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TMI Blog2021 (2) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... es raised in the show cause notice. We accordingly quash the impugned order passed u/s 263 of the Act and restore the assessment order u/s 143(3) of the Act dated 28.8.2016. The sole ground raised by the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... sion placed on record, judgments placed in paper book of case laws (20 decisions) and the paper book running from page 1 to 72 filed on 16.12.2020 submitted that the issue raised in the show cause notice issued by Ld. PCIT is with regard to computation of disallowance u/s 14A of the Act. This issue has been examined thoroughly by the Ld. A.O after taking necessary information from the assessee and making disallowance of ₹ 79,019/- u/s 14A of the Act. 7. Per contra Ld. Departmental Representative vehemently argued supporting the order of Ld. PCIT submitted that with regard to huge interest expenses which have not been examined by Ld. A.O and in such circumstances Ld. PCIT has rightly directed the Ld. A.O to examine the issue of disallowance u/s 14A read with rule 8D of the Act. 8. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred and relied by the Ld. Counsel for the assessee. The sole grievance raised in this appeal by the assessee is challenging the order of Ld. PCIT u/s 263 of the Act contending it to be without jurisdiction, unwarranted, invalid and bad in law. 9. We observe that Ld. PCIT issued fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2). It may also be noted that applicability of the section 14A is restricted to the investments of which income is expressly exempt from the tax. It is evident from above that the Ld. A O. has not simply accepted the submission of the Assessee but made disallowance strictly after satisfaction as obliged upon him u/s 14A(2) using his full wisdom and considering facts as well as law as ruled by the judiciaries. 2. Another reason noted that the Assessee has not submitted any details of unsecured loan of ₹ 13,82, 1791shown as paid in the books of Shivshakti. In the matter it is 'stated that the Assessee has not paid any such loan and it has furnished details of all the loans during the previous year as per para 13 of his submission dated 11/0612016 vide annexure 275-283 thereto. Submission dated 28.02.2019 7.Kind attention of your honour is also invited to clause (a) & (b) to Explanation 2 to. section163(J) which reads as "Explanation 2. -for the purposes of this section, it. is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and it is therefore humbly requested to drop the further proceeding & oblige." 10. Ld. PCIT duly considered the above submissions but was not satisfied and held the order of Ld. A.O u/s 143(3) of the Act dated 28.6.2016 as erroneous and prejudicial to the interest of revenue and directed the Ld. A.O to examine the issue of disallowance u/s 14A read with Rule 8D of the Act. 11. We find that Hon'ble Apex Court in the case of CIT V/s Max India Ltd 295 ITR 282 after discussing the judgment of Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd v/s CIT CIT (SC) (2000) 243 ITR 083 held as follows:- "The phrase "prejudicial to the interest of the Revenue" in section 263 of the Income- tax Act, 1961 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. A.O with regard to disallowance u/s 14A of the Act since there were investment in equity shares as per the balance sheet and huge interest expenditure:- 21. Disallowance u/s 14A: There is no such disallowance in accordance with the mandatory requirements and conditions of sec, 14A. Please note that the application of Rule 80D is not automatic & mechanical but the same has be applied in terms of such mandatory requirements and conditions laid down in section 14A, The various honourable High Courts and Tribunals has duly clarified the provisions of sec 14A from time to time in their pronouncements, Accordingly following conditi6ns must be satisfied before invoking the 'sec 14A i.. There should be direct nexus between any borrowing investment made by the Assessee as such portion of interest on borrowings could not only be disallowed which has direct nexus with the investments. *DCIT vs. COSMOS INTERNATIONAL LTD (2014) 41 CCH 032 Del Trib *ACIT vs. DHAMPUR SUGAR MILL PVT. LTD (2015) 370 ITR 0194 (All) * HDFC BANK LTD vs. DCIT (2014) 41 CCH 0286 Mum Trib * U.P. ELECTRONICS CORPORATION LTD vs.DCIT (2015) 43 CCH 0068 Lucknow Trib * JOINT INVESTMENTS PVT LTD vs. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under rule 8D in accordance with the above mandatory conditions is attached which reveals no disallowance is warranted. 16. Along with this reply assessee also annexed computation of disallowance u/s 14A of the Act and submitted that no disallowance was called for. Assessee's this claim was based on the details placed before Ld. A.O which included break up of value of strategic investment value and value of investments of which income is taxable and the value of investment of which income is claimed as exempt. 17. There was another query letter issued by Ld. A.O dated 27.5.2016 containing 11 questions in which Question No.1 was specifically with regard to interest expenses and the same reads as follows:- 1. On perusal of balance sheet it is seen that you have made Long Term Investment in properties at ₹ 2,02,05,807/-, Long Term Unlisted Equity Shares at ₹ 6,76,000/-, Long Term Listed . Equity Shares at ₹ 47.78,427/- and have made none business purpose and capital advance of ₹ 25,72,952/- to different parties as such please snow cause as to why proportionate interest should not be disallowed keeping in view the relevant provisions of the Act. 18. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eproduced the calculation of disallowance u/s 14A of the Act at ₹ 79,019/- and confirmed the disallowance and added to the income of the assessee. 22. In light of above stated facts there is no doubt that the Ld. A.O has raised specific query with regard to huge interest expenditure as to whether they were allowable as business expenditure and secondly issue of disallowance u/s 14A of the Act and to these specific queries detailed replies were filed by the assessee which are stated above and duly considered by Ld. A.O and he after discussing the issue in detail in the assessment order has confirmed the disallowance u/s 14A of the Act. It thus shows that the present case is neither of "no enquiry" or "incomplete" enquiry at the end of the Ld. A.O nor the order u/s 143(3) of the Act can be said to be erroneous so far as prejudicial to the interest of revenue as the Ld. A.O has taken one of the possible views provided under the law and the application of mind by the Ld. A.O is clearly discernable from records as well as the assessment order. 23. In these given facts and circumstances there was no room left for Ld. PCIT to have assumed his jurisdiction u/s 263 of the Act on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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