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2022 (4) TMI 585 - AT - Income TaxRectification of mistake u/s 154 - Disallowance u/s 14A r.w.r. 8D - Assessee was having its own interest free funds for making the investment - whether section 14A cannot be applied if assessee s interest free funds are more than its investments yielding tax free income? - HELD THAT - Issue of disallowance under section 14A in respect of indirect common interest expenditure as well as indirect common administrative expenditure is a debatable issue and does not fall in the ambit of an error apparent on record which could be rectified under section 154 of the Act. The Tribunal in the earlier order has discussed various aspects and facts which are required to be considered to take a decision on the issue of disallowance under section 14A r.w.r. 8D of the Income-tax Act. Since the jurisdiction of the Assessing Officer to pass an order under section 154 to withdraw the relief granted under section 14A is held to be barred therefore both the issues involved in the cross appeals stand disposed of. Even otherwise when the Revenue has not disputed the interest free funds with the assessee to invest in the shares and securities yielding tax free income then no disallowance is called for under section 14A read with rule 8D(2)(ii). Accordingly the appeal filed by the assessee is allowed and appeal filed by the Revenue for the assessment year 2009-10 is dismissed. Validity of reopening of the assessment after four years from the end of the assessment year - Claim of interest expenditure under section 40(a)(ia) for want of TDS - HELD THAT - As decided in own case 2021 (3) TMI 1357 - ITAT MUMBAI specific tangible information came into the possession of Ld. AO which revealed possible escapement of income in the hands of the assessee. Nothing more in our opinion was required at this stage. Undisputedly once the case was reopened the other issues of underassessment or escapement of income could also be examined by Ld. AO. AR has also pleaded that objections filed by the assessee were not disposed-off. However the said plea has also no substance since the assessee in response to notice u/.s 148 vide letter dated 04/09/2017 merely submitted that it had fully truly disclosed all the particulars required for the assessment at the time of filing of return of income and at the time of various hearings for assessment u/s 143(3) whereas it is notable that case has been reopened on the basis of subsequent receipt of tangible information. Therefore we concur with the view of Ld. CIT(A) in this regard and dismiss ground no.1 raised by the assessee. Disallowance u/s 40(a)(ia) - assessee was not able to explain the reason for non-deduction of tax at source with proper evidences - HELD THAT - As decided in own case 2021 (3) TMI 1357 - ITAT MUMBAI Tribunal has set aside this issue to the record of the Assessing Officer for verification and examination of the relevant evidence to be produced by the assessee to show that no TDS was required to be deducted or alternatively to prove the applicability of Second Proviso to section 40(a)(ia). Following the earlier decision of this Tribunal we set aside this issue to the record of the Assessing Officer on same terms and directions. Applicability of provisions of section 115JB to the assessee bank - HELD THAT - As provisions of section 115JB as it stood prior to its amendment by virtue of Finance Act 2012 would not be applicable to a banking company governed by provisions of Banking Regulation Act 1949. In view of the above this ground of appeal of the assessee is allowed and it is held that the provisions of section 115JB are not applicable to the assessee for this year and accordingly Ground No.4 is allowed. Charging of interest under section 220(2) - Dismissal of appeal of the assessee on the technical ground that the order passed under section 220(2) is not an appealable order - HELD THAT - DR has not disputed this mistake and discrepancy in the computation made by the Assessing Officer while passing the giving effect order in pursuance to the order of the CIT(A). CIT(A) also granted part relief in respect of interest under section 244A of the Income-tax Act which shall have an effect on the demand of tax and consequential charging of interest under section 220(2) of the Income-tax Act. Therefore a substantial relief was granted by the CIT(A) while passing the order dated 25/12/2012. But the Assessing Officer AO has passed the impugned order under section 220(2) without giving effect to the order of the CIT(A). It appears that the Assessing Officer has deliberately not passed any order to give effect to the order of the CIT(A) despite the fact that the assessee had already filed a petition under section 154 of the Income-tax Act to rectify the mistakes. Once the Assessing Officer has not challenged the order of the CIT(A) dated 25/10/2012 then the Assessing Officer is bound to follow the said order in letter and spirit. The non passing of the giving effect order amounts disobedience and judicial indiscipline on the part of the Assessing Officer which is a serious matter to be considered by the appropriate authority - Assessing Officer has acted in a highly arbitrary manner while passing the impugned order under section 220(2) for charging the interest without first determining the tax liability of the assessee in accordance with the issues settled in appeal. Accordingly in the interest of justice we set aside the orders of the authorities below and remand the issue to the record of the Assessing Officer to readjudicate the same after giving effect to the order of the CIT(A) dated 25/10/2012. Assessee s appeal is allowed for statistical purpose.
