FUTURE IDEAS CO LTD., MUMBAI V. PR.CIT -9, MUMBAI

ITA 3062/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1229 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 27-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Keywords: Business income; Business expenditure; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Assessment record
• Section: 143(3); 14A; 115JB; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 3062/MUM/2016 (ASSESSMENT YEAR: 2011-12) FUT U RE IDEAS CO. LTD. VS. PRINCIPAL CIT 9 KNOWLEDGE HOUSE, SHYAM NAGAR OFF JOGESHWARI VIKROLI LINK RD. JOGESHWARI (E), MUMBAI 400060 2 ND FLOOR, ROOM NO. 214 AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400020 PAN AAACF9519L APPELLANT RESPONDENT APPELLANT BY: SHRI VIPUL JOSHI & MS. DINKLE HARIYA RESPONDENT BY: MS. S. PADMAJA DATE OF HEARING: 07.04.2017 DATE OF PRONOUNCEMENT: 12.04.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE PRINCIPAL CIT 9, MUMBAI PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DATED 14.03.20 16 FOR A.Y. 2011-12. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF MARKET RESEARCH SERVICES, BRAND BUILDING ACTIVITIES AND KNOWLEDGE S ERVICES, FILED ITS RETURN OF INCOME FOR A.Y. 2011-12 ON 30.09.2011 DECLARING TO TAL NIL INCOME. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY. THE ASSESSM ENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 26 .02.2014 WHEREIN THE ASSESSEES INCOME UNDER THE NORMAL PROVISIONS WAS D ETERMINED AT NIL AFTER SET OFF OF CARRY FORWARD LOSES OF ` 1,46,98050/- AND WHICH INCLUDED DISALLOWANCE OF ` 24,79,503/- UNDER SECTION 14A OF THE ACT R.W. RULE 8D(2) (III) OF THE I.T. RULES 1962 (IN SHORT THE R ULES). BOOK PROFITS UNDER ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 2 SECTION 115JB OF THE ACT WERE COMPUTED AT ` 19,80,289/- AND INCLUDED THE AFORESAID DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D OF THE RULES. ON APPEAL, THE LEARNED CIT(A) REVERSED THE DISALLOWANC E MADE BY THE ASSESSING OFFICER (AO) UNDER SECTION 14A R.W. RULE 8D(2)(III) OF THE RULES. WHILE MAKING THE AFORESAID DISALLOWANCE UNDER RULE 8D(2)(III), THE AO AT PARA 4.3 OF THE ORDER OF ASSESSMENT, AFTER CONSIDER ING THE ASSESSEES DETAILED SUBMISSION/EXPLANATIONS, ALSO HELD THAT NO DISALLOWANCE OF INTEREST IS CALLED FOR UNDER SECTION 14A R.W. RULE 8D AS THE ASSESSEE HAD NOT CLAIMED INTEREST COST ON INVESTMENT IN ASSOCIAT E AND SUBSIDIARY CONCERNS SINCE IT HAS SUFFICIENT OWN FUNDS FOR MAKI NG THE SAID INVESTMENTS. 3. SUBSEQUENTLY, THE PRINCIPAL CIT -9, MUMBAI INITIATE D REVISIONARY PROCEEDINGS UNDER SECTION 263 OF THE ACT BY ISSUE O F SHOW CAUSE NOTICE DATED 16.12.2015 STATING THAT WHILE THE AO HAD DISA LLOWED AN AMOUNT OF ` 24,79,503/- UNDER SECTION 14A R.W. RULE 8D(2)(III) OF THE RULES, THE AO HAD NOT WORKED OUT DISALLOWANCE UNDER RULE 8D(2)(II ) OF THE RULES THOUGH INTEREST EXPENSES WERE DEBITED TO THE PROFIT & LOSS ACCOUNT. IN THE SAID SHOW CAUSE NOTICE IT WAS FURTHER STATED THAT DISALL OWANCE UNDER RULE 8D(2)(II) IS TO BE MADE IN THE CASE ON HAND AND THA T IN VIEW OF THE AOS FAILURE TO DO SO, THE ORDER OF ASSESSMENT PASSED UN DER SECTION 143(3) OF THE ACT VIDE ORDER DATED 26.02.2014 IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF REVENUE WITHIN THE MEANING OF THE PROV ISIONS OF SECTION 263 OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE DATED 16.12.2015, THE ASSESSEE FILED WRITTEN SUBMISSION BEFORE THE LEARNE D PRINCIPAL CIT ON 05.01.2016 AND 11.02.2016 OBJECTING TO THE REVISION PROCEEDINGS INITIATED, PUTTING FORTH ARGUMENTS AND CITING VARIOUS JUDICIAL PRONOUNCEMENTS AND REQUESTED THE LEARNED PRINCIPAL CIT TO DROP THE PRO CEEDINGS INITIATED UNDER SECTION 263 OF THE ACT. THE ASSESSEES ARGUMENTS/SU BMISSIONS, HOWEVER, DID NOT FIND FAVOUR WITH THE LEARNED PRINCIPAL CIT AND HE PROCEEDED TO PASS THE IMPUGNED ORDER OF REVISION UNDER SECTION 263 OF THE ACT DATED 14.03.2016, HOLDING THAT THE ORDER OF ASSESSMENT PA SSED BY THE AO UNDER SECTION 143(3) OF THE ACT DATED 26.02.2014 TO BE ER RONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND ACCORDINGLY SET ASI DE/CANCELLED THE SAME, ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 3 DIRECTING THE AO TO FRAME A FRESH ASSESSMENT ORDER, AFTER DETERMINING IN ACCORDANCE WITH LAW AND RELEVANT JUDICIAL PRONOUNCE MENTS, THE HEAD UNDER WHICH THE INTEREST DEBITED IN THE PROFIT & LOSS ACC OUNT IS ALLOWABLE UNDER SECTION 36(1)(III) OR UNDER SECTION 57(III) OF THE ACT AND/OR CONSIDERING THE DISALLOWANCE, IF ANY, REQUIRED TO BE MADE IN DETERM INING THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 14A OF THE ACT R.W. R ULE 8D(2)(II) OF THE RULES. 4.1 AGGRIEVED BY THE ORDER OF THE PRINCIPAL CIT-9, MUMBAI PASSED UNDER SECTION 263 OF THE ACT, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS: - 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1 THE LEARNED COMMISSIONER OF INCOME - TAX - 9, M UMBAI ['LD. CIT'], ERRED IN FRAMING THE REVISION ORDER U/S. 263 OF THE INCOME - TAX ACT, 1961 ['THE ACT'] BY NOT GIVING PROPER, SUF FICIENT AND EFFECTIVE OPPORTUNITY OF BEING HEARD TO THE APPELLA NT. 1.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCU MSTANCES OF THE CASE, AND IN LAW, THE ORDER IS REQUIRED TO BE HELD AS BAD AND ILLEGAL IN BREACH OF THE PRINCIPLES OF NATURAL JUST ICE, AS WELL AS NON-APPLICATION OF MIND TO THE FACTS AND THE CONTEN TIONS BROUGHT ON RECORD BY THE APPELLANT. 2. REVISION ILLEGAL 2.1 THE LD. CIT ERRED IN PASSING THE ORDER U/S. 263 OF THE ACT, REVISING THE ASSESSMENT ORDER PASSED BY THE A.O. U/ S. 143 (3) OF THE ACT. 2.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCU MSTANCES OF THE CASE, AND IN LAW, THE ORDER IS BAD, ILLEGAL AND VOI D AS NECESSARY PRE - CONDITIONS FOR INITIATING THE REVISION PROCEE DING AS WELL AS THE COMPLETION THEREOF WERE NOT FULFILLED. 2.3 WITHOUT PREJUDICE TO THE GENERALITY OF THE ABOV E, THE CIT FAILED TO APPRECIATE THAT: (I) THE ORDER WHICH HE WAS SEEKING TO REVISE HAD AL READY MERGED WITH THE APPELLATE ORDER AND, ACCORDINGLY, W AS NOT THE 'RECORD' WITHIN THE MEANING OF SECTION 263 OF T HE ACT; (II) IN ANY CASE, THE ASSESSMENT ORDER FRAMED WAS N OT 'ERRONEOUS' WITHIN THE MEANING OF SECTION 263 OF TH E ACT; AND (III) THE ASSESSMENT ORDER WAS NOT 'PREJUDICIAL TO THE INTEREST OF THE REVENUE' WITHIN THE MEANING OF SECTION 263 OF T HE ACT. 2.4 THE LD. CIT ERRED IN HOLDING THAT THE A.O. HAD FAILED TO MAKE DISALLOWANCE OF INTEREST U/S. 14A OF THE ACT READ W ITH RULE 8D OF ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 4 THE RULES AND, THEREFORE, THE ORDER OF THE A.O. WAS ERRONEOUS AND JUDICIAL TO THE INTEREST OF THE REVENUE. 2.5 THE LD. CIT ERRED IN GIVING DIRECTION TO THE A. O. TO CONSIDER THE ISSUE OF THE DISALLOWABLE U/S. 14A OF THE ACT READ WITH RULE 8D (II) OF THE INCOME TAX RULES, 1962 ['THE RULES']. 2.6 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCU MSTANCES OF THE CASE, AND IN LAW, NO REVISION U/S. 263 OF THE ACT W AS CALLED FOR. ON MERITS 3.1 THE LD. CIT FAILED TO APPRECIATE THAT: (I) THE INTEREST PAYMENT WAS FULLY ALLOWABLE U/S. 3 6 (1) (III) OF THE ACT; AND (II) EVEN ASSUMING AND OTHERWISE ALSO, JUST BECAUSE THE INTEREST EXPENSES IS ALLOWABLE U/S. 57 (III) OF THE ACT, THERE IS NO AUTOMATIC APPLICATION OF SECTION 14A OF THE A CT. 3.2 IT IS SUBMITTED THAT IN THE FACTS AND THE CIRCU MSTANCES OF THE CASE, AND IN LAW, NO SUCH REVISION WAS CALLED FOR E VEN ON MERITS ALSO. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR MODIFY ALL OR ANY THE ABOVE GROUND AT THE TIME OF HEARING. 