TMI Blog2013 (12) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... eing erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue” - In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not - The assessee has been consistently claiming the income earned by way of interest as business income, the AO has made enquiry by way of questionnaire and assessee has given reply thereof - The AO has applied his mind under the facts and circumstances – Decided in favour of assessee. - I.T.A. No. 853/Ahd/2013 - - - Dated:- 31-10-2013 - Shri N. S. Saini And Shri Kul Bharat,JJ. For the Appellant : Shri S. N. Soparkar, AR For the Respondent : Shri Subhash Bains, CIT-DR ORDER Per Shri Kul Bharat, Judicial Member :- This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax-II, Ahmedabad ('CIT' for short) dated 23/01/2013 pertaining to Assessment Year (AY) 2008-09. The assessee has raised the following grounds of appeal:- GROUNDS OF APPEAL AGAINST ORDER DATE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsorbed depreciation and business loss. (iii) Any other reliefs and deductions as the facts and circumstances of the case requires to be granted. [8] The appellant craves leave to add, amend, alter, modify the grounds o9f appeal on or before the time of hearing. 2. Since all the grounds are inter-connected, therefore the same are being disposed of together. 3. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the scrutiny assessment was completed u/s.143(3) of the Income Tax Act,1961. Subsequently, the CIT issued notice u/s.263 of the Act on 16/10/2012. The contents of the notice are reproduced hereinbelow:- "2. In this case, the assessee had filed his return of income on 29/08/2008 declaring total income at Rs.NIL after claiming set off of brought forward business loss against income of Rs.32,81,018/-. The case was selected for scrutiny and finalized u/s.143(3) of the IT Act on 15.11.2010 at total income Nil after allowing set off of brought forward business losses of Rs.35,96,059/-. The addition of Rs.1,37,598/- by way of making disallowance of proportionate expenses u/s.14A. 3. In this case, scrutiny of the assessment re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. D.G. Housing Projects Ltd. reported at (2012) 20 taxmann.com 587 (Delhi). On the contrary, ld.CIT-DR supported the orders of the CIT and submitted that assessment order is erroneous and prejudicial to the interest of the Revenue. Reliance is placed on the decision of the Hon'ble Gujarat High Court rendered in the case of Adani Agro (P) Ltd. Vs. DCIT reported at 32 taxmann.com 356(Guj.) dated 10th December-2012 and also the decision of Hon'ble Coordinate Bench (ITAT 'B' Bench Ahmedabad) rendered in the case of Ratnesh Metal Industries Pvt.Ltd. in ITA No.529 530/Ahd/2012, dated 15/03/2013. Both the parties have filed written submissions in support of their contentions. 5. We have heard the rival submissions, perused the material available on record and gone through the order of the ld.CIT. In the written submissions, the brief contention of the Revenue is that the exact quantification of income under various heads including "business income" or "income from other sources" is not arising out of record available with Hon'ble ITAT. The continuation of business and exact figures for carry forward losses/depreciation for particular year ending cannot be conclusively drawn at this sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reply to that notice, it was submitted by the assessee that the assessee-company was established in 1945 and the assessee- company has share capital and free reserves for over several years. The assessee-company received sale proceeds on sale of its various assets. These finances were available for the purpose of carrying on business. It was submitted that u/s.56 of the Act, what is taxed is an income from business or profession, cannot be included as income from "other sources". Section 56 clause (id) included the income by way of interest on securities, if the income is not chargeable to income-tax under the head "profit and gains of business or profession" The specific inclusion was made for all income by way of interest on securities and which is also subject to and not being charged under the head "profits gains of business or profession" u/s.56(2)(1)(id) of the Act. Interest income of the company is business income and is taxed for all these years as business income of the company. The loans and advances are given for earning interest income as company's business. Interest income of Rs.97,60,763/- is not interest from securities. It is interest on loans and advances given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions of the assessee and has not adverted to the same. It is a settled proposition of law that provisions of section 263 of the Act can be invoked by the Commissioner if he found from the records that the assessment order is erroneous and prejudicial to the interest of the Revenue. In the present case, the assessee has explained to the ld.CIT that the assessee-company has been continuously treating the interest income as 'income from business'. It was also submitted on this aspect that the AO has made enquiry and in response to the query of the AO, a detailed reply was submitted and the AO on the basis of reply treated as the 'interest income' as 'business income' as has been done in earlier years. This fact is borne out of the records that the reply was submitted by the assessee- company submitting therein the details of loans and advances and interest income received from such loans and advances treated as business income of the company. The CIT has not applied his mind on the submissions made by the assessee-company. The Hon'ble Apex Court in the case of CIT vs. M/s.Excel Industries Ltd. has followed the decision of the Privy Counsel reported at 1926 AC 155 (PC in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not". Similar view has been expressed by the Hon'ble Delhi High Court in a recent decision rendered in the case of Director of Income-tax vs. Jyoti Foundation reported at (2013) 357 ITR 388 (Delhi). The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (200) 243 ITR 83 (SC) has held that the CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent, if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue, recourse cannot be had to s. 263(1). In the present case, the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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