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Facts
The assessee's appeal for AY 2015-16 arose from an order under Section 263 of the Income Tax Act, 1961. The PCIT had alleged that the Assessing Officer's assessment was erroneous, causing prejudice to revenue. The PCIT questioned deductions like depreciation, director's salary, and interest expenditure.
Held
The Tribunal noted that a previous coordinate bench had accepted a net profit rate of 4.5% and included FDR interest as business income. The Tribunal held that the PCIT's direction to disallow interest expenditure under Section 57(iii) was unsustainable in law. It also found that the claimed deductions were statutory and could not be denied.
Key Issues
Whether the PCIT's revisionary order under Section 263, disallowing certain deductions and deeming the AO's assessment erroneous, was justified.
Sections Cited
263, 57(3)
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: Sh. Satbeer Singh Godara & Sh. M. Balaganesh
ORDER
Per Satbeer Singh Godara, Judicial Member:
This assessee’s appeal for Assessment Year 2015-16, arises against the CIT(A)-2, Agra’s order dated 13.09.2018, in proceedings u/s 263 of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties at length. Case file perused.
It emerges during the course of hearing that the learned PCIT has exercised his section 263 revision jurisdiction thereby holding the Assessing Officer’s regular assessment framed on 15.05.2017; as an erroneous one causing prejudice to the interest of the revenue. We wish to make it clear that the ./2018 Rajeev Kumar Contractor Pvt. Ltd. Assessing Officer had inter alia applied/assessed net profit rate of 8% on the assessee’s total contract receipts, as reduced by the contractee’s deductions to the tune of Rs.2,46,86,589/- followed by various other statutory deduction. Learned PCIT thereafter issued his section 263 show-cause notice dated 04.05.2018 inter alia alleging that not only the above statutory deductions of depreciation, directors’ salary etc. had been wrongly allowed after rejecting the books and estimation of net profits but also section 57(3) interest deduction against interest income from other sources could not be accepted in the assessee’s favour.
Both the learned representative reiterate their respective stand against and in support of correctness of the impugned revision directions. We first of all not in this factual backdrop that the assessee has filed his paper book running into 114 pages wherein it emerges from a perusal of pages 43 to 49 that the tribunal in his case ITA No. 661/Asr./2008 had inter alia accepted net profit rate of 4.5% only. This is indeed coupled with the fact that the learned co-ordinate bench’s order had further included interest on the assessee’s FDRs as liable to be assessed as business income. We wish to clarify here that there is no distinction; be that on facts or in law, pin-pointed by the ./2018 Rajeev Kumar Contractor Pvt. Ltd. Revenue side during the course of hearing. We thus conclude that the learned PCIT’s impugned revisions direction seeking to disallow the assessee’s interest expenditure u/s 57(iii) of the Act thereby reversing the Assessing Officer’s findings, is not sustainable in law as the assessee’s principle amount itself has been held assessable as business income in the earlier assessment years all along.
The Revenue next seeks to buttress the point that the assessee had been wrongly allowed deduction of partnership remuneration and depreciation etc. in the course of assessment even after his estimation of net profits @ 8%. We are of the considered view that all these claims are statutory deductions than that those based on mere estimation which could not be denied in these peculiar facts and circumstances. We accordingly reverse the learned PCIT’s impugned revision directions as the Assessing Officer’s regular assessment herein could neither be held as erroneous nor the one causing prejudice to the interest of the Revenue in very terms. Ordered accordingly.