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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
These captioned two appeals have been filed by the assessee against the orders of the learned Pr. Commissioner of Income Tax (Central) – Delhi - 2 [‘CIT(C)’ in short] dated 31.03.2025 arising from the assessment orders dated 29.09.2022 & 22.12.2022, passed under Section 143(3) of the Income Tax Act, 1961 (‘the Act’) by the ACIT, Central Circle-15, Delhi concerning Assessment Years (A.Ys.) 2020-21 & 2021-22, respectively.
Since the above captioned appeals were heard together and the facts in issues are identical, all these appeals are being disposed of by this common order for the sake of convenience and brevity.
ITA No. 2975/DEL/2025 [for A.Y. 2020-21]
The grounds raised by the assessee are as under :
“1.On the facts and circumstances of case and in law, the ld. PCIT, Central - 2, New Delhi erred in initiating proceedings under section 263 of Income Tax Act, 1961 (Act) by wrongly assuming jurisdiction under section 263 of the Act and hence, the order passed by the Ld. CIT under section 263 of Act is bad in law, without jurisdiction and barred by limitation.
2.On the facts and circumstances of case and in law, the Id. PCIT erred in setting aside the assessment and has also erred in holding that the original assessment order passed by the Assessing Officer under section 143(3) of Act was erroneous and prejudicial to the interest of the revenue.
3.On the facts and circumstances of case and in law, the directions issued by the Ld. PCIT under section 263 of Act are erroneous, vague, ambiguous and untenable and, therefore the order u/s 263 of the Act passed by the Ld. PCIT is liable to be quashed
4.On the facts and circumstances of the case and in law, the ld. PCIT erred in stating that the assessment passed by the assessing officer was without making inquiries or verification which should have been made.
5.On the facts and circumstances of the case and in law, the various allegations/remarks made/adverse inference drawn by the Id. PCIT are erroneous.
6.On the facts and circumstances of case and in law, the Ld. PCIT erred in mentioning that one third of the finance cost amounting to Rs. 8,02,12,446/- should be added back to the assessee's returned income
7.On the facts and circumstances of the case and in law, the ld. PCIT erred in setting aside the assessment order without appreciating the fact that the assessment order was passed after taking prior approval of the Addl. CIT, Central Range-4, New Delhi.
8.On the facts and circumstances of case and in law, the order passed by PCIT u/s 263 is liable to be quashed as the original assessment order itself is bad in law and without jurisdiction.”
The brief facts of the case are that the assessee is a company engaged in education services through it school, acquire teaching, coaching, schools, colleges, workshops, institute for education, training for various trades, professions, management, craft, arts, medicals, engineering, economics, commercials, financials etc. Assessee originally filed return of income on 30.03.2021 declaring Loss of Rs.19,82,79,784/-. Further, assessee revised his return of income on 31.03.2021 declaring total loss of Rs.18,72,34,708/- which was processed u/s 143(1) of the Act. Subsequently, the case was selected for complete scrutiny under the CASS and notices u/s 143(2) and 142(1) of the Act was issued along with questionnaire, for which assessee submitted reply time to time and filed the details for explanation. Accordingly, after verification of the details the total income of the assessee was computed at a loss of Rs.18,72,34,708/- vide assessment order dated 29.09.2022 was passed by the AO.
The learned PCIT subsequently, examined the records and held that order of the AO was erroneous as well as prejudicial to the interest of the Revenue. The PCIT held that the AO had not examined the issue of interest expenditure claimed by the assessee on borrowed capital which was not utilized wholly or solely for the purpose of business. Aggrieved assessee is before us.
Before us, the learned Counsel of the assessee submitted that assessee had received long term loans which carry interest and deployed for business purposes. It has also received loans from directors/relatives which are interest free. Learned counsel vehemently submitted that the AO had in the course of assessment proceedings, duly examined the issue of loans and advances and deposits whether given free of interest, to which the assessee had given its reply. It is the say of the learned Counsel of the assessee that the Assessing Officer had made detailed enquiry with regard to nature of loans and advances and hence this is not a case of non-enquiry on the issue by the AO. It is the say of the learned AR that the order of the AO is neither erroneous nor prejudicial to the interest of the Revenue and relied on the decision Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT(2000) 243 ITR 83 (SC), CIT vs. Vikash Polymers [2010] 194 Taxman 57 (Delhi) (HC).
The learned Counsel of the assessee stated that the secured term loan of 154 crore had been deployed for the purpose of business for which they were obtained. The unsecured loan from companies amounting to Rs.6.12 crores has been used for the purpose of business of the company, wherein interest has been paid from 6% to 11% PA. Unsecured loans from directors and relevant loans amounting to Rs.32.67 crore has been obtained interest free and loan of Rs.8.62 crores wherein 9% interest has been paid. It is submitted by the learned AR, all the Long Term loans and advances are given for the purpose of business. With respect to short term loans and advances which has increased by 6 crore during the year, is in respect of Balance with Government Authorities. Relying on the decision of Delhi High Court in the case of Sunbeam Auto Ltd., 189 Taxman 436 (Del), the learned Counsel submitted that where the Assessing Officer has undertaken exercise of examining the issue and after such examination he has taken one of the possible view, it cannot said to be a case of lack of enquiry.
Per contra, learned DR relied on the order of the PCIT.
We have heard the rival submissions and perused the material available on record. The core issue involved in the case is the PCIT considering the order of the AO passed u/s 143(3) of the Act dated 29.09.2022 as erroneous and prejudicial to the interest of the Revenue, u/s 263 of the Act. The PCIT has considered the AO is silent on the issue of finance cost claimed by the assessee on borrowed capital which was not utilized for its business purpose. Considering the arguments placed before us, we find that the issue of finance cost on borrowed capital was duly examined by the Assessing Officer. The Assessing Officer had issued notice u/s 142(1) wherein at serial no.11 he had enquired with regard to loans, advances and deposits given as also its business exigencies and whether it carried interest on the advance. At serial no.12 the AO had queried with regard to rate of interest charged by the Assessee in comparison with the interest paid by the assessee on loans taken at a higher rate. The Assessing Officer had also enquired about the interest expenses claimed during the year. We further find that vide notice dated 31.08.2022, the AO vide question no.9 had enquired with respect to loans & advances made to G.D. Goenka Work Institute run by G.D. Goenka Educational Trust and the rational for not charging interest on the same. We thus, find from the record that the Assessing Officer had made due enquires on the issues raised by the PCIT and had arrived at a view that there is no discrepancies on account of finance cost claimed by the assessee. Following the decision of Delhi High Court in the case of Sunbeam Auto Ltd (supra), we are of the considered view that Assessing Officer had undertaken due exercise of examining the issue and after such examination he had taken one of the possible view. There is no lack of enquiry and thus the assessment order passed by the Assessing Officer cannot be held as erroneous and prejudicial to the interest of the Revenue. Appeal is accordingly allowed.
ITA No. 2976/DEL/2025 for A.Y. 2021-22 :
The facts in the instant case are identical to the facts of the case decided above. The decision therefore in the case of ITA 2975/Del/2025 will apply mutatis mutandis to the facts of the instant case.
In the result, the both the appeal of the assessee in ITA Nos. 2975 and 2976/Del/2024 are allowed.