RAKESH KUMAR DOSHI,BARMER V. PCIT-1, JODHPUR

ITA 205/JODH/2024

AI Insights

The case revolves around an appeal by Rakesh Kumar Doshi against the order of the PCIT, Jodhpur-1, which revised the assessment order for the assessment year 2018-19 under Section 263 of the Income Tax Act, 1961. The original assessment had allowed certain deductions under Section 57, which the PCIT later contested, claiming that the Assessing Officer (AO) had erred in not disallowing the full amount of deductions claimed. The Tribunal examined whether the PCIT was justified in revising the assessment order and concluded that the PCIT's action was not warranted as the AO had adequately addressed the issues during the assessment proceedings.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 471468 (ITAT-JODHPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Other Referred Cases: Malabar Industrial Limited V/s CIT, TTK LIG Ltd. v/s. ACIT, Arvee international v/s. Addl. CIT, CTT v/s. Nagesh Knitwears Pvt. Ltd., Gee Vee Enterprises v. Additional Commissioner of Income-tax, CIT v/s. Raisons Industries Ltd., Seshasayee Paper & Boards Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA OJHA
• Assessee Lawyers: AMIT KOTHARI
• Keywords: Set aside; Business income; Opportunity of being heard; Transfer pricing; Business expenditure; Depreciation; Salary income; Rule of consistency; Tax effect; Capital expenditure; Principle of natural justice; Assessment record; Right to appeal; Revision of order
• Section: 143(3); 142(1); 143(2); 263; 13; 2(A); 101

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: DR. S. SEETHALAKSHMI, JUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No.205/Jodh/2024 Assessment Year: 2018-19 Sh. Rakesh Kumar Doshi Doshi Chohtan, Barmer. [PAN: AASPD2444H] (Appellant) Vs. The PCIT, Jodhpur-1, Jodhpur. (Respondent) Appellant by Sh. Amit Kothari, C.A. Respondent by Sh. Rajendra Ojha, CIT Date of Hearing 22.10.2024 Date of Pronouncement 23.12.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by assessee is arising out of the order of the Learned Principal Commissioner of Income Tax, Jodhpur-1 dated 12.03.2024 [for short “PCIT”] for assessment year 2018-19, which in turn arise from the order dated 13.04.2021 passed under section 143(3) read with Sections 143(3A) & 143(3B) of the Income Tax Act (here in after “Act”) by the National e-assessment Centre, Delhi. I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 2 2. In this appeal, the assessee has raised following grounds: - “1. The ld. PCIT erred in passing the order under section 263 which is bad in law and bad on facts. The assessment framed cannot be said to be erroneous or prejudicial to the interest of revenue. 2. The ld. PCIT has erred on observing that the AO has erred in under assessing the income by Rs. 23,58,936/- by allowing excess deduction u/s 57 of the Act. The findings of Ld. PCIT is bad in law and bad on facts. The addition earlier made by AO is already under challenge in appeal. 3. The appellant craves liberty to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing.” 3. Brief fact of the case are that the case was selected for complete scrutiny assessment under the E-assessment Scheme, 2019 on the following issues of claim of deduction from Income from Other Sources. Return of income was e-filed by the assessee on 13-10-2018 at an income of Rs.53,97,560/-. The return is processed by CPC after disallowing depreciation only. After that processing of ITR, the case of the assessee selected for Scrutiny Assessment under the e-Assessment Scheme, 2019 on the issue of \" Large deduction claimed u/s 57.\" Accordingly notice u/s 143(2) of Income Tax Act, 1961 dated 23.09.2019 was issued and served upon the assessee electronically.Notice u/s 142(1) was also issued on 10/12/2020 for compliance on 25/12/2020. 3.1 During the year under consideration the assessee derives income from certain partnership firm in the form of Interest, remuneration and share of profit, Income from other sources like interest on saving I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 3 account, FDR, Interest received from parties, Salary income from Excel Debt Broking Private Ltd. & Income from trading of shares. Ld. AO noted from the documents submitted regarding the income from other sources assessee claimed deduction claimed u/s 57 (Rs. 72,53,862/-(-) Rs. 23,58,936/-) = Rs. 48,94,926/-. Assessee was asked to explain the nexus of deductions claimed with the income earned under the head income from other source along with documentary evidence. Ld. AO considered the submission of the assessee butfound not acceptable. Ld. AO based on the submission noted that assessee is claiming total interest income of Rs.23,58,936/-, which includes interest income from parties of Rs.21,31,492/-& Interest from saving bank of Rs 2,27,444/-. The assessee also claimed Interest Paid expense for Rs. 59,94,993/- which was paid on the loan borrowed by him in past years. Although