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2023 (3) TMI 261 - AT - Income TaxRevision u/s 263 - disallowance u/s 36(1)(iii) - HELD THAT:- We find that the AO only asked the assessee to show cause as to why the interest expense on debentures should not be disallowed being capital in nature and be added back to the total income of the assessee. In its reply assessee submitted that the amount capitalised u/s 36(1)(iii) includes proportionate interest on debentures and the remaining amount was claimed as revenue expenses by the assessee. Thus, it was submitted by the assessee that it has already capitalised the interest cost on debentures till the Unit-2 was put to use. Though the assessee has provided detailed working of computation of disallowance u/s 36(1)(iii) however, it is not evident from the record that any specific enquiry/investigation/examination of such details was ever conducted by the AO or any show cause notice was issued by the AO to examine the other components of expenditure during the assessment proceedings. The assessee has also not brought on record any show cause notice issued by the AO on this issue. Since the issue under consideration during the assessment proceedings was only confined to the disallowance of interest expenses on debentures, therefore, we are of the considered view that revision proceedings under section 263 have correctly been initiated in respect of this issue. Accordingly, to this extent, the impugned order passed u/s 263 is upheld. Applicability of section 79 - As held that the assessee has diluted shareholding in respect of major shareholder vis-à-vis the preceding years in which loss was incurred, and thus as per section 79 he assessee is not entitled to carry forward earlier years brought forward losses, which was allowed by the AO. Since no enquiry in this regard, which was warranted in the facts and circumstances of the case, was made by the AO resulting in the assessment order to be erroneous insofar as prejudicial to the interest of the Revenue. During the hearing, Tribunal in Khajrana Ganesh Properties Pvt Ltd. [2017 (9) TMI 1726 - ITAT MUMBAI] and Instant Traders Private Limited [2018 (9) TMI 211 - ITAT MUMBAI] wherein it has been held that the issue whether the loss in the year may be carried forward to following year and set off against the income of subsequent year is liable to be determined by the Assessing Officer who deals with the assessment of such a subsequent year. Thus, we are of the considered opinion that this issue was duly examined by the Assessing Officer during the scrutiny assessment proceedings. Therefore, the impugned revision order passed under section 263 of the Act is set aside to this extent. Taxability of the share premium received by the assessee u/s 56(2)(vii)(b) - One of the requirements was that the loan given by the lender banks are to be converted into equity shares/preference shares and part of promoter shares were also to be transferred to the lender bank. In pursuance of the above scheme, the assessee company, during the year, converted the existing loan given by the banks into equity shares. Accordingly, the shares were issued to banks, namely, Allahabad Bank, Bank of India, Corporation Bank, Union Bank of India and Andhra Bank. We find that the disclosure regarding the issuance of shares to the aforesaid bank was also made by the assessee in its audited financials. Thus, it is evident that the circumstances under which shares were issued to the banks were completely different than the shares issued to M/s Prism Cement Ltd., as the earlier was under the Scheme/Guidelines issued by RBI. Thus we are of the considered opinion that this issue was duly examined by the AO during the scrutiny assessment proceedings. Therefore, the impugned revision order passed under section 263 of the Act is set aside to this extent. Grounds raised by the assessee are partly allowed.
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