AI Insights
The case involves Vishal Diamonds Pvt. Ltd., which appealed against the order of the Principal Commissioner of Income-tax-5, Mumbai, under section 263 of the Income Tax Act, 1961. The PCIT had proposed that the original assessment order was erroneous and prejudicial to the interests of the revenue, particularly concerning the non-disallowance of certain interest expenses and the examination of the genuineness and creditworthiness of funds borrowed for advancing loans. The Tribunal examined the submissions and evidence presented, including the original assessment records and the responses from both parties, and concluded that the original assessment had adequately addressed the issues raised by the PCIT.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 123496 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
5 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-09-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
F
Next Hearing Date
03-09-2023
Assessment Year
2018-2019
Appeal Filed On
19-03-2023
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA No. 878/MUM/2023 Assessment Year: 2018-19 Vishal Diamonds Pvt. Ltd., 11 th Floor, The Plaza, Hughes Road, 55, Gamdevi, Mumbai-400007. Vs. The PCIT-5, Room No. 515, Aayakar Bhavan, Maharshi Karve Road, Mumbai-400020. PAN No. AAACV 2799 Q Appellant Respondent Assessee by : Mr. Hariom Tulsiyan Revenue by : Mr. Ankush Kapoor, CIT-DR Date of Hearing : 24/08/2023 & 04/09/2023 Date of pronouncement : 06/09/2023 ORDER PER OM PRAKASH KANT, AM This appeal has been preferred by the assessee against order dated 08.03.2023 passed by the Ld. Prncipal Commissioner of Income-tax-5, Mumbai (in short ‘the Ld. PCIT’) for assessment year 2018-19, raising following grounds : 1. On the facts of laws and in the circumstances of the case, the Ld. Pr. CIT erred in passing the order u/s 263 of the Income Tax Act, 1961 as the order passed w/s 143(3) by the Ld. A.O. was neither erroneous nor prejudicial to the interests of the revenue as in the assessment order, the Ld. A.O. has already disallowed the expenditure of Rs 73,54,549/- claimed by the assessee on the issue on which the show cause riotice w/s 263 was issued to the assessee. 2. On the facts of laws and in the circumstances of the case, the order w/s 263 passed by the Ld. Pr. CIT is bad in law and against the principles of natural justice as Ld. PCIT has neve loans received in the show ause notice dated 04.01.2023 on the basis of no which the assessment order is treated as erroneous and prejudicial to the interest of the revenue. 2. Briefly stated facts of the case are that for the ye consideration, the assessee filed return of income on 30.10.2018 declaring total income at Rs.( assessee was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) w complied with. During the assessment proceedings, the Assessing Officer observed the exempted income of Rs.91,39,437/ share of profit from partnership firm assessee in equity shares and partnership fi Rs.127,25,47,388/- as on 31.03.2018 and Rs.98,38,08,250/ 31.03.2017 respectively. As the assessee had not made disallowance for earning the exempted income in terms of section 14A of the Act, the Assessing Officer invoking R Income-tax Rules, 1962 (in short ‘the Rules’) computed disallowance of Rs.1,12,81,778/ disallowance to the amount of Rs.73,54,549/ expenses claimed by the assessee in the profit and loss accoun The breakup of the expenses claimed by the assessee in the profit and loss account is reproduced as under: Sr. No. 1. Payment to Auditor 2. Bank Charges 3. Filling fee 2. On the facts of laws and in the circumstances of the case, the order w/s 263 passed by the Ld. Pr. CIT is bad in law and against the principles of natural justice as Ld. PCIT has never ever raised the issue of loans received in the show ause notice dated 04.01.2023 on the basis of no which the assessment order is treated as erroneous and prejudicial to the interest of the revenue. Briefly stated facts of the case are that for the ye consideration, the assessee filed return of income on 30.10.2018 declaring total income at Rs.