4.2.1 THE LEARNED A.R. OF THE ASSESSEE ARGUED AND C ONTENDED THAT THE LEARNED PRINCIPAL CIT HAD ERRONEOUSLY AND ILLEGALLY INVOKED THE REVISIONARY JURISDICTION UNDER SECTION 263 OF THE ACT. ACCORDIN G TO THE LEARNED A.R., A PERUSAL OF PARAS 4 TO 4.3 OF THE ORDER OF ASSESSMEN T, TO WHICH HE DREW THE ATTENTION OF THE BENCH, WOULD ESTABLISH THAT THE EX ERCISE OF SCRUTINY PROCEEDINGS WAS ALMOST ENTIRELY DEVOTED TO EXAMINAT ION AND CONSIDERATION OF THE ISSUE OF THE DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D TO BE MADE IN THE CASE ON HAND FOR THE YEAR UNDER CONSIDERATIO N. IT WAS SUBMITTED THAT DETAILS CALLED BY THE AO WERE FILED BY THE ASS ESSEE, INQUIRIES THEREON WERE MADE BY THE AO SPECIFICALLY WITH REGARD TO THE ISSUE OF DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D AND MUCH OF THIS FIN DS MENTION IN THE ORDER OF ASSESSMENT SOUGHT TO BE REVISED. IT WAS FU RTHER SUBMITTED THAT THE ASSESSEE HAD NOT INCURRED ANY INTEREST COST AS IT W AS HAVING SUFFICIENT OWN FUNDS FOR MAKING INVESTMENT IN ASSOCIATE AND SUBSID IARY CONCERNS AS PROMOTERS AND THESE WERE EXAMINED BY THE AO ALONGWI TH REASONS FOR SUCH INVESTMENT; AS WAS THE DETAILS OF BUSINESS TRANSACT IONS BETWEEN THESE CONCERNS AND THE ASSESSEE RESULTING IN INCOME TO TH E ASSESSEE. THIS, IT IS CONTENDED, CLEARLY ESTABLISHED THE FACT THAT THE AS SESSEE HAD SUFFICIENT OWN ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 5 FUNDS TO MAKE THE INVESTMENTS IN GROUP/SUBSIDIARY C ONCERNS WHICH ARE STRATEGIC INVESTMENTS, MADE OUT OF COMMERCIAL EXPED IENCY AND NOT FOR EARNING OF PROFITS; MADE SOLELY FOR THE PURPOSE OF ITS BUSINESS AND THEREFORE THE AO HELD THAT THE INTEREST IS TO BE EXCLUDED FRO M THE AMBIT OF DISALLOWANCE, OSTENSIBLY UNDER SECTION 14 R.W. RULE 8D(2)(II). IT IS SUBMITTED THAT THE ABOVE ESTABLISHED BEYOND DOUBT THAT THE AO HAS EXAMINED AND VERIFIED IN DETAIL THE ASPECT OF DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D(2)(II) OF THE RULES, BEFORE REACHING THE CONCLUS ION AND RENDERING THE FINDING THAT NO DISALLOWANCE WAS CALLED FOR FROM IN TEREST, SINCE THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO MAKE THE INVES TMENTS, INTER ALIA, IN ASSOCIATE AND SUBSIDIARY CONCERNS FOR BUSINESS PURP OSES OF THE ASSESSEE. IT IS AFTER COMPLETE EXAMINATION OF THE ASSESSEES SUBMISSION THAT HE REJECTED THE ASSESSEES CLAIM THAT IT HAD NOT INCUR RED ANY EXPENDITURE FOR EARNING OF EXEMPT INCOME AND MADE THE DISALLOWANCE OF ` 24,79,503/- UNDER SECTION 14A OF THE ACT R.W. RULE 8D(2)(III) O F THE RULES. THEREFORE, IT IS CLEAR THAT THE AO HAS DULY APPLIED HIS MIND TO THE APPLICABILITY OF RULE 8D(2) AND HAD ARRIVED AT DEFINITE CONCLUSIONS THAT DISALLOWANCE WAS NOT CALLED FOR UNDER RULE 8D(2)(II), BUT WAS CALLED FOR UNDER RULE 8D(2)(III) OF THE RULES. 4.2.2 ACCORDING TO THE LEARNED A.R. A PERUSAL OF TH E SHOW CAUSE NOTICE INDICATES THAT PROCEEDINGS UNDER SECTION 263 OF THE ACT WERE INITIATED ON THE BASIS OF THE RECORDS OF ASSESSMENT AND DOES NOT ALLEGE THAT THE ASSESSMENT RECORDS, DETAILS/EXPLANATIONS FILED BY T HE ASSESSEE WERE INSUFFICIENT, INADEQUATE OR NOT EXISTENT FOR THE PU RPOSE OF CONSIDERING THE ISSUE OF DISALLOWANCE UNDER SECTION 14A R.W. RULE 8 D OF THE RULES. THERE IS NOT EVEN A WHISPER IN THE IMPUGNED ORDER ABOUT THER E BEING NO INQUIRY OR INADEQUATE INQUIRY ON THE PART OF THE AO OR ANY LAP SE ON HIS PART, EITHER IN THE SHOW CAUSE NOTICE OR IN THE IMPUGNED ORDER PASS ED UNDER SECTION 263 OF THE ACT. IN FACT IN THE IMPUGNED ORDER ALSO, IT APPEARS THAT NO FURTHER INQUIRY OR VERIFICATION WAS REQUIRED BY THE LEARNED PRINCIPAL CIT AND HE PROCEEDED DIRECTLY TO CONCLUDE ON THE BASIS OF THE VERY SAME RECORDS THAT DISALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES WAS CALLED FOR; WITHOUT ASSIGNING ANY REASONS WHY SUCH DISALLOWANCE WAS CAL LED FOR, AS IF IT WAS TO ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 6 BE APPLIED AUTOMATICALLY WITHOUT HAVING REGARD TO T HE PARTICULAR FACTS OF THE CASE. 4.2.3 IT HAS BEEN CONTENDED THAT THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT IS BAD IN LAW, AS THE LEARNED PRINCIPAL CIT HAS TRAVELLED BEYOND THE ISSUE ON THE BASIS OF WHICH THE SHOW CAUSE NOTICE W AS ISSUED. AS CAN BE SEEN FROM THE IMPUGNED ORDER, THE LEARNED PRINCIPAL CIT HAS TAKEN A TOTALLY NEW GROUND, I.E. THE APPLICABILITY OF THE P ROVISIONS OF SECTION 36(I)(III)/SECTION 57(III) OF THE ACT; OF WHICH THE RE WAS NOT EVEN A MENTION IN THE SHOW CAUSE NOTICE DATED 16.12.2015 OR IN THE CO URSE OF REVISION PROCEEDINGS. THIS, THE LEARNED A.R. ARGUES, IS