TMI Blog2018 (8) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 for Assessment Year 2012-13. The assessee has raised the following grounds of appeal: The Learned PCIT erred in facts, in law and under the circumstances of case by 1 a) Incorrectly initiating revision proceedings u/s 263 of Income Tax Act. b) Erred in making revision in Assessment Order passed u/s 143(3) dt.09.02.2015 merely by observing that assessee has made irregular adjustment ₹ 1,08,74,428/-. c) The Learned PCIT incorrectly opined that assessment made is erroneous before initiating proceeding, hence, revision proceeding u/s 263 initiated is required to be cancelled / annulled. d) The Learned PCIT fail to appreciate that the Assessment Order passed u/s 143(3) by AO is made after considering all the facts, and application of mind by AO in allowing the deduction of interest expenses, hence, order passed u/s 143(3), cannot be said to be erroneous. 2 a) Incorrectly observed that interest expenses amounted to ₹ 1,08,74,428/- borrowed is not used for construction / business, hence no amount of interest is required to be capitalized under the law. b) The Learned PCIT fail to appreciate that interest income earned on loan and interest expenses is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the assessee was not accepted by the ld. PCIT and set-aside the assessment order dated 09.02.2015 to the limited extent and direct the Assessing Officer to assess income of ₹ 1,08,74,428/- under the head Income from Other Sources and disallowed the entire interest expenses of ₹ 2,79,72,158/-. The Assessing Officer was also directed to capitalize the disallowed interest to work-in-progress (WIP) after proper verification. Hence, aggrieved by the order of ld. PCIT, the assessee has filed the present appeal before us. 3. We have heard the submissions of the ld. Authorized Representative (AR) of the assessee and the ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee submits that during the assessment, the Assessing Officer raised the proper queries related with the secured and unsecured loan and their utilization vide notice dated 08.07.2014 under section 142(1) of the Act. The Assessing Officer also required the name and address of the parties to whom the loan were advanced and amount of interest charged. The assessee vide its reply dated 03.02.2015 furnished all the details bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ground that in the opinion of the ld PCIT, the Assessing officer carried out insufficient enquiries or that a further probe should have been made by the Assessing Officer or that as per ld PCIT some more revenue could have been fetched based on a different opinion entertained by the Ld PCIT. In support of his submission the ld. AR for the assessee relied on the decision in CIT Vs Nirav Modi (2017) 390 ITR 292 (Bom) [SLP in the above case has been dismissed holding that there are no reasons to entertain the SLP reported in (2017) 244 Taxman 194 (SC)] and MOIL Vs CIT (2017) 396 ITR 244 (Bom), CIT Vs Vikas Polymers (2012) 341 ITR 537 (Delhi) and CIT Vs Krishna Capbox P. Ltd. (2015) 372 ITR 310 (Allahabad). 8. On the other hand the ld. DR for the revenue supported the order of ld. PCIT. The ld. DR for the revenue submits that the assessee borrowed the funds for Hyderabad Project. The part of the amount was given by the assessee to third party on the pretext of advance. The advance was not given for the purpose of business. The interest income was not examined by assessing officer in a particular manner. The interest rate was not examined by assessing officer. Therefore, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course permissible 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 CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of revenue. Unless the view taken by ITO is unsustainable in law. Hon ble Jurisdictional High Court in case of CIT Vs Gabriel India Ltd 203 ITR 108 (Bom), held that The power of suo moto revision under subsection (1) of section 263 of the Act is in the nature of supervisory direction and can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the CIT to exercise the power of revision under this sub section viz ( 1) the order should be erroneous and ( 2) by virtue of the order being erroneous prejudice must have been caused to the interest of the revenue. And order cannot be termed as erroneous unless it is not in accordance with law. If ITO. Act in accordance with law. Make certain assessment; the same cannot be branded as erroneous by the CIT simply because according to him, the order should have been written more celebratory. This section does not visualise a case of substitution of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the Assessing Officer. 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 the Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue, unless the view taken by the Income-tax Officer is unsustainable in law. 11. In view of the above legal position, now, we shall consider and examine the issues on which the assessment order was revised. The perusal of the assessment order passed under section 143(3) dated 09/02/2015 clearly shows that the assessing officer while passing the assessment order, the assessing officer examined and raised the inquiry with regard to the payment of interest paid should not be capitalized toward the work in progress. The assessee furnished its reply dated 03.02.2015. In the reply the assessee specifically contended that the borrowing cost are not to be capitalized on the project when t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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