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TMI Blog2019 (8) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of own funds in form of capital, which is over and above, the amount of investments in shares and securities, which could yield exempt income. The assessee has also made out a case of no exempt income for the year under consideration. It is settled position of law that in case there is no exempt income earned for the year under consideration, then there would be no disallowances of expenditure incurred in relation to exempt income u/s 14A. This legal proposition is supported by number judicial precedents, including decision of Hon ble Supreme Court in the case of CIT vs Chettinad Logistics Pvt.Ltd. [ 2018 (7) TMI 567 - SC ORDER] where, the Hon ble Supreme Court has dismissed SLP filed by the revenue and upheld the findings of Hon ble Madras High Court regarding no exempt income, no disallowances of expenditure u/s 14A of the I.T.Act, 1961. This legal proposition was further supported by the decision of Hon ble Bombay High Court, in the case of Pr.CIT vs Ballarpur Industries Limited [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] where, similar view has been expressed by the High Court. Therefore, we are of the considered view that the Ld.PCIT has set aside assessment order passed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciating that the same is interest income offered for taxation. 8. That the assessment order passed after detailed enquiries does not become erroneous merely because CIT feels further enquiries should have been made. Hence the notice issued U/s 263 and the order passed u/s 263 is illegal, bad in law and without jurisdiction. 9. That without prejudice, the PCIT has wrongly and illegally held that the order passed by AO is erroneous and prejudicial to the interest when independent enquiry has been made by PCIT. Hence the notice issued U/s 263 and the order passed u/s 263 is illegal and bad in law. 10. That the evidence filed and material available on the record have not been properly construed and judiciously interpreted, Hence the addition/ disallowance made is uncalled for. 11. The Appellant craves leave to add, to alter to amend the above Ground of Appeal at the time of hearing, 3. The brief facts of the case are that the assessment for AY 2014-15 was completed in this case u/s. 143(3) of the I.T.Act, 1961 on 12/12/2016, accepting the return of income of ₹ 2,19,82,050/-. Thereafter, the PCIT-24, Mumbai, issued a show cause notice u/s 263 of the I.T.Act, 1961, dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in audit report and ITR, the explanations of the assessee seems to be prima-facie correct and acceptable. However, in respect of Part A ie. large interest expenses of ₹ 70,76,669/- relatable to exempt income u/s 14A of the Act, the Ld.PCIT held that on perusal of relevant assessment records, it was noticed that the claim of the assessee that the AO had duly examined and analyzed the applicability of section 14A r.w.Rule 8D does not support its contention. The PCIT, further observed that it is seen that notice u/s 142(1) of the Act, dated 12/09/2016, was issued by the AO containing questions of very general nature, intended to ascertain, the nature of the business of the assessee and obtained an over all view of the financial. It is pertinent to note that no specific question has been asked by the AO, with regard to 14A disallowances in the said question 'A'. Accordingly, he opined that the AO has failed to apply his mind to the facts of present case in light of provision of section 14A r.w. Rule 8D, which caused prejudice to the interest of the revenue and accordingly, by following the decision of Hon'ble Supreme Court in the case of CIT vs Malabar Industrial company Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of provision of section 14A of the Act, 1961, even though, the assessee has claimed large interest expenses. The Ld. DR, further submitted that although, the Ld.PCIT had accepted the expenses of the assessee with regard to part B and C of show cause notice, regarding 'Nil' interest income and mismatch of turnover reported in audit report and ITR, but because of insufficient record, the AO might not have verified above facts and accordingly, set aside the order passed by the AO to re-do assessment. 8. The Ld. DR, further submitted that the Ld.PCIT has not given any specific findings on two issues and its taxability, but only pointed out mistakes committed by the AO, while completing assessment. Therefore, it is incorrect to interfere in the proceedings of PCIT to revise assessment order u/s 263, where the issue was not examined by the AO and on this ground PCIT revised the order without giving his own finding, but directing the AO to do the necessary exercises , therefore, it was not proper for the Tribunal to decide the same, converting itself to a court of first instance and deciding the factual aspect on which, neither AO nor PCIT had written any findings. In this regard, he re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied. Similarly, in respect of Part B and C of show cause notice regarding 'Nil' interest income declared under the head income from other sources and mismatch between turnover reported in audit report and ITR, the Ld.PCIT himself, in his order at para 3 had admitted the fact that in respect of Part B and C, it seems prima-facie, the explanation offered by the assessee is correct and acceptable. The Ld.PCIT having accepted the fact that there is no prejudicial to the interest of the revenue, in respect of Part B and C of show cause notice regarding turnover mismatch and interest income, he ought not to have revise the assessment order at least on this ground. We, further noted that if, you go through the points taken up by the Ld.PCIT for verification regarding interest income and turnover mismatch, the figure taken up by the Ld.PCIT is exactly one and the same. The assessee has reported interest income under the head sales turnover in its audit reports, whereas in ITR sales turnover and interest income has been shown separately. If, you add back sales turnover and interest income, then there would be no difference in turnover reported by the assesse in its audit report. This fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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