2023 (3) TMI 614 - AT - Income Tax

Revision u/s 263 by CIT - excessive interest has been claimed on the closing balances of capital of partners which includes this claim on account of inadvertent mistake of share of loss in the aforesaid JV - HELD THAT:- We take note of the fact that assessee while arriving at the balances of capital of the partners in the assessee firm, incorrectly took the share of loss in the aforesaid JVs as share of profit. It is quite understandable that interest on the partners’ capital balance must have been calculated on the figure including this wrong treatment. The apprehension of Ld. Pr. CIT that excessive interest has been claimed on the closing balances of capital of partners which includes this claim on account of inadvertent mistake of share of loss in the aforesaid JV. However, the facts do not corroborate the apprehension of the Ld. Pr. CIT. This makes us understand that there is no prejudice to the interest of revenue owing to the inadvertent mistake.

CIT has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of the revenue, for passing the impugned order u/s 263 of the Act. We observe that in the course of proceedings u/s 263 of the Act before the Ld. PCIT, assessee had furnished the relevant details and explained the issues raised through the show cause notice issued by the Ld. PCIT, supporting its contentions by corroborative documentary evidences.

We find that the issue in the present case is purely on facts verifiable from the records of the assessee which revealed that the issue raised by the Ld. Pr. CIT for invoking revisionary proceedings are ill founded. We also note that observation made by the Ld. Pr. CIT for the potential under statement of income owing to this inadvertent mistake of treating the share in loss as share in profit of one JV in the subsequent assessment year i.e. 2017-18 does not justify the present proceeding of revision undertaken by the Ld. Pr. CIT u/s. 263 - The mistake committed by the assessee is rectifiable in its books of accounts and has to be dealt in the respective assessment year. Accordingly, on the issue raised by the Ld. Pr. CIT in the present revisionary proceeding action u/s 263 of the Act is not justifiable, we therefore, quash the impugned order u/s. 263 - Appeal of assessee allowed.