RAJ DEVELOPERS, RAJKOT V. THE PCIT, RAJKOT-1, RAJKOT, RAJKOT

ITA 90/RJT/2022

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1521 (ITAT-RAJKOT)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 07-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 143(3)

Judgement Text

आयकर अपील य अ धकरण, राजकोट यायपीठ, राजकोट । IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./I. T. A. No. 90/Rjt/2022 ( नधा रण वष / As s e s s m e n t Y e ar 2 01 7 - 1 8 ) M/s. Raj Developers, 78/79, Rajlaxmi P ark , Moti Baug Ro ad, Opp. HDFC Bank, Ju nag adh-36 2001. बनाम/ Vs. Pr. C. I. T. -1, Rajkot-1, Rajko t. थायी लेखा सं. /जीआइआर सं. /PAN/GI R No. : AAPFR159 0P (अपीलाथ /Appellant) ( यथ / Respondent) अपीलाथ ओर से / Appellant by : Shri Mehul Ranpura, A.R यथ क ओर से/Respondent by : Shri Sanjeev Jain, CIT. D.R. स ु नवाई क तार ख / D a t e o f H e a r i n g 29/06/2022 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t 01/07/2022 आदेश / O R D E R PER BENCH: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principal Commissioner of Income Tax, Rajkot-1, dated 19/12/2019 arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") relevant to the Assessment Year (A.Y.) 2017-18. ITA No.90/RJT/2022 A.Y.2017-18 - 2 - 2. The only interconnected issue raised by the assessee is that the learned PCIT erred in holding the assessment framed under section 143(3) of the Act as erroneous insofar prejudicial to the interest of Revenue on account of non- verification/ non-application of mind by the AO. 3. The brief facts are that the assessee is a partnership firm and claimed to be engaged in the business of Real Estate Development. The learned PCIT, on examination of the case records found that the assessee has diverted interest bearing funds by way of giving interest free advances amounting to ,20 lakhs. According to the learned PCIT, the assessee on one hand is claiming interest expenses on the borrowed fund and on the other hand it has advanced interest- free loans and advances which has resulted under assessment of income. However, the AO has framed assessment under section 143(3) of the Act without any verification and applying his mind on the disallowance of interest to be made on account of diversion of the borrowed fund. Accordingly, the learned PCIT initiated the proceedings under section 263 of the Act vide show cause notice dated 17 January 2022 proposing to revise the assessment framed by the AO. 3.1 The assessee in response to such show cause notice submitted that it has sufficient interest-free funds which has been utilized for the purpose of providing interest-free advances. Besides above, the assessee also contended that amount of loan was advanced on 30 March 2017 and it was not possible to work out the amount of interest for 2 days payable to such loans and advances. 3.2 However, the learned PCIT rejected the contention of the assessee by observing that there was not sufficient interest-free fund available with it to advance the amount of money as interest-free loan. Accordingly, the learned PCIT was of the view that the order passed by the AO was erroneous insofar prejudicial to the interest of revenue on account of non-verification of the diversion of interest bearing funds. Thus, the learned PCIT held the assessment framed under ITA No.90/RJT/2022 A.Y.2017-18 - 3 - section 143(3) of the Act as erroneous insofar prejudicial to the interest of revenue. 4. Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 5. The learned AR before us contended that amount of loan was advanced without charging any interest only for the limited period i.e. 2 days and therefore, it was not possible to work out interest attributable to such loan for such period of time. In the event, if the interest is calculated it would be of negligible amount i.e. only a few hundred rupees only. The learned AR accordingly contended that the order of the AO cannot be held as erroneous insofar pre-judicial to the interest revenue. 6. On the contrary, the learned DR vehemently supported the order of the authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the interest-free loan and advance was given by the assessee as on 30 March 2017 if any interest which needs to be disallowed shall be calculated proportionately. In absolute figure, the interested amount would be only just for few hundred rupees only. Considering the amount involved in the dispute, we are of the view that the assessment framed under section 143(3) of the Act cannot be held as erroneous insofar prejudicial to the interest of Revenue. It is the settled law that to attract the provisions of section 263 of the Act, the order has to be erroneous insofar prejudicial to the interest of revenue. In the given case there can be an error for not charging the interest on the amount given as loan and advance but there is no prejudice to the revenue for the reason that amount involved in the dispute is of negligible value. Thus, we hold that in the given facts and circumstances there ITA No.90/RJT/2022 A.Y.2017-18 - 4 - is no prejudice to the Revenue. Accordingly, we are not convinced by the order of the learned PCIT, passed under section 263 of the Act. In view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed. 8. In the result, the appeal filed by the assessee is allowed. This Order pronounced in Open Court on 01/07/2022. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot, Dated 01/07/2022 manish