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2019 (12) TMI 1608 - AT - Income TaxRevision u/s 263 - Addition u/s 14A r.w.r. 8D - HELD THAT:- Assessee has taken unsecured loans, which have been utilized for the purpose of investment in shares of private limited companies controlled by the family members and investment in partnership firm. Such investment was at Rs.26.55 crores as on 31.03.2013 and Rs.27.17 crores as on 31.03.2014. The assessee has paid interest of Rs.2,91,18,343/- on unsecured loans and claimed deduction out of income, which has been during allowed by the AO. CIT viewed that such interest is not allowable under section 14A and under section 57(iii) as investment made was related to exempt income and interest expenses were incurred for earning income from other source. However, it is noticed that there was negative income from partnership firm and no dividend income has been earned during the year under consideration, therefore, no expenditure has been incurred for earning exempt income, hence, disallowance under section 14A read with Rule 8D cannot be made as held by the Hon’ble Gujarat High Court in the case of CIT v. Corrtech Energy Pvt. Ltd [2014 (3) TMI 856 - GUJARAT HIGH COURT] Hon`ble Supreme Court in CIT v. Max India Ltd. [2007 (11) TMI 12 - SUPREME COURT] reiterated that the phrase "prejudicial to the interests of the Revenue" as used in section 263(1) of the Act must be read in conjunction with the expression "erroneous" and unless the view taken by the Assessing Officer is found to be unsustainable in law, the powers under section 263 of the Act cannot be invoked. The order passed by the AO, in our opinion, shall be deemed to be erroneous in so far as it prejudicial to the interest of the Revenue, if the Pr. CIT would have specifically pointed out which of inquiries or verification should have been carried out by the AO in this regard and the AO failed to carry out those inquiries and verification as desired by the Pr. Commissioner of Income-tax. Since the Pr. CIT has not suggested the basis of inquiry or verification to be carried out by the AO, the order passed by the AO cannot be deemed to be erroneous in so as far as it is prejudicial to the interest of the Revenue. We are of the opinion that the AO has adopted one possible legal view sustainable in law on the issue and mere invoking proviso based on revenue audit objection amounts non application of mind. Merely just because the view taken by the AO was not found acceptable does not mean that the AO has failed to make requisite enquiries. Thus, the view taken by the AO was plausible view, which cannot be disturbed by the Pr.CIT. Therefore, we find that twin condition were not satisfied for invoking the jurisdiction under section 263 of the Act. Therefore, in absence of the same the ld. Pr.CIT was not correct in exercise the jurisdiction under section 263 of the Act. In view of these facts and circumstances, we quash the impugned order passed under section 263 of the Act and allow the appeal of the assessee.
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