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TMI Blog2021 (5) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... secured loans taken during the year has only been utilized for the business of assessee. Reliance was also placed on the judgment of Hon'ble Apex Court in the case of S.A. Builders Ltd. [ 2006 (12) TMI 82 - SUPREME COURT] contending that the interest on money borrowed and lent to sister concern without charging interest is allowable on the same test as that for allowance of business expenditure viz for the purpose of business allowable if made as a measure of commercial expediency . DR failed to controvert this fact that all these details were very much available before the assessing officer and submissions were duly made by the assessee supported by settled judicial precedence for the claim of interest expenditure - No new enquiry was conducted by Ld. Pr. CIT, in this regard at its own motion as required in the provisions of section 263 of the Act. Thus, this is a case where complete enquiry was conducted by the assessing officer with application of mind and in our considered view, it is not open for Ld. Pr. CIT to order for a fresh enquiry when adequate enquiry has already been done and one of the plausible view has been taken by the assessing officer as permissible un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order thereunder on the basis of audit objection. 6. The appellant craves leave to add, amend, alter or otherwise raise any other ground of appeal. 2. Brief facts of the case as culled out from the records are that the assessee is an individual running sole proprietorship concern M/s Vikash Krishi Seva Kendra. Return of income for A.Y. 2014-15 was e-filed on 13.09.2014 declaring income at ₹ 53,98,610/-. The assessee is engaged in the business trading in seeds, pesticides, fertilizers, machinery part, oil paints colors. etc. Books of account are audited u/s 44AB of the Act. Case selected for scrutiny by Computer Assisted Scrutiny System (CASS) followed by serving of notices 143(2) 142(1) of the Act along with questionnaire. The ld. Assessing Officer has mentioned to have examined the books of account produced before him on test check basis. Submissions made by the assessee were considered and assessment was completed after making disallowance u/s 14A of the Act at ₹ 56,09,870/-. 3. Subsequently, Ld. Pr. CIT assuming jurisdiction u/s 263 of the Act issued following show cause notice: Please refer to the assessment order dated 26.10.2016 for A.Y. 2014- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order cannot give rise to take a view that the order of assessing officer is erroneous and prejudicial to the interest of revenue. However, Ld. Pr. CIT was not satisfied with the submissions made by the assessee and concluded to hold the order of the assessing officer as erroneous so for as prejudicial to the interest of revenue as the AO had not make required enquiry/investigation regarding the claim of interest expenditure and short/not charging of interest on advance given to associates concern. 5. Now the assessee is in appeal before this Tribunal Ld. counsel for the assessee vehemently argued referring to the following written submission and placing reliance on decisions mentioned herein: 1. Assessee is engaged in the trading of seeds, pesticides, fertilizers, machinery part, oil paints and colours under the name and style of Vikas Krishi Sewa Kendra. 2. Assessment u/s 143(3) was completed on 26.10.2016. Disallowance of ₹ 2,11,259 by applying the provisions of section 14A. 3. Notice u/s 263 was issued on 05.07.2018 Para 3 [PB 01] As per the information available on records, it is noted that the assessee has debited interest paid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans and advances made. If interest not charged or charged at a lower rate, give explanation for the same showing cause why proportionate and suitable disallowance be not made out of the interest paid. [PB 142] Details of the interest earned were submitted along with the ledger accounts and confirmations. Assessee stated that interest was charged on all the interest bearing loans and advances. [PB 117-138, 147] 4 20 Party wise details of interest paid on the loans and advance taken along with ledger accounts of the parties in the format specified. [PB 143] Details of party wise interest paid on the loans and advances were placed on record. [PB 83-117, 147] From the above table it is evident that, Ld. AO has made proper enquiries and verified all the transactions relating to the unsecured loans and loans and advances made including interest thereon. 7. Considering the above facts and the documentary evidences, it is evident that the transactions relating to unsecured loans, loans and advances and interest thereon has been duly considered by the Ld. AO. Thus, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary enquiries were conducted by Ld. AO during the assessment proceedings and all the documentary evidences relating to unsecured loan, loans and advances and interest thereon has been duly considered. Thus, it cannot be construed as case of lack of enquiry . 15. Reliance is placed on the following decisions a. Hon ble jurisdictional ITAT Indore Bench in the case of Vinod Bhandari in ITA 350/Ind/2017 others, order dtd 20.03.2020: b. Hon ble Jurisdictional Bench of Indore ITAT in the case of Narottam Mishra [2015] 25 ITJ 206 c. Hon ble Delhi High Court in the case of Vikas Polymers [2010] 194 Taxman 57 d. Hon ble Delhi High Court in the case of Ashish Rajpal [2009] 320 ITR 674 e. Hon ble Mumbai Bench of ITAT in the case of Anil Shah [2007] 162 Taxman 39 16. Application of mind by Ld. AO - In the instant case, Ld. AO during the assessment proceedings has made enquiries related to unsecured loand, loans and advances and interest thereon as is evident from the detailed questionnaire issued u/s 142(1) dated 31.08.2016. After due verification of the evidences and proofs placed on record, the Ld. AO did not made any addition on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undersigned the assessee has given certain submissions in which the calculations for interest charged_ were given and it has been claimed by the assessee that the interest receivedLL as shown in the books of account were correct. As discussed above thej; submiesion 'of the assessee was forwarded to the AO for verification and examination but the same could not be examined properly by him due to non_ availability of counsel of the assessee. Therefore, the submission of the assessee cannot be accepted without proper verification by the AO as the AO has not examined this factor at the assessment stage. Accordingly, the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue. 4.1 Therefore, in view of the above discussions, the assessment order u/s 143(3) dated 26.10.2016 is erroneous in so far as it is prejudicial to the interest of revenue in respect of the issues discussed above, in which necessary enquiry and investigations have not been carried out by the AO. He completed the assessment without making necessary investigation and enquiries which were necessary to arrive at the correct taxable income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicated for further investigation in the preceding discussion. 7. We have heard rival contentions and perused the records placed before us by to the sides and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules and have also perused the judicial decisions relied upon by both the sides. 8. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Ld. Pr. Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Ld. Pr. Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 335 ITR 83 has held that where it was discernible from record that the A.O has applied his mind to the issue in question, the ld. CIT cannot invoke section 263 of the Act merely because he has different opinion. Relevant observation of the High Court reads as under: 63. We find the Hon'ble Delhi High Court in the case of Vikas Polymer reported in 341 ITR 537 has held as under: We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to : (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner, he cannot assume jurisdiction u/s 263 of the Act. In view of the above discussion, we hold that the assumption of jurisdiction by the DIT u/s 263 of the Act is not in accordance with law. We, therefore, quash the same and grounds raised by the assessee are allowed. 12. In the light of above aforementioned judicial decisions, we have carefully perused the questionnaire issued by the assessing officer dated 31.08.2016 and find that in response to question No.15 of this questionnaire assessee filed details of unsecured loans appearing as on 31.03.2014 along with ledger accounts and in some cases copies of income tax returns of various cash creditors (placed at page 83 to 116 of the PB). We have also examined the documents filed by the assessee in response to point 16 of the questionnaire which contains details of loans and advances given to various parties totalling to ₹ 11.42 cr. (Approx.) along with ledger accounts of each of these parties and there income tax return placed at pages no.117 to 138. We have also perused written submission dated 14.10.2016 filed before the Ld. AO which contained various details of interest earned on loans and advances, party wise de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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