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2022 (9) TMI 1184 - AT - Income TaxRevision u/s 263 by CIT - Addition u/s 41(1) - liability towards the share application money as on the balance sheet date and has returned an incorrect finding - HELD THAT:- Where the assessee receives share application money, it doesn’t incur any loss, expenditure or trading liability and the question of an allowance or deduction made in the assessment for any year in respect of loss, expenditure or trading liability doesn’t arise at first place. Therefore, the first condition for invocation of provisions of section 41(1) is not satisfied in the instant case. As a result, the second condition which is an offshoot of the first condition where it says that the assessee has obtained any amount in respect of “such” loss, expenditure or some benefit in respect of “such” trading liability by way of remission or cessation thereof, the question of invocation thereof again doesn’t arise as the phrase “such” has to be read in context of first condition where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. We are of the considered view that there is no legal basis for invocation of provisions of section 41(1) in respect of share application money which continues to remain outstanding pending allotment of shares and continues to remain reflected in the balance sheet of the assessee company as on 31/03/2016 and thus, we set-aside the findings of the ld PCIT in this regard where he says that the order so passed by the AO is erroneous and prejudicial to the interest of the Revenue for non-invocation of section 41(1) and carrying out requisite enquiries in this regard. TDS u/s 194A - Non-deduction of TDS on interest payment to PSIDC, on perusal of the balance sheet and the profit/loss of the assessee company for the financial year relevant to impugned assessment year - HELD THAT:- The application of relevant provisions have to be examined in its entirety including the relevant exemption provisions and tested based on facts and circumstances of each case and merely stating that certain provisions are applicable without establishing its applicability to the facts of the given case cannot be a basis to hold that the order passed by the AO is erroneous as he has failed to apply the relevant provisions. Further, even where it is held that interest so paid is subject to provisions of section 194A of the Act, how the order passed by the AO can be held as erroneous where at first place there is no claim of such interest payment made by the assessee while filing its return of income for the impugned assessment year and we find that the ld PCIT has not addressed the same as well. We find that by virtue of repayment of PSIDC loan, there is a reduction rather than increase in secured loan during the year under consideration and one of the matters for which the case of the assessee was selected for limited scrutiny, even going by the phraseology employed by the ld PCIT in the show cause notice where he says that the case was selected for examining large increase in unsecured loans during the year, we find that matter of repayment of secured loan including the interest thereon was not a subject matter of limited scrutiny and the ld PCIT cannot enlarge the scope of assessment proceedings by invoking provisions of section 263 of the Act. The impugned order passed by the ld. Pr.CIT u/s 263 cannot be sustained in the eyes of law and the same is hereby set aside and the order passed by the AO is sustained. Appeal of assessee allowed.
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