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TMI Blog2019 (10) TMI 245X X X X Extracts X X X X X X X X Extracts X X X X ..... nd prejudicial to the interest of the revenue. 2. He failed to appreciate and ought to have held that: (a) Both the pre-requisites i.e. assessment order being erroneous and prejudicial to the interest of the revenue are necessary to invoke the provisions of section 263. If any one condition is not satisfied, section 263 cannot be invoked. (b) The Appellant had furnished the requisite information and the AO has completed the assessment after considering all the facts and therefore the assessment order is not erroneous. 3. The appellant prays that it be held that the assessment order passed by the AO is not erroneous and accordingly the action of the Pr. CIT in invoking provisions of section 263 and revising assessment order be held ab-initio and / or otherwise void and bad-in-law. WITHOUT PREJUDICE TO GROUND I GROUND II 1. On the fact and circumstances of the case and in law, the Pr. CIT erred in directing the AO to modify the assessment order passed u/s. 143(3) of the Act dated 08 March 2013, after considering the investments worth Rs. 560.85 crores which were directly out of borrowed funds for computing the average investments under rule 8D(2)(ii) of the Income Tax R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he figure of liability shown in the balance-sheet, which is in the nature of fictitious entry without any substance or in other words, the same does not have tangible or intangible asset in its support. Accordingly, due to this error in working/computation of figure of average asset by the assessee has resultantly into lesser working of disallowance under section 14A r.w. Rule 8D by a sum of Rs. 66 crore (approx.), thereby the order passed by Assessing Officer is erroneous and prejudicial to the interest of revenue. 4. In the second show-cause notice dated 25.03.2015, the ld. PCIT observed that the disallowance under section 14A was made considering the average investment made for the purpose of units of mutual funds which is separately assessed under the head "Capital Gain" and not under the head "Business Income", which should have been taken separately not forming part of a computation under Rule 8D(2)(ii). However, the proportionate disallowance of this account in respect of interest paid should have been made separately as the entire investment for the purpose of units of mutual funds are found to be directly attributable to the borrowed funds. 5. The assessee filed reply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT took his view that the exclusion of the debit balance of Profit & Loss A/c firming part of total asset as per Rule 8D(2)(iii) appears to be logical which may be looked into and detailed by Assessing Officer during the set-aside assessment proceeding as directed hereunder based on the details to be furnished by assessee. It was further concluded that (total investment) for the working of (average investment) are exclude the direct investment on which it has already made disallowance of interest under Rule 8D(2)(i) because no specific provision exist either in Rule 8D(2)(i). The ld. PCIT accepted that arguments seems to be logical but being a deeming provision, the said interpretation of assessee considering his own aforesaid argument is not acceptable. The ld. PCIT further held that the assessee while computing the average investment under Rule 8D(2)(ii) as included the amount of investment made in the purchase of units of mutual funds which has resulted into calculation of lesser disallowance which is neither verified by the Assessing Officer nor enquired into before mechanically allowing the disallowance. The income attributable to the purchase of units of the mutual fund as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm Capital Gain is completely overlooked by Assessing Officer. Thus, the assessment order is erroneous and prejudicial to the interest of revenue. Therefore, the assessment order passed under section 143(3) dated 08.03.2011 was set-aside with the direction to pass the fresh order as per law after giving opportunity to the assessee. Aggrieved by the order of ld. PCIT, the assessee has filed the present appeal before us. 7. We have heard the submission of ld. AR of the assessee and ld. DR for the revenue and perused the material available on record. The ld. AR of the assessee submits that during the assessment proceeding, the Assessing Officer raised questionnaire/queries regarding disallowance under section 14A. The assessee vide its reply dated 11.02.2013 furnished the detailed reply and stated that they have not received any tax free/exempt income and therefore, no disallowance under section 14A ought to be made. The assessee relied upon the decision of Tribunal in Avshesh Mercantile vs. DCIT in ITA No. 577/Mum/2006 and ITA No. 208/Mum/2009. The assessee further stated that they made disallowance under section 14A for abundant caution, though no disallowance under section 14A r. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has not verified the disallowances made by assessee. The Assessing Officer has not made any review of return income. The return income cannot be reduced unless the income is revised. The Assessing Officer has mechanically accepted the reply of assessee without applying his mind and thereby made a less disallowance under section 14A. Therefore, the order is erroneous as well as prejudicial to the interest of revenue. 13. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have seen that in the assessment order, there is no reference about the disallowance under section 14A. The ld. AR of the assessee vehemently argued that during the assessment, the Assessing Officer examined the issue of section 14A. The assessee vide its reply dated 11.02.2013 furnished the detailed reply including raising the contention that assessee has not earned any exempt income, though there should not be any disallowance under section 14A. Though the assessee out of abundant caution made a suomoto disallowance. We have further noted that in reply to the showcause notice under section 263, the assessee vide its reply dated 04.03.2015 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eous but is prejudicial to the revenue - recourse cannot be had to section 263(1). It was further held that there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. 16. The Hon'ble Supreme Court in CIT vs. Greenworld Corporation (supra) held that assessment order passed by Assessing Officer (ITO) cannot be interfered with only because another view is possible. 17. Now turning to the facts of the present case as the stand of assessee during the assessment as well as in revision proceeding that no exempt income is earned by the assessee. We have perused the Balance-sheet and Profit & Loss Account of the assessee wherein in Schedule-14 (other income) forming part of Balance-sheet shows Nil income. In Schedule-6 (investments), in Column-B assessee has shown investment in units o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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