(-)73,54,549/-. The case of the assessee was selected for scrutiny assessment and statutory notices tax Act, 1961 (in short ‘the Act’) w complied with. During the assessment proceedings, the Assessing Officer observed the exempted income of Rs.91,39,437/ share of profit from partnership firm , against investment by the assessee in equity shares and partnership firm amounting to as on 31.03.2018 and Rs.98,38,08,250/ 31.03.2017 respectively. As the assessee had not made disallowance for earning the exempted income in terms of section 14A of the Act, the Assessing Officer invoking R tax Rules, 1962 (in short ‘the Rules’) computed disallowance of Rs.1,12,81,778/-. However, restricted the disallowance to the amount of Rs.73,54,549/- i.e. to the extent of expenses claimed by the assessee in the profit and loss accoun The breakup of the expenses claimed by the assessee in the profit and loss account is reproduced as under: Head of expenditure Amount Payment to Auditor 30,000 Bank Charges 3,793 Filling fee 2,400 Vishal Diamonds Pvt. Ltd. 2 ITA No. 878/Mum/2023 2. On the facts of laws and in the circumstances of the case, the order w/s 263 passed by the Ld. Pr. CIT is bad in law and against the r ever raised the issue of loans received in the show ause notice dated 04.01.2023 on the basis of no which the assessment order is treated as erroneous and prejudicial to Briefly stated facts of the case are that for the year under consideration, the assessee filed return of income on 30.10.2018 . The case of the assessee was selected for scrutiny assessment and statutory notices tax Act, 1961 (in short ‘the Act’) were issued and complied with. During the assessment proceedings, the Assessing Officer observed the exempted income of Rs.91,39,437/- received as investment by the rm amounting to as on 31.03.2018 and Rs.98,38,08,250/- as on 31.03.2017 respectively. As the assessee had not made suo-moto disallowance for earning the exempted income in terms of section 14A of the Act, the Assessing Officer invoking Rule 8D of the tax Rules, 1962 (in short ‘the Rules’) computed . However, restricted the i.e. to the extent of expenses claimed by the assessee in the profit and loss account. The breakup of the expenses claimed by the assessee in the profit 4. Interest paid on unsecured loan Total 2.1 In the assessment order passed u/s 143(3) dated 05.03.2021, the Assessing Officer disallowed the claim of the loss amounting to Rs.73,54,549/-. 2.2 Subsequently, the Ld. PCIT called for the assessment record and after examination observed that assessee has shown long term borrowing of Rs.58,12,53,048/ related and other parties amounting to Rs.8 interest income from said loans the interest expenses of Rs.73,18,356/ loss account. According to the Ld. PCIT said interest expenses of Rs.73,18,356/- was required to be disallowed as no interest income was offered by the assessee Accordingly, the Ld. PCIT issued notice u/s 263 of the Act on 04.01.2023 proposing as why the assessment order passed u/s 143(3) of the Act by the Assessing Officer not be held as erroneous in so far as prejudicial to the interest of the revenue meaning of section 263 of the Act. entire interest amounting to Rs.73,18,356/ total expenses of Rs.73,54,549/ Officer in the assessment order u/s 143(3) of the Act and therefore, no separate disallowance on this account was required. The Ld. PCIT however rejected the contention of the assessee and held the Interest paid on unsecured loan 73,18,356 Total 73,54,549 In the assessment order passed u/s 143(3) dated 05.03.2021, the Assessing Officer disallowed the claim of the loss amounting to Subsequently, the Ld. PCIT called for the assessment record ination observed that assessee has shown long term borrowing of Rs.58,12,53,048/- and also shown loans given to related and other parties amounting to Rs.80,87,69,177/ interest income from said loans and advances was shown as against xpenses of Rs.73,18,356/- claimed in the profit and loss account. According to the Ld. PCIT said interest expenses of was required to be disallowed as no interest income was offered by the assessee against loans and advances given. he Ld. PCIT issued notice u/s 263 of the Act on 04.01.2023 proposing as why the assessment order passed u/s 143(3) of the Act by the Assessing Officer not be held as erroneous in so far as prejudicial to the interest of the revenue ction 263 of the Act. The assessee responded that entire interest amounting to Rs.73,18,356/- stands disallowed in total expenses of Rs.73,54,549/- disallowed by the Assessing Officer in the assessment order u/s 143(3) of the Act and therefore, disallowance on this account was required. The Ld. PCIT however rejected the contention of the assessee and held the Vishal Diamonds Pvt. Ltd. 3 ITA No. 878/Mum/2023 In the assessment order passed u/s 143(3) dated 05.03.2021, the Assessing Officer disallowed the claim of the loss amounting to Subsequently, the Ld. PCIT called for the assessment record ination observed that assessee has shown long term and also shown loans given to ,87,69,177/- but no advances was shown as against claimed in the profit and loss account. According to the Ld. PCIT said interest expenses of was