the assessee is not able to prove the nexus between loan taken and loan advanced. Therefore, in the light of the provision of section 57 of the income tax act, 1961 expenditure incurred wholly and exclusively for the purpose of earning interest income shall be allowed as expenditure. In this regard assessee was asked to submit a co-relation between interest bearing loans and interest earning advances. In his submission assessee submitted a list of loans taken and advance given. Ld. AO noted that assessee has advanced higher amount of money in the I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 4 earlier years while higher amount of money was borrowed in later year on which interest expense was claimed, so there is no co-relation between money advanced for earning interest and amount borrowed on which interest expenditure was claimed. When the fund used to lend money, itself belongs to time prior to the borrowed fund, it is clear beyond doubt that there is no nexus between money borrowed and money advanced for interest.Thus, considering the plain reading of Section 57 explicitly clears that the income chargeable under the head \"Income from other sources shall be computed after making the following deductions: \"57(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income;\" Ld. AO thus relying on the decision of Hon’ble Gujarat High Court in Virmati Ramkrishna vs. CIT (1981) 131 ITR 659, further noted that the assessee is notable to prove the co-relation between loan taken and loan advanced. Considering that the expenditure claimed u/s 57 of the act, cannot be claimed under the head \"Income from other sources. In the submission assessee claimed that since, assessee is a partner in various concerns, and to attend the business, such vehicle is being use claimed expenses. There are various group involved in the firms. and I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 5 partners, are normally using their own vehicle for the business of the firm. Further in his own reply assessee accepted that this Car was used \"fully and exclusively for earning income from business but also failed to substantiate his claim regarding usage of such motor car in his business. Here, since the asset was claimed to be used for the benefit of firms and had no nexus in earning the interest income which has been shown by the assessee in the income from other sources, therefore depreciation, Interest paid & Motor Insurance on car was considered as allowable expenses under section 57 of Act. Mere change of claim by the assessee does not establish the allow ability of expense under the head Income from Business or Profession. It is abundantly clear that the expenditure should be laid \"wholly and exclusively for purpose of making or earning such income but in the instant case the funds were utilized for other purposes and the assessee could not establish the direct nexus between the utilization of fund and income earned under the head of income from other source. The assessee shown Income; from salary of Rs.4,77,500/- Income from Business & Profession of Rs.93,42,762/ Income from capital gain of Rs.3,24,783/- and Income from other sources of Rs.2,97,436/-, Total comes to Rs. 1,04,42,481/-, Thereafter, deduction claimed under chapter VIA Rs.1,50,000/- and deduction u/s 57 of the Act, of Rs.48,94,926/-, total income shown is Rs.53,97,555/-. I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 6 Hence, deduction claimed u/s 57 of the I. T. Act, 1961, of Rs.48,94,926/- was disallowed and added back to his total income by the ld. AO. 4. On culmination of the assessment proceeding, learned Principal Commissioner of Income Tax, Jodhpur-1, [ for short PCIT ]in exercise of power vested upon him called for the assessment record for examination. In that process he noted that AO passed the assessment record without conducting proper inquiries / investigations. Accordingly, a notice u/s. 263 of the Act was issued to the assessee on 31.01.2024 providing an opportunity of being heard as to why the said order should not be declared as erroneous in so far as it is prejudicial to the interest of revenue. The contention of the show cause notice reads as under : “On perusal of the assessment record it was found that the aggregate income is shown at Rs. 55,68,290/- and tax has been charged upon that aggregate income of Rs. 55,68,290/- while it should have been charged up the assessed income of Rs. 1,02,92,486/-. Further, while computing total income in the assessment order, addition of Rs. 48,94,926/- only was made as income disallowed u/s. 57 of the IT Act instead of total deduction of Rs. 72,53,862/- & which resulted in under charge of tax and interest and interest having total tax effect of Rs. 34,08,648/-.” In response to the show cause the assessee filed a detailed reply on 12.02.2024 opposing the revisionary power of the PCIT. Assessee was also given personal hearing on 14.02.2024. After considering the submission and