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TMI Blog2025 (3) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... est expenses. HELD THAT:- PCIT, we find has completely misdirected himself in his finding of error in the order of the AO. While he finds the order erroneous for the AO not having examined claim of the assessee to interest expenses against interest income earned, in terms of section 57(iii) of the Act, the scope of which is to allow only those expenses incurred wholly and exclusively to earn income, the error found by him actually relates to genuineness of the said expenses, which is not the concern of section 57(iii) - PCIT records no error in the order with regards to eligibility of claim of interest expenses u/s 57(iii) of the Act. Even from the standpoint of genuineness, considering the facts noted by him, we find there is no error fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Pr. Commissioner of Income-1, Ahmedabad [hereinafter referred to as "ld. Pr. CIT"] dated 27.03.2024 in exercise of revisionary power under section 263 of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2017-18. 2. The grounds raised by the assessee are as under: 1.1 The Order u/s. 263 passed on 27-03-2024 by Pr.CIT.Ahmedabad-1, A'bad (for short Pr. CIT) for AY 2017-18 holding that assessment order passed u/s. 147 r.w.s. 144B dated 31.03.2022 for the A.Y. 2017-18 was erroneous and prejudicial to the interest of the revenue is wholly illegal, unlawful and against the principles of natural justice. 2.1 The Id. Pr. CIT has grievously erred in law and or on facts in holding that the order of assessment u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 147 of the Act, copy of which was part of the said appeal set, filed before us, reveals that the reasons for reopening was the assessee having returned loss under the head "income from other sources" on account of interest income earned, having claimed huge interest expenses against the same, and further noting that as per section 57(iii) of the Act, this interest expenses were allowable only when they were incurred for the purpose of earning interest income. Therefore, clearly the case of the assessee was reopened to ensure the assessee's claim of interest expenses was in accordance with section 57(iii) of the Act. Therefore, the case of the ld. Pr. CIT was that the assessee's claim of interest expenses was not examined by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. has not verified as to whether, the recipients have offered interest income in their respective ITR. The issue of interest payment is restored to the file of the AO for limited purpose of verification. The A.O. is directed to verify as to whether the recipients have offered interest income in their respective ITR, if it is found so, the A.O. may not disallow such interest income 57(iii) of the Act. If it is found otherwise, the A.O. is directed to disallow only those interest expenses which have not been offered by respective recipients. With these findings, the assessment order stands modified accordingly. 6. Clearly his finding of error vis a vis allowance of claim of interest expenses to the assessee is with regard to its genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hold, has no power to do u/s 263 of the Act. Section 263 of the Act requires the Ld. PCIT to record finding of error in the order. Without himself recording any error he cannot exercise any power u/s 263 of the Act. 9. In the present case therefore, we find that there is no error found by the Ld. PCIT in the order passed in the case of the assessee u/s 147 of the Act, vis-a-vis allowability of claim of interest expenses either in terms of section 57(iii) of the Act, for which purpose the case of the assessee was initially reopened, or for that matter with respect to the genuineness of the claim. The order passed by the ld. Pr. CIT, we hold, is not sustainable in law and is accordingly set aside. 10. In the result, the appeal of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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