TMI Blog2017 (1) TMI 252X X X X Extracts X X X X X X X X Extracts X X X X ..... the error in the assessment order - Held that:- The impugned orders observe that the Assessing Company during the previous year, relevant to the Assessment Year 2009-10, has not commenced the business of development of SEZ/Real Estate and that the Company had merely obtained loan from the holding company amounting to ₹ 49,81,00,000/- in the financial year 2007-08 and utilized it for investing in share of subsidiary company M/s. Zuari Developers Pvt. Ltd., to the extent of ₹ 8,26,75,564/- and giving loans to subsidiary company to the extent of ₹ 42,16,40,630/-. The interest paid on the loans amounted to ₹ 3,56,51,678/- and other incidental expenses, amounting to ₹ 4,69,544/- were charged to the Profit and Loss A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act for short) and the order dated 16th February, 2015 passed by the Income Tax Appellate Tribunal ( ITAT for short) on the appeal preferred against the order of the CIT. On 4th April, 2016, the appeal was admitted on the following substantial question of law : Whether the authorities below were justified to uphold the powers exercised under Section 263 of the Income Tax Act by CIT without recording a finding that the Assessment Order is erroneous and prejudicial to the interest of Revenue and that the assessment in the previous assessment years was accepted by the Revenue ? 2. The appellant Company was incorporated on 6th December, 2006 under the name M/s. Zuari SEZ Ltd. with the objective to set up and develop Specia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced assessment is completed as under. Computation of income Total income as per return Nil. 4. The assessee company was served with notices dated 25th October, 2013 under Section 263 of the Income Tax Act for the A.Y. 2009-10 stating that the above assessment order was erroneous and prejudicial to the interest of revenue as the assessing officer had not looked into the following aspect while completing the assessment. During the previous year relevant to the assessment year the company has not commenced its business of development of SEZ/Real estate. The company has obtained loans from holding company amounting to ₹ 49,81,00,000 in the F.Y.2007-08 and utilized for investing in shares of subsidiary company M/s. Zuari De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fresh order after verifying the claim of the assessee company in respect of carry forward of the loss of ₹ 36109708/-. 6. The assessee company challenged the order of CIT by preferring appeal to the ITAT contending that invoking of jurisdiction under section 263 of the Income Tax Act by the CIT was erroneous because the assessment order was neither erroneous nor prejudicial to the interest of the revenue and that it had been passed after making detailed enquiries during the course of assessment proceedings. It was also contended that the CIT erred in ignoring the fact that the business of the appellant was set up as well as commenced during AY 2008-09 when it had borrowed money from holding company and lent it to subsidiary compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT that the order sought to be revised was erroneous or prejudicial to the interest of the Revenue. He argues that it was imperative for the CIT to give positive finding that the order of the Assessing Officer was erroneous and not in the interest of the Revenue, and for this reason, the first impugned order is invalid. Mr. Kapoor further submits that it is established principle of law that for an order to be termed as erroneous it must be not in accordance with law, also for the order to be held prejudicial to the interest of the Revenue, the consequence of the erroneous order must be, the revenue to the State either has not been realised or cannot be realised. This fact must be established on the basis of the material on record. In sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any during the previous year, relevant to the Assessment Year 2009-10, has not commenced the business of development of SEZ/Real Estate and that the Company had merely obtained loan from the holding company amounting to ₹ 49,81,00,000/- in the financial year 2007-08 and utilized it for investing in share of subsidiary company M/s. Zuari Developers Pvt. Ltd., to the extent of ₹ 8,26,75,564/- and giving loans to subsidiary company to the extent of ₹ 42,16,40,630/-. The interest paid on the loans amounted to ₹ 3,56,51,678/- and other incidental expenses, amounting to ₹ 4,69,544/- were charged to the Profit and Loss Account as expenses incurred during the P.Y. relevant to the assessment year 2009-10. On the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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