contentions ld. PCIT hold as under : 6. Perusal of assessment record shows that in the assessment order, the Assessing Officer has mentioned the deduction claimed u/s 57 to be Rs.48,94,926/- whereas the deduction claimed is of Rs. 72,53,862/-. In para 6 I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 7 of assessment order, the Assessing Officer has mentioned that the Assessee was asked to explain the nexus of deductions claimed with the income earned under the head income from other sources along with the documentary evidences. The Assessing Officer has further noted that the submission of the Assessee have been carefully considered and the same have not been accepted. In Para 13 of the assessment order, the Assessing Officer has further mentioned that total deductions claimed u/s 57 are disallowed. However, the Assessing Officer has erroneously taken the figure of total deductions u/s 57 to be of Rs. 48,94,926/- whereas the total deductions are in fact of Rs. 72,53,862/-. The contention of Assessee is that in the computation of income, the Assessee had shown net negative income of Rs. 48,94,926/- being net of interest received and interest and other expenses paid and that the Assessing Officer in the assessment has taken a view that this nexus income cannot be allowed and he made the addition of this amount and this cannot be a subject matter of 263 proceedings and that the Assessing Officer in his wisdom had taken a conscious decision that the net negative income only be disallowed. This contention of Assessee is not tenable because as has been brought out above, the Assessing Officer has categorically mentioned that total deductions u/s 57 are to be disallowed as the Assessee has failed to establish nexus between the interest income and the deductions u/s 57. The contention of the Assessee that correct view has been adopted after detailed verification and that there is no error in the order and that the proceedings u/s 263 are not justified is not tenable in view of the above facts and discussion. The case laws cited by the Assessee are not relevant to the facts of the present case. 7. In view of the above facts and circumstances of the case and having regard the material of record I am of the considered view that the Assessing Officer has not taken the correct figure of deductions u/s 57 when he has categorically mentioned in the assessment order that total deductions u/s 57 are to be disallowed. Therefore, the order u/s 143(3) on 13.04.2021 is erroneous in so far as it is prejudicial to the interest of the revenue. In reaching such conclusion, I am aided by the following judicial rulings:- 1. The Hon'ble Supreme Court in the case of Malabar Industrial Limited V/s CIT243ITR has held that\" An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind\". 2. In case of TTK LIG Ltd., v/s. ACIT(Mad) 51 DTR 228 it has been held that Order would be erroneous if it is based on an incorrect assumption of facts or an incorrect application of law or non- application of mind or based on no or insufficient materials. 3. In the case of Arvee international v/s. Addl. CIT (ITAT, Mum) 101 ITD 495, it has been held that Unlike the Civil Court which is neutral to give a I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 8 decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also an investigator. He cannot remain passive on the face of a return which is apparently in order but calls for further enquiry - It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke inquiry - If there is failure to make such enquiry, order is erroneous and prejudicial to revenue CIT need not prove that it is erroneous and he can revise it u/s 263. 4. In the case of CTT v/s. Nagesh KnitwearsPvt. Ltd., 345 ITR 135, the Hon'ble Delhi High Court has held that \"The Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of ht Revenue. The expression \"prejudicial to the interest of the Revenue, is of wide import and is not confirmed to merely loss of tax. The term 'erroneous' means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as on adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As on investigator, it is compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word 'erroneous' includes failure to make the enquiry. Or verification has not been made and not because a wrong order has been passed on merits.\" 1. Delhi High Court in Gee Vee Enterprises v. Additional Commissioner of Income-tax (1975) 99 ITR 375, has observed that The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the fact of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word \"erroneous\" in section 263 emerges out of this context. It is because it is incumbent on the Income tax Officer to further investigate the facts stated in the return when circumstances should make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.