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Facts
The assessee claimed deduction of interest expenses under Section 57(iii) of the Income Tax Act, 1961, for interest on loans obtained and advanced to a related party. The Assessing Officer accepted the claim after inquiry. The Principal Commissioner of Income Tax (PCIT) invoked Section 263, holding the assessment order erroneous due to lack of proper inquiry.
Held
The Tribunal held that the Assessing Officer had conducted a thorough inquiry and examined the submissions and documentary evidence. The PCIT's invocation of Section 263 was based on a difference of opinion, not a lack of inquiry, and thus was not justified.
Key Issues
Whether the PCIT was justified in invoking Section 263 of the Income Tax Act, 1961, on the grounds of lack of inquiry by the Assessing Officer, when the AO had indeed conducted inquiries and accepted the assessee's claim.
Sections Cited
263, 143(3), 144B, 57(iii), 143(2), 142(1), 272A(1)(d), 194A
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
ORDER
PER OM PRAKASH KANT, AM
1. This appeal by the assessee is directed against revision order dated 19.03.2025 passed by the Ld. Principal Commissioner of Income-tax, Mumbai – 20 [in short ‘the Ld. PCIT’] for assessment year 2020-21, raising following grounds:
1) On the facts and under the circumstances of the case and in law, the Hon'ble PCIT has erred in initiating proceedings under section 263 of the Income Tax Act, 1961 since all the submissions already made during the proceedings of scrutiny assessment have been duly verified by the Assessing Officer before passing an been duly verified by the Assessing Officer before passing an been duly verified by the Assessing Officer before passing an order under section 143(3) of the Act and the reasons assigned for order under section 143(3) of the Act and the reasons assigned for order under section 143(3) of the Act and the reasons assigned for doing so are wrong and contrary to the facts and the provision of ng so are wrong and contrary to the facts and the provision of ng so are wrong and contrary to the facts and the provision of the law. 2) On the facts and under the circumstances of the case and in 2) On the facts and under the circumstances of the case and in 2) On the facts and under the circumstances of the case and in law, the Hon'ble PCIT has erred in passing an order under section law, the Hon'ble PCIT has erred in passing an order under section law, the Hon'ble PCIT has erred in passing an order under section 143(3) r.w.s. 263 of the Act without properly consideri 143(3) r.w.s. 263 of the Act without properly consideri 143(3) r.w.s. 263 of the Act without properly considering the submissions made by the assessee on being granted an submissions made by the assessee on being granted an submissions made by the assessee on being granted an opportunity of being heard and the reasons assigned for doing so opportunity of being heard and the reasons assigned for doing so opportunity of being heard and the reasons assigned for doing so are wrong and contrary to the facts and the provision are wrong and contrary to the facts and the provision of the law.
The brief facts of the case are that the assessee, an individu The brief facts of the case are that the assessee, an individu The brief facts of the case are that the assessee, an individual, filed her return of income on 05.01.2021, declaring a total income filed her return of income on 05.01.2021, declaring a total income filed her return of income on 05.01.2021, declaring a total income of ₹1,78,02,520/-, comprising income under the heads 'Salary', , comprising income under the heads 'Salary', , comprising income under the heads 'Salary', 'House Property', 'Capital Gains' and 'Income from Other Sources'. 'House Property', 'Capital Gains' and 'Income from Other Sources'. 'House Property', 'Capital Gains' and 'Income from Other Sources'. The return was selected for scrutiny and the assessment was The return was selected for scrutiny and the assessment The return was selected for scrutiny and the assessment completed under Section 143(3) read with Section 144B of the completed under Section 143(3) read with Section 144B of the completed under Section 143(3) read with Section 144B of the Income-tax Act, 1961 (hereinafter referred to as "the Act") on tax Act, 1961 (hereinafter referred to as "the Act") on tax Act, 1961 (hereinafter referred to as "the Act") on 08.09.2022, wherein the Assessing Officer accepted the returned 08.09.2022, wherein the Assessing Officer accepted the returned 08.09.2022, wherein the Assessing Officer accepted the returned income in toto.
2.1 Subsequently, the Principal Commissioner of Income Tax Subsequently, the Principal Commissioner of Income Tax Subsequently, the Principal Commissioner of Income Tax (hereinafter "Ld. PCIT") invoked revisionary jurisdiction under (hereinafter "Ld. PCIT") invoked revisionary jurisdiction under (hereinafter "Ld. PCIT") invoked revisionary jurisdiction under Section 263 of the Act after examining the assessment record. Section 263 of the Act after examining the assessment record. Section 263 of the Act after examining the assessment record. According to the Ld. PCIT, the deduction of ₹1,69,18,439/ According to the Ld. PCIT, the deduction of 1,69,18,439/- claimed by the assessee under Section 57(iii) of the Act towards interest ssessee under Section 57(iii) of the Act towards interest ssessee under Section 57(iii) of the Act towards interest expenditure was erroneously allowed by the Assessing Officer, expenditure was erroneously allowed by the Assessing Officer, expenditure was erroneously allowed by the Assessing Officer, without due inquiry or verification. The Ld. PCIT observed that the without due inquiry or verification. The Ld. PCIT observed that the without due inquiry or verification. The Ld. PCIT observed that the loan on which interest was paid was secured against house loan on which interest was paid was secured against house loan on which interest was paid was secured against house property, and was then allegedly advanced to M/s. Sanyam Realtors and was then allegedly advanced to M/s. Sanyam Realtors and was then allegedly advanced to M/s. Sanyam Realtors Pvt. Ltd., a company wherein the assessee's husband was a Pvt. Ltd., a company wherein the assessee's husband was a Pvt. Ltd., a company wherein the assessee's husband was a director. The Ld. PCIT was of the view that the assessee had failed director. The Ld. PCIT was of the view that the assessee had failed director. The Ld. PCIT was of the view that the assessee had failed to demonstrate any nexus between the expenditure incurred and to demonstrate any nexus between the expenditure incurred and to demonstrate any nexus between the expenditure incurred and the income earned, and accordingly, held the assessment order to arned, and accordingly, held the assessment order to arned, and accordingly, held the assessment order to be erroneous and prejudicial to the interest of the Revenue in terms be erroneous and prejudicial to the interest of the Revenue in terms be erroneous and prejudicial to the interest of the Revenue in terms of Explanation 2 to Section 263 of the Act. In support of his of Explanation 2 to Section 263 of the Act. In support of his of Explanation 2 to Section 263 of the Act. In support of his conclusion, the Ld. PCIT relied upon several decisions including conclusion, the Ld. PCIT relied upon several decisions including conclusion, the Ld. PCIT relied upon several decisions including Malabar Industrial Co. Ltd. v. CIT Industrial Co. Ltd. v. CIT [(2000) 243 ITR 83 (SC)], and [(2000) 243 ITR 83 (SC)], and other decisions of the High Courts and Tribunals, to reiterate the other decisions of the High Courts and Tribunals, to reiterate the other decisions of the High Courts and Tribunals, to reiterate the proposition that lack of enquiry or inadequate enquiry by the proposition that lack of enquiry or inadequate enquiry by the proposition that lack of enquiry or inadequate enquiry by the Assessing Officer renders an order erroneous and prejudicial to the Assessing Officer renders an order erroneous and prejudicial to the Assessing Officer renders an order erroneous and prejudicial to the interest of the Revenue, thereby justifying the invocation of nterest of the Revenue, thereby justifying the invocation of nterest of the Revenue, thereby justifying the invocation of jurisdiction under Section 263. The relevant finding of the ld PCIT is jurisdiction under Section 263. The relevant finding of the ld PCIT is jurisdiction under Section 263. The relevant finding of the ld PCIT is reproduced as under: under:
