9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (10) TMI 1095 - AT - Income TaxRevision u/s 263 by CIT - As per CIT, AO has not examined about the disallowances to be made u/s 10(14A) in view of earning of exempt income by the assessee by way of share from partnership firms - HELD THAT - When these details about the return filed of those firms alongwith tax payments by them were submitted before the ld. Pr. CIT in response to show cause notice then in the final order u/s 263, the ld. Pr. CIT has not mentioned anything about non-payment etc. of taxes by the firms as she was satisfied on this issue. Pr. CIT raised a new issue for which opportunity was not provided to the assessee to explain its case namely that the AO has not examined about the disallowances to be made u/s 10(14A) in view of earning of exempt income by the assessee by way of share from partnership firms. As submitted by assessee before us that firstly this matter was taken up without giving proper opportunity to the assessee and secondly on merits also the issue does not survive in view of the fact that assessee has not claimed any expenditure in its return of income. Accordingly, there is no scope of allegedly applying Section 10(14A) and disallowing any expenditure and, therefore, the assessment order cannot in any way said to be erroneous or prejudicial to the interest of revenue on this issue. We took into consideration the assessment order, order u/s 263 of the Act as well written submission of the assessee and the arguments made by the ld. AR of the assessee. It is a fact that in the show cause notice CIT mentioned as to whether those firms have filed their returns and paid due taxes from whom exempt income is received by the assessee by way of partner in those firms. However, on being satisfied by the explanation and details furnished by the ld. AR before the ld. Pr. CIT, she changed the issue and observed that the AO has not examined the disallowance to be made u/s 10(14A) of the Act without appreciating the fact that the issue is an individual and moreover in its computation of income, the assessee has not at all claimed any expenditure against any taxable income. Therefore, there is no any scope of making any disallowance u/s 10(14A) out of the expenditure as no expenditure was claimed as deduction. Thus on this issue, we full concur on the arguments of the ld. AR of the assessee and observe that this issue lacks merit for the purpose of invoking provisions of Section and passing order u/s 263 of the Act. No enquiry being made in respect of cash deposit made by the assessee in its bank account during demonetization period - As seen that details regarding source of deposit of Rs. 10 lacs was enquired by the ld. AO for which submissions and explanations were given by the assessee that the source of deposit is out of cash withdrawal from the capital account of the firm in which assessee is one of the partner and this withdrawal was made just four days back only. A confirmation from the firm was also filed during assessment proceedings. Accordingly, it cannot be said that no enquiries were made by the AO on this issue. Even after considering the amendment made by Finance Act, 2015 in the provisions of Section 263 widening the scope of its applicability and including non-proper enquiry within its fold, on perusal of facts and details submitted and in the circumstances of the case, the present issue is also not covered even considering the amended provisions. In brief, considering the facts on both the issues and also the legal position on the issue under consideration, the findings of the ld Pr. CIT about the assessment order being erroneous and prejudicial to the interest of Revenue lacks merit and is, therefore, set aside and the order of the AO is restored. Thus the appeal of the assessee is allowed.
Issues Involved:
1. Invocation of Section 263 of the Income Tax Act, 1961 by the Principal Commissioner of Income Tax (Pr. CIT). 2. Applicability of Section 14A concerning the assessee's investment in a partnership firm. 3. Verification of cash deposit of Rs. 10,00,000 during demonetization. Issue-wise Detailed Analysis: 1. Invocation of Section 263 of the Income Tax Act, 1961: The assessee challenged the invocation of Section 263 by the Pr. CIT, Udaipur, asserting that the original assessment order passed by the AO under Section 143(3) was neither erroneous nor prejudicial to the interest of the Revenue. The Pr. CIT had issued a show-cause notice under Section 263, questioning the AO's failure to verify whether the partnership firms had filed their returns and paid due taxes. The assessee provided the necessary details, including PANs and certified copies of capital accounts. The Pr. CIT, however, shifted the focus in the final order to the AO's failure to examine the applicability of Section 14A, despite the assessee not claiming any expenditure. The tribunal concurred with the assessee, noting that the Pr. CIT did not provide an opportunity to address the new issue and that no expenditure was claimed, making Section 14A inapplicable. Thus, the tribunal found the invocation of Section 263 on this ground unwarranted. 2. Applicability of Section 14A: The Pr. CIT argued that the AO failed to consider the disallowance under Section 14A for the exempt income received from the partnership firms. The assessee contended that no expenses were claimed in the return, making Section 14A irrelevant. The tribunal agreed, emphasizing that the assessee did not claim any expenditure against taxable income, and thus, there was no basis for disallowance under Section 14A. The tribunal concluded that the AO's order was neither erroneous nor prejudicial concerning this issue, invalidating the Pr. CIT's directive under Section 263. 3. Verification of Cash Deposit During Demonetization: The Pr. CIT also raised concerns about the AO's alleged lack of inquiry into the source of a Rs. 10,00,000 cash deposit during demonetization. The assessee explained that the cash was withdrawn from the capital account of a partnership firm a few days before the deposit. The tribunal noted that the AO had indeed made inquiries, and the assessee provided confirmations and relevant details. The tribunal found the Pr. CIT's concerns about the currency denomination irrelevant, as the transaction was within the permissible period for depositing specified bank notes. The tribunal held that the AO's inquiries were adequate and that the assessment order was neither erroneous nor prejudicial on this issue. Conclusion: The tribunal concluded that the Pr. CIT's order under Section 263 lacked merit on both the grounds of Section 14A applicability and the cash deposit verification. The original assessment order was restored, and the appeal filed by the assessee was allowed. The tribunal emphasized that the AO had made reasonable inquiries and that the Pr. CIT's invocation of Section 263 was unwarranted.
|
