M/s. Sara Promoters & Developers, Aurangabad V. Commissioner of Income-tax,

ITA 957/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7183 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Proportionate interest; Difference of opinion; Prejudicial to interest; Change of opinion
• Section: 143(3); 142(1); 37(1); 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWASTHY, JM / ITA NO.957/PUN/2014 / ASSESSMENT YEAR : 2009-10 M/S. SARA PROMOTERS AND DEVELOPERS, CANNAUGHT PLACE, CIDCO, AURANGABAD 431 003. PAN NO.ABAGD3192E. . / APPELLANT V/S ITO, WARD 2(3), LIC BUILDING, 2 ND FLOOR, CANNAUGHT PLACE, TOWN CENTRE, CIDCO, AURANGABAD 431 003. . / RESPONDENT / APPELLANT BY : SHRI SUNIL GANOO / RESPONDENT BY : SHRI NARESH KUMAR / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX, AURANGABAD DATED 19.03.2014 PASSED U/S 263 OF THE ACT. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- / DATE OF HEARING : 30.01.2017 / DATE OF PRONOUNCEMENT: 02.02.2017 2 ITA NO.957/PUN/2014 AY.NO.2009-10 2.1 ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPING HOUSING PROJECT UNDER T HE NAME AND STYLE OF SARA PROMOTERS AND DEVELOPERS. ASS ESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 12.09.2009. THEREAFTER IT REVISED THE RETURN OF INCOME ON 17.09.2009 DISCLOSING THE T OTAL INCOME AT RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORD ER DT.01.04.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.NIL AFTER GRANTING DEDUCTION OF RS.1,70,61,890/- U/S 80IB(10) OF THE I.T. ACT. THEREAFTER ON VERIFICATION OF THE ASSESSMENT RE CORDS LD.CIT NOTICED THAT ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB(10) ON THE AMOUNT OF PROFITS WHICH INCLUDED THE INCOME OF RS.19,79,695/- ON ACCOUNT OF INTEREST ON CAPITAL. HE WAS OF THE VIEW THAT ACCORDING TO PROVISION OF SEC. 80IB(10), DEDUCT ION IS ALLOWABLE ONLY ON PROFITS DERIVED ON HOUSING PROJECT AND S INCE INTEREST ON CAPITAL IS NOT THE INCOME DERIVED FROM HOUSING PROJECTS, DEDUCTION U/S 80IB(10) WAS NOT ALLOWABLE ON THE INTEREST INCOME. HE WAS THEREFORE OF THE VIEW THAT AO HA S PASSED ORDER U/S 143(3) WITHOUT APPLICATION OF MIND AND ON THE BASIS OF INCORRECT ASSUMPTION OF FACTS AND THUS THE ORDER PASSED BY AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF R EVENUE. HE ACCORDINGLY ISSUED NOTICE ON 12.03.2014 AND CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ORDER U/S 263 OF THE ACT NOT BE PASSED. IN RESPONSE TO THE NOTICE, ASSESSEE INTER-ALIA SUBMITTED THAT ORDER PASSED BY THE AO IS NOT ERRONEOU S AND THAT PROVISIONS OF SE.263 CANNOT BE APPLIED AS ASSESSING OFFICER HAS APPLIED HIS MIND ON THE ISSUE DURING THE ASSESSMENT 3 ITA NO.957/PUN/2014 AY.NO.2009-10 PROCEEDINGS AND IF THE