“DECISION: 6 It is noticed that the assessee had taken loan amounting 6 It is noticed that the assessee had taken loan amounting 6 It is noticed that the assessee had taken loan amounting to Rs.17.25 Crores from Bajaj Hou to Rs.17.25 Crores from Bajaj Housing Finance and HDFC sing Finance and HDFC Overdraft facility. It is also noted that the assessee Overdraft facility. It is also noted that the assessee Overdraft facility. It is also noted that the assessee hasgiven loan to M/s Sanyam Realtors (P) Ltd wherein hasgiven loan to M/s Sanyam Realtors (P) Ltd wherein hasgiven loan to M/s Sanyam Realtors (P) Ltd wherein assessee's husband is director. The assessee has received assessee's husband is director. The assessee has received assessee's husband is director. The assessee has received savings bank interest of Rs. 16,712/ savings bank interest of Rs. 16,712/- from HDFC Bank from HDFC Bank while Rs. 2116/ while Rs. 2116/- from Central Bank of India. Further from Central Bank of India. Further interest of Rs. 1,69,16,310/ interest of Rs. 1,69,16,310/- was received from Sanyam was received from Sanyam Realtors Pvt. Ltd. The assessee has claimed interest Realtors Pvt. Ltd. The assessee has claimed interest Realtors Pvt. Ltd. The assessee has claimed interest expenses of Rs. 1,61,86,047/ expenses of Rs. 1,61,86,047/- to Bajaj Finance and Rs. to Bajaj Finance and Rs. 7,32,392/- to HDFC Overdraft account. It is also noted to HDFC Overdraft account. It is also noted to HDFC Overdraft account. It is also noted that the loans were received from Bajaj Housing Finance and the loans were received from Bajaj Housing Finance and the loans were received from Bajaj Housing Finance and HDFC against house property. Therefore, interests paid to HDFC against house property. Therefore, interests paid to HDFC against house property. Therefore, interests paid to those parties can be claimed against house property income those parties can be claimed against house property income those parties can be claimed against house property income if the same is allowable under the relevant provisions of the if the same is allowable under the relevant provisions of the if the same is allowable under the relevant provisions of the Act. In this case Act. In this case, interest income has been received from , interest income has been received from Sanyam Sanyam Sanyam Realtors Realtors Realtors Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. and and and it it it has has has not not not been been been substantiated by the assessee that any expense was laid substantiated by the assessee that any expense was laid substantiated by the assessee that any expense was laid out or expended fully and exclusively for the purpose of out or expended fully and exclusively for the purpose of out or expended fully and exclusively for the purpose of making or earning such interest income and therefore, making or earning such interest income and therefore, making or earning such interest income and therefore, deduction u/s. 57(iii) of the Act was not allowable. It is also duction u/s. 57(iii) of the Act was not allowable. It is also duction u/s. 57(iii) of the Act was not allowable. It is also noticed that this case was selected under scrutiny to noticed that this case was selected under scrutiny to noticed that this case was selected under scrutiny to examine the large deduction claimed u/s. 57 of the Act. On examine the large deduction claimed u/s. 57 of the Act. On examine the large deduction claimed u/s. 57 of the Act. On perusal of the assessment order, it is noted that the AO has perusal of the assessment order, it is noted that the AO has perusal of the assessment order, it is noted that the AO has not made enquiries a not made enquiries and verification which should have been nd verification which should have been made to examine the deduction claimed u/s. 57 of the Act. made to examine the deduction claimed u/s. 57 of the Act. made to examine the deduction claimed u/s. 57 of the Act. In view of the above, the assessment order passed by the In view of the above, the assessment order passed by the In view of the above, the assessment order passed by the AO is deemed to be erroneous in so far as it is prejudicial to AO is deemed to be erroneous in so far as it is prejudicial to AO is deemed to be erroneous in so far as it is prejudicial to the interests of the revenue. the interests of the revenue.
As per the provisions of section 57 of the Act, income the provisions of section 57 of the Act, income the provisions of section 57 of the Act, income chargeable under the head income from other sources shall chargeable under the head income from other sources shall chargeable under the head income from other sources shall be computed after giving deductions to expenses incurred be computed after giving deductions to expenses incurred be computed after giving deductions to expenses incurred for earning the income. Thus in individual capacity there is for earning the income. Thus in individual capacity there is for earning the income. Thus in individual capacity there is no co- relation between earning relation between earning income on loans forwarded income on loans forwarded to to to another another another company company company and and and receiving receiving receiving loan loan loan from from from the the the bank/financial institutions for any personal nature (nothing bank/financial institutions for any personal nature (nothing bank/financial institutions for any personal nature (nothing in the records available to specify the nature of loan) and in the records available to specify the nature of loan) and in the records available to specify the nature of loan) and deducting the interest as expenditure for earning the deducting the interest as expenditure for earning the deducting the interest as expenditure for earning the income.In this regard, it is noted that the provisions of In this regard, it is noted that the provisions of In this regard, it is noted that the provisions of Explanation 2 to the Section 263 of the Act are squarely Explanation 2 to the Section 263 of the Act are squarely Explanation 2 to the Section 263 of the Act are squarely applicable in this case. The said provisions are as under: applicable in this case. The said provisions are as under: applicable in this case. The said provisions are as under: Explanation 2. Explanation 2.-For the purposes of this section, it is hereby For the purposes of this section, it is hereby declared that an order pass declared that an order passed by the Assessing Officer ed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial shall be deemed to be erroneous in so far as it is prejudicial 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 to the interests of the revenue, if, in the opinion of the to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, Principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or (a) the order is passed without making inquiries or (a) the order is passed without making inquiries or verification which should have been made; which should have been made; (b) the order is passed allowing any relief without inquiring (b) the order is passed allowing any relief without inquiring (b) the order is passed allowing any relief without inquiring into the claim; into the claim; (c) the order has not been made in accordance with any (c) the order has not been made in accordance with any (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under order, direction or instruction issued by the Board under order, direction or instruction issued by the Board under section 119; or section 119; or (d) the order has n (d) the order has not been passed in accordance with any ot been passed in accordance with any decision which is prejudicial to the assessee, rendered by decision which is prejudicial to the assessee, rendered by decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the jurisdictional High Court or Supreme Court in the case of the jurisdictional High Court or Supreme Court in the case of the assessee or any other. person. the assessee or any other. person.
Further, the following decisions are relied upon in this 8. Further, the following decisions are relied upon in this 8. Further, the following decisions are relied upon in this regard-
1. 1. Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No.
1. Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No.
1. Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No. 2396/2017) dated 29.11.2017. In this case, Hon'ble 2396/2017) dated 29.11.2017. In this case, Hon'ble 2396/2017) dated 29.11.2017. In this case, Hon'ble Supreme Court has dismissed SLPs in cases where AO did Supreme Court has dismissed SLPs in cases where AO did Supreme Court has dismissed SLPs in cases where AO did not make any proper inquiry while making the assessment not make any proper inquiry while making the assessment not make any proper inquiry while making the assessment and accepting the explanation of the and accepting the explanation of the assessee(s) insofar as assessee(s) insofar as receipt of share application money is concerned. On that receipt of share application money is concerned. On that receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting basis the Commissioner of Income Tax had, after setting basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the aside the order of the Assessing Officer, simply directed the aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. Assessing Officer to carry thorough and detailed inquiry. Assessing Officer to carry thorough and detailed inquiry.
2. CIT Vs Ballarpur Industries Ltd. [2017] 85 taxmann.com 2. CIT Vs Ballarpur Industries Ltd. [2017] 85 taxmann.com 2. CIT Vs Ballarpur Industries Ltd. [2017] 85 taxmann.com 10 (Bombay) Jurisdictional Hon'ble Bombay High Court held that where Jurisdictional Hon'ble Bombay High Court held that where Jurisdictional Hon'ble Bombay High Court held that where Assessing Officer allowed claim of deduction under section Assessing Officer allowed claim of deduction under section Assessing Officer allowed claim of deduction under section 80HHC without examining said claim with reference to 80HHC without examining said claim with reference to 80HHC without examining said claim with reference to unabsorbed deprec unabsorbed depreciation and investment allowance as iation and investment allowance as referred referred referred to to to in in in sections sections sections 32 32 32 and and and 32A 32A 32A respectively. respectively. respectively. Commissioner was justified in invoking revision under Commissioner was justified in invoking revision under Commissioner was justified in invoking revision under section 263.
