IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VP &

MS PADMAVATHY S, AM I.T.A. No. 2849/Mum/2024 (Assessment Year: 2014-15)

Savita Homemakers LLP ACIT, Central Circle-2(2), 1003, 10^th Floor, Raheja Centre Mumbai.

Premises, Free Press Journal Marg, Vs.

Nariman Point, Maharashtra-400021.

PAN: ABYFS2195M Appellant) : Respondent Appellant /Assessee by : Shri Piyush Chhajed & Shri Ayush Chhajed, AR Revenue / Respondent by : Shri Rakesh Ranjan- CIT-DR Date of Hearing : 23.04.2025 Date of Pronouncement : 06.05.2025 O R D E R Per Padmavathy S, AM:

This appeal by the assessee is against the order of the Principle Commissioner of Income Tax, Central, Mumbai-1 [In short 'PCIT'] passed under section 263 of the Income Tax Act, 1961 (the Act) dated 21.03.2024 for AY 2014-15. The assessee raised the following grounds of appeal:

“1. The Learned Principal Commissioner of Income Tax erred in issuing notice

Uls 263 of the Act without bringing out the charge as to how was the order

erroneous, so far as it is prejudicial to the interest of revenue, without bringing

out under which clause of Explanation 2 to section 263 the said notice was issued.

2. The order passed U/s 263 pursuant to the notice issued u/s 263 is bad in law since the same does not bring out the clause under which the assessee's case falls for the purpose of treating the same as erroneous and prejudicial to the interest of revenue and therefore, the notice is devoid of natural justice and bad in law rendering the order passed u/s 263 void ab initio.

3. The Learned Principal Commissioner of Income Tax has ultimately passed the order u/s 263 treating the case covered by clause A & clause B of Explanation 2. whereas the notice did not bring out the said proposal in regard to which clause the same was covered and therefore the order itself is bad in law and beyond the Show Cause Notice and therefore a nullity.

4. The Learned Principal Commissioner of Income Tax erred in passing the order u/s 263 without specifically bringing out whether the assessee's case is covered under Clause A or Clause B or without even explaining thereof. The Show Cause notice was issued on 3 issues, which issue fell within which clause has not been brought out in the order passed u/s 263 and therefore, same deserves to be annulled.

5. The Learned Principal Commissioner of Income Tax failed to appreciate that complete details in respect of issues determined in notice u/s 263 were filed and verified and in fact, a Show Cause Notice was issued before making an assessment u/s 143(3) and therefore it is not the case of no inquiry or no verification and therefore invoking the provisions of section 263 is bad in law.”

2. The assessee is a partnership firm and engaged in the business of construction of residential and commercial buildings. The assessee filed the return of income for AY 2014-15 on 17.09.2014 declaring a total income of Rs. Nil. The assessee's case was reopened under section 147 of the Act and the Assessing Officer (AO) while completing the assessment under section 147 of the Act has made addition towards interest on alleged bogus loans at 12% amounting to Rs. 2,04,96,000/- under section 69C of the Act. The AO made similar addition towards interest payment to Ms. Priyanka for Rs. 4,50,000/-. Subsequently the PCIT issued a show-cause notice to the assessee under section 263 for the reason that “2.2 It is also observed that for the year under consideration, the assessee has claimed interest expenses. It is understood from the records that the interest expenses as claimed by the assessee includes the interest to the unsecured loans that has been allowed by the AO without thorough verification. Accordingly, for the year under consideration the interest expenses needs to be verified.

2.3 It is seen that deemed rent under 'Income from House Property' have not been offered by the assessee nor disallowed by the AO during the assessment proceedings for the property held under inventory during