In a recent ruling, the Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) allowed all the grounds filed by the assessee and held that the order passed under Section 263 of the Income Tax Act, 1961, was passed by the Principal Commissioner of Income Tax ( PCIT ) by violating the principles of natural justice and quashes disallowance of interest on a grant of Rs. 4.18 crore.
In this case, Gujarat Power Corporation Ltd. had appealed against the order passed by the PCIT for the assessment year ( AY ) 2018-19.
Turn Section 148 Challenges into Opportunities – Enroll Now
During the verification proceedings, the assessee company invested listed and
unlisted equity shares for Rs. 197,74,06,788 and earned exempt income of
Rs. 1,42,39,767 from a share of profit and debited an amount of Rs. 1,00,000 as expenses related to exempt income.
The PCIT found that the AO made insufficient disallowance under Section 14A of the Income Tax Act, 1961, by not considering investments in subsidiaries, joint ventures, and associated concerns, leading to under-assessment of income. Additionally, the PCIT noted that the AO failed to verify the allowability of interest on grants claimed as revenue expenditure. Consequently, the PCIT set aside the assessment order, terming it erroneous and prejudicial to the Revenue’s interest. The assessee has appealed against this order.
Turn Section 148 Challenges into Opportunities – Enroll Now
One of the issues raised by the assessee was regarding the disallowance of interest on a grant of Rs. 4,18,06,812.
The counsel on behalf of the assessee submitted that, although detailed written submissions were made by the assessee, the PCIT did not consider them.
The bench observed that the PCIT, while passing the order under Section 263 of the Income Tax Act, did not consider the submissions made by the assessee. The bench observed that the 263 order was against the principles of natural justice.
Turn Section 148 Challenges into Opportunities – Enroll Now
The bench, comprising Annapurna Gupta ( Accountant Memebr ) and Siddhartha Nautiyal (
Judicial Member ) set aside the order passed under Section 263 of the Income Tax Act and allowed the appeal filed by the assessee.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
