DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 6(4), MUMBAI, MUMBAI vs. RAB ENTERPRISES (INDIA) PRIVATE LIMITED, MUMBAI

"Whether, on the facts, in the circumstances of the case and in law, the Ld. CIT(A) is justified in quashing the notice issued u/s 148 and setting aside subsequent assessment order u/s 147 by wrongly interpreting the decision of the Hon'ble Supreme Court in the case of UOI vs Rajeev Bansal and thus erred in holding that the assessing officer ought to have obtained sanction from Chief Commissioner of Income Tax and not from the Pr. Commissioner of Income Tаx (herein after referred to as PCIT)?"

"Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in quashing the notice issued u/s 148 without considering that the initial notice u/s 148 was issued on 28.06.2021 after obtaining prior approval of JCIT u/s 151(2) of the Act and the same is covered under the extended time limit provided by TOLA?"

"Whether, on the facts, in the circumstances of the case and in law, the Ld. CIT(A) is justified in quashing the notice issued u/s 148 holding that the approval obtained from PCIT is not in accordance with law, without appreciating that the order u/s 148A(d) dated 30.07.2022 was passed with prior approval of the PCIT as per section 151(i) of the Act after following the due procedures laid down by the Hon'ble Supreme Court in consequence to its direction in the case of UOI vs Ashish Agarwal?

"Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing interest of Rs.37,41,80,843/ - claimed U/s 37(1) of the Income Tax Act, 1961 and while doing so, failed to appreciate that (a) such loans were not used for the purpose of business of the assessee and (b) was on the contrary invested in subsidiaries and other companies of the group, in the form of share capital?"

Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance u/s 37(1) of the Act of Rs.37,41,80,843/- without appreciating the facts that the assessee had invested borrowed funds into

None appeared on behalf of the assessee despite repeated calls. On going through the case records, we noticed that this is the 10th opportunity granted to the assessee. Since nobody has appeared and no application seeking adjournment has been filed, in the absence of the assessee or his representative.

On the other hand, the Ld. DR present in the Court is ready with his arguments; therefore, we have decided to proceed with the hearing of the appeal ex parte.

Ground Nos. 1, 2 and 3 raised by the Revenue are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in quashing the notice issued under Section 148 and setting aside the subsequent assessment order passed under Section 147 of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

We have heard the learned Departmental Representative (Ld. DR) and perused the material available on record. The Ld. CIT(A) has dealt with this issue in detail in his order, and the operative findings are contained in paragraphs 5 to 5.1 and the same is reproduced herein below:

After having gone through the order passed by the Ld. CIT(A) and hearing the submissions of the Ld. DR, we find that the Ld. CIT(A) has not considered the facts of the year under consideration and has instead referred to the facts of AY 2016-17, which shows that the facts of the year under consideration were not considered at all.

Ground Nos. 4 and 5 raised by the Revenue are interrelated and interconnected and relate to challenging the order of the Ld. CIT(A) in allowing the interest claimed and also deleting the disallowance under Section 37(1) of the Act.

We have heard the Ld. DR and perused the material available on record. The Ld. CIT(A) has dealt with this issue in detail in his order, and the operative findings are contained in paragraphs 6 to 6.3.3 and the same is reproduced herein below:

After having considered the order passed by the Ld. CIT(A) and the submissions of the Ld. DR, we find that while adjudicating these grounds, the Ld. CIT(A) has failed to appreciate that such loans were not used for the purpose of the business of the assessee and were, on the contrary, invested in subsidiaries and other group companies in the form of share capital. It has not been examined by the Ld. CIT(A) whether the assessee had invested borrowed funds into the equity shares of its subsidiary companies, which was neither in the course of its business nor for commercial expediency and, therefore, not for the purpose of business as mandated under Section 37(1) of the Act. Hence, a clear picture is not emerging.

Accordingly, the Bench is of the view that the matter should be restored to the file of the Ld. CIT(A) with a direction to pass a fresh order after conducting a de novo adjudication and considering the reasons mentioned above, after proper appreciation and verification of the relevant facts, in the terms indicated above.

Before parting, we make it clear that our decision to restore the matter to the file of the Ld. CIT(A) shall not be construed as expressing any opinion on the merits of the dispute. The issues shall be adjudicated independently by the Ld. CIT(A) in accordance with law.

In the result, appeal filed by the Department stands partly allowed.