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2013 (2) TMI 377 - AT - Income TaxDisallowance u/s.14A - Held that - As Tribunal remitted the matter to the file of AO for computing the disallowance in accordance with the judgment Godrej Boyce Mfg Co. Ltd (2010 (8) TMI 77 - BOMBAY HIGH COURT) the matter passed by CIT(A) ceased to be operative who directed the AO to re-compute the disallowance u/s.14A by applying Rule 8D the consequential order passed by the AO giving effect to such in-operative order of CIT(A), in has been rightly set aside by CIT(A). It is obvious that there can be only one proceeding for one case. When the AO is ceased of the matter for computing the disallowance u/s.14A, as per the order passed by the Tribunal, there can be no question of continuing with any other proceedings - appeal filed by the revenue is dismissed. Penalty u/s.271(1)(c) pursuant to disallowance u/s.14A - Held that - As the original disallowance made by the AO has been restored by the Tribunal to the file of AO the instant penalty should also be consequently restored - set aside the impugned order and remit the matter to the file of AO for considering the question of penalty afresh -appeal of revenue allowed for statistical purposes.
Issues:
1. Disallowance u/s.14A of the Income Tax Act, 1961. 2. Penalty imposed under section 271(1)(c) of the Act. Issue 1: Disallowance u/s.14A of the Income Tax Act, 1961: The appeal involved the revenue's challenge against the direction given by the first appellate authority regarding the disallowance made under section 14A of the Income Tax Act. The Assessing Officer (AO) initially computed the disallowance under section 14A by applying Rule 8D during the original assessment proceedings. The assessee contested this addition before the Commissioner of Income Tax (Appeals) [CIT(A)], who instructed the AO to re-calculate the disallowance under section 14A using Rule 8D of the Income Tax Rules, 1962. Following the CIT(A)'s order, the AO re-computed the disallowance under Rule 8D(2)(ii) at Rs.2,77,78,433/- and under Rule 8D(2)(iii) at Rs.15,38,665/-. Subsequently, the Tribunal directed the AO to recompute the disallowance in line with the judgment of the Jurisdictional High Court in a specific case. The CIT(A) then deleted the addition made by the AO based on the original CIT(A)'s order. The Tribunal held that the CIT(A)'s order became inoperative once the matter was referred back to the AO for re-computation. Therefore, the Tribunal dismissed the revenue's appeal against the CIT(A)'s order. Issue 2: Penalty imposed under section 271(1)(c) of the Act: The second issue revolved around the penalty imposed by the AO under section 271(1)(c) of the Act, following the disallowance under section 14A. The penalty was imposed based on the AO's order, which was subsequently set aside by the Tribunal. The Tribunal noted that since the original disallowance made by the AO had been referred back for re-computation, the penalty should also be correspondingly reconsidered. Referring to a Supreme Court case, the Tribunal emphasized that when the quantum has been restored for fresh computation, the penalty should also be restored accordingly. As the CIT(A) had deleted the penalty instead of referring it back to the AO, the Tribunal set aside the CIT(A)'s order and remitted the matter to the AO for a fresh decision on the penalty. Consequently, the revenue's appeal against the penalty was allowed for statistical purposes. In conclusion, the judgment addressed the issues of disallowance under section 14A of the Income Tax Act and the penalty imposed under section 271(1)(c) of the Act. The Tribunal provided detailed reasoning for dismissing the revenue's appeal against the disallowance and allowing the appeal regarding the penalty. The decision highlighted the importance of following legal procedures and ensuring that penalties are aligned with the underlying tax computations.
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