3. BSES Rajdhani Power Ltd. Vs PCIT [2017] 88 3. BSES Rajdhani Power Ltd. Vs PCIT [2017] 88 3. BSES Rajdhani Power Ltd. Vs PCIT [2017] 88 taxmann.com 25 (Delhi)/[2017] 399 ITR 228 (Delhi) Hon'ble taxmann.com 25 (Delhi)/[2017] 399 ITR 228 (Delhi) Hon'ble taxmann.com 25 (Delhi)/[2017] 399 ITR 228 (Delhi) Hon'ble Delhi High Court held that non elhi High Court held that non- consideration of larger claim consideration of larger claim for Rs. 298.93 crores as depreciation and consideration of for Rs. 298.93 crores as depreciation and consideration of for Rs. 298.93 crores as depreciation and consideration of only a part of it being Rs. 6.45 crore by Assessing Officer, only a part of it being Rs. 6.45 crore by Assessing Officer, only a part of it being Rs. 6.45 crore by Assessing Officer, who did not go into issue with respect to whole amount, who did not go into issue with respect to whole amount, who did not go into issue with respect to whole amount, was an error, that was an error, that could be corrected under section 263. could be corrected under section 263. Commissioner has power to consider all aspects which Commissioner has power to consider all aspects which Commissioner has power to consider all aspects which were subject matter of Assessing Officer's order, if in his were subject matter of Assessing Officer's order, if in his were subject matter of Assessing Officer's order, if in his opinion, they were erroneous, despite assessee's appeal on opinion, they were erroneous, despite assessee's appeal on opinion, they were erroneous, despite assessee's appeal on that or some other aspect. that or some other aspect.
4. Delhi Surya Jyot 4. Delhi Surya Jyoti Software Pvt. Ltd. Vs PCIT (I.T.A. i Software Pvt. Ltd. Vs PCIT (I.T.A. No.2158/DEL/2017) ITAT No.2158/DEL/2017) ITAT Hon'ble ITAT Delhi held that the Pr. CIT has amply Hon'ble ITAT Delhi held that the Pr. CIT has amply Hon'ble ITAT Delhi held that the Pr. CIT has amply demonstrated in his impugned order that this issue was demonstrated in his impugned order that this issue was demonstrated in his impugned order that this issue was neither enquired into nor was verified by the Assessing neither enquired into nor was verified by the Assessing neither enquired into nor was verified by the Assessing Officer once the information and t Officer once the information and the material in hard copy he material in hard copy and in form of CD was made available to him. Hence, and in form of CD was made available to him. Hence, and in form of CD was made available to him. Hence, assessment order is not only erroneous but also prejudicial assessment order is not only erroneous but also prejudicial assessment order is not only erroneous but also prejudicial to the interest of revenue to the interest of revenue ITA No. 2280/MUM/2025
5. 5. 5. Surya Surya Surya Financial Financial Financial Services Services Services Ltd Ltd Ltd Vs Vs Vs PCIT PCIT PCIT (Ι.Τ.Α. (Ι.Τ.Α. (Ι.Τ.Α. No.2158/DEL/2017) ITAT Delhi No.2158/DEL/2017) ITAT Delhi Hon'ble ITAT Hon'ble ITAT Delhi held that when AO fails to carry out Delhi held that when AO fails to carry out adequate enquiry about alleged accommodation entries in adequate enquiry about alleged accommodation entries in adequate enquiry about alleged accommodation entries in the name of the assessee, the Pr. CIT rightly invoked the name of the assessee, the Pr. CIT rightly invoked the name of the assessee, the Pr. CIT rightly invoked provisions of section 263 of the Act to reopen the provisions of section 263 of the Act to reopen the provisions of section 263 of the Act to reopen the assessment 6. Malabar Industrial Co. Ltd. Vs CIT [20 6. Malabar Industrial Co. Ltd. Vs CIT [2000] 109 Taxman 66 00] 109 Taxman 66 (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC) Where (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC) Where (SC)/[2000] 243 ITR 83 (SC)/[2000] 159 CTR 1 (SC) Where Hon'ble Supreme Court held that where Assessing Officer Hon'ble Supreme Court held that where Assessing Officer Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by had accepted entry in statement of account filed by had accepted entry in statement of account filed by assessee, in absence of any supporting material without assessee, in absence of any supporting material without assessee, in absence of any supporting material without making making any any enquiry enquiry, , exercise exercise of of jurisdiction jurisdiction by by Commissioner under section 263(1) was justified Commissioner under section 263(1) was justified 7. Rajmandir Estates (P.) Ltd. Vs PCIT [70 taxmann.com 124 7. Rajmandir Estates (P.) Ltd. Vs PCIT [70 taxmann.com 124 7. Rajmandir Estates (P.) Ltd. Vs PCIT [70 taxmann.com 124 (Calcutta)/[2016] 240 Taxman 306 (Calcutta)/[2016] 386 (Calcutta)/[2016] 240 Taxman 306 (Calcutta)/[2016] 386 (Calcutta)/[2016] 240 Taxman 306 (Calcutta)/[2016] 386 ITR 162 (Calcutta)/[2016] 287 CTR 512] ITR 162 (Calcutta)/[2016] 287 CTR 512] Where Hon'ble Calcutta Hi Where Hon'ble Calcutta High Court held that where gh Court held that where assessee with a small amount of authorised share capital, assessee with a small amount of authorised share capital, assessee with a small amount of authorised share capital, raised a huge sum on account of premium and chose not to raised a huge sum on account of premium and chose not to raised a huge sum on account of premium and chose not to go in for increase of authorised share capital merely to go in for increase of authorised share capital merely to go in for increase of authorised share capital merely to avoid payment of statutory fees and Assessing Officer avoid payment of statutory fees and Assessing Officer avoid payment of statutory fees and Assessing Officer passed assessment order without carrying out requisite d assessment order without carrying out requisite d assessment order without carrying out requisite enquiry into increase of share capital including premium enquiry into increase of share capital including premium enquiry into increase of share capital including premium received by assessee, Commissioner was justified in received by assessee, Commissioner was justified in received by assessee, Commissioner was justified in treating assessment order as erroneous and prejudicial to treating assessment order as erroneous and prejudicial to treating assessment order as erroneous and prejudicial to interest of revenue interest of revenue 8. 8. Rajmandir Rajmandir Estates Estate s (P.) (P.) Ltd. Ltd. Vs Vs PCIT[2017] PCIT[2017] 77 77 taxmann.com 285 (SC)/[2017] 245 Taxman 127 (SC) taxmann.com 285 (SC)/[2017] 245 Taxman 127 (SC) Hon'ble Supreme Court has dismissed SLP against High Hon'ble Supreme Court has dismissed SLP against High Hon'ble Supreme Court has dismissed SLP against High Court's ruling that where assessee with a small amount of Court's ruling that where assessee with a small amount of Court's ruling that where assessee with a small amount of authorised share capital, raised huge sum on account of authorised share capital, raised huge sum on account of authorised share capital, raised huge sum on account of premium, exercise of revisionary powers by Commissioner exercise of revisionary powers by Commissioner exercise of revisionary powers by Commissioner opining that this could be a case of money laundering was opining that this could be a case of money laundering was opining that this could be a case of money laundering was justified 9. Swarup Vegetable Products Vs CIT [1991] 54 Taxman 9. Swarup Vegetable Products Vs CIT [1991] 54 Taxman 9. Swarup Vegetable Products Vs CIT [1991] 54 Taxman 175 (Allahabad)/[1991] 187 ITR 412 (Allahabad)/[1990] 90 175 (Allahabad)/[1991] 187 ITR 412 (Allahabad)/[1990] 90 175 (Allahabad)/[1991] 187 ITR 412 (Allahabad)/[1990] 90 CTR 113 (Allahabad) CTR 113 (Allahabad)
