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2018 (8) TMI 1756 - AT - Income TaxRevision u/s 263 - allowing the claim of interest payment against the interest receipt is without making proper enquiry or verification - lack of enquiry on a issue of allowability of the claim of interest expenditure under section 57(iii) - Held that:- As it is evident from the available details there are various transactions of loans given by the assessee as well as capital introduced in the old partnership firms by using the borrowed funds from various parties as well as from the partnership firm. Thus the assessee has borrowed the fund from the partnership firm M/s. Vishal Agencies in the category of over-drawing and at the same time a capital of ₹ 28,21,000/- was also introduced in the same firm. This is not a newly formed firm but this is an old partnership firm and, therefore, it is not an initial introduction of capital by the partners. AO while passing the assessment order has not raised even a query about the allowability of the interest under section 57(iii) of the Act. There is no such query raised either in the notice issued under section 142(1) or otherwise and, therefore, even if the details filed by the assessee were considered by the AO but if the same are not examined in the context of allowability of the claim under section 57(iii), then the case would certainly fall in the category of complete lack of enquiry on a particular issue of allowability of the claim of interest expenditure under section 57(iii) - the details revealed that the assessee has received the interest @ 12% from M/s. Vishal Agencies, the partnership firm as against the interest charged by the same firm from the assessee @ 18%, hence there is a difference of 6% in the interest received and paid by the assessee. All these aspects were not even examined by the AO. there is no bar for considering the audit objections by the ld. Pr. CIT if the audit objection reveals certain relevant and crucial facts about the allowability of the claim. Therefore, no merit in the contention of the A/R on this point as it is clear that it is a case of lack of enquiry particularly on the issue of allowability of the claim under section 57(iii) of the Act. Thus the order of the AO suffers from error so far as it is prejudicial to the interest of the revenue. CIT has rightly invoked the provisions of section 263 and directed the AO to conduct a proper enquiry on this issue. As regards the other issues raised by the ld. Pr. CIT in the show cause notice, those were not specifically discussed in the impugned order as the assessee explained some of the issues which were factually found to be correct. Accordingly, we restrict the fresh adjudication of the matter only on the issue of allowability of the claim under section 57(iii) to that extent the impugned orders of ld. Pr. CIT is upheld. - Appeals of the assessee are partly allowed.
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