Dhanesh Badarmal Jain Vs PCIT (ITAT Ahmedabad)
Assessee filed return for AY 2021-22 declaring income of ₹4.99 lakh. In scrutiny, AO noticed unsecured loans of ₹1.36 crore, out of which ₹92 lakh was fresh loans from 10 parties & the balance ₹44.51 lakh was interest accrued thereon. As assessee failed to prove identity & creditworthiness of creditors, AO added ₹92 lakh u/s 68 as unexplained loans, besides addition of ₹14 lakh unexplained cash deposit, & completed assessment at ₹1.10 crore.
PCIT later invoked revision u/s 263, observing that AO erred in not disallowing the interest of ₹44.51 lakh on the same bogus loans, which was debited to accounts. He held the assessment order erroneous & prejudicial to Revenue & directed AO to verify & disallow such interest.
Before Tribunal, assessee contended that AO had already examined loans & interest during assessment, issued multiple SCNs, & consciously decided not to disallow interest. Hence, PCIT could not step in merely to substitute his opinion. Reliance was placed on GMR Varalakshmi Foundation v. CIT (173 taxmann.com 535, Vizag ITAT) & SC ruling in V-Con Integrated Solutions Pvt Ltd (173 taxmann.com 774).
Tribunal, however, noted that AO, after holding ₹92 lakh loans as unexplained, should have logically disallowed the accrued interest too. His omission was a wrong decision/conclusion, not a mere difference of opinion. Relying on the Supreme Court in V-Con Integrated Solutions, ITAT held that such errors can be corrected under s.263. Since the issue of interest was not part of appeal before CIT(A), revision jurisdiction was valid. Accordingly, ITAT upheld PCIT’s order u/s 263, & assessee’s appeal was dismissed.