ITA No. 2280/MUM/2025 Assessee received certain amount by way of refund of ceived certain amount by way of refund of ceived certain amount by way of refund of excise duty and claimed that he had placed this amount in excise duty and claimed that he had placed this amount in excise duty and claimed that he had placed this amount in suspense account as a large part of this amount was suspense account as a large part of this amount was suspense account as a large part of this amount was claimed by one G and a suit and also a writ petition filed by claimed by one G and a suit and also a writ petition filed by claimed by one G and a suit and also a writ petition filed by G in this regard were pending before Court G in this regard were pending before Courts and, thus, this s and, thus, this amount did not constitute his income. ITO accepted amount did not constitute his income. ITO accepted amount did not constitute his income. ITO accepted assessee's assessee's assessee's claim claim claim without without without making making making proper proper proper enquiries. enquiries. enquiries. Commissioner Commissioner Commissioner acting acting acting under under under section section section 263, 263, 263, set set set aside aside aside assessment order on ground that it was clearly erroneous assessment order on ground that it was clearly erroneous assessment order on ground that it was clearly erroneous and also prejudicial to revenue and also prejudicial to revenue inasmuch as claim of inasmuch as claim of assessee was accepted without proper enquiries and assessee was accepted without proper enquiries and assessee was accepted without proper enquiries and directed ITO to make fresh assessment after making proper directed ITO to make fresh assessment after making proper directed ITO to make fresh assessment after making proper enquiries and recording a finding. Order upheld enquiries and recording a finding. Order upheld 10. Lakshmi Vilas Bank Vs JCIT (2018 10. Lakshmi Vilas Bank Vs JCIT (2018-TIOL-2284-HC- -MAD- IT) Hon'ble Madras High Hon'ble Madras High Court held that a show cause notice is Court held that a show cause notice is not mandated to be issued by CIT prior to passing of his not mandated to be issued by CIT prior to passing of his not mandated to be issued by CIT prior to passing of his revisional order u/s 263 revisional order u/s 263 11. CIT Vs Amitabh Bachhan (69 taxmann.com 170, 240 11. CIT Vs Amitabh Bachhan (69 taxmann.com 170, 240 11. CIT Vs Amitabh Bachhan (69 taxmann.com 170, 240 Taxman 221, 384 ITR 200, 286 CTR 113 Taxman 221, 384 ITR 200, 286 CTR 113 Hon'ble Supreme Court held that Section 263 Hon'ble Supreme Court held that Section 263 does not does not require any specific show cause notice detailing specific require any specific show cause notice detailing specific require any specific show cause notice detailing specific grounds on which revision of assessment order is grounds on which revision of assessment order is grounds on which revision of assessment order is tentatively being proposed affecting initiation of exercise in tentatively being proposed affecting initiation of exercise in tentatively being proposed affecting initiation of exercise in absence thereof or to require commissioner to confine absence thereof or to require commissioner to confine absence thereof or to require commissioner to confine himself to terms of not himself to terms of notice and foreclosing consideration of ice and foreclosing consideration of any other issue or question of fact; Commissioner is free to any other issue or question of fact; Commissioner is free to any other issue or question of fact; Commissioner is free to exercise his jurisdiction on consideration of all relevant exercise his jurisdiction on consideration of all relevant exercise his jurisdiction on consideration of all relevant facts, provided an opportunity of hearing is afforded to facts, provided an opportunity of hearing is afforded to facts, provided an opportunity of hearing is afforded to assessee to contest facts on basis of whic assessee to contest facts on basis of which he had h he had exercised revisional jurisdiction exercised revisional jurisdiction 12. Shree Manjunathesware Packing Products & Camphor 12. Shree Manjunathesware Packing Products & Camphor 12. Shree Manjunathesware Packing Products & Camphor Works Vs CIT [1998] 96 Taxman 1 (SC)/[1998] 231 ITR 53 Works Vs CIT [1998] 96 Taxman 1 (SC)/[1998] 231 ITR 53 Works Vs CIT [1998] 96 Taxman 1 (SC)/[1998] 231 ITR 53 (SC)/[1997] 143 CTR 406 (SC) (SC)/[1997] 143 CTR 406 (SC) Hon'ble Supreme Court held that word 'record' used in Hon'ble Supreme Court held that word 'record' used in Hon'ble Supreme Court held that word 'record' used in section 263(1) would m section 263(1) would mean records as it stands at time of ean records as it stands at time of examination by Commissioner but not as it stands at time of examination by Commissioner but not as it stands at time of examination by Commissioner but not as it stands at time of order passed by Assessing Officer. Material which had order passed by Assessing Officer. Material which had order passed by Assessing Officer. Material which had already come on record though subsequently to making of already come on record though subsequently to making of already come on record though subsequently to making of assessment assessment assessment could could could be be be taken taken taken into into into consideration consideration consideration by by by Commissioner. Commissioner was justified in invoking mmissioner. Commissioner was justified in invoking mmissioner. Commissioner was justified in invoking section 263 on basis of valuation report submitted by DVO section 263 on basis of valuation report submitted by DVO section 263 on basis of valuation report submitted by DVO subsequent to assessment order. subsequent to assessment order.
CIT Vs Ashok Logani (11 taxmann.com 208, 202 13. CIT Vs Ashok Logani (11 taxmann.com 208, 202 13. CIT Vs Ashok Logani (11 taxmann.com 208, 202 Taxman 201, 347 ITR 22) Taxman 201, 347 ITR 22) Hon'ble Delhi High Court held that when, o Hon'ble Delhi High Court held that when, on facts, it was n facts, it was found that there was no proper consideration by Assessing found that there was no proper consideration by Assessing found that there was no proper consideration by Assessing Officer to issue at hand and he left many loose ends, that Officer to issue at hand and he left many loose ends, that Officer to issue at hand and he left many loose ends, that too in a case where huge cash was found during search too in a case where huge cash was found during search too in a case where huge cash was found during search most of which was surrendered by giving statement at time most of which was surrendered by giving statement at time most of which was surrendered by giving statement at time of search, though retracted and sought to be explained though retracted and sought to be explained though retracted and sought to be explained afterward, it was necessary for Assessing Officer to afterward, it was necessary for Assessing Officer to afterward, it was necessary for Assessing Officer to properly adjudicate upon that issue and assessment order properly adjudicate upon that issue and assessment order properly adjudicate upon that issue and assessment order should have at least reflected that he was satisfied with should have at least reflected that he was satisfied with should have at least reflected that he was satisfied with explanation disclosing source of cash found; explanation disclosing source of cash found; and that there and that there was a proper and valid retraction. was a proper and valid retraction.
