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2021 (8) TMI 686

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..... or prejudicial to the interest of revenue. 3. The learned ld. CIT-27, has erred in passing an order u/s 263of the Income Tax Act 1961. 4. The appellant reserves the right to add, alter, delete or amend any of the grounds of the appeal cither earlier or at the time of hearing." 2. Briefly stated, the assessee who is a lawyer by profession had e-filed his return of income for A.Y. 2016-17, declaring a total income of Rs. 1,14,72,080/-. Initially the return of income filed by the assessee was processed as such vide an intimation under Sec. 143(1) of the Act, dated 13.02.2016. Subsequently, the case of the assessee was selected for scrutiny assessment under the "Computer Assisted Scrutiny Assessment" (CASS). Accordingly, notices u/ss. 143(2) and 142(1) were issued and served on the assessee. Original assessment was thereafter framed by the A.O vide his order passed u/s 143(3) of the Act, dated 30.11.2017, wherein the returned income of the assessee was accepted as such. 3. After culmination of the assessment proceedings, the Pr.CIT in exercise of the powers vested with him u/s 263 of the Act called for the assessment records of the assessee. On a perusal of the records, it was o .....

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..... dated 28.11.2019 and called upon the assessee to explain as to why the aforesaid order passed by the A.O may not be revised under Sec. 263 of the Act. In reply, the assessee vide his letter dated 13.12.2019 submitted before the Pr.CIT that he had purchased the new office premises No.1001 and 1702 at Brindavan Terrace, Mumbai for a consideration of Rs. 8,56,85,000/-, vide registered agreements dated 13.10.2014 and 25.11.2014 which was partly sourced by loans that were raised from two financial institutions, viz. (i) loan from DHFL (for purchase of office premises No. 1702): Rs. 3,00,00,000/-; and (ii) loan from India Bulls (for purchase of office No. 1001: Rs. 2,59,50,000/-). It was submitted by the assessee that since the aforementioned offices during the year were under renovation and thus, used only for few days, therefore, the assesee had opted not to claim depreciation on the same during the year under consideration. As regards the query pertaining to the claim for deduction of interest expenditure of Rs. 79,67,173/- in his profit and loss account, the bifurcated details as regards the same were furnished by the assessee with the Pr. CIT, which read as under: Sr. No. Name of .....

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..... aid issue. 5. After deliberating at length on the contentions advanced by the assessee, the Pr.CIT was not persuaded to accept the same. On a perusal of the record, it was observed by the Pr.CIT that the A.O while framing the assessment had allowed the assessee's claim for deduction of interest expenditure of Rs. 79,67,173/- that was debited in his 'profit and loss account', without carrying out any proper verification. It was observed by the Pr.CIT that the assessee had himself admitted before him that out of the total interest expenditure of Rs. 79,67,172/- an amount of Rs. 10,91,073/- and Rs. 11,73,230/- pertained to Office No. 1702 and Office No. 1001, respectively, which were purchased by him vide agreements that were registered on 13.10.2014 and 25.11.2014. It was observed by the Pr.CIT, that the assessee had neither furnished any documentary evidence which would reveal that the aforementioned properties were put to use during the year under consideration nor filed the copies of the aforesaid registered agreements. Backed by the aforesaid facts, the Pr.CIT observed that no material was placed on record by the assessee which would reveal that he had received possession of the .....

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..... the ld. A.R that the A.O in his aforesaid notice had specifically queried as regards the assessee's claim for deduction of interest expenditure. Our attention was thereafter drawn by the ld. A.R to the reply, dated 04.02.2017 that was filed by the assessee in compliance to the aforesaid notice u/s 142(1), dated 290.01.2017. It was submitted by the ld. A.R that the assessee at Serial no.9 of his reply had furnished the bifurcated details as regards his claim for deduction of interest expenditure of Rs. 83,61,643/- pertaining to the various loans that were raised from the banks/financial institutions. Backed by the aforesaid facts, it was the claim of the ld. A.R, that now when the A.O in the course of the assessment proceedings had carried out necessary verifications qua the assessee's claim for deduction of interest expenditure, therefore, the Pr.CIT was clearly divested of his jurisdiction to revise the assessment order on the said count in exercise of the powers that were vested with him u/s 263 of the Act. In support of his aforesaid claim the ld. A.R had relied on the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Gabriel India Limited (1997) 203 ITR 108 (B .....

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..... d by the A.O, but the material on record reveals that the A.O had applied his mind on the said issue, then, the CIT would stand divested of his jurisdiction to revise such an order in exercise of powers vested with him u/s 263 of the Act. It was, thus, submitted by the ld. A.R that as the Pr.CIT in the present case had exceeded his jurisdiction u/s 263 of the Act, therefore, the order passed by him was liable to be vacated. Alternatively, it was submitted by the ld. A.R that as the Pr.CIT had not afforded sufficient opportunity of being heard to the assessee in the course of the proceedings u/s 263 of the Act, therefore, for the said reason the requisite details could not be filed before him. 7. Per contra, the ld. Departmental Representative (for short 'D.R') relied on the order passed by the Pr.CIT u/s 263 of the Act, dated 18.03.2020. It was submitted by the ld. D.R that as the A.O had blatantly failed to conduct any enquiry vis-a-vis the issue in question i.e the assessee's claim for deduction of interest expenditure and had summarily allowed the same without carrying out any verification at all, therefore, the Pr.CIT had rightly invoked his jurisdiction u/s 263 of the Act an .....

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..... e assessee for his business purpose during the year under consideration. On being confronted, the assessee in the course of the revisional proceedings furnished the bifurcated details of interest aggregating to Rs. 79,67,173/- that was claimed to have been paid in respect of the various loans/borrowings taken from banks/financial institutions vis-a-vis the purchase/acquisition of his various office premises. On a perusal of the aforesaid details, we find that out of the total interest expenditure of Rs. 79,67,173/- (supra) only an amount of interest expenditure of Rs. 22,63,303/- pertains to the aforementioned office premises i.e Office Nos. 1001 and 1702 at Brindavan Terrace, Mumbai, the purchase/acquisition of which, as stated by the assessee, was partly sourced from the loans/borrowings that were raised by him from two financial institutions, viz. (i). loan from DHFL (for purchase of office no. 1702) : Rs. 3,00,00,000/-; and (ii) loan from India Bulls (for purchase of office No. 1001) : Rs. 2,59,50,000/-. In the backdrop of the facts furnished by the assessee in the course of the revisional proceedings, we find, that as observed by the Pr.CIT, and rightly so, the assessee had no .....

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..... ture of Rs. 57,02,869/- (supra) pertained to the loans that were raised by the assessee for acquiring/purchasing the other three office premises of his at South Mumbai, Delhi and Chembur in the earlier years. As regards the claim of the ld A.R that the A.O in the course of the assessment proceedings had duly verified the assessee's claim for deduction of the interest expenditure, we are unable to persuade ourselves to accept the same. As is discernible from the reply dated 04.02.2017 filed by the assessee in compliance to the queries that were raised by the A.O u/s 142(1), dated. 29.01.2017, we find, that the assessee had therein only furnished the bifurcated details of the interest expenditure with reference to the banks/financial institutions from whom the same were raised. Accordingly, in the backdrop of our aforesaid deliberations, we are of a strong conviction that no infirmity emanates from the order passed by the Pr.CIT, who had rightly observed that the A.O without verifying the assessee's claim for deduction of interest expenditure had summarily accepted the same on the very face of it. Our aforesaid conviction is fortified by the 'Explanation 2(a)' to Sec. 263 of the Act .....

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