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TMI Blog2024 (8) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... cceptable as the order passed by the A.O. does not satisfy the twin conditions of erroneous and prejudicial to the interest of the revenue. Accordingly, we set aside the order of the Pr.CIT and allow the grounds of appeal in favour of the assessee. - SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER For the Appellant : Shri Jay Bhansali.AR For the Respondent : Shri Jogendra Singh.Sr.DR. ORDER PER PAVAN KUMAR GADALE JM: These two appeals are filed by the two different assessees under the same group of companies against the separate orders of the Principal Commissioner of Income Tax (Pr.CIT)-6 Mumbai passed u/sec 263 of the Act. 2. Since issues involved in these appeals are common and identical, hence they are clubbed, heard and a consolidated order is passed. For the sake of convenience, we shall take up ITA No.1208/Mum/2023. A.Y 2018-19 as lead case and facts narrated. The assessee has raised the following grounds of appeal: 1. On the facts and circumstances of the case and in law, the Principal Commissioner Income-tax 6, Mumbai ( the Pr.CIT ) erred in assuming jurisdiction under section 263 and holding the assessment order, under section 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal on 12.10.2020. Further the AO having verified the facts and documents and has called for the additional information and issued notice u/sec 142(1) of the Act and the assessee has submitted the details along with the supporting evidences on 22.01.2021. Finally the AO on verification of the financial statements, information and tax audit report has accepted the loss as per the return of income filed and passed the order u/sec 143(3) r.w.s 143(3A) 143(3B) of the Act dated 15.02.2021. 4. Subsequently, the Pr. CIT on perusal of the records and information found that the order passed by the AO under section 143(3) of the Act is erroneous and prejudicial to the interest of the revenue and issued revision notice U/sec 263 of the Act as under: Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2018-19 In this regard, a hearing in the matter is fixed on 20/01/2023 at 12:30 PM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below)If you wish that the Revision proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing/making submission online on or before 20.01.2023 at 12.30 PM. In case of non-compliance, it will be presumed that you have no objection to the proposed revision u/s 263 of the Act, of the assessment order passed by the Assessing Officer u/s. 143(3) of the Act on 15.02.20216 5. Further the Pr. CIT has also issued another notice under revisionary powers to justify the claim of disallowance u/sec 36(1)(iii) of the Act referred at Para 5 of the Pr. CIT order as under: 5. Accordingly, For further examination, invoking revisionary powers, notices u/s.263 were issued to the assessee on 05.01.2023 09.03.2023, providing an opportunity to the assessee to justify its claim of disallowance u/s. 36(1)(iii). In the notice, it was specifically noted as under: . 2.1 on verification of the records, it is seen that an amount of Rs. 9369.28 lakh has been debited as interest expenses in the Profit Loss Account It is also observed that only an amount of Rs. 5.52 lakh has been credited to the P L A/c against which an amount of Rs. 5658.64 lakh has been disallowed u/s 36(1)(iii) in the computation of income suo-moto as the borrowed capital was used for non business purposes. 2.2 It has been furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus seen the twin statements are self contradictory. 6.2 The AO ought to have disallowed the entire amount of Rs. 93,69,28,205/- and ought to have added the amount of Rs. 37,10,63,373/- also in the total income of the assessee. Therefore, from the facts above, it is clear that the AO has not made any enquiry on the issue of allowability of deduction u/s 36(1)(iii) and hence the case clearly falls under the purview of clause (a) of Explanation 2 to section 263 of the IT Act. Accordingly, the order passed u/s 143(3) is held to be erroneous and prejudicial to the interests of revenue. 7. In view of the above, I am of the considered opinion that the assessment order passed by the Assessing Officer u/s. 143(3) dated 15.02.2021, is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, the said order passed by the Assessing Officer is set-aside on the issue of allowability of 37,10,63,373/- u/s. 36(1)(iii) and the AO is directed to make an enquiry in this matter and re-assess the income after giving an opportunity of being heard to the assessee. 8. The order u/s 263 of the Income Tax Act, 1961 is passed accordingly. 8. Finally the Pr.CIT has passed order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct dated 29-12-2020 along with the annexure and in compliance, the asssessee has the submitted the details of loans obtained and interest payments along with the ledger accounts and bank account statements reflecting the transactions placed at page 61 to 71 of the paper book. The AO on verification of the financial statements, information and tax audit report has accepted the loss as per the return of income filed and passed the order u/sec 143(3) r.w.s 143(3A) 143(3B) of the Act dated 15.02.2021. Further the Ld.AR referred to the submissions made before the Pr.CIT in the revision proceedings and highlighting on the suo moto disallowance made by the asssessee u/sec 36(1)(iii) of the Act. At this juncture, the submissions of the asssessee on investments, loans and advances provided and borrowed along with the evidences filed on 27.01.2023 before Pr.CIT are referred as under: The assessee has given interest free loans of Rs. 7,16,05,000/- and holds investments of Rs. 935,56,66,708/- break-up of which is as under: Particulars Amount Amount A. Interest free advances 7,16,05,000 B. Investments 935,56,66,708 Investments in unquoted equity shares 195,85,37,419 Investments in LLP as parter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.6. Hence, in view of the above facts of the case, your proposal to exercise jurisdiction u/s 263 of the Act for additional disallowance of interest of Rs. 37,10,63,372/- is required to be dropped. 12. The Ld. AR emphasized that the assessee has been following the consistency from the earlier years and was being accepted by the revenue and it cannot be disturbed. When the Pr.CIT observes that the order passed by the A.O. is erroneous, he should make necessary inquiries or verification. Whereas the AO has applied the mind and accepted the possible view. We rely on the decision of the Honble High Court of Bombay in the case of M/S Grasim Industries Ltd Vs CIT (321 ITR 92) considered the law laid down by the Honble Supreme Court on the scope of the revisionary proceedings initiated under sec 263 of the Act and the observations are read as under: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in the case of CIT Vs. Goetze (India) Ltd (361 ITR 505) as under:- Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of Income tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... celled order of ITO observing that order of ITO did not contain discussion in regard to allow ability of claim for deduction which indicated non-application of mind and that claim of assessee required examination as to whether expenditure in question was a revenue or capital expenditure and directed ITO to make a fresh assessment on lines indicated by him - Whether under section 263 substitution of judgment of Commissioner for that of ITO is permissible - Held, no - Whether ITO's conclusion can be termed as erroneous simply because Commissioner does not agree with his conclusion - Held, no - Whether ITO's order could be held to be 'erroneous' simply because in his order he did not make an elaborate discussion - Held, no - Whether provisions of section 263 were applicable to instant case and Commissioner was justified in setting aside assessment order - Held, no 14. We Considering the overall facts, circumstances, ratio of the judicial decision and the details submitted in the course of hearing are of the view that the if any query is raised in the assessment proceedings and it was responded by the assessee, mere fact that it is not dealt within by the A.O. in the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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