TMI Blog2017 (5) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... . While accepting the fact that the FDR was for obtaining letter of credit to purchase machinery but so far as interest earned thereon is concerned, that is nothing but income through other sources, as such, the Commissioner of Income Tax rightly treated the same as income taxable. So far as the second question is concerned as to whether the Commissioner of Income Tax was justified in invoking powers under Section 263 of the Act of 1961 by holding that the enquiry conducted by the Assessing Officer before the assessment order was neither proper nor adequate, we would like to state that the order passed by the Assessing Officer nowhere reflects about any enquiry said to be made. It simply refers the explanation given by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue, as held by the CIT in his order u/s.263 of the I.T. Act ? In brief facts of the case are that the respondent-assessee filed return with no income, hence, that was selected under scrutiny and a notice as per provisions of Section 143(2) of the Income Tax Act, 1961 (hereinafter referred to as the Act of 1961 ) was issued. The Assessing Officer considering the explanation given by the assessee arrived at the conclusion that since no expenditure or depreciation claimed by the assessee, the addition sought to be made is set off and the returned income be treated as nil. The Commissioner of Income Tax on subsequent examination of record found the order passed by the Assessing Officer erroneous and prejudicial to the interest of rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment without proper and adequate enquiry and that was erroneous and prejudicial to the interest of revenue, as such, the Income Tax Appellate Tribunal erred while setting aside the order under Section 263 of the Act of 1961. Heard learned counsel for the appellant. None is present on behalf of the respondent-assessee. As already stated, the Commissioner of Income Tax while invoking powers under Section 263 of the Act of 1961 held that the interest earned on FDRs was taxable as income and that could have not been set off by treating the same as margin money required for obtaining letter of credit or bank guarantee etc. The Income Tax Appellate Tribunal negativated the stand of the Commissioner of Income Tax by holding that the Fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borrowed money does not detract anything from the Revenue character of the receipt. The question of adjustment of interest payable by the company against the interest earned by it will depend upon the provisions of the Act. The expenditure would have been deductible as incurred for the purpose of business if the assessee s business had commenced. But that is not the case here. The assessee may be entitled to capitalise the interest payable by it. But what the assessee cannot claim is adjustment of this expenditure against interest assessable under section 56. Section 57 of the Act sets out in its clauses (i) to (iii) the expenditures which are allowable as deduction from income assessable under section 56. It is not the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Income Tax Appellate Tribunal dated 28.3.2003 is set aside. The order passed by the Commissioner of Income Tax invoking powers under Section 263 of the Act of 1961 stands restored. D.B. Income Tax Appeal No.46/2006 This appeal is directed against the order of the Tribunal dtd. 1.4.2005 relating to assessment year 1996-97. It is sequel to the order passed by the Tribunal in ITA No.212/JU/01 on 28.3.2003. The original assessment for assessment year 1996-97 was made at nil income by the assessing officer accepting the contention of the assessee. However, in pursuance of order passed by the CIT in exercise of its power under Section 263, a fresh assessment for the year 1996-97 came into existence which is subject matter of this appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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