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2021 (11) TMI 494 - ITAT HYDERABADRevision u/s 263 by CIT- AO has not addressed the issue to the extent it deserves and also there was no relevant enquiries conducted to allow the claim of the assessee company under the head “loss on assigned portfolio.” - HELD THAT:- AO without applying his mind, failed to make requisite enquiries and without going into the details and without investigating the issue in detail, allowed the claim of the assessee. Therefore, it tantamount to non-application of mind on the part of the AO. Assessee did not furnish the data to verify the working of the loss and also repayment schedule furnished to the assignee bank(s), agreements and also there was no relevant requisite enquiries conducted by the revenue, but allowed the claim of the assessee. The questionnaire issued by the AO and the reply filed by the assessee, which is not in consonance with the questionnaire is erroneous as per law and claim made by the assessee has been allowed by the AO is without justification as per the provisions of the IT Act is prejudicial to the interests of revenue. Before invoking the provisions us/ 263, the twin conditions must be satisfied, namely, the order is erroneous and prejudicial to the interests of the revenue, which are exist in the instant case and, therefore, the Pr. CIT has rightly invoked section 263 and set aside the order of the AO. Therefore, the order passed by the AO is erroneous and prejudicial to the interests of revenue. AO is first an investigating officer thereafter he is an adjudicator but here in this case, the AO remained silent, but, he ought to have exercised his duty properly. We find substance in the submissions made by the ld. DR. The arguments of the AR is rejected in regard to show cause notice and finding of the Pr. CIT is different because the issues are the loss on assigned portfolio. and the Pr. CIT has rightly exercised his jurisdiction vested u/s 263 and set aside the order of AO - Decided against assessee. Addition u/s 14A r.w.r. 8D - HELD THAT:- It is the duty of the assessee to rebut the findings recorded by the AO, but, he failed to do so. The contentions raised by the ld. AR of the assessee in the written submissions with regard to disallowance of ₹ 6,76,30,358/- u/s 8D(i) is not warranted as the disallowance of under rule 8D(ii) has already been made by the AO, on the ground that the said amount of ₹ 6,76,30,358/- was already included in the total interest expenditure of ₹ 307.90 crores, are not acceptable because the disallowance calculated under rule 8D(i) was directly attributable for earning exempt income and during the course of arguments, the AR of the submitted that during the impugned AY no fresh loans have been taken, is also not acceptable. On examination of the cash flow statements, there is a huge negative cash flow from operations during the year, which clearly shows that the own funds have been exhausted and there is increase in loan funds to the extent of ₹ 177,91,92,156/-. It shows that the assessee has used loan funds for making investments during the year of which income is exempt. Disallowance made by the AO under rule 8D(i) of ₹ 6,76,30,358/- is correct and the CIT(A) was not justified in allowing the appeal of the assessee. Therefore, the disallowance made by the AO under rule 8D2(ii) of ₹ 1,11,434/- is hereby deleted.
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