CLEA RLY CONTRARY TO THE SETTLED LEGAL POSITION THAT A REVISION ORDER CANNOT BE PASS ED ON AN ISSUE DIFFERENT FROM THE ISSUE MENTIONED IN THE SHOW CAUSE NOTICE. IN SUPPORT OF THIS PROPOSITION, THE LEARNED A.R., INTER ALIA, PLACED R ELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - (I) CIT VS. SMT. R.G. UMARANEE (2003) 265 ITR 507 ( MAD) (II) CIT VS. CONTIMETERS ELECTRICALS P. LTD. (2009) 317 ITR 249 (DEL) (III) COLORCRAFT VS. INCOME TAX OFFICER (2007) 105 ITD 599 (MUM) (IV) CIT VS. G.K. KABRA COOPERATIVE INDUSTRIAL ESTA TE (1995) 211 ITR 336 (AP) 4.2.4 THE LEARNED A.R. SUBMITTED THAT THE RELIANCE PLACED BY THE LEARNED PRINCIPAL CIT ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SUJANI TEXTILES P. LTD. (1985) 151 ITR 6 53 (MAD) IS NOT TENABLE AS IT IS CLEARLY DISTINGUISHABLE ON FACTS FROM THE FAC TS ON HAND. IT WAS A CASE WHERE THE ASSESSEE THEREIN HAD ADVANCED SOME AMOUNT TO A BROKER, WHO IN TURN LOANED IT TO A DIRECTOR OF THE ASSESSEE COMPAN Y. THE ASSESSEE STOPPED RECEIVING INTEREST INCOME ON SUCH AMOUNT. IT WAS IN THAT FACTUAL CIRCUMSTANCES THAT THE CLAIM OF THE ASSESSEE FOR DE DUCTION OF THE INTEREST EXPENSES ON THE AMOUNT BORROWED TO GIVE SUCH LOAN W AS HELD TO BE DISALLOWABLE BOTH UNDER THE HEAD BUSINESS INCOME AS WELL AS UNDER THE ALTERNATE CLAIM UNDER SECTION 57(II) OF THE ACT. IT IS SUBMITTED THAT THE FACTS AND ISSUES OF THE ASSESSEE IN THE CASE ON HAND ARE TOTALLY DIFFERENT. ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 7 4.2.5 THE LEARNED A.R. OF THE ASSESSEE FURTHER SUBM ITS THAT NO REVISION UNDER SECTION 263 OF THE ACT IS PERMISSIBLE BY CIT IF ENQUIRY HAS ALREADY BEEN CONDUCTED BY THE AO IN THE COURSE OF ASSESSMEN T PROCEEDINGS; AS HAS BEEN CARRIED OUT BY THE AO IN THE CASE ON HAND. IN THE CASE ON HAND IT IS EVIDENT FROM THE ORDER OF ASSESSMENT THAT THE AO CO NDUCTED ENQUIRIES IN RESPECT OF DISALLOWANCE TO BE MADE UNDER SECTION 14 A R.W. RULE 8D OF THE RULES AND HAS APPLIED HIS MIND TO THIS ISSUE. IT IS WELL SETTLED POSITION THAT IF SOME INQUIRY HAS BEEN MADE BY THE AO IN THE ASSE SSMENT PROCEEDINGS, EVEN IF INADEQUATE, THAT CANNOT CLOTHE THE CIT WITH JURISDICTION UNDER SECTION 263 OF THE ACT MERELY BECAUSE HE CAN FORM A DIFFERENT OPINION IN THE MATTER. IN SUPPORT OF THE PROPOSITION THAT, SIN CE THE AO HAS MADE INQUIRIES IN THE COURSE OF ASSESSMENT PROCEEDINGS I N RESPECT OF THE DISALLOWANCE TO BE MADE UNDER SECTION 14A R.W. RULE 8D OF THE RULES AND APPLIED HIS MIND TO RENDER FINDINGS THAT NO DISALLO WANCE OF INTEREST WAS CALLED FOR AS NO INTEREST COST WAS CLAIMED SINCE TH E ASSESSEE HAD SUFFICIENT OWN FUNDS WHICH WAS ALMOST ENTIRELY INVESTED ON INV ESTMENTS WITH GROUP/SUBSIDIARY CONCERNS WHICH WAS FOR BUSINESS PU RPOSES, BUT HOWEVER HELD THAT DISALLOWANCE WAS CALLED FOR UNDER RULE 8D (2)(III) OF THE RULES, THE LEARNED CIT COULD NOT ASSUME JURISDICTION UNDER SEC TION 263 OF THE ACT MERELY BECAUSE HE HAD A DIFFERENT OPINION IN THE MA TTER; RELIANCE WAS, INTER ALIA, PLACED ON: - (I) SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DEL) (II) CIT VS. ANIL KUMAR SHARMA (2011) 335 ITR 83 (D EL) (III) CIT VS. NEW DELHI TELEVISION LTD. (2014) 360 ITR 44 (DEL) 4.26 IT WAS FURTHER ARGUED THAT WITHOUT PREJUDICE T O THE MAIN OBJECTIONS, THE PROVISIONS OF SECTION 14A AND SECTION 36(I)(III ) OF THE ACT ARE MUTUALLY EXCLUSIVE. IN AS MUCH AS, TO THE EXTENT INTEREST EX PENDITURE IS FOUND TO BE INCURRED NOT FOR THE PURPOSE OF BUSINESS, BUT INCUR RED FOR THE PURPOSE OF EARNING TAX FREE INCOME, TO THAT EXTENT SECTION 14A OF THE ACT GETS ATTRACTED. CONVERSELY, TO THE EXTENT THE INTEREST E XPENDITURE IS FOUND TO BE RELATED NOT TO THE EARNING OF EXEMPT INCOME, THE SA ME WOULD BE ALLOWABLE UNDER SECTION 36(I)(III) OF THE ACT IF THE SAME IS INCURRED FOR THE PURPOSES OF ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 8 ASSESSEES BUSINESS. IT IS CONTENDED THAT THERE IS NO SCOPE FOR INVOKING BOTH THE SECTIONS 14A AND 36(I)(III) OF THE ACT SIM ULTANEOUSLY AS THIS WOULD AMOUNT TO MAKING DOUBLE DISALLOWANCE. IN THE