PROCEEDINGS U/S 263 ARE INITIATED IT WOULD AMOUNT TO CHANGE OF OPINION BY LD. CIT, WHICH IS NOT PERM ISSIBLE. ON THE MERITS OF THE ALLOWABILITY OF DEDUCTION U/S 80IB(10) O N THE INTEREST INCOME IT WAS SUBMITTED THAT INTEREST CHARG ED ON DEBIT BALANCE OF THE PARTNERS CAPITAL ACCOUNT HAD NEXUS WITH THE BORROWED FUND I.E., BANK LOAN AND THE INCOME WAS NOT OUT OF INVESTMENT OF SURPLUS FUNDS AND THEREFORE IT CANNOT BE TREATED AS INCOME FROM OTHER SOURCES. THE SUBMISSION OF THE ASSESSE E WAS NOT FOUND ACCEPTABLE TO LD.CIT. HE THEREFORE VIDE ORDER DT.19.03.2014 HELD THAT ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB(10) ON THE INTEREST INCOME EARNED O N DEBIT BALANCE OF PARTNERS ON RS.19,79,694/-. HE ACCORDINGLY DIR ECTED THE AO TO GIVE CONSEQUENTIAL EFFECT TO THE ORDER BY DISALLO WING DEDUCTION TO THE EXTENT OF INTEREST ON CAPITAL OF RS.19,79,6 94/-. AGGRIEVED BY THE ORDER OF LD.CIT, ASSESSEE IS NOW IN APP EAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW , THE HON'BLE COMMISSIONER OF INCOME TAX , A URANGABAD HAS ERRED IN SETTING ASIDE THE ORDER OF T HE A SSESSING OFFICER, WARD 2(3), AURANGABAD ORDER DATED 01/04 / 2011 . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LA W, THE LEARNED CIT , A URANGABAD HAS ERRED IN TREATING THE ORDER PASSED BY THE A . O. DATED 01/04 / 2011 A S E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE . 3. ON THE FACTS AND CIRCUMSTANCES OF TH E CASE AND IN LAW , THE HON'BLE CIT , A URANGABAD HAS NOT REALIZED THE FACT THAT THE ASSESSING OFFICER HAS MADE ASSESSMENT TAKI NG I N TO CONSIDERATION ALL THE FACTS AND FIGURES OF THE C ASE INCLUDING THE RECORDS CALLED FOR VERIFICATION BY HI M. THE ASSESSING OFFICER HAS MADE THE ASSESSMENT AFTER CAL LING THE RE QUISITE INFORMATION AS PER QUESTIONER WHICH WAS DULY VERIFIED BY HIM AND HE HAS MADE T HE ASSESSMENT AFTER FULLY EXERCISING THE STATUTORY POWERS AND OBL IGATIONS CASTED UPON HIM . 4. THE ASSESSEE HAS FURNISHED ALL DETAILS AND INFORMAT ION BEFORE THE HON'BLE C IT RESPONDING TO THE LETTER OF PROPOSAL FOR ACTION U / S . 263. THOUGH ALL THE QUARRIES RAISED BY T H E 4 ITA NO.957/PUN/2014 AY.NO.2009-10 CIT WERE EXPLAINED PROPERLY , EVEN THEY THE CIT TREATED THE ORDER OF THE ASSESSING OFF ICER AS ERRONEOUSLY AND PREJUDICIAL TO INTEREST OF REVENUE AND SET ASIDE TH E ASSESSMENT ARBITRARILY . 3. BEFORE US, AT THE OUTSET, LD. AR SUBMITTED THAT THOU GH THE ASSESSEE HAS RAISED VARIOUS GROUNDS, BUT THE SOLE CONTR OVERSY IS WITH RESPECT TO ASSUMPTION OF JURISDICTION U/S 263 AND DIR ECTING THE AO TO PASS CONSEQUENTIAL ORDER. 