Issues Involved:
1. Disallowance under section 14A of the Income-tax Act. 2. Validity of reopening the assessment after four years. 3. Disallowance under section 40(a)(ia) for non-deduction of TDS. 4. Applicability of section 115JB to a banking company. 5. Levy of interest under section 220(2) and short granting of interest under section 244A. Detailed Analysis: 1. Disallowance under section 14A: The Tribunal addressed the cross appeals for the assessment year 2009-10 concerning disallowance under section 14A. The assessee’s appeal contended that the CIT(A) erred in upholding the rectification order reinstating the addition under section 14A, which was originally withdrawn. The Revenue’s appeal questioned the CIT(A)'s decision that section 14A could not be applied if the assessee’s interest-free funds exceeded its investments yielding tax-free income. The Tribunal noted that the issue of disallowance under section 14A was previously directed to be decided afresh by the Assessing Officer. The Assessing Officer initially allowed the claim without disallowance but later rectified the order under section 154, making the disallowance again. The Tribunal held that disallowance under section 14A is a debatable issue and not subject to rectification under section 154. Consequently, the Tribunal allowed the assessee’s appeal and dismissed the Revenue’s appeal for the assessment year 2009-10. For the assessment year 2010-11, the Tribunal found the issues identical to those in 2009-10 and decided in favor of the assessee, dismissing the Revenue’s appeal. 2. Validity of reopening the assessment after four years: For the assessment year 2011-12, the assessee challenged the reopening of the assessment after four years, arguing there was no failure to disclose all material facts. The Tribunal noted that the reopening was based on specific information from the TDS Wing regarding non-deduction of TDS. The Tribunal upheld the reopening, citing that the receipt of tangible information justified the Assessing Officer's action. 3. Disallowance under section 40(a)(ia): The Tribunal addressed the disallowance under section 40(a)(ia) for the assessment year 2011-12, which was confirmed by the CIT(A) due to the assessee's failure to provide evidence for non-deduction of TDS. The Tribunal granted the assessee another opportunity to furnish the necessary evidence to the Assessing Officer, setting aside the issue for re-examination. 4. Applicability of section 115JB to a banking company: The Revenue's appeal questioned the CIT(A)’s decision that section 115JB does not apply to the assessee, a banking company. The Tribunal upheld the CIT(A)’s decision, referencing the jurisdictional High Court’s ruling in the assessee’s favor and previous Tribunal decisions. The Tribunal dismissed the Revenue’s appeal on this ground. 5. Levy of interest under section 220(2) and short granting of interest under section 244A: For the assessment year 2000-01, the assessee contested the levy of interest under section 220(2), arguing that the Assessing Officer did not give effect to the CIT(A)’s order, which would have resulted in no outstanding demand. The Tribunal found that the Assessing Officer acted arbitrarily by not giving effect to the CIT(A)’s order and remanded the issue back to the Assessing Officer for re-adjudication, ensuring the correct tax liability and interest were determined. Conclusion: The Tribunal allowed the assessee’s appeals for the assessment years 2009-10 and 2010-11, partly allowed the appeal for 2011-12, and allowed the appeal for 2000-01 for statistical purposes. The Revenue’s appeals for the assessment years 2009-10 to 2011-12 were dismissed.
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