2020 (1) TMI 691 - AT - Income Tax

Disallowance u/ 14A r.w.s. 8D - HELD THAT - As in assessment year 2011-12 we find that the Ld. CIT(Appeals) has given relief to the assessee following the decision of the Tribunal in assessee‟s own case for assessment year 2008-09 by holding that the disallowance of expenditure u/s.14A read with rule 8D is not justified in view of the fact that the appellant has its own sufficient funds which were invested in the shares and were utilized for incurring the various other expenses and no interest has been paid on these surplus funds available with the appellant. DR at the very outset submitted that with regard to the order of the Tribunal for assessment year 2008-09 in assessee‟s own case, the Revenue had preferred an appeal before the Hon‟ble Jurisdictional High Court and the Hon‟ble High Court also had given relief to the assessee. That being further aggrieved, the Revenue had preferred an appeal before the Hon‟ble Supreme Court as passed an ex-parte order wherein the findings of the Hon‟ble High Court and the Tribunal was reversed and the issue was decided in favour of the Revenue. That further the said order being ex-parte, the assessee had filed an curative petition before the Hon‟ble Supreme Court and the Hon‟ble Supreme Court had recalled the ex-parte order to be now heard on merits and had directed for listing the said appeal. Thereafter, whether the Hon‟ble Supreme Court had heard the appeal or decided the appeal on merits is not coming out from the facts on record nor the Ld. DR was in a position to state the correct legal scenario. The Ld. DR vehemently contended that technically as on date, the matter stands in favour of the Revenue. However, it has to be ascertained whether after recalling the ex-parte order, the Hon‟ble Supreme Court had heard the appeal on merits or not or has passed any order that has to be considered since it will have the effect on all these appeals. More so, as evident from the aforesaid facts after decision of the Tribunal for assessment year 2008-09, lot of events has taken place and these events and the legal developments have to be ascertained before arriving at any decision. In the interest of justice, we, therefore, set aside the respective orders of the Ld. CIT(Appeals) in respect of all these assessment years and remit the matter back to their respective files for adjudicating the issue after taking into consideration recent legal developments specifically the order passed by the Hon‟ble Supreme Court on merits, if any, and the Ld. CIT(Appeals) shall adjudicate the issue after complying with the principles of natural justice. Reopening of assessment u/s 147 - validity of reason to believe - determination of book profits u/s.115JB - HELD THAT - There was no new material in front of the Assessing Officer to form reason to believe‟ that any income has escaped assessment. The power of the Ld. CIT(Appeals) is co-terminus with that of the Assessing Officer and he has made statement on record that there was no new material before the Assessing Officer so to resort to the provisions of section 147/148 of the Act. Even before us, the Ld. DR could not bring any material on record to controvert these facts nor could place before us any case laws in support of the revenue. The binding judicial pronouncements as on record have also been considered and are equally applicable to the facts of the present case. That further, once reassessment proceedings and the consequent order passed is declared void-ab-initio as per law and hence, quashed, the issue of book profits determined u/s.115JB of the Act becomes academic in nature. Therefore, we do not find any infirmity with the findings of the Ld. CIT(Appeals) and the same is hereby upheld. - Decided against revenue

Summary

Issues Involved:
1. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962.
2. Reopening of assessment under Section 147 of the Income Tax Act, 1961.
3. Determination of book profit under Section 115JB of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Disallowance under Section 14A read with Rule 8D
The Revenue's appeals in ITA No.34/NAG/2015, ITA No.283/NAG/2015, and ITA No.284/NAG/2015 pertain to the disallowance under Section 14A read with Rule 8D for the assessment years 2011-12, 2009-10, and 2010-11 respectively. The Tribunal noted that the CIT(Appeals) had provided relief to the assessee based on the Tribunal's earlier decision in the assessee's own case for the assessment year 2008-09. The Tribunal had previously held that the disallowance under Section 14A read with Rule 8D was not justified because the assessee had sufficient own funds which were invested in shares and no interest was paid on these surplus funds. However, the Revenue submitted that the Supreme Court had reversed the High Court's decision favoring the assessee in an ex-parte order, which was later recalled for a hearing on merits. Given the uncertainty regarding the Supreme Court's final decision on the matter, the Tribunal set aside the orders of the CIT(Appeals) and remitted the cases back to the CIT(Appeals) for adjudication after considering recent legal developments and ensuring compliance with the principles of natural justice.

Issue 2: Reopening of assessment under Section 147
The appeal in ITA No.260/NAG/2015 for the assessment year 2009-10 involved the reopening of the assessment under Section 147. The CIT(Appeals) held that the reopening was bad in law as there was no failure on the part of the assessee to disclose material facts necessary for the assessment. The CIT(Appeals) referred to binding decisions from the jurisdictional High Court and Tribunal, which uniformly held that reopening an assessment based on a change of opinion is not permissible. The Tribunal upheld the CIT(Appeals)'s decision, noting that no new material had come on record to justify the reopening and that the reassessment proceedings were void-ab-initio. Consequently, the issue of book profits under Section 115JB became academic.

Issue 3: Determination of book profit under Section 115JB
In the reassessment proceedings for the assessment year 2009-10, the CIT(Appeals) observed that the issue of book profits under Section 115JB was academic since the reassessment proceedings were quashed. The Tribunal agreed with the CIT(Appeals)'s findings and upheld the decision, resulting in the dismissal of the Revenue's appeal in ITA No.260/NAG/2015.

Conclusion:
The Tribunal allowed the Revenue's appeals in ITA No.34/NAG/2015, ITA No.283/NAG/2015, and ITA No.284/NAG/2015 for statistical purposes, remitting the matters back to the CIT(Appeals) for further adjudication. The appeal in ITA No.260/NAG/2015 was dismissed, upholding the CIT(Appeals)'s decision to quash the reassessment proceedings.