Considering the facts mentioned above and relying on the 9. Considering the facts mentioned above and relying on the 9. Considering the facts mentioned above and relying on the judicial pronouncements, I am satisfied that the order judicial pronouncements, I am satisfied that the order judicial pronouncements, I am satisfied that the order passed by the AO is erroneous in so far as it is prejudicial passed by the AO is erroneous in so far as it is prejudicial passed by the AO is erroneous in so far as it is prejudicial to the interests of the reve to the interests of the revenue in terms of Section 263 of the nue in terms of Section 263 of the Act. Hence, the assessment order is cancelled and set Act. Hence, the assessment order is cancelled and set- -aside to the AO for making fresh assessment in the light of the to the AO for making fresh assessment in the light of the to the AO for making fresh assessment in the light of the discussion above. The AO shall make necessary inquiry discussion above. The AO shall make necessary inquiry discussion above. The AO shall make necessary inquiry and verification and shall give opportunity of be and verification and shall give opportunity of being heard to ing heard to the assessee before passing necessary the assessee before passing necessary order.” 3. Before us, the Ld. Counsel for the assessee submitted that Before us, the Ld. Counsel for the assessee submitted that Before us, the Ld. Counsel for the assessee submitted that proper inquiry on the issue of the claim of deduction of interest u/s proper inquiry on the issue of the claim of deduction of interest u/s proper inquiry on the issue of the claim of deduction of interest u/s 57(3) of the Act was carried out by the Assessing Officer and 57(3) of the Act was carried out by the Assessing Officer and 57(3) of the Act was carried out by the Assessing Officer and therefore, Explanation 2 below section 263 has been incorrectly refore, Explanation 2 below section 263 has been incorrectly refore, Explanation 2 below section 263 has been incorrectly invoked by the Ld. PCIT. The Ld. Counsel referred to assessee’s invoked by the Ld. PCIT. The Ld. Counsel referred invoked by the Ld. PCIT. The Ld. Counsel referred paper book page 60, which is a copy of notice u/s 143 143(2) of the Act dated 29.06.2021, wherein wherein the assessee was asked to clarify in asked to clarify in respect of deduction under the head ‘income from other sources’. respect of deduction under the head ‘income from other sources’. respect of deduction under the head ‘income from other sources’. Further, the Ld. Counsel referred to Paper Book pages 18 and 19, Further, the Ld. Counsel referred to Paper Book page Further, the Ld. Counsel referred to Paper Book page which is a copy of notice issued u/s 142(1) dated 15.11.2011. The which is a copy of notice issued u/s 142(1) dated 15.11.2011. The which is a copy of notice issued u/s 142(1) dated 15.11.2011. The Ld. Counsel referred to the queries raised in the annexure at serial Ld. Counsel referred to the queries raised in the annexure Ld. Counsel referred to the queries raised in the annexure No. 3. For ready reference or ready reference, said query is reproduced as under: reproduced as under:
3. In the return of income for the A.Y.2020 3. In the return of income for the A.Y.2020-21 filed by you please 21 filed by you please refer to the Schedule OS: Income from other source column No.3. a(i) refer to the Schedule OS: Income from other source column No.3. a(i) refer to the Schedule OS: Income from other source column No.3. a(i) Deductions under section 57: Deductions under section 57:- (other than those relating to income e relating to income chargeable at special rates under 2a, 2b & 2d) I.e. Expenses / chargeable at special rates under 2a, 2b & 2d) I.e. Expenses / chargeable at special rates under 2a, 2b & 2d) I.e. Expenses / Deductions (in case of other than family pension) you have claimed Deductions (in case of other than family pension) you have claimed Deductions (in case of other than family pension) you have claimed Rs. 1,69,18,439/ Rs. 1,69,18,439/-, Please provide the details of expenditure claimed , Please provide the details of expenditure claimed under section 57, if any, along with under section 57, if any, along with documentary proof. documentary proof. 3.a. Furnish the bifurcation of the expenditure claimed of Rs. 3.a. Furnish the bifurcation of the expenditure claimed of Rs. 3.a. Furnish the bifurcation of the expenditure claimed of Rs. 1,69,18,439/ 1,69,18,439/- with evidences 3.6. 3.b. Substantiate the allowability of expenditure with reference 3.6. 3.b. Substantiate the allowability of expenditure with reference 3.6. 3.b. Substantiate the allowability of expenditure with reference to the specific subsection of sec 57 with evidences. to the specific subsection of sec 57 with evidences. Further, please note Further, please note that failure to provide information asked u/s that failure to provide information asked u/s 142(1) would attract penalty u/s 272A(1)(d) of the Income 142(1) would attract penalty u/s 272A(1)(d) of the Income 142(1) would attract penalty u/s 272A(1)(d) of the Income-tax Act, 1961 which is Rs.10,000/ 1961 which is Rs.10,000/- for each such default or failure. for each such default or failure. Providing incomplete information or not furnishing information may Providing incomplete information or not furnishing information may Providing incomplete information or not furnishing information may lead to drawing lead to drawing of adverse inference on the issue. Please Note: For better communication, please make sure to answer Please Note: For better communication, please make sure to answer Please Note: For better communication, please make sure to answer all the questions; to do page numbering to your reply letter & all the questions; to do page numbering to your reply letter & all the questions; to do page numbering to your reply letter & annexure thereof and to provide Index annexure thereof and to provide Index for the same.
” 3.1 Thereafter, the Ld. Counsel referr Thereafter, the Ld. Counsel referred to Paper Book page ed to Paper Book pages 21 to 24, which contained reply of the assessee in respect of query raised which contained reply of the assessee in respect of query raised which contained reply of the assessee in respect of query raised by the Assessing Officer vide notice dated 05.11.2021. In the said by the Assessing Officer vide notice dated 05.11.2021. by the Assessing Officer vide notice dated 05.11.2021. reply, the assessee provided the details of the gross income under reply, the assessee provided the details of the gross income under reply, the assessee provided the details of the gross income under the head ‘income from ot the head ‘income from other sources’ and detail of deduction her sources’ and detail of deduction claimed deduction u/s 57 of the Act. The said details of the gross claimed deduction u/s 57 of the Act. The said details of the gross claimed deduction u/s 57 of the Act. The said details of the gross income and deduction claim income and deduction claimed are reproduced as under: are reproduced as under:
Manju Rakesh Jain A.Y. 2020-21 Details of Gross Income under the head Income from Other Sources Details of Gross Income under the head Income from Other Sources Particulars Amount in Rs. Saving Bank Interest from HDFC Bank Saving Bank Interest from HDFC Bank 16,712.00 Saving Bank Interest from Central Bank of India Saving Bank Interest from Central Bank of India 2,116.00 1,69,16,310.00 Interest Received on Loan advanced to Sanyam Interest Received on Loan advanced to Sanyam Realtors Private Limited TOTAL 1,69,35,138.00 Manju Rakesh Jain A.Y. 2020-21 Details of Deductions claimed u/s. 57 of the Act Details of Deductions claimed u/s. 57 of the Act Particulars Amount in Rs. Interest paid to Bajaj Finance Interest paid to Bajaj Finance 1,61,86,047.00 interest paid to HDFC Overdraft A/cs interest paid to HDFC Overdraft A/cs 7,32,392.00 TOTAL 1,69,18,439.00 3.2 Thereafter, the Ld. Counsel Thereafter, the Ld. Counsel referred to the overdraft bank referred to the overdraft bank account of the HDFC Bank account of the HDFC Bank, wherein the loan of Rs.16,59,000/ n the loan of Rs.16,59,000/- had been received on 19.12.2018 from Bajaj Housing Finance and been received on 19.12.2018 from Bajaj Housing Finance and been received on 19.12.2018 from Bajaj Housing Finance and amount Rs.1,70,00,000/ amount Rs.1,70,00,000/- had been transferred to M/s Sanyam to M/s Sanyam Realtors Pvt. Ltd. on 19.12.2018 Realtors Pvt. Ltd. on 19.12.2018, i.e. Same day, e day, thus the Ld. Counsel for the assessee submitted that the loan received from the Counsel for the assessee submitted that the loan received from the Counsel for the assessee submitted that the loan received from the Bajaj Housing Finance Pvt. Ltd. was directly expanded to M/s Bajaj Housing Finance Pvt. Ltd. was directly expanded to M/s Bajaj Housing Finance Pvt. Ltd. was directly expanded to M/s Sanyam Realtors Pvt. Ltd. Further, the Ld. Counsel referred to the Sanyam Realtors Pvt. Ltd. Further, the Ld. Counsel referred to the Sanyam Realtors Pvt. Ltd. Further, the Ld. Counsel referred to the notice u/s 142(1) dated 30.06.2022 notice u/s 142(1) dated 30.06.2022, a copy of which is available on y of which is available on Paper Book pages 35 to 37 35 to 37. In said query, the Assessing Officer query, the Assessing Officer asked specific justification for the claim of the deduction o justification for the claim of the deduction o justification for the claim of the deduction of interest. The relevant query raised raised is reproduced as under:
ITA No. 2280/MUM/2025 “1. 1.