4. BEFORE US, LD. AR REITERATED THE SUBMISSIONS MADE BEFO RE AO AND LD.CIT AND FURTHER SUBMITTED THAT IN THE PRESEN T CASE THE PRE-REQUISITE CONDITIONS SPECIFIED U/S 263 OF THE ACT W ERE NOT SATISFIED AND THEREFORE THE PROCEEDINGS U/S 263 INITIATED B Y LD.CIT LACKS JURISDICTION AND THEREFORE THE ORDER PASSE D BY LD.CIT IS BAD-IN-LAW. HE SUBMITTED THAT U/S 263, THE LD.C IT CAN REVISE THE ORDER PASSED BY THE AO ONLY ON THE SATISFAC TION OF TWIN CONDITIONS NAMELY, (1) THE ORDER IS ERRONEOUS (2) IT IS PRE JUDICIAL TO THE INTEREST OF REVENUE. IF ONE OF THEM IS ABSENT I.E., IF EITHER THE ORDER OF THE REVENUE IS ERRONEOUS BUT IT IS NOT PR EJUDICIAL TO THE INTEREST OF REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE INTEREST OF REVENUE, RECOURSE CANNOT B E HAD TO SEC.263(1). HE FURTHER SUBMITTED THAT THE ERROR ENVISAGED U/S.263 IS NOT ONE WHICH DEPENDS ON POSSIBILITY BUT IT SHOU LD BE AN ACTUAL ERROR EITHER OF FACTS OR OF LAW. HE FURTHER SUBM ITTED THAT WHEN ON AN ISSUE, TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE LD. CIT DOES NOT AGREE, T HE ORDER OF AO CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUD ICIAL TO THE INTERESTS OF REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW AND FOR THIS PROPOSITION, HE RELIED ON 5 ITA NO.957/PUN/2014 AY.NO.2009-10 DECISION IN THE CASE OF MALABAR INDUSTRIAL COMPANY VS. CIT (2000) 243 ITR 83 (SC). HE FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO HAD RAISED A QUERY AND THE SAME WAS REPLIED BY THE ASSESSEE AND ON BEING SATISFIED BY THE REPLY, AO HAD ALLOWED THE CLAIM OF ASSESSEE. LD.A.R. POINTED T O THE NOTICE U/S 142(1) DT.18.01.2011 AND FROM THE QUESTIONNA IRE POINTED TO THE RELEVANT QUERY RAISED BY AO WHEREIN THE AO HAD SPECIFICALLY ASKED THE ASSESSEE TO EXPLAIN ABOUT ALLOWABILITY OF DEDUCTION U/S 80IB(10) ON THE INTEREST INCOME. IN RESP ONSE TO THE QUESTION RAISED BY THE AO, HE POINTED TO THE SUBMIS SIONS MADE BY THE ASSESSEE VIDE LETTER DT.08.03.2011. HE FURTHE R SUBMITTED THAT THEREAFTER THE ISSUE WAS FURTHER CLARIFIED B Y THE ASSESSEE VIDE LETTER DT.17.03.2011 AND THE COPY OF WHICH IS PLACED AT PAGE 16 AND 17 OF THE PAPER BOOK. HE THEREFO RE SUBMITTED THAT AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE AND ON BEING SATISFIED BY THE REPLY GIVEN BY THE ASSESS EE NO ADDITION WAS MADE BY THE AO. THE LD.A.R. FURTHER PLACING RELIANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD., (1993) 203 ITR 108 SUBM ITTED THAT SEC.263 DOES NOT VISUALISE THE CASE OF SUBSTITUTION O F JUDGMENT OF THE COMMISSIONER FOR THAT OF AO TO PASS THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. THE LD.A.R. FURTHER RELYING ON THE DECISION IN THE CASE OF CIT VS. ANIL KUMAR SHARMA REPORTED IN (2011) 335 ITR 83 (DEL) SUBMITTED THAT HONB LE DELHI HIGH COURT, FOLLOWING THE DECISION IN THE CASE OF CIT VS. SUNBEAM AUTO LIMITED (2011) 332 ITR 167 (DEL), HAS HELD TH AT THERE IS DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQ UATE ENQUIRY. IF THERE WAS ANY ENQUIRY, EVEN INADEQUATE THAT WOULD 6 ITA NO.957/PUN/2014 AY.NO.2009-10 NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS OR DERS U/S 263 OF THE IT ACT, 1961 MERELY BECAUSE HE HAS A D IFFERENT OPINION IN THE MATTER. WITH RESPECT TO LD.CITS RELIANCE O N THE DECISION OF CIT VS. VIDYUT CORPORATION (2010) 324 ITR 221 (B OM) ON THE NON-ALLOWABILITY OF DEDUCTION U/S 80IB(10) ON THE INTE REST INCOME, HE SUBMITTED THAT THE FACTS IN THE CASE OF VIDYUT CORPORATION (SUPRA) ARE DISTINGUISHABLE FROM THAT OF THE PR ESENT CASE. IN CASE OF VIDYUT CORPORATION (SUPRA) THE DEDUCTION U/S 80IB(10) WAS HELD TO BE NOT ALLOWABLE AS IN THAT CASE THE ASSESSEE HAD PARKED SURPLUS FUNDS TO THE EARN INTEREST . IN THE PRESENT CASE, LD.A.R. SUBMITTED THAT IT WAS NOT A CASE OF PARKING OF SURPLUS FUNDS BUT ON THE CONTRARY IT WAS THE FUND THA T WAS BORROWED FROM THE BANK THAT WAS WITHDRAWN BY THE ASS ESSEE AND ON WHICH THE ASSESSEE HAD EARNED INTEREST. IN SUP PORT OF HIS CONTENTION THAT THE FUNDS WERE NOT SURPLUS FUNDS HE POINTED TO THE COPY OF AUDITED BALANCE-SHEET WHICH WAS PLACED AT PAGE 1 OF THE PAPER BOOK. FROM THE COPY OF THE BALANCE-SHEET AS ON 31.03.2009 HE POINTED THAT AS AGAINST THE CREDIT BALANCE OF AGGREGATE CAPITAL OF RS.10,00,000/-, ASSESSEE HAD BORROWIN G IN THE FORM OF SECURED LOANS TO THE EXTENT OF RS.1,35,00,000/- AND IT WAS THESE FUNDS FROM BANK THAT WERE WITHDRAWN BY THE ASSESSEE AGGREGATING TO RS.98,00,000/- AND WHICH IS AS SH OWN ON THE ASSETS SIDE OF THE BALANCE-SHEET AS PARTNERS CU RRENT ACCOUNT ON WHICH THE INTEREST WAS RECEIVED. HE THEREFOR E SUBMITTED THAT IT WAS A CASE WHERE SECURED LOANS WERE USED BY THE PARTNERS AND ON SUCH FUNDS THAT WERE USED BY THE PARTNERS, ASSESSEE HAD CHARGED INTEREST AND WHICH WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT. THE LD.A.R. THEREFORE SUBMITTED T HAT 7 ITA NO.957/PUN/2014 AY.NO.2009-10 THE ORDER OF LD.CIT PASSED U/S 263 OF THE ACT NEEDS TO BE SET ASIDE BOTH ON THE GROUNDS OF JURISDICTION AND ON FACTS. L D. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LD.CIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE I N THE P R ESE NT CASE IS ABOUT TH E IN VOK I NG O F P R OVISIONS O F SEC TI O N 263 BY C IT . 6. S . 263(1) OF THE ACT , THE POWERS UNDER WHICH CIT HAS ASSUMED POWER F O R REVISION , READS AS UNDER : ' T HE COMMISS I ONE R MAY CALL FOR AND EXAMINE T HE R ECORD OF ANY P R OCEED I NG UNDE R THIS ACT , AND IF HE CONSIDERS THAT ANY ORDER PASSED THERE I N BY THE ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENU E , HE MAY , AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD AND AFTER MAKING OR CAUS I NG TO BE MADE SUCH I NQU I RY AS HE DEEMS NECESSARY , PASS SUCH O R DE R T HEREON AS T HE CI R CUMSTANCES O F THE CASE J UST I FY , I NCLUDING AN ORDER ENHANC I NG O R MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. 