required to be disallowed as no interest income loans and advances given. he Ld. PCIT issued notice u/s 263 of the Act on 04.01.2023 proposing as why the assessment order passed u/s 143(3) of the Act by the Assessing Officer not be held as erroneous in so far as prejudicial to the interest of the revenue within the he assessee responded that stands disallowed in disallowed by the Assessing Officer in the assessment order u/s 143(3) of the Act and therefore, disallowance on this account was required. The Ld. PCIT however rejected the contention of the assessee and held the order of the Assessing Officer the interest of the revenue on following two counts: (i) The claim of erroneously by the Assessing Officer. (ii) The Assessing Officer has not examined genuineness and creditworthiness of the fund borrowed for advancing loan of Rs.80,87,69,177/ 2.3 The relevant finding of the Ld. PCIT is reproduced as under: “6. I have perused submissions filed by the assessee, relevant material available on record as well as the AO's reports. The assessee has produced copy of bank statement and copy of schedule Reserve and Surplus of Annual Report in support of claim made that during the year under consideration the assessee has received share of profit of Rs. 91,39,1371-from partnership firm namely M/s B. Vijaykumar & Co which was credited to Reserve and Surplus of Profit & Loss sheet. On perusal of the record it is seen that. while passing the assessment order, the claim of expenses of Rs. 73,18,356/ allowed by the then AO in the assessment order, However the A.O. has disallowed claim of deduction of 73,18,356 u/s 14A r.w.s. 8D of the Act. ot advance loans of Rs. 80,87,69, 1771 parties, the genuineness & creditworthiness of the borrowed fund has not been examined properly Us 13316) of the Act during the assessment proceedings though case was selected for complete scrutiny and these parties were nöt examined under section 133(6) of, the Act. 7. Considering the above discussed facts and circumstance the assessment order dated 05.03.2021 is erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the Income Tax ACT, 1961. Therefore, the said order passed by the AO is set aside with the taking into account the observations made above in accordance with law and after allowing reasonable opportunity to the assessee. The order under section 263 of the Income Tax Act, 1961 is passed accordingly. 3. Before us, the Ld. Counsel of the assessee has filed a Paperbook containing pages 1 to 115. 4. We have heard rival submission of the parties and perused the relevant material on record. Before us, the Ld. Counsel of the order of the Assessing Officer is erroneous in so far as prejudicial to the interest of the revenue on following two counts: (i) The claim of interest expenses of Rs.73,18,356/- had been allowed erroneously by the Assessing Officer. (ii) The Assessing Officer has not examined genuineness and creditworthiness of the fund borrowed for advancing loan of Rs.80,87,69,177/-. finding of the Ld. PCIT is reproduced as under: I have perused submissions filed by the assessee, relevant material available on record as well as the AO's reports. The assessee has produced copy of bank statement and copy of schedule Reserve and us of Annual Report in support of claim made that during the year under consideration the assessee has received share of profit of Rs. from partnership firm namely M/s B. Vijaykumar & Co which was credited to Reserve and Surplus of Profit & Loss Account of Balance sheet. On perusal of the record it is seen that. while passing the assessment order, the claim of expenses of Rs. 73,18,356/ allowed by the then AO in the assessment order, However the A.O. has disallowed claim of deduction of Rs. 73,54,549/- including interest of Rs. 73,18,356 u/s 14A r.w.s. 8D of the Act. Further it'is seen that in respect ot advance loans of Rs. 80,87,69, 1771- to related parties and other parties, the genuineness & creditworthiness of the borrowed fund has not been examined properly Us 13316) of the Act during the assessment proceedings though case was selected for complete scrutiny and these parties were nöt examined under section 133(6) of, the Act. 7. Considering the above discussed facts and circumstance the assessment order dated 05.03.2021 is erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the Income Tax ACT, 1961. Therefore, the said order passed by the AO is set aside with the direction to pass the same de taking into account the observations made above in accordance with law and after allowing reasonable opportunity to the assessee. The order under section 263 of the Income Tax Act, 1961 is