CASE O N HAND, THE ORDER OF ASSESSMENT CLEARLY ESTABLISHES THAT THE AO AFTER CO NSIDERING AND VERIFYING THE ASSESSEES SUBMISSIONS IN THIS REGARD, AT PARAS 4.2 AND 4.3 OF THE ORDER OF ASSESSMENT HAD ARRIVED AT A DEFINITE CONCLUSION THAT NO INTEREST WAS TO BE DISALLOWED AS THE ASSESSEE HAD SUFFICIENT ON FUN DS TO COVER THE INVESTMENTS MADE ; WHICH WERE LARGELY STRATEGIC INV ESTMENTS IN GROUP CONCERNS. IT IS CONTENDED THAT AS DECIDED IN THE CA SE OF PHIL CORPORATION LTD. (2011 TIOL-432-HC-MUM-IT) THIS IS IN CONSONA NCE WITH SETTLED LEGAL POSITION THAT THE STRATEGIC INVESTMENTS MADE BY AN ASSESSEE IN GROUP CONCERNS FOR THE PURPOSE OF BUSINESS DOES NOT ATTRA CT ANY DISALLOWANCE UNDER SECTION 14A OF THE ACT. ACCORDING TO THE LEAR NED A.R. OF THE ASSESSEE, IT IS ALSO SETTLED LEGAL POSITION THAT INTEREST EXP ENDITURE INCURRED IN RESPECT OF LOANS USED FOR THE PURPOSE OF MAKING STRATEGIC I NVESTMENTS IN GROUP CONCERNS IS ALLOWABLE AS BUSINESS EXPENDITURE UNDER SECTION 36(I)(III) OF THE ACT. IN SUPPORT OF THIS CONTENTION, RELIANCE WAS, I NTER ALIA, PLACED ON THE DECISIONS OF THE HON'BLE MADRAS HIGH COURT IN THE C ASE OF CIT VS. SPENCERS & CO. LTD. (2013) 359 ITR 644 (MAD) AND CIT VS. RPG TRANSMISSION LTD. (2013) 359 ITR 673 (MAD). 4.2.7 THE LEARNED A.R. OF THE ASSESSEE FURTHER CONT ENDED THAT WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, NO REVISION IS PERMISSIBLE UNDER SECTION 263 OF THE ACT, IF THE AO ADOPTS ONE OF THE POSSIBLE METHODS/ COURSES OF ACTION/CONCLUSIONS PERMISSIBLE IN LAW. T HE MERE FACT THAT THE CIT IS NOT IN AGREEMENT WITH THE VIEW TAKEN/CONCLUS ION REACHED BY THE AO, WHICH IS PERMISSIBLE IN LAW, WOULD NOT RENDER THE O RDER OF ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. EVEN OTHERWISE, WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN O NE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT RENDER THE ORDER OF ASSESSMENT ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. IN SUPPORT OF THIS PROPORT ION RELIANCE WAS, INTER ALIA, PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMEN TS: - ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 9 (I) MALABAR INDUSTRIAL CO. LTD. (2000) 243 ITR 83 (SC) (II) CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) (III) CIT VS. DESIGN AND AUTOMATION ENGINEERS (BOMB AY) P. LTD. (2010) 323 ITR 632 (BOM) (IV) GRASIM INDUSTRY LTD. (2010) 221 ITR 92 (BOM) 4.2.8 THE LEARNED A.R. OF THE ASSESSEE SUBMITTED TH AT IT IS WELL SETTLED THAT IF ANY ENQUIRY IS CONDUCTED BY THE AO IN ASSESSMENT PROCEEDINGS, IT WILL NOT GIVE JURISDICTION TO THE CIT TO PASS REVISIONAR Y ORDERS MERELY BECAUSE HE HAS A DIFFERENT VIEW OR OPINION IN THE MATTER. H E HAS TO DEMONSTRATE THAT A PATENT ERROR HAS BEEN COMMITTED IN ASSESSMEN T PROCEEDINGS RESULTING IN PREJUDICE TO REVENUE, OTHERWISE IT WIL L TANTAMOUNT TO GIVING THE AO A SECOND INNINGS TO RE-EXAMINE AND RE-ADJUDI CATE CONCLUDED ISSUES. THE LEARNED A.R. SUBMITS THAT THE HON'BLE B OMBAY HIGH COURT IN THE CASE OF GABRIEL INDIA LTD. (1993) 203 ITR 108 ( BOM) HAS OBSERVED THAT WHERE IT IS FOUND THAT THE AO HAD EXAMINED AND CONS IDERED THE RELEVANT ISSUE AND MATERIAL IN THE COURSE OF ASSESSMENT PROC EEDINGS, AS HAS BEEN EVIDENTLY DONE BY THE AO IN THE CASE ON HAND, IT WO ULD NOT BE OPEN TO THE CIT TO INVOKE REVISIONARY POWERS JUST TO RE-EXAMINE ISSUES ON THE GROUND THAT THE AO HAD NOT INQUIRED INTO THE MATTER PROPER LY. 4.2.9 THE LEARNED A.R. SUBMITTED THAT IDENTICAL ISS UE OF REVISION UNDER SECTION 263 OF THE ACT WAS CONSIDERED BY A COORDINA TE BENCH OF THIS TRIBUNAL IN ONE OF THE ASSESSEES GROUP COMPANIES, I.E. M/S. FUTURE CORPORATE RESOURCES LTD. REGARDING DISALLOWANCE UND ER SECTION 14A R.W. RULE 8D IN THE VERY SAME ASSESSMENT YEAR AND THE CO ORDINATE BENCH IN ITS ORDER IN ITA NO. 3160/MUM/2016 FOR A.Y. 2011-12 DAT ED 26.10.2016 HELD THAT THE ORDER UNDER SECTION 263 OF THE ACT WAS UNS USTAINABLE AND WAS SET ASIDE AS THE LEARNED CIT HAD EXCEEDED HIS JURISDICT ION WHILE INVOKING THE PROVISIONS UNDER SECTION 263 OF THE ACT. 