7. THE R EAD I NG O F TH E ABOVE PROV I S I O N S M AKES IT VE RY C L EA R THAT T HE POWER OF S U O MOTU REVISION U / S 263(1 ) IS I N T HE NA T U R E OF SUPE R V I SORY J URISD I C T ION AND T HE SA M E CAN BE EXE R CISED ONLY I F T HE C IR C U MS T A N CES SPECIF I ED THEREIN EX I ST. T WO C I RCUMSTANCES MUST EX I ST TO ENABLE T HE COMM I SS I ONER TO E X ERCISE POWER OF REVISIO N U / S 263 , NAMELY (I) THE O R DER IS ERRONEOUS ( I I) BY VIRTUE OF BEING ERRONEOUS P R EJUDICE HAS BEEN CAUSED TO THE I NTERESTS OF THE REVENUE . 8. HON ' BLE AP E X CO U RT I N THE CASE OF MA L ABA R IND U ST RI A L CO LTD VS CIT ( 2000 ) 2 4 3 I TR 83 ( SC ) H AS HE L D TH A T CIT HAS TO BE SA TI S F IED O F T W IN CO N D ITI O N S , N AME L Y , ( I ) TH E ORDE R O F TH E AO SO U GHT T O BE R EVISED I S E R RO N EO U S ; AN D (II) IT I S PRE JU D I C I AL T O THE 8 ITA NO.957/PUN/2014 AY.NO.2009-10 IN TERES T S O F TH E REVE NU E . I F O NE O F TH EM I S ABSE NT-IF TH E ORDE R O F TH E IT O I S ER R O N EO U S B UT I S N O T P R E JU D I C I A L T O THE REVE NU E O R IF I T I S NO T E RR O N EO U S B UT I S PRE JU D I C I A L T O TH E REVE N UE -R ECO UR SE CA NN OT B E H A D T O S. 263 (1) . IT WAS FURTHER H E L D T H AT TH E PROV I SIO N CA NN OT BE IN VOKED T O CO RR ECT EAC H AND EVERY TYPE O F MISTAKE O R ER R OR COMM ITT E D BY TH E AO ; WHEN AN I TO ADOP T ED ONE OF THE COURS E S PERMISS I BLE IN LAW AND IT HAS RESUL T ED I N LOSS O F REVE N UE ; OR WHERE T WO V I EWS AR E POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVE NUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTA I NAB L E IN LAW . 9. I N T H E CASE O F CI T VS. GAB RI EL I N D I A LT D (1 993 ) 203 I T R 1 08 ( BOM ), THE HON ' B L E BO M BAY H I GH COU R T HAS HE L D AS U NDE R : ' AN ORD ER C A NNO T BE T ERMED AS ER R O N EOUS UNLESS IT I S NO T I N ACCO R DANCE W I TH L AW . IF A N ITO ACTING IN ACCORDANCE W I TH L AW MAKES CER T A I N A SSESSMENT , T H E SA M E CANNOT BE BRANDED AS ERRONEOUS BY T HE COMMISSIONE R S I MPLY BECAUSE A C CO R D IN G TO HIM THE ORDER SHOULD H A V E BEE N WR IT TEN MORE E L ABO R ATELY . THIS SEC TI ON DOES NOT V ISUAL I SE A CASE OF SUBS TIT UT I ON O F J UDGMEN T OF T HE COMMISSIONER FOR THAT O F THE ITO , WHO PASSED THE ORDER , UNLESS T HE DECIS I ON IS HELD TO BE ERRONEOUS . 