passed accordingly. fore us, the Ld. Counsel of the assessee has filed a Paperbook containing pages 1 to 115. We have heard rival submission of the parties and perused the relevant material on record. Before us, the Ld. Counsel of the Vishal Diamonds Pvt. Ltd. 4 ITA No. 878/Mum/2023 erroneous in so far as prejudicial to had been allowed (ii) The Assessing Officer has not examined genuineness and creditworthiness of the fund borrowed for advancing loan of finding of the Ld. PCIT is reproduced as under: I have perused submissions filed by the assessee, relevant material available on record as well as the AO's reports. The assessee has produced copy of bank statement and copy of schedule Reserve and us of Annual Report in support of claim made that during the year under consideration the assessee has received share of profit of Rs. from partnership firm namely M/s B. Vijaykumar & Co which Account of Balance- sheet. On perusal of the record it is seen that. while passing the assessment order, the claim of expenses of Rs. 73,18,356/- has been allowed by the then AO in the assessment order, However the A.O. has including interest of Rs. Further it'is seen that in respect to related parties and other parties, the genuineness & creditworthiness of the borrowed fund has not been examined properly Us 13316) of the Act during the assessment proceedings though case was selected for complete scrutiny and these 7. Considering the above discussed facts and circumstances, I hold that the assessment order dated 05.03.2021 is erroneous in so far as it is prejudicial to the interest of the revenue within the meaning of section 263 of the Income Tax ACT, 1961. Therefore, the said order passed by direction to pass the same de-novo after taking into account the observations made above in accordance with law and after allowing reasonable opportunity to the assessee. The order under section 263 of the Income Tax Act, 1961 is passed accordingly.” fore us, the Ld. Counsel of the assessee has filed a We have heard rival submission of the parties and perused the relevant material on record. Before us, the Ld. Counsel of the assessee has submitted that as far as first issue of disallowance of interest amounting to Rs.73,18,356/ Officer has already disallowed the entire expenses claimed in the profit and loss account amounting to Rs.73,54,549/ interest amounting to Rs.73,18,356/ disallowance could be made in the case of the assessee. Thus of the Assessing Officer is not prejudicial to the interest of the revenue to this extent. As regard to the second issue fo revision u/s 263 of the Act, the Ld. Counsel of the assessee submitted that for examining genuineness and creditworthiness of the borrowed fund, no show cause notice or any opportunity has been granted by the Ld. PCIT and therefore revision ord issue without providing due opportunity to the assessee is invalid. The Ld. Counsel of the assessee in support of claim decision of the Hon’ble Supreme Court in the case of CIT v. Amitabh Bachchan [2016] 69 taxmann.com 170 (SC). 4.1 The Ld. DR on the other hand submitted that there is no requirement of issuing specific show cause notice for assessment order on a particular issue decision of the Hon’ble Supreme Court in the case of Amitabh Bachchan (supra). 4.2 Thus, the issue in dispute precipitated in the case is whether there was a requirement of issue of show cause notice or providing opportunity of being heard to the assessee has submitted that as far as first issue of disallowance of interest amounting to Rs.73,18,356/- is concerned, disallowed the entire expenses claimed in the profit and loss account amounting to Rs.73,54,549/ interest amounting to Rs.73,18,356/- and therefore, no further disallowance could be made in the case of the assessee. Thus of the Assessing Officer is not prejudicial to the interest of the revenue to this extent. As regard to the second issue fo revision u/s 263 of the Act, the Ld. Counsel of the assessee submitted that for examining genuineness and creditworthiness of no show cause notice or any opportunity has been granted by the Ld. PCIT and therefore revision ord issue without providing due opportunity to the assessee is invalid. The Ld. Counsel of the assessee in support of claim of the Hon’ble Supreme Court in the case of CIT v. Amitabh [2016] 69 taxmann.com 170 (SC). The Ld. DR on the other hand submitted that there is no requirement of issuing specific show cause notice for order on a particular issue. He also relied on the decision of the Hon’ble Supreme Court in the case of Amitabh the issue in dispute precipitated in the case is whether there was a requirement of issue of