\" 1. In CIT v/s. Raisons Industries Ltd., 288 ITR 322 (SC): The Hon'ble Supreme Court held as under:-\" The power of revision under section 263 is exercised by a higher authority. It is a special provision. The revisional I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 9 jurisdiction is vested in the Commissioner. An order there under can be passed if it is found that the order of assessment is prejudicial to the Revenue. In such a proceeding, he may not only pass an appropriate order in exercise of the said jurisdiction but in order to enable him to do it, he may make such inquiry as he deems necessary in this behalf.\" 1. Madras High Court in the case of Seshasayee Paper & Boards Ltd. [2000] 242 ITR 490 (Mad.) has held that the powers of the Commissioner are very wide in exercising the powers of revision u/s 263. It is no doubt true that for making a valid order u/s 263, it is essential for the Commissioner to record an express finding that the order sought to be revised was erroneous as well as prejudicial to the interest of the revenue. However, there is nothing in section 263 to show that the Commissioner should in all cases record his final conclusion on the points in controversy before him. The legislative intent to bring the amendment was to make clear the provisions of Explanation to section 263 and to reduce the litigations in this regard which is well supported in view of the clear words used in clause (a) of the Explanation 2 to section 263(1) wherein it is mentioned that the order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the PCIT the order is passed without making inquiries or verification which should have been made. If the order is passed without application of mind, such order will fall under the category of erroneous order\". 8. Accordingly, by virtue of powers conferred on the undersigned under the provisions of section 263 of the Income Tax Act 1961, I hold that the order under Section 143(3) dated 13.04.2021 for 2018-19 passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of revenue as the said order has been passed by the Assessing Officer in a routine and perfunctory manner. The order of the Assessing Officer is therefore held erroneous in so far as it is prejudicial to the interest of revenue under Explanation (2) to section 263 of the Income Tax Act. Therefore, I hereby set aside the assessment order u/s 143(3) dated 13.04.2021 on the above issue with the directions to the Assessing officer to reframe the assessment in the light of the observations made in the preceding paragraphs. The AO is directed to examine and verify this issue in view of provisions of law after allowing adequate opportunity of being heard to the assessee before passing the assessment order on this issue.” 5. Feeling dissatisfied from the above order of the ld. PCIT, assessee has preferred the present appeal on the ground as stated hereinabove. I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 10 Apropos to the grounds so raised the ld. AR of the assessee relied on the written submission which is reproduced here in below :- “The assessee respectfully begs to submit following facts and details for your honour's kind consideration A. The Assessee is partner in certain firm and had derived income from these partnership firm in the form of Interest, remuneration and share of profits. B. The Assessee has invested that capital in a partnership firm by taking loans from various parties. And the same parties have been given interest on the loan given by them. The interest amount has been deducted in other sources income. And Dep. on car and computer, Interest paid to car loan and motor insurance wholly and exclusive for eared business income. c. Income and expenses chart Income Expenses Interest from Saving Bank Rs. 227444.00 Interest paid to parties Rs. 5994993.00 Interest from parties Rs. 2131492.00 Depreciation on car Rs. 778815.00 Interest from partnership firm Rs. 4884752.00 Interest paid on car loan Rs. 361159.00 Remuneration received Rs. 4458010.00 Motor insurance Rs. 104759 Profit partnership Firm Rs. 1718940.00 Depreciation on computer Rs/ 14136.00 Total Rs. 3420638.00 Total Rs. 7253862.00 Case-Rakesh kumardoshi Vs ACIT Circle Barmer ITA no. 52/jodh/2020 A.Y. 2015-16-Expense for earned income so allowable expense for deduction u/s 57. Order copy are attached. Issue inverted in already covered in favour of assessee by above decision in assessee own case. The assessee submitted details of interest payment made to various parties and car loan. Depreciation on car is also on old vehicle, and is not a new vehicle purchased during the year. Since assessee is partner in various concerns, and to attend the business, such vehicle is being used. There are various groups involved in the firms, and partners are normally using their own vehicle for the business of the firm. The assessee had derived remuneration and share of profits from these firms, which had been duly shown in the return of income submitted. The assessee had been using the vehicles for the purpose of his business which is allowable as deduction against this income from firm. Similarly the claim of insurance is on the said vehicle. Your kind attention is also invited towards the decision of Hon'ble Supreme Court in the case of CIT v. Ramniklal Kothari reported in 74 ITR 57 (SC) in which also it has been held as under: \"Business Expenditure Allowability Expenditure incurred for earning share income by partner of firm Receipt of share income by partner is business I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 11 income for purpose of section 10(1) of 1922 Act - Expenditure by way of salary and bonus to staff, maintenance of car and travelling expenses for the purpose of earning such income, therefore allowable as business expenditure.