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TMI Blog2021 (1) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. Accordingly, finding ourselves in agreement with the view taken by the PCIT that the A.O had wrongly allowed the assessee s claim for deduction of the interest paid on the loans against the interest received on the FDR s, we uphold the order passed by him under Sec. 263 of the Act. - Decided against assessee. - ITA No.380/Mum/2020 - - - Dated:- 22-1-2021 - Shri S. Rifaur Rahman, Accountant Member And Shri Ravish Sood, Judicial Member Appellant by : Dr. K. Shivar am, Senior Advocate Respondent by : Ms. Shreekala Pardeshi, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order of the Principal Commissioner of Income Tax-30, Mumbai, (for short PCIT ) under Sec. 263 of the Income Tax Act, 1961 (for short Act ), dated 03.12.2019 for A.Y. 2015-16. The assessee has assailed the impugned order on the following grounds of appeal before us: 1. The learned Principal Commissioner of Income-tax (Pr.CIT) erred in revising the assessment order dated November 21,2017 passed under section 143(3) of the Income-tax, Act, 1961 (Act) with respect to the issue of claiming deduction under section 57 of the Act without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment had accepted the aforesaid claim of deduction raised by the assessee. Holding a conviction that the deduction of the aforesaid interest expenditure against the interest income was not in accord with the provisions of Sec. 57 of the Act, the PCIT was of the view that allowing of the same by the A.O without verifying the records had rendered the order passed by him under Sec. 143(3), dated 21.11.2017 as erroneous in so far it was prejudicial to the interest of the revenue. Backed by his aforesaid conviction the PCIT issued a Show cause notice (for short SCN ) under Sec. 263 and called upon the assessee to explain as to why the assessment order may not be revised. In reply, it was submitted by the assessee that as its aforesaid claim for deduction of the interest expenditure was as per the mandate of Sec. 57 of the Act and was allowed by the A.O only after making necessary verifications in the course of the assessment proceedings, thus, the same was not amenable for revision under Sec.263 of the Act. However, the PCIT not finding favour with the aforesaid claim of the assessee rejected the same. Observing, that the assessee was liable to be assessed on the gross amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed having regard to the circumstances of the case. It was further averred by the ld. A.R that as the A.O had made detailed inquiries while allowing the assessee s claim for deduction of the interest expenditure, thus, his order could not have been revised by the PCIT. In order to substantiate his claim that the A.O had made detailed enquiries as regards the issue in question and the same were from time to time duly replied to his satisfaction by the assessee, the ld. A.R took us through the relevant pages of the assessee s paper book (for short APB ). In support of his aforesaid contention the ld. A.R relied on the judgment of the Hon ble Supreme Court in PCIT-8, Mumbai, Vs. Sumatichand Tolamal Gouti (2019) 111 taxmann.com 287 (SC). It was further submitted by the ld. A.R that the non-mentioning of the queries raised by the A.O and the replies filed by the assessee as regards the issue of deduction of the interest paid on loan against the interest received on FDR s in the body of the assessment order could not lead to a conclusion that the A.O had not enquired into the said aspect. In support of his aforesaid contention the ld. A.R relied on the orders of the Hon ble High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaon (East), Mumbai. Against the interest income of ₹ 51,03,256/- received on the FDR s held by him with the bank, the assessee had claimed deduction of the interest paid on the loans that were raised from the bank (on security of the aforesaid FDR s). Resultantly, the assessee had offered the net interest income of ₹ 2,88,316/- for tax under Sec. 56 of the Act. Observing, that the assessee was liable to be assessed on the gross amount of interest income received by him on his FDR s, and no deduction of the interest paid on loan raised from the bank (on security of the FDR s) was allowable under Sec. 57 of the Act, the PCIT was of the view that the A.O had erred in not bringing the entire amount of interest received on FDR s to tax in the hands of the assessee. 7. At the first blush the claim of the assessee for setting off the interest paid on the loan raised (on security of the FDR s) against the interest received on FDR s appeared to be very convincing. However, we find that the issue is no more res integra and had been settled by the Hon ble Supreme Court in CIT Vs. Dr. V.P Gopinathan (2001) 248 ITR 449 (SC). We find that the Hon ble Apex Court while reversing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was that the real income of the assessee is only ₹ 27,034. It was not disputed, as it could not be, that if the assessee had taken a loan from another bank and paid interest thereon his real income would not diminish to the extent thereof. The only question then is : does it make any difference that he took the loan from the same bank in which he had placed the fixed deposit. There is no difference in the eye of the law. The interest that the assessee received from the bank was income in his hands. It could stand diminished only if there was a provision in law which permits such diminution. There is none, and, therefore, the amount paid by the assessee as interest on the loan that he took from the bank did not reduce his income by way of interest on the fixed deposit by him in the bank. 5. Learned counsel for the assessee drew our attention to the judgment of the Gujarat High Court in Jashvidhyaben C. Mehta vs. CIT (1988) 67 CTR (Guj) 239 : (1988) 172 ITR 680 (Guj) : TC 41R.709. This was in respect of moneys deposited in three different accounts of a firm and it was found, as a fact, that the real income that the assessee drew from the firm was reduced ..... X X X X Extracts X X X X X X X X Extracts X X X X
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