show cause notice or providing opportunity of being heard to the assessee on a particular issue Vishal Diamonds Pvt. Ltd. 5 ITA No. 878/Mum/2023 has submitted that as far as first issue of disallowance of concerned, the Assessing disallowed the entire expenses claimed in the profit and loss account amounting to Rs.73,54,549/- which include and therefore, no further disallowance could be made in the case of the assessee. Thus, order of the Assessing Officer is not prejudicial to the interest of the revenue to this extent. As regard to the second issue for proposing revision u/s 263 of the Act, the Ld. Counsel of the assessee submitted that for examining genuineness and creditworthiness of no show cause notice or any opportunity has been granted by the Ld. PCIT and therefore revision order passed on issue without providing due opportunity to the assessee is invalid. The Ld. Counsel of the assessee in support of claim relied on the of the Hon’ble Supreme Court in the case of CIT v. Amitabh The Ld. DR on the other hand submitted that there is no requirement of issuing specific show cause notice for revising the e also relied on the decision of the Hon’ble Supreme Court in the case of Amitabh the issue in dispute precipitated in the case is whether there was a requirement of issue of show cause notice or providing on a particular issue for revising the assessment order. In this refe referred to the finding of the Hon’ble Supreme Court in the case of Amitabh Bachchan (supra) wherein, the Hon’ble Supreme Court has rendered that the section 263 does not require issue of any specific show cause notice to be served on t requirement under the said provision is to the assessee. The relevant finding of the Hon’ble Supreme Court is reproduced as under: “11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing con not the purport of that while the C.I.T. is free to exercise his jurisdiction on consideration of controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision.” 4.3 In the case of the assessee, the relevant show cause notice issued by the Ld. PCIT is reproduced as under: M/s/Mr/Ms Subject: Notice for Hearing in respect of Revision proceedings us 263 of the THE INCOME TAX ACT, In this regard, a hearing in the matter is fixed on 12/01/2023 at 11:30 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith revising the assessment order. In this reference, we gainfully referred to the finding of the Hon’ble Supreme Court in the case of Amitabh Bachchan (supra) wherein, the Hon’ble Supreme Court has rendered that the section 263 does not require issue of any specific show cause notice to be served on the assessee under the said provision is of opportunity of the assessee. The relevant finding of the Hon’ble Supreme Court is reproduced as under: 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision.” (emphasis supplied externally) In the case of the assessee, the relevant show cause notice issued by the Ld. PCIT is reproduced as under: “NOTICE FOR THE HEARING Subject: Notice for Hearing in respect of Revision proceedings us 263 of INCOME TAX ACT, 1961 - Assessment Year 2018-19. In this regard, a hearing in the matter is fixed on 12/01/2023 at 11:30 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith Vishal Diamonds Pvt. Ltd. 6 ITA No. 878/Mum/2023 rence, we gainfully referred to the finding of the Hon’ble Supreme Court in the case of Amitabh Bachchan (supra) wherein, the Hon’ble Supreme Court has rendered that the section 263 does not require issue of any he assessee but opportunity of hearing the assessee. The relevant finding of the Hon’ble Supreme Court 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and sideration of any other issue or question of fact. This is Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the is supplied externally) In the case of the assessee, the relevant show cause notice Subject: Notice for Hearing in respect of Revision proceedings us 263 of 19. In this regard, a hearing in the matter is fixed on 12/01/2023 at 11:30 AM. You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then yo attendance is not required. You also have the option to file your submission from the e incometaxindiaefiling.gov.in Sub: Show-cause Notice under section 263 of the Income 1961 in your case for A.Y. 2018 In this case the assessee has filed return of income on 30.10.2018 declaring to total income of Rs. ( for scrutiny under CASS. The assessment was completed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Inc 05.03.2021 assessing income at Rs. 2. On perusal of the assessement records, it is observed that, the assessee has shown revenue from operation as Nil