\" b. RAM MURTI SOOD vs. ITO (1982) 14 TT) (CHD) 352 Business Expenditure-Allowability of deduction-Personal car used by assessee partner for business of firm-Assessee was entitled to allowance of such expenditure and depreciation or car against share income from said firm. The Learned Counsel for the assessee submitted that in this case also, the assessee has share income from three firms and has no independent business of his own. It was contended that factually he was travelling between Sirhind and Sadhugarh for purposes of the business of the firm and was also going to various villages for disbursement of amounts to Zamindars who were given advances to make sure that tey sell their produce through the assessee. As such the amount was admissible and should have been allowed. The Supreme Court in the case of Ramniklal Kothari has laid down a general proposition that the business carried on by a firm is business carried on by the partners. Profits of the firm are profits earned by all the partners in carrying on the business. The share of the partner is business income in his hands for purposes of s. 10(1) of the IT Act, 1922, and being business income expenditure necessary for purposes of earning that income and appropriate allowances are deductible therefrom in determining taxable income of the partners. Taking into consideration the general proposition of law laid down by the Supreme Court, Gujarat High Court and the Patna High Court that the partner if he expends an amount in earning the share of profit from a firm, he can on showing its actual expenditure be allowed a deduction from the total income, the case of the assessee is to be examined. The authorities below have not bifurcated the amount of Rs. 12,000 as to the expenditure on petrol and the depreciation on car. However, it is common ground that the car was new and was purchased during the previous year relevant to the asst. yr. under appeal. It was clarified at the bar by the Learned Counsel for the assessee and by the assessee who was present in the court that the total expenditure on petrol was Rs. 3,500 and he claimed Rs. 2,000 only as relating to the business activities of the firm from which he earned the profit. Applying the above laid down principles by the Hon'ble Courts, it is held that the expenditure of Rs. 2,000 incurred by the assessee was an expenditure wholly and exclusively laid out for carrying on the business and earning business income. The share of profits of the assessee from various firms including the firm of M/s. Sood Bhandari and Cop. Therefore, constituted business income in his hands. Against this business income, the assessee is entitled to deduct the expenditure incurred actually for earning this income and depreciationon the car. It is found that the assessee had actually used the car for this purpose because the activities of the firm, the distance between the head office and the branch office and participation of the assessee in the business of the firm justify it.” It is respectfully submitted that the Hon'ble Supreme Court in the case of CIT Vs. Ramlik Lal Kothari reported in 74 ITR 57 held that the expenditure incurred for the purpose of earning the share income from the firm is an allowable expenditure. In earlier years also similar claim was made and allowed except in I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 12 one of the year for which the same has been challenged in appeal. Your kind attention is also invited towards the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Limited reported in 358 ITR 395 and the decision in the case of Radha Soami Satsang Vs. CIT reported in 193 ITR 321 ne submitted that the rule of consistency should be followed. On identical disallowance was made in the hands of Shri Sunil Dosi in which the said disallowance had been deleted. It is therefore submitted that the claim of expenses against business income may kindly be allowed to the assessee. It is respectfully submitted that the claim of depreciation is apparently allowable against the business income, and inadvertently the same had been claimed set off against income from other sources. The deduction of such business expenditure is also apparently allowable against the business income taxed in the hands of the assessee. Case-sunil kumarkanhayalaldoshi v/s assistant commissioner of income tax circle- jodhpur ITA no. 53/JODH/2020 A.Y. 2016-17 in this case Assessee paid to Interest various parties are allowable against business income because assessee take loan parties and invested in partnership firm so interest expense deductible business income. Case copy are attached. Conclusion Interest Paid to Parties, Interest Paid to car loan, and Depreciation car and computer wholly and exclusive for eared business income and other source income are therefore allowable expenditure.” 