4.3.1 PER CONTRA, THE LEARNED D.R. SUBMITTED THAT T HE LEARNED PRINCIPAL CIT HAS EXERCISED HIS REVISIONARY POWERS UNDER SECTION 263 OF THE ACT CORRECTLY AND IN ACCORDANCE WITH LAW. IT WAS SUBMITTED THAT A S PER THE PROVISIONS OF SECTION 263 OF THE ACT AND EXPLANATION 2 THEREOF, T HE CIT WAS EMPOWERED ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 10 TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDIN GS UNDER THE ACT AND THE ORDER CAN BE HELD TO BE ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF REVENUE IF IN THE OPINION OF THE CIT, THE ORDER HAS BEEN PASSED WITHOUT MAKING INQUIRIES OR VERIFICATIONS WHICH SHOULD HAVE BEEN MADE OR THAT IN THE ORDER THE AO HAS ALLOWED ANY RELIEF WITHOUT INQ UIRING INTO THE CLAIM. IT WAS CONTENDED THAT EXPLANATION 2 IS CLARIFICATORY I N NATURE AND CAN BE APPLIED RETROSPECTIVELY. IT WAS PRAYED THAT THE IMP UGNED ORDER OF THE LEARNED PRINCIPAL CIT BE UPHELD. 4.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE MANDATE OF THE PROVISIONS OF SECTION 263 OF THE ACT IS THAT THE CIT MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDI NGS UNDER THE ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE A O IS ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE, H E MAY THEN, AFTER AFFORDING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTE R MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE FACTS AND CIRCUMSTANCES OF THE CASE SO WARRANT; INC LUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. IT IS TRITE LAW THAT THE POWERS UNDER SECTION 263 OF THE ACT CAN BE EXERCISED BY THE CIT ONLY ON SATI SFACTION OF THE TWIN CONDITION, VIZ., THE ASSESSMENT ORDER SHOULD BE (I) ERRONEOUS AND (II) PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS, THER EFORE, AMPLY CLEAR THAT THE CIT CANNOT EXERCISE THE REVISIONARY POWER UNDER SECTION 263 OF THE ACT UNLESS HE IS ABLE TO ESTABLISH THAT THE ORDER OF THE AO IS BO TH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IF, HOWEVER, THERE ARE TWO POSSIBLE VIEWS ON AN ISSUE AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEW S, THEN THERE IS NO OCCASION FOR THE CIT TO EXERCISE THE POWERS OF REVI SION. FURTHER, THE REVISIONARY POWERS UNDER SECTION 263 OF THE ACT CAN NOT BE EXERCISED BY THE CIT FOR DIRECTING A FULL INQUIRY TO FIND OUT IF THE VIEW TAKEN BY THE AO IS ERRONEOUS, WHEN A VIEW HAS ALREADY BEEN TAKEN IN TH E MATTER AFTER AN INQUIRY HAS BEEN UNDERTAKEN. THE POWER OF REVISION CAN BE E XERCISES ONLY WHEN NO INQUIRY, AS REQUIRED UNDER LAW, IS CARRIED OUT. HOW EVER, EVEN IN CASE OF INADEQUATE INQUIRY BY THE AO, THE ORDER OF THE AO C ANNOT BE REVIEWED. ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 11 4.4.2 WE HAVE CAREFULLY PERUSED THE ORDER OF ASSESS MENT PASSED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 26.02.20 14 FOR A.Y. 2011-12. ON PERUSAL THEREOF, WE FIND THAT THE ISSUE OF DISALLOW ANCE UNDER SECTION 14A R.W RULE 8D OF THE RULES HAS CERTAINLY BEEN THE SUB JECT MATTER OF INQUIRY AND WAS TAKEN UP IN DETAIL BY THE AO IN ASSESSMENT PROCEEDINGS AS CAN BE SEEN AT PARAS 4 TO 4.3 OF THE ORDER. IN FACT, IT AP PEARS TO US THAT THE SCRUTINY PROCEEDINGS WAS ENTIRELY DEVOTED TO THE CO NSIDERATION OF THE ISSUE OF THE DISALLOWANCE TO BE MADE UNDER SECTION 14A R. W. RULE 8D OF THE RULES. WE FIND THAT DETAILS CALLED FOR BY THE AO, W HILE INQUIRING INTO THIS ISSUE, WERE FILED BY THE ASSESSEE; INQUIRIES AND EX AMINATION THEREOF WERE MADE BY THE AO AND MUCH OF THIS FINDS MENTION AT PA RAS 4 TO 4.3 OF THE ORDER OF ASSESSMENT THAT IS SOUGHT TO BE REVISED. A FTER NOTING THE FACTS OF THE CASE, THE DETAILS CALLED FOR, SUBMISSIONS OF TH E ASSESSEE AND AN EXAMINATION AND CONSIDERATION THEREOF, THE AO PROCE EDED TO RENDER HIS DECISION FOR MAKING DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D OF THE RULES AS UNDER AT PARAS 4.1 AND 4.3 THEREOF: - 4.1 ON PERUSAL OF THE BALANCE SHEET IT WAS NOTICE D THAT THE ASSESSEE WAS HOLDING INVESTMENTS WORTH OF RS.12,20, 02,042/- AND RS.86,97,99,026/ AT THE BEGINNING AND END