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TMI Blog2022 (12) TMI 837X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, assessment order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue. The reliance can be placed on the decision in the case of Indian Textiles [ 1985 (2) TMI 23 - MADRAS HIGH COURT] wherein it was held that provisions of section 263 can be invoked even where full facts are disclosed but the AO has not examined these details as per correct provisions of law. Therefore, considering the facts and circumstances, as narrated above, we uphold the order passed by ld PCIT under section 263 of the Act and dismiss the appeal of the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... of disallowance as per Rule 8D r.w.s.14A is worked out as under: As per rule 8D(2)(i) Direct expenditure relating to income which does not form part of total income. NI: As per rule 8D(2)(ii) Indirect expenditure interest not directly attributable to any particular income receipt Total investment which can earn exempt income as on 01.04.2016 as shown in above table Rs.6,69,13,876/- Total investment which can earn exempt income as 31.03.2017, as shown in above table Rs.99,03,385/- Average value of investment (D) income form which is exempt (B) + (C) divided by 2 Rs.3,84,08,631/- 1% x average value of investment (income from which is exempt) 1% x Rs.3,84,08,631/- Rs.3,84,086/- Total disallowance Rs.3,84,086/- 6. Thus, Ld.PCIT noted that while finalizing the assessment proceedings, an amount of Rs.3,84,086/- should have been disallowed u/s 14A and required to be added to the total income of the assessee. The ld PCIT noted that no inquiry in this regard has been made by the assessing officer in the course of assessment proceedings and order was passed without application of his mind. Therefore, ld PCIT noted that this makes the assessment order erroneous in so far as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the claim of the assessee that no expenditure was incurred in relation to income which does not form part of the total income under this Act. Therefore, ld PCIT held that assessing officer has not inquired the issue of disallowance u/s 14A of the Act while completing the assessment proceedings therefore, the assessment order passed u/s143(3) of the Act dated 21.12.2019 for A.Y. 2017-18 was set -aside with a direction to the Assessing Officer to pass fresh assessment order. In view of the above and in exercise of the powers conferred by the provisions of section 263 of the Act the assessment order passed u/s143(3) of the Act dated 21.12.2019 for A.Y 2017-18 in the case of the above mentioned assessee was set aside with a direction to the Assessing Officer to pass fresh assessment order. 9. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. 10. Shri Ankur A Shah, Ld. Counsel for the assessee, pleads that Ld. PCIT has exercised his jurisdictional power without any error in the assessment order. The Ld. Counsel for the assessee submitted that section 14A disallowance is not applicable to the assessee under consideration, as there is no exempt income during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the reply from the assessee, the assessing officer examined the issue and applied his mind, therefore the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. We note that assessee has replied to the assessing officer stating that income claimed as exempt pertains to the share of Joint Venture entered into by the company, and the share from JV is exempted u/s 86 of the Income-Tax Act, 1961, and accordingly, provisions of section 14A of the Act, is not applicable in relation to this income. We note that submitted its reply during the assessment stage, stating that share from Joint Venture is exempted u/s 86 of the Income-Tax Act, 1961. Therefore, at this juncture, it is appropriate to quote the provisions of section 86 of the Act, which reads as follows: "Section - 86, Income-tax Act, 1961 [Share of member of an association of persons or body of individuals in the income of the association or body. 86. Where the assessee is a member of an association of persons or body of individuals (other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the details relating to issue of section 14A does not mean that order passed by the assessing officer is correct. In assessee`s case under consideration, the assessing officer, after getting the relevant documents and details from assessee about exempt income, has reached on wrong conclusion. The assessee has himself submitted before the assessing officer that share from Joint Venture (JV) is exempt u/s 86 of the Income-tax Act, 1961. It means the assessee has received the exempt income from the Joint venture and assessee himself submitted such information before the Assessing Officer. However, Assessing Officer did not apply his mind and did not make the disallowance under section 14A of the Act, therefore order passed by the Assessing Officer is not sustainable in the eye of law. 17. Therefore, from the above facts, it is abundantly clear that there are no two possible views are available before the Assessing Officer. In the assessee`s case, there is only one view available before the Assessing Officer, which is that if the assessee has received exempt income from Joint venture then there should be disallowance under section 14A of the Act and Assessing Officer has failed to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer has passed the order on incorrect assumption of fact, that is, assessing officer has not considered exempt income received from joint Venture for the purpose of disallowance under section 14A of the Act. No doubt, assessing officer issued the notice to the assessee to furnish the documents relating to exempt income, and in fact the assessee in response to such notice furnished the details about exempt income under section 86 of the Act ( Share from JV), however, assessing officer passed the assessment order without application of mind, that is, assessing officer did not examine whether share from Joint Venture is liable for disallowance under section 14A of the Act, hence it is clear non-application of mind on the part of the assessing officer. Therefore, we note that after getting the details and information from the assessee, the assessing officer has not investigated the issue before him, therefore in our view the order passed by the Assessing Officer can be termed as erroneous order. Since, order of the assessing officer is erroneous, therefore, there is loss to the Revenue, hence order passed by the assessing officer is prejudicial to the interest of Revenue. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with the interpretation of provisions of section 10(2A) of the Income tax Act, 1961 ('Act') seeking clarification as to what will be the amount exempt in the hands of the partners of a partnership firm in cases where the firm has claimed exemption/deduction under Chapter III or VI-A of the Act. 2. The matter has been examined. Sub section (2A) of section 10 was inserted by the Finance Act, 1992 w.e.f. 1-4-1993 due to a change in the scheme of taxation of partnership firms. Since assessment year 1993-94, a firm is assessed as such and is liable to pay tax on its total income. A partner is not liable to tax once again on his share in the said total income. 3. It is clarified that 'total income' of the firm for sub section (2A) of section 10 of the Act, as interpreted contextually, includes income which is exempt or deductible under various provisions of the Act. It is, therefore, further clarified that the income of a firm is to be taxed in the hands of the firm only and the same can under no circumstances be taxed in the hands of its partners. Accordingly, the entire profit credited to the partners' accounts in the firm would be exempt from tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion proceedings under section 263 of the Act, it has been observed by Ld.PCIT that assessee-company has made following investment in unquoted shares, which can earn exempt income: Sr. No Nature of investment Amount of investment as on 01.04.2016 (Rs) Amount of investment as on 31.03.2017 (Rs) 1 Shares of Mahalaxmi Rubtech Ltd. 5,55,19,521/- 80,11,385/- 2 Shares of Gandhinagar Hotel Ltd. 49,71,303/- 1,90,000/- 3 Shares of raj Packaging Ltd 58,73,052/- 11,52,000/- 4 Investment in mutual fund 5,50,000/- 5,50,000/- Total 6,69,13,876/- 99,03,385/- These above noted investments were not examined by the assessing officer. There is no discussion in the assessment order framed by the assessing officer under section 143(3) of the Act dated 21.12.2019 in respect of these investments. There is no reference in the assessment order that these investments did not earn any exempt income nor assessee has filed details before the assessing officer. Therefore, assessment order passed by the assessing officer is erroneous and prejudicial to the interest of Revenue. The reliance can be placed on the decision of Hon'ble Madras High Court in the case of Indian Textiles Vs. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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