6. To support the various grounds so raised by the ld. AR of the assessee and has relied upon the following evidences in support of the contentions so raised:- S. No. Particulars Pages 1. Show cause notice issued u/s 263 by PCIT, Jodhpur. 1-3 2. Reply submitted before the ld. PCIT, Jodhpur in the proceedings u/s 263. 4-16 3. Notices issued by AO during the assessment proceedings in which the issue was fully examined on which notice u/s 263 had been issued. 17-21 4. Reply submitted to the AO during the assessment proceedings. 22-28 5. Order of Hon’ble ITAT in appellant own case for AY 2017-18 in ITA No. 85/Jodh/2024 in which similar claimed had been allowed. 29-59 I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 13 7. Ld. AR of the assessee in addition the written submission and the paper book so filed also argued that while making the assessment order, ld. AO has made a detailed discussion as to the computation of income and has made the disallowance of the expenditure. The ld. PCIT merely not founding any defect even has not discussed which of the conditions as to explanation 2 of the provision of section 263 is applicable in the case of the assessee. As is evident from the finding recorded in para 7 page 10 wherein the PCIT stated that “I am of the considered view that the Assessing Officer has not taken the correct figure of deductions u/s 57 when he has categorically mentioned in the assessment order that total deductions u/s 57 are to be disallowed. Therefore, the order u/s 143(3) on 13.04.2021 is erroneous in so far as it is prejudicial to the interest of the revenue.” Provision of 263 cannot be invoked to correct each and every mistake and not to correct the figure of disallowance. When the ld. AO has dealt with the issue in detailed based on the facts and he has disallowed the figure in his wisdom for which has exercised his judicial wisdom. Merely the ld.AO has not disallowed complete deduction the order cannot be revised by the PCIT. 8. Per contra, the ld. DR relied on the order of the ld. PCIT. Ld. DR vehemently argued that the decision cited by the ld. AR of the assessee is of the last year and not of the current year wherein the ld. PCIT noted I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 14 that the figure of the gross amount is to be considered whereas the the same was not considered and therefore, as per power of the PCIT same has rightly been invoked and same should be sustained. 9. We have heard parties and perused the materials available on record. The bench noted that the effective assessee has taken two grounds challenging the order of the PCIT wherein the PCIT invoked the provision of section 263 of the Act alleging that ld. AO has allowed excess deduction u/s. 57 for an amount of Rs. 23,58,936/- while framing the assessment order dated 13.04.2021. Apropos, to the grounds so raised the brief facts as emerges from the records are that case of the assessee was selected for complete scrutiny assessment under the E- assessment Scheme, 2019 on the issues of claim of deduction from Income from Other Sources. Return of income was e-filed by the assessee on 13-10-2018 at an income of Rs.53,97,560/- and was processed by CPC after disallowing depreciation claimed. After that processing of ITR, the case of the assessee selected for Scrutiny Assessment under the e-Assessment Scheme, 2019 on the issue of \" Large deduction claimed u/s 57. Accordingly notice u/s 143(2) and 142(1) was also issued. Assessee derives income from certain partnership firm in the form of Interest, remuneration and share of profit, Income from other sources like interest on saving account, FDR, Interest I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 15 received from parties, Salary income from Excel Debt Broking Private Ltd. & Income from trading of shares. Ld. AO noted from the documents submitted regarding the income from other sources assessee claimed deduction claimed u/s 57 (Rs. 72,53,862/-(-) Rs. 23,58,936/-) = Rs. 48,94,926/-. Assessee was asked to explain the nexus of deductions claimed with the income earned under the head income from other source along with documentary evidence. Ld. AO considered the submission of the assessee but found not acceptable. Ld. AO based on the submission noted that assessee is claiming total interest income of Rs.23,58,936/-, which includes interest income from parties of