9911796707
TMI Blog2025 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.2021 should be alleged to be erroneous in so far as prejudicial to the interests of the revenue. There is neither error of law nor of facts. There is no erroneous assumption by the AO of either the facts or of law, as alleged by the ld. PCIT. Assessee appeal allowed. - Dr. S. Seethalakshmi, Judicial Member And Shri Rathod Kamlesh Jayantbhai, Accountant Member For the Appellant : Sh. Amit Kothari, C.A. For the Respondent : Sh. Rajendra Ojha, CIT ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Learned Principal Commissioner of Income Tax, Jodhpur-1 dated 12.03.2024 [for short PCIT ] for assessment year 2018-19, which in turn arise from the order dated 13.04.2021 passed under section 143(3) read with Sections 143(3A) 143(3B) of the Income Tax Act (here in after Act ) by the National e-assessment Centre, Delhi. 2. In this appeal, the assessee has raised following grounds: - 1. The ld. PCIT erred in passing the order under section 263 which is bad in law and bad on facts. The assessment framed cannot be said to be erroneous or prejudicial to the interest of revenue. 2. The ld. PCIT has erred on observing that the AO has erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of earning interest income shall be allowed as expenditure. In this regard assessee was asked to submit a co-relation between interest bearing loans and interest earning advances. In his submission assessee submitted a list of loans taken and advance given. Ld. AO noted that assessee has advanced higher amount of money in the earlier years while higher amount of money was borrowed in later year on which interest expense was claimed, so there is no co-relation between money advanced for earning interest and amount borrowed on which interest expenditure was claimed. When the fund used to lend money, itself belongs to time prior to the borrowed fund, it is clear beyond doubt that there is no nexus between money borrowed and money advanced for interest. Thus, considering the plain reading of Section 57 explicitly clears that the income chargeable under the head Income from other sources shall be computed after making the following deductions: 57(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income; Ld. AO thus relying on the decision of Hon ble Gujarat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r inquiries / investigations. Accordingly, a notice u/s. 263 of the Act was issued to the assessee on 31.01.2024 providing an opportunity of being heard as to why the said order should not be declared as erroneous in so far as it is prejudicial to the interest of revenue. The contention of the show cause notice reads as under : On perusal of the assessment record it was found that the aggregate income is shown at Rs. 55,68,290/- and tax has been charged upon that aggregate income of Rs. 55,68,290/- while it should have been charged up the assessed income of Rs. 1,02,92,486/-. Further, while computing total income in the assessment order, addition of Rs. 48,94,926/- only was made as income disallowed u/s. 57 of the IT Act instead of total deduction of Rs. 72,53,862/- which resulted in under charge of tax and interest and interest having total tax effect of Rs. 34,08,648/-. In response to the show cause the assessee filed a detailed reply on 12.02.2024 opposing the revisionary power of the PCIT. Assessee was also given personal hearing on 14.02.2024. After considering the submission and contentions ld. PCIT hold as under : 6. Perusal of assessment record shows that in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of the revenue. In reaching such conclusion, I am aided by the following judicial rulings:- 1. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT243ITR has held that 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 . 2. In case of TTK LIG Ltd., v/s. ACIT(Mad) 51 DTR 228 it has been held that Order would be erroneous if it is based on an incorrect assumption of facts or an incorrect application of law or non- application of mind or based on no or insufficient materials. 3. In the case of Arvee international v/s. Addl. CIT (ITAT, Mum) 101 ITD 495, it has been held that Unlike the Civil Court which is neutral to give a decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also an investigator. He cannot remain passive on the face of a return which is apparently in order but calls for further enquiry - It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong with the order if all the facts stated therein are assumed to be correct. 1. In CIT v/s. Raisons Industries Ltd., 288 ITR 322 (SC): The Hon'ble Supreme Court held as under:- The power of revision under section 263 is exercised by a higher authority. It is a special provision. The revisional jurisdiction is vested in the Commissioner. An order there under can be passed if it is found that the order of assessment is prejudicial to the Revenue. In such a proceeding, he may not only pass an appropriate order in exercise of the said jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf. 1. Madras High Court in the case of Seshasayee Paper Boards Ltd. [2000] 242 ITR 490 (Mad.) has held that the powers of the Commissioner are very wide in exercising the powers of revision u/s 263. It is no doubt true that for making a valid order u/s 263, it is essential for the Commissioner to record an express finding that the order sought to be