INCOME TAX ACT, 1961

Section 263

Revision under section 263 - Erroneous and prejudicial order - Due application of mind of AO -

CIT noticed that interest income of Rs. 27 lakhs as credited to Profit and Loss Account as other income was accepted as business income by AO and assessee had claimed set-off of brought forward business losses of earlier assessment year against the same. CIT took the view that interest income was earned out of idle funds borrowed for business which had neither commenced nor carried out during the year under consideration and therefore, interest had to be assessed as income from other sources and accordingly, not available for set-off against brought forward business losses and since AO failed to verify the same during regular assessment proceedings and accepted interest income as business income following decision of CIT(A) for assessment year 2011-12, therefore, assessment order was erroneous and prejudicial to revenue. Held: Specific queries were raised by AO as to taxability of interest income under appropriate heads which were duly responded to by assessee with requisite details and explanations. Accordingly, there was due application of mind to the issue by AO and claim was accepted after due consideration of factual matrix rather than by merely relying upon appellate order for assessment year 2011-12. Therefore, view taken by AO being a possible view, could not be interfered with by CIT under section 263 merely on the ground that there was another possible view of the matter.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

SUBSCRIBE FOR FULL CONTENT