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TMI Blog2013 (10) TMI 874X X X X Extracts X X X X X X X X Extracts X X X X ..... .R. ORDER Per : D. K. Tyagi, Judicial Member:- This is the assessee's appeal against the order of Ld. CIT-II Ahmedabad passed u/s. 263 of the Act dated 11-01-2013. 2. Brief facts of the case are that assessment u/s. 143(3) of the Act was completed in this case determining the total income of assessee at Rs. 53,61,37,830/-. Subsequently, Ld. CIT issued following show cause notice u/s. 263 of the Act. "2. The assessment u/s. l43(3) of the Act was finalized on 29/10/2010 by the ACIT, Circle-4, Abmedabad determining total income at Rs. 53,61,37,83Q/- which is reassessed u/s.250 at Rs. 52,80,20,720/- on 30/01/2032. Subsequently, on verification of records it is noticed by the A.O. that the assessee had earned dividend income of Rs. 1,89,42,065/- which was claimed as exempt and the assessee itself had disallowed an amount of Rs.9,45,960/- u/s. 14A of the Act. However, as per the provisions of section 14A r.w.s. 8D of the I T. Rules, the disallowance should hove been worked out to Rs. l,22,25,394/-. Thus, the income of the assessee has been under assessed by an amount of Rs. 1,12, 79,434/-. 3. Considering the facts and circumstances as mentioned above, it appears that the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led for the explanation for the disallowance to be made under section 14A of the Income Tax Act 1961 read with Rule 8D. Copy of questionnaire is placed on Page 28 to 30 of the paper book and relevant page is 28 of the paper book. 5. In response to the said questionnaire, GRUH has, vide letter dated 01.07.2010 addressed to Assessing Officer, submitted detailed working of disallowance under section 14A of the Income Tax Act, 1961 read with rule 8D and have stated that the same is duly disallowed in the return of income. The working of disallowance is placed on Page 36 of the paper bonk. 6. It seems that the disallowance worked out by You Honour at Rs.l,22,25,394/-is as per balance sheet as on 31.03.2008, wherein investment details are mentioned. In the Schedule of investments, the investments which are mentioned, the income of which is received by GRUH is taxable and GRUH has duty offered the same in the computation of income while filling the return of income. Such details ore placed on Page 37 to 38 of the paper book. As per the provisions of sub-rule (2) of Rule 8D, the working of disallowance is to be made at aggregate of the following: i) the amount of expenditure directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil. 6.4 Thus, even if the disallowance is to be worked out as per rule 8D, the resultant figure comes to Rs. Nil only. However, while filing the return of income, GRUH has considered proportionate expenditure in relation to exempt income, and accordingly, suo moto disallowance has been made by GRUH in the return of income. 6.5 It is also submitted that the funds utilized for earning exempt income during the year under consideration are own funds only and no borrowed funds ore utilized for the purposes of making investment in exempt income. This is evident from Reserve and Surplus in Schedule 1 and 2 of the balance sheet. Please see Internal page 32 of balance sheet which shows share capital of Rs. 34,64,76,990/- and Reserve and Surplus shows Rs.155,61,88,327/- totaling to Rs.190,26,65,317/-. In view of this also, no disallowance is required to be made as per Rule 8D. 7. It is submitted that thus all the details in respect of disallowance to be made under section 14A of the Income Tax Act, 1961 were on record of the Assessing after considering and examining the same, the Assessing Officer has finalized assessment in question which is in accordance with the law. It is two circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) CIT v. G.R. Thangamaligai [259 ITR 128 Mad)] (iv) CIT v. Govindo Choudhary Ors. [203 ITR 880 (SC)] (v) CIT v. Hastings Properties [253 ITR 124 (Cal)] (vi) CIT v.Mehrotra Brothers [(270 ITR 167 (MP)] (vii) CIT v. Macneill Magore Ltd. [232 ITR 945 (Cal)] (viii) CIV v. Smt. D. Vallammal [230 ITR 695 (Mad)] (ix) J. K. Industries Ltd. v. ACIT [283 ITR 101 (Kol)] 8. In view of the above, it is established beyond doubt that the assessment order passed by the Assessing Officer cannot be considered as prejudicial to the interest of revenue, and therefore, we have to request Your Honour to drop proceedings initiated under section 263 of the income Tax Act, 1961". 4. A further written submission was also filed by the assessee which reads as under:- "During the course of last hearing, your goodself have asked to provide a note on working carried out for calculating the disallowance made under section 14A of the Income Tax Act, 1961. In this respect, we would like to submit that in the paper book on page no. 5, detailed statement of calculation of disallowance under section 14A of the Income Tax Act, 1962 has been given. The same is summarized hereunder again for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d make inquiries in respect of disallowance u/s. 14A of the Act which was duly complied with by the assessee in its reply dated 01-07-2010 addressed to AO. Therefore Ld. CIT was not correct in holding that no inquiry as such was done by the AO in respect of disallowance u/s. 14A of the Act thereby holding the order passed by AO as erroneous and prejudicial to the interest of revenue. Concluding his argument learned counsel of the assessee submitted that it was not a fit case for invoking the provisions of section 263 of the Act by Ld. CIT. Ld. DR on the other hand submitted that no inquiry about the calculation of disallowance u/s. 14A made by assessee himself while filing the return of income was made by AO. Since Ld. CIT was of the view that calculation of disallowance u/s. 14A made by assessee himself which was accepted by AO during the assessment proceedings was not correct and AO did not make any inquiry in this respect, he held that order passed by AO was erroneous and prejudicial to the interest of revenue and the same was set aside by Ld.CIT with the direction that AO should pass a fresh assessment after conducting necessary inquires and after giving proper opportunity of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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