In In In response response response to to to the the the notice notice notice u/s u/s u/s 142(1) 142(1) 142(1) v vide v ITBA/AST/F/142(1)/2021 ITBA/AST/F/142(1)/2021- 22/1040464233(1) 22/1040464233(1) dated dated 08.03.2022 you have uploaded your reply on 15.03.2022 08.03.2022 you have uploaded your reply on 15.03.2022 08.03.2022 you have uploaded your reply on 15.03.2022 stating stating stating that that that the the the assessee assessee assessee has has has received received received interest interest interest of of of Rs.1,69,16,310/ Rs.1,69,16,310/- on Loan advanced to M/s Sanyam Realtors on Loan advanced to M/s Sanyam Realtors Private Limited during the F.Y. 2019 Private Limited during the F.Y. 2019-20. In this connection you this connection you are requested to provide the following: are requested to provide the following: a. Furnish your bank account statement(s) highlighting the a. Furnish your bank account statement(s) highlighting the a. Furnish your bank account statement(s) highlighting the amount of interest of Rs. 1,69,16,310/ amount of interest of Rs. 1,69,16,310/- received from M/s received from M/s Sanyam Realtors Private Limited during the F.Y. 2019 Sanyam Realtors Private Limited during the F.Y. 2019- -20.
2. Furnish financial 2. Furnish financial year wise break-up of loan/advance given up of loan/advance given to M/s Sanyam Realtors Private Limited. to M/s Sanyam Realtors Private Limited. 3.a. You have stated that an amount of Rs.3,52,96,965/ 3.a. You have stated that an amount of Rs.3,52,96,965/ 3.a. You have stated that an amount of Rs.3,52,96,965/- has been given as loan/advance to M/s Sanyam Realtors Private been given as loan/advance to M/s Sanyam Realtors Private been given as loan/advance to M/s Sanyam Realtors Private Limited during the F.Y. 2019 Limited during the F.Y. 2019-20. Furnish your bank accoun Furnish your bank account statement(s) highlighting the amount t statement(s) highlighting the amount of Rs.3,52,96,965/ of Rs.3,52,96,965/- given as loan/advance to M/s Sanyam given as loan/advance to M/s Sanyam Realtors Private Limited during the F.Y. 2019 Realtors Private Limited during the F.Y. 2019- 20. 3.b. You have stated that an amount of Rs.7,20,32,900/ 3.b. You have stated that an amount of Rs.7,20,32,900/ 3.b. You have stated that an amount of Rs.7,20,32,900/- has been received back from M/s Sanyam Realtors Privat been received back from M/s Sanyam Realtors Privat been received back from M/s Sanyam Realtors Private Limited during during the the F.Y. F.Y. 2019-20. 2019 20. Furnish Furnish your your bank bank account account statement(s) highlighting the amount of Rs.7,20,32,900/ statement(s) highlighting the amount of Rs.7,20,32,900/ statement(s) highlighting the amount of Rs.7,20,32,900/- received back from M/s Sanyam Realtors Private Limited during received back from M/s Sanyam Realtors Private Limited during received back from M/s Sanyam Realtors Private Limited during the F.Y. 2019 the F.Y. 2019-20. 3.c. Furnish Form 16A provided by M/s Sanyam Realtors 3.c. Furnish Form 16A provided by M/s Sanyam Realtors 3.c. Furnish Form 16A provided by M/s Sanyam Realtors Private Limited for the TDS deducted of Rs. 16,91,631/ ate Limited for the TDS deducted of Rs. 16,91,631/ ate Limited for the TDS deducted of Rs. 16,91,631/- during the F.Y. 2019 the F.Y. 2019-20. 3.d. Furnish the copy of loan agreement made with M/s 3.d. Furnish the copy of loan agreement made with M/s 3.d. Furnish the copy of loan agreement made with M/s Sanyam Realtors Private Limited. Sanyam Realtors Private Limited. 3.e. Kindly furnish the rate of interest paid by the M/s Sanyam 3.e. Kindly furnish the rate of interest paid by the M/s Sanyam 3.e. Kindly furnish the rate of interest paid by the M/s Sanyam Realtors Private Limited to Realtors Private Limited to the assessee.
4. As per your reply uploaded on 22.11.2021 you have 4. As per your reply uploaded on 22.11.2021 you have 4. As per your reply uploaded on 22.11.2021 you have furnished details of bank account statements which is furnished details of bank account statements which is furnished details of bank account statements which is reproduced below: reproduced below: Details of Bank Accounts Details of Bank Accounts Sr. Mo. Name of Bank Branch Details Type of Account Account No, Account No, Name of Bank 1 Central bank of India Juhu, Vile Saving Account 1181932620 1181932620 Central bank of India Parle 2 HDFC Bank Vile Parle West Saving Account 10271870000323 10271870000323 HDFC Bank 3 HDFC Bank Vile Parle West Overdraft 50200022439652 HDFC Bank 50200022439652 4 HDFC Bank Vile Parle West Overdraft 50200029134409 HDFC Bank 50200029134409 5 Indusind Bank Nariman Point Saving Account 00235565624 00235565624 Indusind Bank You are requested to furnish the bank account statement(s) for You are requested to furnish the bank account statement(s) for You are requested to furnish the bank account statement(s) for the above account(s) held by you during the F.Y. 2019 the above account(s) held by you during the F.Y. 2019- -20.
5. As per your reply uploaded on 22.11.2021 you have 5. As per your reply uploaded on 22.11.2021 you have 5. As per your reply uploaded on 22.11.2021 you have furnished Loan Sanction Letter from M/s Bajaj Housing Finance furnished Loan Sanction Letter from M/s Bajaj Housing Finance furnished Loan Sanction Letter from M/s Bajaj Housing Finance limited where it is mentioned the co where it is mentioned the co-borrowers as (i) Shri. borrowers as (i) Shri. Rakesh Brijlal Jain and (ii) Shri Akshay Rakesh Jain. In this Rakesh Brijlal Jain and (ii) Shri Akshay Rakesh Jain. In this Rakesh Brijlal Jain and (ii) Shri Akshay Rakesh Jain. In this connection you are requested to provide PAN and e connection you are requested to provide PAN and e- -mail of (i) Shri. Rakesh Brijlal Jain and (ii) Shri Akshay Rakesh Jain. Shri. Rakesh Brijlal Jain and (ii) Shri Akshay Rakesh Jain. Shri. Rakesh Brijlal Jain and (ii) Shri Akshay Rakesh Jain.
6. You are hereby r 6. You are hereby requested to furnish the Balance sheet and P equested to furnish the Balance sheet and P & L of the assessee for the F.Y.2017 & L of the assessee for the F.Y.2017-18 and F.Y.2018- -19. Further, please note that failure to provide information asked Further, please note that failure to provide information asked Further, please note that failure to provide information asked u/s 142(1) would attract penalty u/s 272A(1)(d) of the Income u/s 142(1) would attract penalty u/s 272A(1)(d) of the Income u/s 142(1) would attract penalty u/s 272A(1)(d) of the Income- tax Act, 1961 which is Rs.10,0 tax Act, 1961 which is Rs.10,000/- for each such default or for each such default or failure. Providing incomplete information or not furnishing information Providing incomplete information or not furnishing information Providing incomplete information or not furnishing information may lead to drawing of adverse inference on the issue. may lead to drawing of adverse inference on the issue. may lead to drawing of adverse inference on the issue. Please Note: For better communication, please make sure to Please Note: For better communication, please make sure to Please Note: For better communication, please make sure to answer all the questions; to do page num answer all the questions; to do page numbering to your reply bering to your reply letter & annexure thereof and to provide Index letter & annexure thereof and to provide Index for the the same.” 3.3 The assessee filed detailed submission in respect of query The assessee filed detailed submission in respect of query The assessee filed detailed submission in respect of query, which is available on Paper Book page which is available on Paper Book pages 40 and 41.
