission of the assessee passed the assessment order. The Assessing Officer had taken a possible view. The assessment order passed by Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. In support of his submission, the ld. AR of the assessee submitted four propositions. 4. In first proposition the ld AR for the assessee submits that while framing the Assessment under section 143(3) the Assessing Officer (AO) has adopted one of the possible views then the order passed by him cannot be treated as erroneo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 341 ITR 537 (Delhi) and CIT Vs Krishna Capbox P. Ltd. (2015) 372 ITR 310 (Allahabad). 8. On the other hand the ld. DR for the revenue supported the order of ld. PCIT. The ld. DR for the revenue submits that the assessee borrowed the funds for Hyderabad Project. The part of the amount was given by the assessee to third party on the pretext of advance. The advance was not given for the purpose of business. The interest income was not examined by assessing officer in a particular manner. The interest rate was not examined by assessing officer. Therefore, the order passed by assessing officer is not only erroneous but prejudicial to the interest of revenue. In support of his submission the ld. DR for the revenue relied on the decision of Gauhati High Court in CIT Vs Jawahar Bhattacharjee [2012] 20 taxmann.com 652 (Gauhati). 9. We have considered the rival submission of the parties and have gone through the order of the authorities below. Before discussing the facts of the present case and the issue raised, we may refer the scope of section 263 as laid down by Hon'ble Supreme Court in Malabar Industrial Co Ltd (supra); " A bare reading of section 263 of the Act 1961, makes it clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the CIT to exercise the power of revision under this sub section viz ( 1) the order should be erroneous and ( 2) by virtue of the order being erroneous prejudice must have been caused to the interest of the revenue. And order cannot be termed as erroneous unless it is not in accordance with law. If ITO. Act in accordance with law. Make certain assessment; the same cannot be branded as erroneous by the CIT simply because according to him, the order should have been written more celebratory. This section does not visualise a case of substitution of the judgment of the CIT for that of the ITO, who passed the order, unless the decision is held to be erroneous. This is may be visualised where the ITO while making the assessment examines the accounts, makes enquiries, applied his mind to the facts and circumstances of the case and determine the income either by accepting the accounts for by making some estimate himself. The CIT on perusal of records, may be of opinion that the estimate made by the officer concerned was on the lower side and left to the CIT, he would have estimated the income at a higher figure than one determine by the ITO. That would not vest the CIT with power to re- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and examine the issues on which the assessment order was revised. The perusal of the assessment order passed under section 143(3) dated 09/02/2015 clearly shows that the assessing officer while passing the assessment order, the assessing officer examined and raised the inquiry with regard to the payment of interest paid should not be capitalized toward the work in progress. The assessee furnished its reply dated 03.02.2015. In the reply the assessee specifically contended that the borrowing cost are not to be capitalized on the project when the development of the project is interrupted on extended period. The assessee further contended that the assessee suspended the construction activity due to slow down in the real estate; the borrowing cost is claimed as business expenses as the borrowing are for the business purpose and the same is allowable. After considering the reply of the assessee the assessing officer disallowed net of the interest received Rs. 1,70,97,730/- (Rs.2,79,72,158 - Rs. 1,08,74,428/-). Therefore, the assessing officer examined the issue and disallowed interest of Rs. 1,70,97,730/-. The assessing officer has adopted one of the courses permissible in law. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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