10. IN THE PRESENT CASE IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD EARNED INTEREST OF RS.19,79,694/-. IT IS SE EN THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO HAD RAIS ED QUERY VIDE QUESTIONNAIRE DT.18.01.2011. THE RELATED QUERY RAISED BY THE AO IS REPRODUCED HEREUNDER FOR READY REFERENCE. THE FIRM HAS RECEIVED AN INTEREST OF RS.19,79,694/ -. IF IT IS CONSIDERED SEPARATELY THE NET PROFIT WORKS OUT T O RS.1,50,82,196/-. AS THE INTEREST IS NOT EXEMPTED U/S 80IB(10) WHY THE SAME SHOULD NOT BE TAXED ? 9 ITA NO.957/PUN/2014 AY.NO.2009-10 11. IN RESPONSE TO THE QUERY RAISED, WE FIND THAT THE AS SESSEE HAD GIVEN A REPLY VIDE LETTER DT.08.03.2011 WHICH READS AS UNDER : REGARDING THE INTEREST OF RS.19,79,694/- CHARGED ON DEBIT BALANCE OF PARTNERS AS THE WITHDRAWALS OF PAR TNERS ARE FROM THE BANK LOAN OF RS.1,35,84,625/-. THE BA NK HAS CHARGED INTEREST OF RS.26,18,190/- AS THE BORRO WED FUNDS ARE USED FOR THE PURPOSE OF WITHDRAWALS OF PA RTNERS THE INTEREST ON DEBIT BALANCE IS RECOVERY TOWARDS T HE BANK INTEREST HAD THE FIRM NOT CHARGED THE INTEREST ON D EBIT BALANCE OF PARTNERS. A QUESTION WOULD HAVE ARISED OF DISALLOWING THE PROPORTIONATE INTEREST U/S 37(1) AS BANK LOAN NOT USED FOR THE PURPOSE OF BUSINESS. INDIREC TLY THE INTEREST ON TERM LOAN OF RS.26,18,190/- GETS REDUCE D BY RS.19,79,694/- WHEREBY THE INTEREST RESULTANT PROFI T REMAINS THE SAME. HENCE, THE INTEREST CHARGED TO PARTNERS ON DEBIT BALANCE OF PARTNERS IS NOT IN NAT URE OF SURPLUS FUND OF THE FIRM SO AS TO TREAT IT SEPARATE FROM THE BUSINESS ACTIVITY. THEREAFTER ASSESSEE VIDE LETTER DT.17.03.2011 AGAIN CLARIFIED THE ISSUE BY SUBMITTING AS UNDER III) CLARIFICATION OF INTEREST CHARGE ON DEBIT BAL ANCE OF PARTNERS CAPITAL A/C: - DURING THE YEAR UNDER CONSIDERATION ON DEBIT BALANCE OF PARTNERS CAPITAL A/C INTERESTIS CHARGED AT RS.19,74,694/- WHICH HAS BEEN CREDITED TO PROFIT & LOSS A/C. A QUESTION IS RAISE D THAT WHY IT SHOULD NOT CONSIDERED AS INCOME FROM OTHER SOURCES. IN THIS REGARD WE WOULD LIKE TO STATE THA T THE WITHDRAWALS ARE DIRECTLY ATTRIBUTED TO BANK LOAN ON WHICH THE FIRM HAS PAID INTEREST OF RS.26,18,190/-. SINC E THE BORROWED FUNDS ARE USED FOR THE WITHDRAWALS OF THE PARTNERS CAPITAL A/C, IT IS IN NATURE OF REIMBURSE MENT OF INTEREST ON BANK LOAN. 12. THUS ON PERUSING THE QUERY OF AO AND THE REPLY BY THE ASSESSEE TO THE QUERY RAISED BY THE AO, IT IS SEEN THAT SPECIFIC QUERY ABOUT THE ALLOWABILITY OF DEDUCTION U/S 80IB(10) ON THE INTEREST INCOME WAS RAISED BY THE AO AND WAS ALSO REPLIED BY THE ASSESSEE. IT APPEARS THAT THE REPLY OF THE ASSESSEE WAS FOUND ACCEPTABLE TO THE AO BECAUSE NO ADDITION ON THAT ACCOU NT WAS MADE BY THE ASSESSEE. CONSIDERING THE AFORESAID FACTS IT IS SEEN THAT WITH RESPECT TO THE ISSUE UNDER CONSIDERATION NECE