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2008 (5) TMI 633 - HC - Income TaxOrder Passed u/s 263 by CIT(A) without jurisdiction - Claim for interest due on sticky loans - Whether the Tribunal was right in law in allowing the assessee’s claim regarding interest due on sticky loans? - Claim discount on bonds and debentures as allowable expenditure - HELD THAT:- The CIT has power to exercise jurisdiction, if the order of the Income-tax Officer is erroneous and prejudicial to the interest of the Revenue. An incorrect assumption of fact or an incorrect application of law would satisfy the requirement of the order being erroneous - The expression "prejudicial to the interest of Revenue" as understood in its ordinary meaning is of wide import and not confined to the loss of tax alone. If due to an erroneous order of the AO, the revenue is loosing, as lawfully payable by a person, it should be certainly prejudicial to the interest of Revenue [Malabar Industrial Co. Ltd. v. CIT [2000 (2) TMI 10 - SUPREME COURT], Rampyari Devi Saraogi v. CIT [1967 (5) TMI 10 - SUPREME COURT] and Smt. Tara Devi Aggrawal v. CIT [1972 (11) TMI 2 - SUPREME COURT]. While setting aside the assessment order, the CIT noted that the Income-tax Officer passed the order without any material on record. Admittedly, the Circular has also not been considered by the AO. In our view, the AO failed to apply its mind in its correct perspective and the order passed by him is erroneous. There is no material on record to support the decision arrived at by the Tribunal. In this background, the Tribunal, therefore, was wrong in arriving at its conclusion that the CIT had exceeded its jurisdiction while setting aside the same. The CIT rightly exercised his power u/s 263(1) of the Act - Questions of law Nos. 1 and 3 are answering accordingly. Whether the Tribunal was right in law in holding that the discount pertaining to bonds issued up to 31-3-1976 and thus relating to AY 1976-77 was allowable in the AY 1977-78, the previous year in respect of which ended on 31-3-1977? - This issue is squarely covered by a decision rendered by this Court in H.P. Financial Corpn. Ltd. v. CIT [1997 (5) TMI 19 - HIMACHAL PRADESH HIGH COURT] held that it is not necessary for the assessee to make out a case of actual expenditure before claiming allowable deduction under the provisions of section 37 of the Act - Question is answered accordingly as admittedly having been covered by the aforesaid decision. The matter is remanded back to the AO to frame fresh assessment order in view of our aforesaid observations.
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