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TMI Blog2018 (2) TMI 1516X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. In our view, the non–disposal of assessee’s objections independently before completion of the assessment under section 143(3) r/w section 147 of the Act is against the ratio laid down by the Hon'ble Supreme Court in case of GKN Drive Shaft India Ltd. (2002 (11) TMI 7 - SUPREME Court). - Decided in favour of assessee Disallowance u/s 14A r/w rule 8D - Held that:- We direct the Assessing Officer to exclude from the average value of investment the investments which are not capable of yielding exempt income and the investments which have not yielded any exempt income in the impugned assessment year for computing disallowance under rule 8D(2). Needless to mention, the Assessing Officer must afford reasonable opportunity of being heard to the assessee before deciding the issue. Ground no.1 raised by the assessee is allowed for statistical purposes. Short credit of TDS - Held that:- Having heard the submissions of the parties, we direct the Assessing Officer to verify assessee’s claim with regard to TDS credit and decide the issue after providing due opportunity of being heard to the assessee. - ITA no.5256/Mum./2015 And ITA no.5257/Mum./2015 - - - Dated:- 31-1-2018 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting proceedings under section 147 of the Act. As it appears, the Assessing Officer while completing the assessment under section 143(3) r/w section 147 of the Act dealt with the objections raised by the assessee and dismissed them and simultaneously proceeded to complete the assessment under section 143(3) r/w 147 of the Act by making addition of an amount of ₹ 1,97,20,195 on account of unreported sales which resulted in determination of total income at ₹ 73,50,18,911. Being aggrieved of the assessment order so passed, assessee preferred appeal before the first appellate authority, inter alia, on the ground of validity of re opening of assessment u/s 147 of the Act. 4. The assessee challenged the validity of the assessment order passed under section 143(3) r/w 147 of the Act before the first appellate authority on various grounds including on the grounds of non issuance of notice under section 143(2) of the Act and non disposal of the objections raised by the assessee before completing the assessment. The first appellate authority while dealing the aforesaid two aspects held that since, the assessee availed full and proper opportunity by participating in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 019; ii) KSS Petrons Pvt. Ltd. v/s ACIT, ITA no.224 of 2014 dated 03.01.2016; iii) Jayanthi Natarajan v/s ACIT, W.P. no.1905 of 2017 and W.M.P. no.1925 of 2017 dated 14.09.2017; iv) Dockendale Shipping Co. v/s ADIT, 51 CCH 55 (Mum.). 7. The learned Departmental Representative submitted, issuance of notice under section 143(2) is not mandatory under the scheme of the Act and absence in issuance of notice under section 143(2) of the Act by the Assessing Officer does not invalidate the assessment order passed under section 143(3) r/w 147 of the Act. In support of such submission, he relied upon the decision of the Hon'ble Delhi High Court in case of CIT v/s Madhya Bharat Energy Corp. Ltd., ITA no.950/2008, judgment dated 11th July 2008. Further, learned Departmental Representative submitted, assessee s objections regarding non issuance of notice under section 143(2) of the Act cannot be entertained, since, the assessee has not raised such objection within a period of one month from the date of completion of assessment in terms of section 124(3) of the Act. 8. In rejoinder, the learned Authorised Representative submitted, the decision of the Hon'ble Delhi High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in any way as the Hon'ble Delhi Court in a later judgment delivered in case of Jai Shiv Shankar Traders Pvt. Ltd. (supra) after taking note of the decision of CIT v/s Madhya Bharat Energy Corp. Ltd., held that failure of the Assessing Officer in re assessment proceedings to issue notice under section 143(2) of the Act, prior to finalizing the re assessment order cannot be condoned by referring to section 292BB of the Act. The Hon'ble High Court held that failure by the Assessing Officer to issue a notice to the assessee under section 143(2) of the Act in course of the re assessment proceedings is fatal to the order of re assessment. The other decisions relied upon by learned Authorized Representative also express similar view. Therefore, in terms of the ratio laid down in the decisions referred to above, it has to be held that non issuance of notice under section 143(2) of the Act by the Assessing Officer invalidates the order passed under section 143(3) r/w 147 of the Act. As far as the submissions of the learned Departmental Representative that assessee should have raised the objection against non issuance of notice under section 143(2) within a period of one month as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is not only invalid due to lack of jurisdiction for non issuance of notice under section 143(2) but also invalid due to non disposal of objections raised by the assessee against re assessment proceedings prior to completion of the assessment. In view of the aforesaid, we quash the assessment order passed under section 143(3) r/w section 147 of the Act for the impugned assessment year. Resultantly, the order of the first appellate authority is set aside. Grounds no.1 and 2 are allowed. 12. In view of our aforesaid decision on the legal issues, grounds raised on merits having been reduced to mere academic importance do not require adjudication. 13. In the result, assessee s appeal is partly allowed. ITA no.5257/Mum./2015 A.Y. 2010 11 14. In ground no.1, assessee has challenged disallowance made under section 14A r/w rule 8D. 15. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that the assessee in the relevant previous year has earned exempt income by way of dividend amounting to ₹ 50,95,000. Mentioning that funds utilized for earning exempt income and employment of borrowed capital in such investment is not asce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. Further, as regards disallowance of administrative expenditure, the learned Commissioner (Appeals) directed the Assessing Officer to examine the working of disallowance submitted by the assessee in the course of appeal proceedings and accordingly decide the issue. So far as assessee s claim of availability of own fund which can be presumed to have been utilized for investment purpose, the learned Commissioner (Appeals) observed, in the absence of actual details to indicate that investments were made out of own funds assessee s claim cannot be accepted and accordingly directed the Assessing Officer to obtain necessary details from the assessee regarding utilization of funds, either interest free or interest bearing, in investments and accordingly calculate the disallowable expenditure. 17. Learned Authorised Representative submitted, the learned Commissioner (Appeals) having directed the Assessing Officer not to disallow interest expenditure if borrowed funds were utilized for specific purpose like purchase of fixed assets, etc., his observations on the issue of utilization of interest free funds in investment activities were uncalled for and without any basis. The learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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