TMI Blog2023 (3) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has furnished all the details in respect of expenses incurred by it on letter of credits against its import purchase, which the Ld. Pr. CIT has failed to consider and examine or caused to have examined them before arriving at the conclusion to pass the impugned revisionary order. The long term and short term borrowings outstanding at the end of the year as reported in the audited financial statements at Rs. 2.90 Cr. and the trade payables are at Rs. 40.45 Cr. Against these two components, the total finance cost claimed by the assessee is of Rs. 3.92 Cr. All these facts are verifiable from the material placed on record. In respect of second issue relating to reporting of interest income by the assessee wherein the bank itself has done the netting of interest income against the interest expenses though the assessee has reported the interest income of Rs. 1,12,15,593/-. There is no under assessment of the interest income as observed by the assessee since interest income earned has been reconciled with Form 26AS. Thus we find that PCIT has not applied his mind to arrive at a consideration which is erroneous in so far as prejudicial to the interest of the revenue, for pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order has been set aside were not subject matter of reasons for which the case was selected limited scrutiny. 4. For that the Ld. PCIT erred in setting aside the assessment order in respect of interest income received from bank whereas the interest was received from bank and correct Income was accounted for by the assessee which was also verifiable from Form No. 26AS. 5. For that the Ld. PCIT erred in setting aside the assessment order in respect of finance cost paid to bank whereas the entire payment was made to the bank for various credit facilities availed by the assessee from bank and all the ledgers in support of the same were submitted before the Ld. pelT and no discrepancies whatsoever have been found therein to suggest that the assessment order passed by the Ld. AO is erroneous or prejudicial to the interest of the revenue. 6. For that under the facts and circumstances of the case, the revision order passed by the Ld. PCIT is liable to be quashed. 7. For that the appellant craves leave to add, alter or withdraw an grounds of appeal on or before hearing of the appeal. 3. From the perusal of the above grounds, there are particularly two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st expenses of Rs. 26.14 lakh. He thus, observed that interest income of Rs. 35.12 lakh could have been concealed by netting off resulting into an under assessment of Rs. 26.14 lakh (35.12 - 8.90) with consequential tax effect of Rs. 11,49,475/-. A show cause notice was issued u/s. 263 of the Act, as Ld. Pr. CIT was satisfied that it is a case of erroneous assessment in so far as prejudicial to the interest of the revenue. 5. Before us Shri S.M. Surana, Advocate appeared for the assessee and Shri Devi Saran Singh, CIT, DR appeared for the revenue. 6. Ld. Counsel has placed on record a paper book containing 278 pages. On the first issue relating to quantum of borrowing cost claimed by the assessee, Ld. Counsel referred to the audited financial statement, more particularly, the statement of profit and loss for the year ended 31.03.2017 and pointed to finance cost reported at Rs. 3,92,90,011/-, details of which are presented in Note No. 24, forming part of financial statement, placed at page 25 of the paper book. The details of financial cost reported in Note 24 is tabulated as under : 6.1. Ld. Counsel referred to the reply furnished by the assessee dated 21.05.2019 befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the borrowing and loans as well as availment of credit facility towards import made by the assessee against the issue of letter of credits by the bank is reflected as trade payables under the head sundry creditors which has been duly reported in the audited financial statements. In this respect, credit summary of the sundry creditors is also placed on record, wherefrom the net balance payable towards sundry creditors for which letter of credit facility has been availed is Rs. 38,45,31,057/-. It is placed in the paper book page at 71 and 72. 6.4. In the course of hearing, Ld. Counsel placed reliance on the decision of Hon'ble High Court of Delhi in the case of ITO Vs. D.G. Housing Projects Ltd. 343 ITR 329 on the aspect of application of mind by the Ld. PCIT on the records of the case. This aspect of application of mind by the CIT has been succinctly dealt by the Hon'ble Delhi High Court in the judgment of DG Housing Finance Co. Ltd. [2012] 20 taxmann.com 587 (Del). 6.4.1. While adverting on the issue, Hon'ble High Court held that the CIT has to come to the conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, hold that order is erroneous. The jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. 6.4.5. It was further observed by the Hon'ble High Court that the material, which the CIT can rely up on includes not only the records as it stands at the time when the order in question was passed by the AO but also records as it stands at the time of the examination by the CIT. Nothing prohibits CIT from collecting and relying new/additional material which evidence to show and state that the order of the AO is erroneous. 6.5. In the present case before us, we note that what the Ld. Pr. CIT has recorded in para 2 is his prima facie observation for invoking the revisionary proceedings to issue the show cause notice u/s. 263. Assessee made exhaustive submission bringing relevant facts which are verifiable from the records. Ld. Pr. CIT himself failed to apply his mind on the same and directed to pass a fresh assessment order which is contrary to the decision given by Hon'ble High Court of Delhi (supra). 7. In respect of second issue relating to reporting of interest income, Ld. Counsel submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its import purchase. The import purchase outstanding as on 31.03.2017 are reported as sundry creditors/trade payables which forms part of current liabilities and not the borrowed money. We also take note of the fact that assessee has furnished all the details in respect of expenses incurred by it on letter of credits against its import purchase, which the Ld. Pr. CIT has failed to consider and examine or caused to have examined them before arriving at the conclusion to pass the impugned revisionary order. The long term and short term borrowings outstanding at the end of the year as reported in the audited financial statements at Rs. 2.90 Cr. and the trade payables are at Rs. 40.45 Cr. Against these two components, the total finance cost claimed by the assessee is of Rs. 3.92 Cr. All these facts are verifiable from the material placed on record. 9.1. Further, in respect of second issue relating to reporting of interest income by the assessee wherein the bank itself has done the netting of interest income against the interest expenses though the assessee has reported the interest income of Rs. 1,12,15,593/-. There is no under assessment of the interest income as observed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this phrase i.e. prejudicial to the interest of the revenue has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 12. We find that the issue in the present case is purely on facts which are verifiable from the records of the assessee placed on record. Examination and verification of the audited financial statement i.e. Balance sheet and P L Account of the assessee. Perusal of the ledger account and the details of imports made by the assessee tabulated in the paper book, reveals the correct state of affairs in respect of the two issues raised in the impugned revisionary proceeding for which, both the Ld. Pr. CIT and th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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