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2015 (10) TMI 2246

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..... e year which also means that the business has been commenced during the year under consideration and the expenditures claim as prior period expenditure are allowable u/s 35D of the Act. - Decided in favour of assessee. Taxability of interest income - Held that:- Assessing Officer has taken a view which may be different from the view of the Ld. Commissioner and assuming that the view taken by the Assessing Officer is a loss to the revenue but the Hon'ble Supreme Court in Malabar Industrial Co. (2000 (2) TMI 10 - SUPREME Court) has held that "every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue", for example, when an ITO adopted one of the courses presumably in law and it has resulted in loss of revenue or where two views are possible and the ITO has taken one view with which the Ld. Commissioner does not agree, it cannot be treated as an order which is erroneous or prejudicial to the interest of the revenue unless the view taken by the ITO is unsustainable in law. Thus the assessment order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impug .....

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..... s has been allowed by the A.O. However, the Hon'ble Supreme Court while referring to the decision in the Bokaro Steel in the case of Bongaigaon Refinery Petrochemicals Ltd. vs CIT reported in 251 ITR 329, has held that interest income is chargeable to tax as 'income from other sources'. Hence, it appears that the Assessing Officer failed to consider/examine these issues during the course of assessment proceedings. Consequently, there is escapement of income to the tune of ₹ 43,09,002/- resulting in short levy of tax amounting to ₹ 13,29,481/- In view of the above, the assessment order passed by the ITO.3(3)(3), Mumbai dated 30.11.2011 appears to be erroneous and prejudicial to the interest of Revenue and it is evident that the Assessing Officer has committed the lapse of not applying his mind to the issues discussed above. I, therefore, propose to pass such order thereon as the circumstance of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment under the provisions of Section 263 . In response to the aforementioned notice, the assessee filed a detailed reply da .....

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..... ated on 10.07.2007. The business has been commenced only during the year under consideration. Our view is also fortified by the fact that in the Balance sheet under the head current assets, loans and advances project work-in-progress as on 31.03.2008 was only ₹ 13,373/- and as on 31.03.2009 which is the impugned financial year, WIP is shown at ₹ 1,47,77,27,412/- which means that the entire purchase of land was done during the year which also means that the business has been commenced during the year under consideration and the expenditures claim as prior period expenditure are allowable u/s 35D of the Act. 6. In so far as the second issue relating to taxability of interest income is concerned, the CIT has heavily relied upon the judgment of Hon'ble Bombay High Court in the case of Thane Electricity Supply (206 ITR 727). The observation of the CIT is that the judgment of the Hon'ble Madras High Court is not applicable in the State of Maharashtra. Without going deep into these observations, these observations of CIT itself shows that two views are possible and the Assessing Officer has followed one possible view, therefore, invoking the jurisdiction u/s 263 o .....

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..... his judgment itself, could not have differed with another Division Bench of the same strength in the case of Godavaridevi Saraf's case [1978] 113 ITR 589 (Bom). Therefore, it cannot be open to a subordinate Tribunal like us to disregard any of the judgments of the Hon'ble Bombay High Court, whether in the case of Thana Electricity Supply Ltd. [1994] 206 ITR 727 or in the case of Godavaridevi Saraf's case [1978] 113 ITR 589. It is indeed our duty to loyally extent utmost respect and reverence to the hon'ble High Court, and to read these two judgments by the Division Benches of equal strength of the hon'ble jurisdictional High Court, i.e., in the cases of Thana Electricity Supply Ltd. [1994] 206 ITR 727 (Bom) and Godavaridevi Saraf's case [1978] 113 ITR 589 (Bom), in a harmonious manner And at Para 13, the Tribunal has further observed as under :- It is thus clear that while the issue before the hon'ble High Court in Thana Electricity Supply Ltd.'s case [1994] 206 ITR 727 (Bom) was whether or not a High Court should follow another High Court, whereas in Godavaridevi Saraf's case [1978] 113 ITR 589 (Bom), their Lordships dealt with the is .....

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