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2019 (10) TMI 1170 - AT - Income TaxRevision u/s 263 - AO did not made any inquiry,verifications and investigation before allowing interest payments paid to HUF as business deductions - HELD THAT:- AO has not made any inquiry, verifications and investigation as to whether HUF is partner of the assessee firm or karta is partner of the assessee firm representing HUF. AO has allowed deduction of interest expenditure paid to M/s Ashok Kumar Fomra (HUF) as revenue expenses on advances appearing in books of accounts of the assessee having been received from said HUF, without going into aspect that HUF cannot be partner in partnership firm as per ratio of decision of Hon’ble Supreme Court in the case of Rashik Lal & Co [1997 (12) TMI 2 - SUPREME COURT] . It is not inquired, verified or investigated by the AO whether Mr Ashok Kumar Fomra is partner in assessee firm in his individual capacity albeit representing HUF or HUF is partner in assessee firm. This fact finding has to be recorded by the AO to adjudicate dispute between rival parties. PCIT has rightly invoked his revisionary powers under provisions of Sec.263 of the 1961 Act and rightly cancelled assessment order dated 24.11.2016 passed by the AO u/s 143(3) by holding the same to be erroneous so far as is prejudicial to the interest of Revenue as the AO did not made any inquiry,verifications and investigation before allowing interest payments paid to HUF as business deductions. PCIT has rightly invoked extraordinary revisionary powers as are enshrined in Section 263 as no inquiry, verifications and ivestiigations were made by the AO before allowing deduction of interest expenditure payments to HUF. It is not brought on record by the AO whether Karta is partner in his individual capacity albeit representing HUF or instead HUF is partner in the assessee firm directly - Decided against assessee.
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