and claimed expenses of Rs. 73,54,549/ AO. It is seen from the Balance Sheet that the assessee had shown total Long term borrowings of Rs. 58,12,53,036/ and shown loans to related and other parties amounting to Rs. 80,87,69, 177/ has offered no income during A.Y. 2018 73,18,356/- claimed in P&L account is required to be disallowed. This has resulted in under assessment of income to the extent of Rs. 73, 18,356/- Further, no interest income is offered on loans and advances given. Therefore, it appears section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act dated 05.03.2021 of the Act, is erroneous in so far as it is prejudicial to the interest of revenue, within the meaning of Section 263 of the I.T. Act. You are required to show cause as to why said assessment order should not be revised under section 263 of the 3. In this connection, you are hereby given an opportunity to file submission on or before supporting documents and evidences. If you wish to avail personal hearing, you are requested to attend the hearing on 12.01.2023 at 11.30 a.m. at Room No. 515, 5th Floor, Aayakar Bhavan, Mumbai either in person or through an authorized representative. compliance on the stipulated date and time, it will be presumed that you have no objection to the proposed revision of the assessment order passed by the Assessing Officer under section 143(3) r.w.s. 143(3A) & 143(3B of the Income Tax Act d 4.4 On perusal of the above no where asked for examination of the genuineness or creditworthiness of the funds borrowed for advancing. During the rting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then yo attendance is not required. You also have the option to file your submission from the e-filing portal using the link: incometaxindiaefiling.gov.in cause Notice under section 263 of the Income 1961 in your case for A.Y. 2018-19-reg. In this case the assessee has filed return of income on 30.10.2018 declaring to total income of Rs. (-) 73,54,549/-. The case was selected for scrutiny under CASS. The assessment was completed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act dated 05.03.2021 assessing income at Rs. Nil. 2. On perusal of the assessement records, it is observed that, the assessee has shown revenue from operation as Nil and claimed expenses of Rs. 73,54,549/-which was accepted and allowed by the t is seen from the Balance Sheet that the assessee had shown total Long term borrowings of Rs. 58,12,53,036/ and shown loans to related and other parties amounting to Rs. 80,87,69, 177/-. As the assessee has offered no income during A.Y. 2018-19 the interest expenses of Rs. claimed in P&L account is required to be disallowed. This has resulted in under assessment of income to the extent of Rs. 73, Further, no interest income is offered on loans and advances given. Therefore, it appears that the assessment order passed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act dated 05.03.2021 of the Act, is erroneous in so far as it is prejudicial to the interest of revenue, within the meaning of Section 263 of the I.T. Act. are required to show cause as to why said assessment order should not be revised under section 263 of the Income Tax Act. 3. In this connection, you are hereby given an opportunity to file submission on or before 11.01.2023 through ITBA Portal, along supporting documents and evidences. If you wish to avail personal hearing, you are requested to attend the hearing on 12.01.2023 at 11.30 a.m. at Room No. 515, 5th Floor, Aayakar Bhavan, Mumbai either in person or through an authorized representative. In case of non compliance on the stipulated date and time, it will be presumed that you have no objection to the proposed revision of the assessment order passed by the Assessing Officer under section 143(3) r.w.s. 143(3A) & 143(3B of the Income Tax Act dated 05.03.2021.” On perusal of the above notice, we find that the Ld. PCIT has no where asked for examination of the genuineness or creditworthiness of the funds borrowed for advancing. During the Vishal Diamonds Pvt. Ltd. 7 ITA No. 878/Mum/2023 rting documents/information in support of the issues involved (as mentioned below). If you wish that the Revision proceeding be concluded on the basis of your written submissions/representations filed in this office, on or before the said due date, then your personal attendance is not required. You also have the option to file your filing portal using the link: cause Notice under section 263 of the Income-tax Act, In this case the assessee has filed return of income on 30.10.2018 . The case was selected for scrutiny under CASS. The assessment was completed under section ome Tax