CONSTITUTION OF INDIA, 1950

Sections 147 & 264

Revision under section 264 - Validity - CIT failed to consider objection of assessee -

Notice under section 148 was issued to Petitioner by AO seeking to reopen the assessment under section 147 on the ground that assessee had raised huge secured loan and claimed interest expenses on such secured loan which were utilized for providing temporary advance to the sister concerns and accordingly, the claim of interest expenses was not at all related to business. Petitioner responded to this notice that he had sufficient funds to make such advances and there was no nexus between the borrowed funds and such advances. Consequently, no part of the interest paid by the assessee to banks/financial institutions was disallowable. The grievance of the Petitioner was that without considering the above objection, a reassessment order was passed by AO, which petitioner challenged before PCIT under section 264. Held: PCIT failed to deal with one of the principal grounds of challenge to the assessment order viz., that without considering the Petitioner's objection to the reopening of the assessment under section 147, reassessment order could not have been framed. Court was of the view that order of PCIT was unsustainable in law in so far as it is failed to consider the principal objection of the Petitioner to the opening of the assessment. Therefore, the flaw vitiates the order of reassessment equally vitiates the impugned order of PCIT as well. Thus, order of PCIT as well as reassessment order of AO was set aside.

Followed:GKN Driveshafts (India) Ltd. v. ITO & Ors. (2003) 259 ITR 19 (SC) : 2003 TaxPub(DT) 734 (SC), Tuff Tubes (Orissa) (P) Ltd. v. The Dy. CIT [W.P.(C) No. 25229 of 2017, dt. 15-2-2022] and Viresh Hemani v. ITO (2021) 435 ITR 376 (Ori.) : 2021 TaxPub(DT) 2426 (Ori-HC).

REFERRED :

FAVOUR : Petition allowed.

A.Y. : 2008-09

SUBSCRIBE FOR FULL CONTENT