OF THE YE AR RESPECTIVELY, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART O F TOTAL INCOME. THE ASSESSEE OUGHT TO HAVE MADE DISALLOWANCE OF EXPENDI TURE IN RELATION TO THE INCOME WHICH DOES NOT OR SHALL NOT FORM PART OF TOTAL INCOME AS REQUIRED U/S. 14A IN ACCORDANCE WITH THE PROVISION OF RULE 8D. 4.2 IN THE COURSE OF SCRUTINY PROCEEDINGS, THE ASS ESSEE WAS ASKED TO FURNISH THE DETAILS OF ITS INVESTMENTS AND TO SHOW CAUSE AS TO WHY DISALLOWANCE U/S. 14A OF THE ACT SHOULD NOT BE MADE IN ACCORDANCE WITH THE PROVISIONS OF RULE 8D. IN RESPONSE, THE AS SESSEE STATED THAT IT HAS NOT INCURRED ANY INTEREST COST FOR THE PURPO SE OF MAKING INVESTMENT AND COMPANY HAS SUFFICIENT OWN FUND FOR MAKING INVESTMENT. YOUR HONOURS KINDLY OBSERVE THAT THE SA ME CONTENTION HAS BEEN ACCEPTED DURING THE ASSESSMENT YEAR 2010-1 1 ALSO. WE WOULD ALSO LIKE TO INFORM YOU THAT SUCH INVESTMENT HAS BEEN MADE IN SUBSIDIARY COMPANY AND SUCH IS FOR THE PURPOSE OF B USINESS AND STRATEGIC INVESTMENT; HENCE DISALLOWANCE U/S 14A IS NOT APPLICABLE. 4.3 THE CONTENTIONS OF THE ASSESSEE HAVE BEEN CONSI DERED AND IT IS ACCEPTED THAT ASSESSEE HAS SUFFICIENT OWN FUND FOR MAKING INVESTMENT; HENCE DISALLOWANCE OF INTEREST NOT MADE . BUT AS PER RULE 8(D)(III) DISALLOWANCE OF 0.5% OF AVERAGE VALUE OF INVESTMENT IS HEREBY DISALLOWED, WHICH COMES TO RS.24,79,503/-. ACCORDIN GLY, AN AMOUNT OF RS.24,79,503 IS HEREBY DISALLOWED U/S 14A AND TH E SAME IS ADDED ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 12 TO TOTAL INCOME AS WELL AS BOOK PROFIT OF THE COMPA NY. PENALTY PROCEEDING U/S.271(1)(C) R.W. EXPLANATION I & 4 TO SEC.274 IS INITIATED SEPARATELY FOR FURNISHING INACCURATE PARTICULARS O F INCOME. 4.4.3 A PERUSAL OF PARAS 4.2 AND 4.3 OF THE ORDER O F ASSESSMENT FOR A.Y. 2011-12 (EXTRACTED SUPRA) CLEARLY ESTABLISHES THAT AFTER CONSIDERATION OF THE ASSESSEES EXPLANATIONS THE AO HAS NOT ACCEPTED THE ASSESSEES CONTENTION THAT NO DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D OF THE RULES IS CALLED FOR. THE AO OBSERVES THAT FROM THE DETAILS FILED AND EXP LANATIONS PUT FORTH BY THE ASSESSEE, THAT THE ASSESSEE HAD NOT INCURRED INTERE ST COST ON INVESTMENTS AS IT HAD SUFFICIENT OWN FUNDS FOR MAKING THE INVESTME NTS, INCLUDING STRATEGIC INVESTMENTS MADE IN ITS GROUP/SUBSIDIARY CONCERNS F OR THE PURPOSES OF ITS BUSINESS AND THEREFORE PROCEEDED TO HOLD THAT NO DI SALLOWANCE ON ACCOUNT OF INTEREST IS TO BE CONSIDERED FOR THE PURPOSE OF DIS ALLOWANCE UNDER SECTION 14A R.W. RULE 8D OF THE RULES AS THE ASSESSEE HAD SUFFI CIENT OWN FUNDS TO COVER THE INVESTMENTS MADE. IN OUR VIEW, THIS ESTABLISHES BEYOND DOUBT THAT THE AO, IN FACT, CALLED FOR, EXAMINED AND VERIFIED THE DETAILS/SUBMISSIONS FILED BY THE ASSESSEE, BEFORE HOLDING THAT NO DISALLOWANCE I S TO BE MADE FROM OUT OF INTEREST, OSTENSIBLY UNDER RULE 8D(2)(II) OF THE RU LES, AS THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO COVER THE INVESTMENTS MADE INCLUDING WHAT HAS BEEN STRATEGICALLY INVESTED IN ITS ASSOCIATE/SUBSIDIARY CONCERNS FOR THE PURPOSES OF THE ASSESSEES BUSINESS. WE ALSO FIND THAT AFTER HO LDING SO, THE AO PROCEEDED TO MAKE A DISALLOWANCE OF ` 24,79,503/- UNDER SECTION 14A R.W. RULE 8D(2)(III) OF THE RULES AS ADMINISTRATIVE COSTS INCURRED FOR M AINTAINING THE INVESTMENTS AND EARNING EXEMPT INCOME @0.5% OF THE AVERAGE VALU E OF OPENING INVESTMENT AND CLOSING INVESTMENT. 4.4.4 AN IMPORTANT ASPECT THAT WE OBSERVE IN THE CA SE ON HAND, IS THAT THE LEARNED CIT HAS NOT DISPUTED THE BASIC FACT THAT TH E ASSESSEE HAD NOT INCURRED COST ON INVESTMENT AS IT HAD SUFFICIENT OW N FUNDS TO COVER THE INVESTMENTS MADE; INCLUDING THOSE STRATEGIC INVESTM ENTS IN GROUP CONCERNS, WHICH WERE MADE FOR THE PURPOSE AND IN TH E COURSE OF THE ASSESSEES BUSINESS. IT IS ALSO SEEN THAT THE LEARN ED CIT(A) HAS NOT DISPUTED, CONTROVERTED OR FOUND ANY DISCREPANCY IN THE SUBMISSIONS, EXPLANATIONS AND FACTUAL DETAILS BROUGHT ON RECORD BY THE ASSESSEE, WHICH ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 13 HAVE BEEN