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2021 (1) TMI 78 - AT - Income TaxRevision u/s 263 - Interest on capital of partners & remuneration to partners - HELD THAT:- There is no change in the rate of interest clause in the supplementary deed dated 30th March 2012 and such interest has been allowed in the past on that basis and also in the immediately preceding assessment year i.e. 2013-14 where the order was passed u/s 143(3). Further, the salary paid to the partners is within the limit prescribed u/s 40(b)(v) which is as per the original deed dated 4th February, 2008. Even otherwise also on the basis of supplementary partnership deed dated 30th March, 2012 effective from 1.4.2012 i.e relevant to assessment year 2013-14 the salary to partners has been allowed at ₹ 13,20,000/- in the order passed u/s 143(3). We find no reason as to why the AO shall again go through the same when the salary paid to the partners is in consonance with the salary paid in assessment year 2013-14. Correctness of computation of capital gain - Cost of improvement and the cost of properties for computation of LTCG is concerned, we find these are already shown in the balance sheet since assessment year 2001-02 which is not in dispute. Therefore, once the assessee sells these properties during impugned assessment year there was no necessity for the AO to again re-examine the cost of purchase and cost of improvement once those were accepted in the past years u/s 143(3) proceedings. So far as the Deposits and withdrawals in the capital account of the partners are concerned, we find these are already recorded in the books of accounts which were produced before the AO who has examined the same on test check basis and has passed the order u/s 143(3). Therefore it cannot be said that the order passed by the AO is erroneous and prejudicial to the interest of the revenue on this issue. It is the settled proposition of law that for invoking jurisdiction u/s 263 of the Act the twin condition namely that a) the order is erroneous and (b) the order is prejudicial to the interest of the revenue must be satisfied. In the instant case the order may be prejudicial to the interest of revenue but certainly cannot be called as erroneous. We, therefore, find force in the arguments of the Ld. Counsel for the assessee that the Ld. PCIT(A) has exceeded his jurisdiction by invoking the provision of section 263 of the Act for the impugned assessment year. We, therefore, set aside the order of the Ld. PCIT and the grounds raised by the assessee are allowed.
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