Rs.21,31,492/-& Interest from saving bank of Rs 2,27,444/-. The assessee also claimed Interest Paid expense for Rs. 59,94,993/- which was paid on the loan borrowed by him in past years. Although the assessee is not able to prove the nexus between loan taken and loan advanced. Therefore, in the light of the provision of section 57 of the act, assessee was asked to submit a co-relation between interest bearing loans and interest earning advances. Assessee was issued a detailed show cause notice and after considering the submission of the assessee ld. AO held that assessee could not establish the direct nexus between the utilization of fund and income earned under the head of income from other source. The assessee I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 16 shown Income; from salary of Rs.4,77,500/- Income from Business & Profession of Rs.93,42,762/ Income from capital gain of Rs.3,24,783/- and Income from other sources of Rs.2,97,436/-, Total comes to Rs. 1,04,42,481/-, Thereafter, deduction claimed under chapter VIA Rs.1,50,000/- and deduction u/s 57 of the Act, of Rs.48,94,926/-, total income shown is Rs.53,97,555/-. Hence, deduction claimed u/s 57 of the I. T. Act, 1961, of Rs.48,94,926/- was disallowed and added back to his total income by the ld. AO. As is evident that the case of the assessee was selected to verify the claim of the assessee as per provision of section 57 of the Act and accordingly ld. AO has applied his mind and determined the income. Ld. PCIT hold that the ld. AO should have disallowed further sum of interest income of Rs.23,58,936/- and hold the order of the assessment liable to revised as per provision of section 263 of the Act. Thus, the only issue to be decided in this appeal is as to whether the Principal Commissioner of Income Tax (PCIT) was justified in invoking his revisionary jurisdiction under section 263 of the Act in the facts and circumstances of the instant case with regard to provision allowability of deduction u/s. 57 of the Act when the case of the assessee already selected for that issue only. As is evident from the record that the assessee has made elaborate submissions on this issue I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 17 and the Assessing Officer has satisfied himself that assessee is eligible to claim deduction under Section u/s. 57 of the Act. Therefore, we are of the considered view that on the very same issue ld. PCIT cannot form another view of that of the ld. Assessing Officer wherein he has after making a detailed enquiry also disallowed the claim of the assessee. As we note that the ld. PCIT while exercising the power u/s. 263 of the Act invoked the explanation (2) to section which we would like to go through so as to decide the issue on hand; Revision of orders prejudicial to revenue 263. (1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer 81a[or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, 81b[including,— xxx xxx xxx xx Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 82[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 83[Explanation 3.—For the purposes of this section, \"Transfer Pricing Officer\" shall have the same meaning as assigned to it in the Explanation to section 92CA.] I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 18 xxx xxx xxx xx As we note that even the Explanation 2 to section 263 does not confer blind powers and it is held that despite there being an amendment, enlarging the scope of the revisionary power of the ld. PCIT u/s 263 to some extent, it cannot justify the invoking of the Explanation 2 in the facts of the present case. Before referring to that Explanation, one has to understand what the true meaning of the Explanation in the context of application of mind by a quasi-judicial authority was. It is further noted that in the case of Narayan Tatu Rane Vs. ITO (2013) 7 NYPTTJ 1493 (Mum.),it was held that newly inserted Explanation 2(a) to Sec. 263 does not authorize or give unfettered powers to Commissioner to revise each and every order, if in his (subjective) opinion, same has been passed without making enquiries or verification which should have been made. Thus, in the totality of facts and circumstances, it is not at all a case where the subjected assessment order dt. 13.04.2021 should be alleged to be erroneous in so far as prejudicial to the interests of the revenue. There is neither error of law nor of facts. There is no erroneous assumption by the AO of either the facts or of law, as alleged by the ld. PCIT. I.T.A. No. 205/Jodh/2024 Rakesh Kumar Doshi vs. PCIT 19 Hence in view of these legal and factual submissions, and the binding judicial precedents cited the impugned order passed u/s 263 deserves to be quashed. In the result the appeal of the assessee stands allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf; dlnL;@Judicial Member ys[kk lnL;@Accountant Member Dated 23/12/2024 *Santosh Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order "