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TMI Blog2019 (7) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us the Balance Sheet for A.Y.2013-14, where we note that total own funds consisting share capital and reserve and surplus are which is more than the total investments of ₹ 20,69,06,913/-. - Bombay High Court in the case of CIT Vs Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if there were funds available both interest free and over draft/loans are taken, then a presumption would arise that investment would be out of the interest free funds generated or available with the assessee, if the interest free funds were sufficient to meet the investment. Therefore, so far Rule 8D (2) (ii) is concerned, order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. Coming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aptioned appeal filed by the Assessee, pertaining to assessment year 2013-14, is directed against the order passed by the Pr. Commissioner of Income Tax, Central-1, Kolkata, under section 263 of the Income Tax Act, 1961 (in short the Act ) dated 24/03/2017. 2. By way of this appeal, the assessee has challenged correctness of the order dated 24.03.2017 passed by the learned Pr. Commissioner of Income Tax, under section 263 of the Act. The assessee`s main grievance is that LdPr.CIT has not assumed a valid jurisdiction under section 263 of the Act to revise the assessment completed under section 143(3)/153A of the Act, dated 30.03.2015. 3. Brief facts qua the issue are that a search and survey operation was conducted on Bhutoria Group o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 14,32,08,537 x ₹ 26,25,81,342/₹ 268,10,29,565 = ₹ 1,40,25,914 (iii) Under Rule 8D(2) (iii). Average Investment 0.5% of ₹ 26,25,81,342 = ₹ 13,12,906 Total ₹ 1,53,38,820 The ld Pr.CIT observed that assessing officer has disallowed ₹ 4,15,750/-, hence a sum of ₹ 1,49,23,070/- [ being the difference of ₹ 1,53,38,820 ₹ 4,15,750] was required to have been disallowed by AO during the course of assessment proceedings U/s 143(3)/153A of the Act. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D. Moreover, since no satisfaction is recorded therefore,section 14A read with Rule 8D cannot be applied, hence order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue. However, ld PCIT rejected the contention of the assessee and held that a sum of ₹ 1,49,23,070/- [ being the difference of ₹ 1,53,38,820 ₹ 4,15,750] was required to have been disallowed by AO during the course of assessment proceedings U/s 143(3)/ 153A of the Act, hence, the ld Pr CIT set aside assessment order for A.Y.2013-14, dated 30.03.2015 and directed the AO to pass fresh assessment order, as the assessment order was erroneous in so far as it was prejudicial to the interest of the Revenue. 5. Aggrieved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to theinterest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance is warranted under Rule 8D (2) (ii) of the Rules. We note that direct nexus between the own funds and tax free investment should not be seen and it is only the overall availability of own funds that has to be seen as laid down by the Hon`ble Bombay High Court in the case of CIT Vs Reliance Utilities Power Ltd., 313 ITR 340(Bom.). The Hon ble Bombay High Court has held that if there were funds available both interest free and over draft/loans are taken, then a presumption would arise that investment would be out of the interest free funds generated or available with the assessee, if the interest free funds were sufficient to meet the investment. Therefore, so far Rule 8D (2) (ii) is concerned, order passed by the AO is neither ..... X X X X Extracts X X X X X X X X Extracts X X X X
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