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TMI Blog2023 (3) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... nd trading addition of Rs. 40,000/- and addition of Rs. 78,620/- was made out of expenses claimed in the P&L, A/c. hence, the impugned asstt. being framed after examining the returned income and the books as per law, therefore the impugned asstt. order is neither erroneous nor prejudicial to the interest of revenue so as to allow to invoke jurisdiction u/s. 263 of the I.T. Act. 3. That under the facts and circumstances, in view of the fact that SCN u/s. 263 was issued on only three issues namely verification of sundry creditors correctness of interest expenses u/s. 36(1)(iii) claimed at Rs. 19,48,522/- and to examine the nature and reasonableness of expenses claimed in P&L A/c., Ld. PCIT was not legally justified and competent to set aside the complete asstt. order which obviously includes other issues also. 4. That under the facts and circumstances, the issue of sundry creditors was examined by the Ld. A.O. as per law during the course of impugned asstt. proceedings and he has taken a possible view on the aspect, hence, the impugned asstt. order on this issue is neither erroneous nor prejudicial to the interest of the revenue so as to allow to proceed u/s. 263 of the I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there is no requirement in law to raise queries even on the issues on which the AO after examining the record feels satisfied. It was submitted that if in the opinion of the Ld. PCIT, some more enquiries were to be made, this opinion of the Ld. Pr. CIT cannot be a basis for invoking the provisions of Section 263 of the Act. It was further submitted that various instances wherein the Explanation 2 to Section 263 can be invoked are not applicable in the instant case. It was accordingly submitted that it is not a case where the AO has lapsed in his duties so much so which may provide the platform for invoking Section 263 of the Act. It was submitted that where two views are possible, the provision of Section 263 are not applicable and merely because the Ld. Pr. CIT disagrees with the AO, the same cannot be a reason for invoking Section 263 of the Act. 2.3. On merits, it was submitted that the disallowance consists of two amounts namely bank charges of Rs. 1,32,786/- and interest of Rs. 18,15,736/-. It was submitted that the bank charges being normal business expenses cannot be disallowed under section 36(1)(iii) of the Act. It was further submitted that interest of Rs. 18,15,736 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd seek explanation and submissions from the assessee which the AO has failed to carry out during the course of assessment proceedings and basis the material available on the record, it has rightly been pointed out by the Ld. Pr. CIT and the jurisdiction under section 263 has rightly been invoked by the Ld. Pr. CIT. Further the reference was drawn to the findings of the Ld. Pr. CIT which are contained at para 6.3 to 6.5 of the impugned order which read as under: "6.3 Further, in the Balance Sheet, the assessee has shown secured & unsecured loans at Rs. 2,03,71,893/- and Rs. 10,00,000/- respectively on which the interest & bank expense have been claimed at Rs. 19,48,522/- in the Profit & Loss Account. On the assets side of the Balance Sheet, the assessee has shown amount Recoverable from Others' at Rs. 2,15,68,200/-. The assessee in its reply has stated that it enjoys its own capital of Rs. 1,20,93,976/- and interest free amount of Rs. 42,25,540/- which can be given interest free to anyone. However, the interest free funds available with the assessee are found less than the interest free advances given. Or in other words, the interest free advances are given by the assessee ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was a case of complete scrutiny where all matters arising out of the return of income are opened for verification by the AO, our reference was drawn to the impugned order where it has been stated by the ld. PCIT that "the case was selected for complete scrutiny to verify low income shown by large contractors, large increase in sundry creditors against reduction in business income as compared to preceding year and mismatch in amount paid to related persons u/s. 40A(2)(b) reported in ITR and Audit report". It was accordingly submitted that the said contention raised by the ld. CIT DR cannot be accepted. 5. We have heard the rival contentions and pursued the material available on record. Firstly, it is noted that the matter was selected for complete scrutiny to examine inter alia low income shown by the assessee. The AO was therefore required to examine the transactions both on the receipts and expenditure side which will have an impact on the income so disclosed by the assessee and which will include claim of interest expense in the profit/loss account. On perusal of the profit/loss account, it is noted that the assessee has claimed total interest and bank expenses of Rs. 19,48, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has ever been made in the past for the interest paid to bank for availing the cash credit limit. It has been further contended that the assessee is having interest free funds in form of partner's capital and has another sum of Rs. 42,25,539/- which is available interest free to the assessee. Merely the fact that no disallowance has been made in the earlier period, and partners capital and other funds are available at the balance sheet cannot be accepted on face value as what is relevant is the availability of funds and nature thereof at the relevant point in time when the funds were advanced to the sister concerns out of the cash credit account. The cash credit facility is an ongoing (rather than one time) credit facility provided by the banks for working capital purposes to its clients and there are withdrawals and deposits from time to time for meeting business expenditure and receipts from business operations. Depending on the position of the funds in the said cash credit account on a given day, where the withdrawals are more than the deposits, the surplus withdrawals are in the nature of short term borrowings from the bank on which the bank charges interest at the prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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