revised was erroneous as well as prejudicial to the interest of the revenue. However, there is nothing in section 263 to show that the Commissioner should in all cases record his final conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by them. The interest amount has been deducted in other sources income. And Dep. on car and computer, Interest paid to car loan and motor insurance wholly and exclusive for eared business income. c. Income and expenses chart Income Expenses Interest from Saving Bank Rs. 227444.00 Interest paid to parties Rs. 5994993.00 Interest from parties Rs. 2131492.00 Depreciation on car Rs. 778815.00 Interest from partnership firm Rs. 4884752.00 Interest paid on car loan Rs. 361159.00 Remuneration received Rs. 4458010.00 Motor insurance Rs. 104759 Profit partnership Firm Rs. 1718940.00 Depreciation on computer Rs/ 14136.00 Total Rs. 3420638.00 Total Rs. 7253862.00 Case-Rakesh kumardoshi Vs ACIT Circle Barmer ITA no. 52/jodh/2020 A.Y. 2015-16-Expense for earned income so allowable expense for deduction u/s 57. Order copy are attached. Issue inverted in already covered in favour of assessee by above decision in assessee own case. The assessee submitted details of interest payment made to various parties and car loan. Depreciation on car is also on old vehicle, and is not a new vehicle purchased during the year. Since assessee is partner in various concerns, and to attend the business, such ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he general proposition of law laid down by the Supreme Court, Gujarat High Court and the Patna High Court that the partner if he expends an amount in earning the share of profit from a firm, he can on showing its actual expenditure be allowed a deduction from the total income, the case of the assessee is to be examined. The authorities below have not bifurcated the amount of Rs. 12,000 as to the expenditure on petrol and the depreciation on car. However, it is common ground that the car was new and was purchased during the previous year relevant to the asst. yr. under appeal. It was clarified at the bar by the Learned Counsel for the assessee and by the assessee who was present in the court that the total expenditure on petrol was Rs. 3,500 and he claimed Rs. 2,000 only as relating to the business activities of the firm from which he earned the profit. Applying the above laid down principles by the Hon'ble Courts, it is held that the expenditure of Rs. 2,000 incurred by the assessee was an expenditure wholly and exclusively laid out for carrying on the business and earning business income. The share of profits of the assessee from various firms including the firm of M/s. Sood B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n support of the contentions so raised:- S. No. Particulars Pages 1. Show cause notice issued u/s 263 by PCIT, Jodhpur. 1-3 2. Reply submitted before the ld. PCIT, Jodhpur in the proceedings u/s 263. 4-16 3. Notices issued by AO during the assessment proceedings in which the issue was fully examined on which notice u/s 263 had been issued. 17-21 4. Reply submitted to the AO during the assessment proceedings. 22-28 5. Order of Hon ble ITAT in appellant own case for AY 2017-18 in ITA No. 85/Jodh/2024 in which similar claimed had been allowed. 29-59 7. Ld. AR of the assessee in addition the written submission and the paper book so filed also argued that while making the assessment order, ld. AO has made a detailed discussion as to the computation of income and has made the disallowance of the expenditure. The ld. PCIT merely not founding any defect even has not discussed which of the conditions as to explanation 2 of the provision of section 263 is applicable in the case of the assessee. As is evident from the finding recorded in para 7 page 10 wherein the PCIT stated that I am of the considered view that the Assessing Officer has not taken the correct figure of deductions u/s 57 when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m other sources assessee claimed deduction claimed u/s 57 (Rs. 72,53,862/-(-) Rs. 23,58,936/-) = Rs. 48,94,926/-. Assessee was asked to explain the nexus of deductions claimed with the income earned under the head income from other source along with documentary evidence. Ld. AO considered the submission of the assessee but found not acceptable. Ld. AO based on the submission noted that assessee is claiming total interest income of Rs. 23,58,936/-, which includes interest income from parties of Rs. 21,31,492/- Interest from saving bank of Rs 2,27,444/-. The assessee also claimed Interest Paid expense for Rs. 59,94,993/- which was paid on the loan borrowed by him in past years. Although the assessee is not able to prove the nexus between loan taken and loan advanced. Therefore, in the light of the provision of section 57 of the act, assessee was asked to submit a co-relation between interest bearing loans and interest earning advances. Assessee was issued a detailed show cause notice and after considering the submission of the assessee ld. AO held that assessee could not establish the direct nexus between the utilization of fund and income earned under the head of income from other s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 81b [including, xxx xxx xxx xx Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 83 [Explanation 3. For the purposes of this section, Transfer Prici ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