CONSIDERED, EXAMINED AND VERIFIED BY THE AO. WE FIND THAT IN REVISONARY PROCEEDINGS, THE LEARNED CIT, APART FROM THE FACTS ALREADY ON RECORD, HAS NOT FOUND ANY FRESH OR DIFFERENT FACTS IN COMING TO HIS VIEW. THE LEARNED CIT HAS MERELY TAKEN A DIFFERENT VIEW O N THE SAME SET OF FACTS. IN OUR CONSIDERED VIEW, IF THE ACTIONS/FINDING OF T HE AO ARE EVALUATED IN THE FACTUAL MATRIX AS LAID OUT ABOVE AND THE SETTLE D LEGAL POSITION, IT IS CLEAR THAT THERE IS NO INFIRMITY IN THE ORDER OF TH E AO AS IT WAS IN ACCORDANCE WITH LAW IN THE GIVEN FACTS AND CIRCUMST ANCES OF THE CASE, AND THE FINDING OF THE AO WAS RENDERED AFTER DUE APPLIC ATION OF MIND ON THE ISSUE OF DISALLOWANCE UNDER SECTION 14A R.W. RULE 8 D. 4.4.5 FOR THE PURPOSE OF REVISION UNDER SECTION 263 OF THE ACT, WHAT IS RELEVANT IS TO DECIDE WHETHER THE VIEW ADOPTED BY T HE AO IN THE ORDER OF ASSESSMENT, WHILE CONSIDERING THE ISSUE OF DISALLOW ANCE UNDER SECTION 14A R.W. RULE 8D OF THE RULES, WAS A POSSIBLE VIEW, NOT WITHSTANDING THE FACT THAT THE LEARNED CIT ENTERTAINS A DIFFERENT VIEW/OP INION ON THE SAME SET OF FACTS. IN THE CASE ON HAND, AS SPELT OUT EARLIER IN THIS ORDER, AND WHICH WE AGAIN REITERATE, THAT THE LEARNED CIT HAS NOT CONTR OVERTED THE FACTUAL ASPECTS OF THE AOS FINDING THAT NO DISALLOWANCE OF INTEREST ON LOANS DEBITED BY THE ASSESSEE IS CALLED FOR THEREON (OSTE NSIBLY UNDER RULE 8D(2)(II) OF THE RULES) SINCE ALMOST THE ENTIRE INVESTMENT WA S MADE STRATEGICALLY IN GROUP CONCERNS FOR THE PURPOSES OF THE ASSESSEES B USINESS, BUT PROCEEDED BEYOND THE SHOW CAUSE NOTICE HE ISSUED TO THE ASSES SEE BY DIRECTING INQUIRY TO BE CARRIED OUT UNDER SECTION 57(II) OF T HE ACT ALSO ALONGWITH THE DISALLOWANCE TO BE MADE UNDER RULE 8D(2)(II) OF THE RULES. WE ALSO FIND THAT THE LEARNED CIT/LEARNED D.R. FOR REVENUE HAVE ALSO NOT CONTROVERTED THE JUDICIAL PRONOUNCEMENTS CITED BY THE ASSESSEE IN SU PPORT OF ITS VARIOUS CONTENTIONS, ON JURISDICTION AS WELL AS ON MERITS. IN THIS FACTUAL AND LEGAL MATRIX OF THE CASE AS LAID OUT ABOVE, WE ARE OF THE OPINION THAT, SINCE IT IS CLEAR TO US THAT INQUIRY IN RESPECT OF THE REQUIREM ENT OF DISALLOWANCE OF INTEREST UNDER SECTION 14A R.W. RULE 8D OF THE RULE S WAS CONDUCTED BY THE AO IN THE ASSESSMENT PROCEEDINGS, AS IS EVIDENT FRO M THE ORDER OF ASSESSMENT FOR A.Y. 2011-12, AND HE TOOK A POSSIBLE VIEW THAT NO DISALLOWANCE WAS CALLED FOR ON INTEREST, OSTENSIBLY IN RESPECT OF RULE ITA NO. 3062/MUM/2016 FUTRE IDEAS CO. LTD. 14 8D(2)(II) OF THE RULES AND THAT DISALLOWANCE WAS CA LLED FOR UNDER RULE 8D(2)(III) OF THE RULES; THE MERE FACT THAT THE CIT IS NOT IN AGREEMENT WITH THE VIEW ADOPTED BY THE AO, WOULD NOT RENDER THE OR DER OF ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN COMING TO THIS VIEW, WE DRAW SUPPORT FROM, INTER ALIA, THE DECISIO NS OF THE HON'BLE COURTS IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. (243 ITR 83) (SC), CIT VS. MAX INDIA LTD. (295 ITR 282) (SC) AND DESIGN AND AUTOMA TION ENGINEERS (BOMBAY) P. LTD. (323 ITR 632) (BOM). IN THIS FACTU AL AND LEGAL MATRIX OF THE CASE AND CONSIDERING THE AFORESAID JUDICIAL PRO NOUNCEMENTS, WE ARE OF THE VIEW THAT SINCE THE AO HAS COME TO A FINDING AN D TAKEN A POSSIBLE VIEW IN THE MATTER AFTER APPLICATION OF MIND, THE C ONDITIONS PRECEDENT FOR THE LEARNED CIT FOR INVOKING JURISDICTION UNDER SEC TION 263 OF THE ACT DID NOT EXIST AND THEREFORE THE LEARNED CIT EXCEEDED HI S JURISDICTION UNDER SECTION 263 OF THE ACT. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE IMPUGNED ORDER OF THE LEARNED CIT IS UNSUSTAINABLE IN LAW AND ACCORDINGLY SET ASIDE/QUASH THE ORDER OF THE LEARNED CIT PASSED UNDER SECTION 263 OF THE ACT ON 14.03.2016 FOR A.Y. 2011-12. WE HOLD AND DIRECT ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2011- 12 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2017. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH APRIL, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE PR. CIT - 9, MUMBAI 4. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.