TMI Blog2015 (9) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Accordingly this ground is not accepted. In the present case, the assessee has shown the investment as stock-in-trade as noted by the ld.CIT that the security was sold within one year and three months of the purchase that it shows that it was not the permanent investment of the bank as the bank has not waited till the maturity of the security. Therefore, in our considered view, the ld.CIT was not justified in exercising her jurisdiction u/s.263 of the Act - Decided in favour of assessee. - I.T.A. No. 881/Ahd/2012 - - - Dated:- 21-9-2015 - Shri Pramod Kumar And Shri Kul Bharat, JJ. For the Appellant : Shri S.N.Soparkar, AR For the Respondent : Shri D.V. Singh, Sr. 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-I, Baroda [ CIT in short] dated 29/02/2012 pertaining to Assessment Year (AY) 2007-08. The Assessee has raised the following grounds of appeal:- 1. The Ld. Commissioner of Income Tax-I, Baroda has erred in law and in facts in the revision of the order of Assessing Officer made u/s.143(3) dated 27.11.2009 holding the same as prejudicial to Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e settled principles of law. He submitted that the ld.CIT initiated the proceedings on the basis that the loss of ₹ 30,80,000/- was debited to Investment depreciation fund in the Balance Sheet and also reduced from the total business income. As per section 70 of the Act, the loss on account of sale of Government securities is Long Term Capital Loss and is required to be set off against any capital gains only and not from other heads of income . He submitted that this issue was duly considered by the AO as the AO had made a specific query. In support of this contention, he drew our attention towards page No.49 of the paper-book, wherein as per clause(8), the AO has asked to explain how the amount of ₹ 380,80,000/- is an allowable expense. Further, he submitted that the other reasoning of the ld.CIT was that the assessee had claimed exempted interest income and dividend income OF ₹ 15,97,250/-. On scrutiny of balance-sheet as on 31/03/2007 revealed that there were deposits worth ₹ 34,48,33,450/- (current account, saving account and fixed deposit account) on which assessee has paid interest of ₹ 2,75,55,485/- (as per P L account). Further, verificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment order as to how the loss claimed by the assessee is a business loss and not a capital loss. Moreover, the AO has not given any finding as to how the Rule 8D would not be applicable on the facts of the present case. 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the decisions relied upon by the ld.Sr.counsel for the assessee. The law is well settled that the power conferred u/s.263 of the Act on the ld.CIT is to be exercised with two basic ingredients are fulfilled; namely, the order of the AO is erroneous as well as prejudicial to the interests of the Revenue and if one of the ingredients is missing, then the ld.CIT would not be justified for exercising the jurisdiction u/s.263 of the act for revising the order passed u/s.143(3) of the Act. The order of the AO can be termed as erroneous if the AO has not carried out any enquiry with regard to any claim even if the enquiry has been carried out. The finding on the particular claim or the issue is contrary to the provisions of law or the law laid down by the Court on the particular issue. In the case in hand, there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. 4.2. Further, it was contented that the second ground which is in respect of invocation of provisions of section 14A of the Act, the assessee had not utilized interest-bearing fund for purchasing the securities which has resulted into the earning of exempted income. It was contented that both these issues were thoroughly examined by the AO and the AO had rightly allowed the claim of the assessee. It was further contended that if anything adverse is found against the assessee that is required to be recorded in the assessment order but not recording the finding, however after thoroughly examining and satisfying itself would not make an order of the AO as erroneous and prejudicial to the interests of the Revenue. Thus, on both the counts, the ld.CIT was not justified in invoking the provisions of section 263 of the Act. 4.3. After considering the totality of the facts and the case-laws as relied upon by the ld.counsel for the assessee, we find force into the contention of the ld.counsel for the assessee that the ld.CIT was not justified in terming the order of the AO as erroneous and prejudicial to the interests of the Revenue. The Hon ble High Court of Gujarat in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot inclined to entertain this Tax Appeal. However, we should not be seen to have confirmed the Tribunal's view on the aspect that in absence of Rule 8D, no disallowances can be made under Section 14A of the Act, by proportionate bifurcation of the expenditure. 12. In the instant case, however, as discussed here-in- above, it clearly emerges from the material on record that no expenditure was incurred for earning exempted income and that being the question of fact, we hold that disallowance of 1% of interest expenditure artificially or on the basis of assumption rightly has not been sustained by the Tribunal. 4.4. The assessee has demonstrated that investments were made out of interest-free funds. Under these facts, the ld.CIT(A) was not justified to restore the issue with regard to disallowance of expenditure u/s.14A of the Act to the file of AO for fresh decision. In respect of Long term capital loss, it is demonstrated by the assessee that investments in government securities, is normal business activity of the assessee. The Coordinate Bench (ITAT Mumbai I Bench) in ITA Nos.1081, 1082 1191/Mum/2004 in the case of Dy.DIT (Intl. taxation) in paras-5 6 decided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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