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2024 (2) TMI 1333 - AT - Income TaxRevision u/s 263 - Validity of limited scrutiny proceedings - as per CIT AO has passed assessment order without proper verification and interest expenses claimed as deduction u/s 57 were required to be disallowed - assessee submitted that the assessment proceedings were selected for limited scrutiny with the specific purpose of enquiry into claim of interest expenses u/s 57. HELD THAT:- On going through the contents of the 263 order and the assessment records, we observe that firstly there was no evidence lack of enquiry on part of the AO on the aspect of allowability of claim of deduction u/s 57 of the Act. We observe that the case of the assessee was opened under limited scrutiny to examine whether the deduction against interest income from other sources has been correctly shown in the return of income and also to examine whether deduction claimed on account of interest expenses is deductible. The assessee had also filed replies to the query raised by the Assessing Officer during the course of assessment proceedings. Even before PCIT, the assessee had filed written submissions giving the basis for claim of deduction of interest expenses u/s 57 by stating that the aforesaid interest income had been incurred exclusively for the purpose of earning interest income and accordingly the order passed by the AO was not erroneous and prejudicial to the interest of the Revenue. Assessee had filed detailed written submission before Ld. PCIT explaining that the notice issued u/s 263 was on an incorrect understanding / appreciation of the facts of the assessee’s case and the assessee had submitted that the interest expenditure had been incurred wholly for the purpose of earning interest income. Assessee had also submitted that only that part of interest expenditure had been claimed by way of deduction u/s 57 which had been incurred for earning interest income and the proportionate part of the interest expenditure which was not utilized for earning interest income had not been claimed by the assessee as deduction under Section 57 of the Act. As PCIT did not give any specific finding to controvert the written submissions filed by the assessee during the course of 263 proceedings and proceeded to hold that the assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Accordingly, PCIT has erred in facts and law in holding that the assessment order passed by the Assessing Officer in the instant case is erroneous and prejudicial to the interest of the Revenue. Appeal of the assessee is allowed.
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