2025 (7) TMI 29 - AT - Income Tax

Revision u/s 263 - treating order erroneous and prejudicial to the interest of the revenue as AO has not inquired on the interest claimed by the assessee - case of the Revenue that the assessee has claimed the payment of interest of loan as business expenses and observations of the PCIT were that loan taken by the assessee has not been utilized for the purpose of business and hence the assessee is not entitled for the deduction of interest paid. HELD THAT - PCIT has partly set aside the order of the AO in order to verify the applicability of provisions of sec.14A as well as the utilization of loan borrowed by the assessee. Therefore we are of the view that no prejudice should be caused to the assessee in case the assessee substantiate its claim in the remand proceedings then no addition is warranted. Therefore we do not find any infirmity in the order of the PCIT it is accordingly upheld. Appeal filed by the assessee is dismissed.

Summary

The Appellate Tribunal (ITAT Cochin) dismissed the assessee's appeal against the Principal Commissioner of Income-tax's (PCIT) order dated 28th February 2025 for AY 2020-21. The PCIT, invoking section 263 of the Income-tax Act, held the Assessing Officer's (AO) order erroneous and prejudicial to revenue as the AO failed to inquire into the interest claimed by the assessee on a loan, which the PCIT found was not utilized for business purposes, disallowing the interest deduction. The ITAT observed that the PCIT's order partly set aside the AO's assessment to verify applicability of section 14A and loan utilization. The Tribunal held that "no prejudice should be caused to the assessee" and if the assessee substantiates its claim during remand proceedings, no addition would be warranted. Finding no infirmity in the PCIT's order, the ITAT upheld it and dismissed the appeal.