3.4 In view of the above submission In view of the above submissions, the Ld. Counsel for the , the Ld. Counsel for the assessee submitted that the Assessing Officer has passed the assessee submitted that the Assessing Officer has passed the assessee submitted that the Assessing Officer has passed the assessment order after thorough inquiry on the issue in dispute. He assessment order after thorough inquiry on the issue in dispute. He assessment order after thorough inquiry on the issue in dispute. He further referred to the assessment order passed by the Assessing further referred to the assessment order passed by the Assessing further referred to the assessment order passed by the Assessing Officer wherein also the Assessing O Officer wherein also the Assessing Officer has mentioned the fact fficer has mentioned the fact and thorough inquiry and thereafter accepted inquiry and thereafter accepted the submission the submissions of the assessee. For ready reference said finding of the Assessing the assessee. For ready reference said finding of the Assessing the assessee. For ready reference said finding of the Assessing Officer is reproduced as under: Officer is reproduced as under:
“On verification of the return filed it was found that assessee ha On verification of the return filed it was found that assessee ha On verification of the return filed it was found that assessee has earned interest income of Rs.1,69,35,138.00/ interest income of Rs.1,69,35,138.00/- during the FY. 2019 during the FY. 2019-20. The interest income was earned from M/s. Sanyam Realtors (P) ltd and saving interest income was earned from M/s. Sanyam Realtors (P) ltd and saving interest income was earned from M/s. Sanyam Realtors (P) ltd and saving bank account maintained with HDFC Bank and Central Bank of India. The bank account maintained with HDFC Bank and Central Bank of India. The bank account maintained with HDFC Bank and Central Bank of India. The breakup of the same is reproduced as u breakup of the same is reproduced as under: Particulars Amount in Rs. Amount in Rs. Saving Bank Interest from HDFC Bank 16,712.00 Saving Bank Interest from HDFC Bank 16,712.00 Saving Bank Interest from Central Bank of India 2,116.00 Saving Bank Interest from Central Bank of India 2,116.00 1,69,16,310.00 1,69,16,310.00 Interest Received on Loan advanced to Sanyam Realtors . Interest Received on Loan advanced to Sanyam Realtors . Private Limited TOTAL 1,69,35,138.0 1,69,35,138.0 0 Assessee claimed the expense of Rs. 1,69,18,439/ Assessee claimed the expense of Rs. 1,69,18,439/- u/s 57 of the Income u/s 57 of the Income tax Act, 1961 for interest income earned. The breakup of the same is tax Act, 1961 for interest income earned. The breakup of the same is tax Act, 1961 for interest income earned. The breakup of the same is reproduced from reproduced from assessee reply. Particulars Amount in Rs. Amount in Rs. Interest paid to Bajaj Finance 1,61,86,047.00 Interest paid to Bajaj Finance 1,61,86,047.00 paid to HDFC Overdraft A/cs 7,32,392.00 Interest paid to HDFC Overdraft A/cs 7,32,392.00 TOTAL 1,69,18,439.00 1,69,18,439.00 On perusal of the submissions, it was seen that assessee acquired loan of On perusal of the submissions, it was seen that assessee acquired loan of On perusal of the submissions, it was seen that assessee acquired loan of Rs. 17.25 Crores from Bajaj Housing Financeand HDFC Overdraft facility Rs. 17.25 Crores from Bajaj Housing Financeand HDFC Overdraft facility Rs. 17.25 Crores from Bajaj Housing Financeand HDFC Overdraft facility and the same was given to M/s Sanyam Realtors and the same was given to M/s Sanyam Realtors (P) Ltd.The details of the (P) Ltd.The details of the loan given to M/s Sanyam Realtors (P) Ltds was furnished by the assessee loan given to M/s Sanyam Realtors (P) Ltds was furnished by the assessee loan given to M/s Sanyam Realtors (P) Ltds was furnished by the assessee as under: Copy of Form 16A provided by M/s. Sayman Realtors Private Limited is Copy of Form 16A provided by M/s. Sayman Realtors Private Limited is Copy of Form 16A provided by M/s. Sayman Realtors Private Limited is attached herewith in “Exhibit attached herewith in “Exhibit-D". No specific loan agreement has been execut No specific loan agreement has been executed between the assessee and ed between the assessee and M/s. Sayman Realtors Private Limited and hence, not provided. Sayman Realtors Private Limited and hence, not provided. Sayman Realtors Private Limited and hence, not provided. The assessee had given the loan to M/s. Sayman Realtors Private Limited The assessee had given the loan to M/s. Sayman Realtors Private Limited The assessee had given the loan to M/s. Sayman Realtors Private Limited at rate of interest of 10% p.a. at rate of interest of 10% p.a. Assessee paid the interest of Rs. 1,61,86,047/ Assessee paid the interest of Rs. 1,61,86,047/- to the Bajaj H to the Bajaj Housing Finance through Indusind Bank account maintained by the assessee and Finance through Indusind Bank account maintained by the assessee and Finance through Indusind Bank account maintained by the assessee and Rs.7,32,392/- debited by the HDFC Bank for the overdraft facilitytowards debited by the HDFC Bank for the overdraft facilitytowards the loan amount given to M/s Sanyam Realtors Private Ltd. The interest the loan amount given to M/s Sanyam Realtors Private Ltd. The interest the loan amount given to M/s Sanyam Realtors Private Ltd. The interest rate for the loan availed by the ass rate for the loan availed by the assessee from Bajaj Housing Finance essee from Bajaj Housing Finance is9.25%. For the F.Y.2019 For the F.Y.2019-20, the assessee has accrued interest income of 20, the assessee has accrued interest income of Rs.1,69,16,310/ Rs.1,69,16,310/- from M/s. Sanyam Realtors (P) Ltd. On verification in the from M/s. Sanyam Realtors (P) Ltd. On verification in the Form 26AS, M/s Sanyam Realtors Private Limited has deducted the tax Form 26AS, M/s Sanyam Realtors Private Limited has deducted the tax Form 26AS, M/s Sanyam Realtors Private Limited has deducted the tax u/s 194A of Rs.16,91,631/ 4A of Rs.16,91,631/-same was verified from Form 26AS of the same was verified from Form 26AS of the assessee. The assessee submitted the following for the accrual of interest assessee. The assessee submitted the following for the accrual of interest assessee. The assessee submitted the following for the accrual of interest of Rs. 1,69,16,310/ of Rs. 1,69,16,310/- The assessee follows mercantile system of accounting. In mercantile The assessee follows mercantile system of accounting. In mercantile The assessee follows mercantile system of accounting. In mercantile system of accounting. expenses a system of accounting. expenses are accounted on accrual basis whether re accounted on accrual basis whether 'paid' or 'payable'. Likewise, the income is also accounted on accrual basis 'paid' or 'payable'. Likewise, the income is also accounted on accrual basis 'paid' or 'payable'. Likewise, the income is also accounted on accrual basis whether 'received' or 'receivable'. It is a system in which accounting entries whether 'received' or 'receivable'. It is a system in which accounting entries whether 'received' or 'receivable'. It is a system in which accounting entries are made on the basis of amount having become due for receipt. are made on the basis of amount having become due for receipt. are made on the basis of amount having become due for receipt. This system recognises the fact that if a transaction or an event has occurred, system recognises the fact that if a transaction or an event has occurred, system recognises the fact that if a transaction or an event has occurred, it's consequences cannot be avoided and should be brought into books. it's consequences cannot be avoided and should be brought into books. it's consequences cannot be avoided and should be brought into books. On perusal of the above facts, it is seen that the assessee has expended On perusal of the above facts, it is seen that the assessee has expended On perusal of the above facts, it is seen that the assessee has expended an amount of Rs.1,69,18.439 in an amount of Rs.1,69,18.439 in order to earn the interest income of order to earn the interest income of Rs.1,69,16,310/ Rs.1,69,16,310/- Hence the deduction claimed by the assessee u/s 57(iii) Hence the deduction claimed by the assessee u/s 57(iii) is found to be correct is found to be correct and acceptable.”
