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2021 (9) TMI 602 - ITAT KOLKATARevision u/s 263 - allowability of interest expenditure - AO issued statutory notices calling for details in respect of the items selected for ‘Limited Scrutiny’ - deduction of interest incurred in the course of business - As per CIT AO had failed to examine the commercial expediency of the assessee in advancing interest free loan to the partners, when the assessee-firm was paying interest on the borrowed capital - HELD THAT:- Assessee had demonstrated before the AO that the loan was availed from ICICI Bank for business purpose and in connection and for the benefit of their project ‘Ozone’. Having regard to the facts as discussed in the foregoing, it thus cannot be said that arrangement carried out by the assessee with these two partners lacked commercial expediency. AO, after being satisfied with the explanation/ submission/documents, had allowed the deduction of interest incurred in the course of business. Such view taken by the AO was indeed a plausible view and cannot be said to be ‘unsustainable in law’. Appreciating the commercial expediency involved, the AO’s successor did not take any adverse view in AY 2017-18 even though debit balance in current account of these partners were M/s. P. S. Group Realty Ltd.and M/s. Srijan Realty Pvt. Ltd.- Having regard to the foregoing facts and applying the rule of consistency, we are of the opinion that the Ld. Pr. CIT ought not to have disturbed the assessment order for the relevant year on this issue of allowability of interest expenditure. The net withdrawal by the partners during the year was only to the tune of ₹ 15.37 crore and not ₹ 74 crore as wrongly assumed by the Ld. Pr.CIT. We thus find force in the argument of the Ld. AR that the impugned order was passed by the Ld. Pr.CIT without due application of mind to the facts of the case and material available on record. Pr.CIT wrongly asserted that AO did not examine the balance sheet of the assessee and did not enquire into the commercial expediency of withdrawal of fund by the partners. The facts and figures assumed by the Ld. Pr.CIT are also found to be erroneous. We find that the AO had discharged his duty as an investigator on this issue. And his view as an adjudicator on this issue is based on the relevant material placed on record, which we find to be in consonance with the decision of the Hon’ble Apex Court in S. A. Builders vs. CIT [2006 (12) TMI 82 - SUPREME COURT] - Following the decision of Apex Court in Malabar Industries Ltd.[2000 (2) TMI 10 - SUPREME COURT] we are thus of the considered opinion that, while passing the assessment order the AO did not follow a view which can be said to be 'unsustainable in law'. The jurisdictional facts for usurping the jurisdiction, being absent, we hold that the action of Ld. Pr. CIT was without jurisdiction and therefore ‘null’ in the eyes of law. We accordingly quash the order of Ld. Pr. CIT impugned before us - Appeal of the assessee is allowed.
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