TMI Blog2004 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... r Tribunal was justified to hold that CIT acted within his power to initiate proceedings under section 263?" - There is no escape from the conclusion that the Income-tax Officer had not made necessary enquiries before allowing the deduction of interest to M/s. M.M. Enterprises on the credit balance, which resulted in the order not only being erroneous but also prejudicial to the interests of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-tax under section 263 of the Income-tax Act, 1961, dated March 16, 1985, treating the Income-tax Officer's order as erroneous and prejudicial to the interests of the Revenue? 2. Whether the Appellate Tribunal was justified to hold that the Commissioner of Income-tax acted within his power to initiate proceedings under section 263 of the Income-tax Act?" The reference relates to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audit party the Commissioner of Income-tax examined the records and after coming to the conclusion that the assessment order was erroneous and also prejudicial to the interests of the Revenue initiated proceedings under section 263 of the Act. After giving opportunity of hearing to the applicant and taking into consideration the submission made therein the Commissioner of Income-tax had set aside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partners are the close relatives of the aforementioned two creditors. There was neither inflow nor outflow of funds from the applicant firm. Only the debtor and creditor have changed. Further we find that M/s. Kashi Nath and Krishna Gopal were being paid interest at the rate of 6 per cent, per annum on the credit balance with the applicant firm whereas M/s. M.M. Enterprises has been paid interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue. The Commissioner of Income-tax, was therefore, justified in drawing the proceeding under section 263 of the Act and also disallowing the amount of interest to be paid to M/s. M.M. Enterprises as it was only a paper transaction. We, accordingly, answer both the questions in the affirmative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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