Act dated 2. On perusal of the assessement records, it is observed that, the assessee has shown revenue from operation as Nil and claimed which was accepted and allowed by the t is seen from the Balance Sheet that the assessee had shown total Long term borrowings of Rs. 58,12,53,036/ and shown loans to related . As the assessee st expenses of Rs. claimed in P&L account is required to be disallowed. This has resulted in under assessment of income to the extent of Rs. 73, Further, no interest income is offered on loans and advances that the assessment order passed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act dated 05.03.2021 of the Act, is erroneous in so far as it is prejudicial to the interest of revenue, within the meaning of Section 263 of the I.T. Act. are required to show cause as to why said assessment order Income Tax Act. 3. In this connection, you are hereby given an opportunity to file 11.01.2023 through ITBA Portal, along-with all supporting documents and evidences. If you wish to avail personal hearing, you are requested to attend the hearing on 12.01.2023 at 11.30 a.m. at Room No. 515, 5th Floor, Aayakar Bhavan, Mumbai either In case of non- compliance on the stipulated date and time, it will be presumed that you have no objection to the proposed revision of the assessment order passed by the Assessing Officer under section 143(3) r.w.s. 143(3A) & , we find that the Ld. PCIT has no where asked for examination of the genuineness or creditworthiness of the funds borrowed for advancing. During the course of the hearing on 19.07.2013 and was asked to furnish necessary evidence in support that opportunity of being heard was given to the assessee on the issue of genuineness of examination of the borrowed fund dated 04.09.2023, the Ld. DR filed the Ld. PCIT including order sheet and submitted that as per the record no such opportunity was appeared aforesaid circumstances of the case, the Ld. PCIT cannot be sustained. 4.5 Since, we find that on the first issue, the Assessing Officer has already made disallowance of the interest amounting to Rs.73,18,356/- and therefore, order cannot be revised on that count . In absence of any opportunity provided by the Ld. PCIT on the second issue, the assessment order cannot be revised second issue also therefore, on both these cou PCIT cannot be sustained. Accordingly, we quash u/s 263 of the Act by the Ld. PCIT. 5. In the result, the appeal filed Order pronounced in the open Court on Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 06/09/2023 Rahul Sharma, Sr. P.S. e of the hearing on 19.07.2013 and 24.08.2013, the Ld. DR was asked to furnish necessary evidence in support that opportunity of being heard was given to the assessee on the issue of genuineness of examination of the borrowed fund. During hearing 04.09.2023, the Ld. DR filed a copy of the relevant folder of the Ld. PCIT including order sheet and submitted that as per the no such opportunity was appeared to be circumstances of the case, the order u/s 263 passed by the Ld. PCIT cannot be sustained. we find that on the first issue, the Assessing Officer has already made disallowance of the interest amounting to and therefore, order cannot be revised on that In absence of any opportunity provided by the Ld. PCIT on he assessment order cannot be revised also therefore, on both these counts, stained. Accordingly, we quash the order passed u/s 263 of the Act by the Ld. PCIT. In the result, the appeal filed by the assessee is allowed. nounced in the open Court on 06/09/2023. Sd/- KAVITHA RAJAGOPAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Vishal Diamonds Pvt. Ltd. 8 ITA No. 878/Mum/2023 24.08.2013, the Ld. DR was asked to furnish necessary evidence in support that opportunity of being heard was given to the assessee on the issue of . During hearing f the relevant folder of the Ld. PCIT including order sheet and submitted that as per the to be have given. In he order u/s 263 passed by we find that on the first issue, the Assessing Officer has already made disallowance of the interest amounting to and therefore, order cannot be revised on that In absence of any opportunity provided by the Ld. PCIT on he assessment order cannot be revised on the order of the Ld. the order passed by the assessee is allowed. /09/2023. Sd/- (OM PRAKASH KANT) ACCOUNTANT MEMBER Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Vishal Diamonds Pvt. Ltd. 9 ITA No. 878/Mum/2023 BY ORDER, (Assistant Registrar) ITAT, Mumbai
Other Referred Cases
CIT v. Amitabh Bachchan [2016] 69 taxmann.com 170 (SC)
Laws Referred To
Income Tax Act, 1961
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