On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) submitted that the Assessing Officer has not submitted that the Assessing Officer has not applied his mind to applied his mind to the facts of the case and no proper inquiry was conducted. the facts of the case and no proper inquiry was conducted. the facts of the case and no proper inquiry was conducted. According to him, the loan was granted for investment in the asset According to him, the loan was granted for investment in the asset According to him, the loan was granted for investment in the asset of the personal nature of the personal nature, whereas same had been utilized for giving been utilized for giving loan to the related party loan to the related party, which is against the purpose for which the purpose for which loan was sanctioned ed and therefore, the interest paid in respect of and therefore, the interest paid in respect of loan was not eligible eligible to be allowed against the interest income to be allowed against the interest income earned. He accordingly prayed that the order of the Ld. PCIT to earned. He accordingly prayed that the order of the Ld. PCIT to earned. He accordingly prayed that the order of the Ld. PCIT to might be upheld.
We have heard riva We have heard rival submissions of the parties and perused l submissions of the parties and perused the relevant materials on record. The Ld. PCIT has held the order of the relevant materials on record. The Ld. PCIT has held the order of the relevant materials on record. The Ld. PCIT has held the order of the Assessing Officer as erroneous in so far as prejudicial to the the Assessing Officer as erroneous in so far as prejudicial to the the Assessing Officer as erroneous in so far as prejudicial to the interest of the Revenue mainly for the r interest of the Revenue mainly for the reason that Assessing Officer eason that Assessing Officer had not carried out t rried out the inquiry, which ought to have been carried ought to have been carried out in the facts and circumstances of the case, invoking out in the facts and circumstances of the case out in the facts and circumstances of the case Explanation 2 to section 263 of the Act. Explanation 2 to section 263 of the Act. A perusal of the A perusal of the assessment assessment assessment record reveals that record reveals record reveals that that the Assessing Officer the Assessing Officer had the Assessing Officer had had specifically raised queries specifically raised queries on the allowability of the claim under on the allowability of the claim under Section 57(iii) of the Act. In response, the assessee submitted Section 57(iii) of the Act. In response, the assessee submitted Section 57(iii) of the Act. In response, the assessee submitted detailed replies explaining the nexus between the borrowed funds detailed replies explaining the nexus between the borrowed funds detailed replies explaining the nexus between the borrowed funds and the income earned. It is evident from the assessment order and the income earned. It is evident from the assessment order and the income earned. It is evident from the assessment order itself that the Assessing itself that the Assessing Officer had taken into account the relevant Officer had taken into account the relevant facts, facts, facts, examined examined examined the the the interest interest interest payments, payments, payments, verified verified verified the the the bank bank bank transactions, and was satisfied that the interest expenditure had transactions, and was satisfied that the interest expenditure had transactions, and was satisfied that the interest expenditure had been incurred wholly and exclusively for the purpose of earning the been incurred wholly and exclusively for the purpose of earning the been incurred wholly and exclusively for the purpose of earning the interest income offe interest income offered under the head 'Income from Other red under the head 'Income from Other Sources'. The principal basis for the invocation of jurisdiction under Sources'. The principal basis for the invocation of jurisdiction under Sources'. The principal basis for the invocation of jurisdiction under Section 263 by the Ld. PCIT is the alleged lack of inquiry. However, Section 263 by the Ld. PCIT is the alleged lack of inquiry. However, Section 263 by the Ld. PCIT is the alleged lack of inquiry. However, the factual record demonstrates otherwise. The record clearly the factual record demonstrates otherwise. The record clearly the factual record demonstrates otherwise. The record clearly reflects that inquiries were made, and replies with supporting quiries were made, and replies with supporting quiries were made, and replies with supporting documents were furnished and examined. The Assessing Officer, documents were furnished and examined. The Assessing Officer, documents were furnished and examined. The Assessing Officer, having considered the same, formed a view and accepted the claim having considered the same, formed a view and accepted the claim having considered the same, formed a view and accepted the claim of the assessee. Mere difference of opinion with the conclusion of the assessee. Mere difference of opinion with the conclusion of the assessee. Mere difference of opinion with the conclusion drawn by the Assessing Officer does not confer jurisdiction under sing Officer does not confer jurisdiction under sing Officer does not confer jurisdiction under Section 263. It is well settled that so long as the view taken by the Section 263. It is well settled that so long as the view taken by the Section 263. It is well settled that so long as the view taken by the Assessing Officer is a plausible one, based on material on record Assessing Officer is a plausible one, based on material on record Assessing Officer is a plausible one, based on material on record and after due application of mind, the jurisdiction under Section and after due application of mind, the jurisdiction under Section and after due application of mind, the jurisdiction under Section 263 cannot be invoked merely because the Commissioner holds a nnot be invoked merely because the Commissioner holds a nnot be invoked merely because the Commissioner holds a different view. We also find that the Assessing Officer had duly We also find that the Assessing Officer had duly We also find that the Assessing Officer had duly recorded his satisfaction in the assessment order, stating that the recorded his satisfaction in the assessment order, stating that the recorded his satisfaction in the assessment order, stating that the assessee had incurred interest expenditure against income earned assessee had incurred interest expenditure against income earned assessee had incurred interest expenditure against income earned from loans advanced, and that the nexus stood substantiated by om loans advanced, and that the nexus stood substantiated by om loans advanced, and that the nexus stood substantiated by documentary evidence. Therefore, we are unable to accept the documentary evidence. Therefore, we are unable to accept the documentary evidence. Therefore, we are unable to accept the Revenue’s contention that there was no proper application of mind Revenue’s contention that there was no proper application of mind Revenue’s contention that there was no proper application of mind or that the assessment order suffered from any jurisdictional defect. or that the assessment order suffered from any jurisdictional defect or that the assessment order suffered from any jurisdictional defect 5.1 In light of the foregoing discussion, we are of the considered In light of the foregoing discussion, we are of the considered In light of the foregoing discussion, we are of the considered view that the conditions precedent for invoking the jurisdiction view that the conditions precedent for invoking the jurisdiction view that the conditions precedent for invoking the jurisdiction under Section 263 of the Act were not satisfied in the present case. under Section 263 of the Act were not satisfied in the present case. under Section 263 of the Act were not satisfied in the present case. The assessment order, on the issue in question, was neither The assessment order, on the issue in question, was The assessment order, on the issue in question, was erroneous nor prejudicial to the interest of the Revenue. erroneous nor prejudicial to the interest of the Revenue. erroneous nor prejudicial to the interest of the Revenue. Accordingly, the impugned impugned revisionary order passed by the Ld. PCIT revisionary order passed by the Ld. PCIT under Section 263 of the Act is hereby set aside. The assessment under Section 263 of the Act is hereby set aside. The assessment under Section 263 of the Act is hereby set aside. The assessment order dated 08.09.2022 is restored. order dated 08.09.2022 is restored. The grounds raised b The grounds raised by the assessee are accordingly. y the assessee are accordingly.
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on nounced in the open Court on 31/07/2025. /07/2025.