SSARY 10 ITA NO.957/PUN/2014 AY.NO.2009-10 ENQUIRIES WERE MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND THE SAME WAS REPLIED BY THE ASSESSEE A ND ON RECEIPT OF THE REPLIES THE CLAIM OF THE ASSESSEE WAS ALLOWED AND THUS IT CANNOT BE CONSIDERED TO BE A CASE OF NO INQUIRY AND THEREFORE WE ARE OF THE VIEW THAT REVISION U/S 263 IS NOT PERMISSIBLE AND FOR WHICH WE DRAW SUPPORT BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SUNBEAM AUTO LTD (2011) 332 ITR 167 (DEL) WHEREIN HONBLE HIGH COURT HAS OBSERVED THAT IF THERE IS ANY INQUIRY EVEN INADEQUATE, THA T WOULD NOT BE ITSELF GIVE OCCASION TO LD. CIT TO PASS ORDERS U/S 263 OF THE ACT. WE FURTHER FIND THAT HONBLE APEX COURT IN THE CA SE OF CIT VS. MAX INDIA LIMITED (2007) 295 ITR 282 SC HAS HELD THAT WH EN TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW W ITH WHICH THE CIT DOES NOT AGREE THEN THE ORDER OF AO CAN NOT BE TREATED AS AN ERRONEOUS ORDER AND PREJUDICIAL TO THE IN TEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINAB LE IN LAW. IN THE PRESENT CASE WE FIND THAT LD.CIT HAD RELIED O N THE DECISION IN THE CASE OF VIDYUT CORPORATION (SUPRA) FOR HOLDING THAT INTEREST INCOME IS NOT ALLOWABLE FOR DEDUCTION U/S 80I B(10). WE FIND THAT THE FACTS IN THE CASE OF VIDYUT CORPORATION WAS THAT IT WAS A CASE OF PARKING OF SURPLUS FUNDS BUT HOWEVER IN THE PRESENT CASE ON THE PERUSAL OF BALANCE-SHEET AS ON 31.0 3.2009 WHICH HAS BEEN PLACED BY THE ASSESSEE ON RECORD, IT IS S EEN THAT THE DEBIT ACCOUNT IN THE PARTNERS CURRENT ACCOUNT WHIC H AGGREGATES TO AROUND RS.98,00,000/- IS FROM THE SECURED LOANS OBTAINED BY THE ASSESSEE AND THE INTEREST INCOME IS EAR NED FROM SUCH DEBIT BALANCE AND THAT THE INTEREST EARNING IS NOT OUT OF PARKING OF SURPLUS FUNDS. 11 ITA NO.957/PUN/2014 AY.NO.2009-10 13. BEFORE US REVENUE HAS NOT PLACED ANY MATERIAL ON RE CORD TO DEMONSTRATE THAT THE VIEW TAKEN BY THE AO WAS IMPE RMISSIBLE VIEW OR WAS CONTRARY TO LAW OR WAS ON ERRONEOUS APPLICA TION ON LEGAL PRINCIPLES NECESSITATING THE EXERCISING OF REVISIONARY PO WERS U/S 263. IN VIEW OF THESE FACTS AND RELYING ON THE DEC ISIONS CITED HEREINABOVE, WE ARE OF THE VIEW THAT LD.CIT WAS NOT JUST IFIED IN RESORTING TO REVISIONARY POWERS U/S 263. WE THEREFORE SET ASIDE THE ORDER OF LD.CIT. THUS THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 2 ND DAY OF FEBRUARY, 2017. SD/- SD/- ( VIKAS AWASTHY ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; ! DATED : 2 ND FEBRUARY, 2017. YAMINI '#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. CIT, AURANGABAD. #$% &&'(, * '(, / DR, ITAT, B PUNE; %+, - / GUARD FILE. / BY ORDER, // TRUE COPY // // TRUE COPY // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.