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TMI Blog2024 (9) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked Section 263, claiming that the AO did not properly examine the applicability of Section 14A resulting in an erroneous order prejudicial to the revenue. As argued by the assessee, the AO had duly inquired into the relevant facts and legal provisions during the original assessment proceedings. Considering the above, it is apparent that the twin conditions required for invoking Section 263 of the Act are not satisfied in this case as the AO had made inquiries and followed the law as interpreted by Courts, including the Hon ble Supreme Court. The fact that the PCIT has a different view does not make the order erroneous. The non-application of Section 14A of the Act was based on a judicially accepted position that no disallowance can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 for the scrutiny of following issues: 1. Investments/Advances/Loans 2. Refund Claim 3. Business Loss 4. ICDS Compliance and adjustment 5. Expenses Incurred for earning exempt income 2.1. A notice u/s 142(1) of the Act was issued on 01-02-2020 requiring the assessee to provide information relating to the issues specified in notice u/s. 143(2) of the Act. The assessee filed its reply on 28-02-2020 giving the particulars called for including the expense incurred for earning exempt income. The assessee submitted that during the year under assessment no exempt income has been earned on investments made in shares and debentures of subsidiary companies as well as on investments in LLP and also stated that no disallowance u/s. 14A of the Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.PCIT, now the assessee is in appeal before us with the following grounds of appeal: 1. In law and in the facts and circumstances of the Appellant's case, impugned order u/s. 263 of the Act passed by Principal Commissioner of Income Tax, Ahmedabad-1 bad in law and deserves to be quashed. 2. In law and in the facts and circumstances of the Appellant's case, the Principal Commissioner of Income Tax, Ahmedabad-1 has erred in setting aside the assessment order dated 14.05.2021 passed by the Assessing Officer without considering the fact that the Assessing officer during the course of Assessment proceedings has already gone through issue regarding investment in quoted and unquoted shares and net proceeds from sale of (investment) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as it is evident from the statement of income submitted. The Ld.AR also stated that the Ld.PCIT has relied on the Circular No. 5 of 2014 issued by CBDT and concluded that the AO has failed to make proper examination of the issues. The Ld.AR further stated that the issue was properly examined by the AO by issuing the notice u/s. 142(1) of the Act as explained and, therefore, the conclusion of the Ld.PCIT is not correct. The Ld.AR placed reliance on the decision of Co-ordinate Bench in the case of N.K. Proteins Ltd. Vs. ACIT, Circle 3(1)(1), Ahmedabad (in ITA No. 313/Ahd/2022 dated 12-06-2024). 6. On the other hand, the Ld. Departmental Representative (DR) argued that the Explanation to section 14A inserted by the Finance Act, 2022 w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. Considering the above, it is apparent that the twin conditions required for invoking Section 263 of the Act are not satisfied in this case as the AO had made inquiries and followed the law as interpreted by Courts, including the Hon ble Supreme Court. The fact that the Ld.PCIT has a different view does not make the order erroneous. Also, the non-application of Section 14A of the Act was based on a judicially accepted position that no disallowance can be made, when no exempt income is earned. 7.2. The Ld.DR has argued that the amendment to Section 14A of the Act, brought by the Finance Act, 2022, is clarificatory and has retrospective effect, relying on the judgement of the Hon ble Supreme Court in the case of Commissioner of Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empt income. Moreover, the explanation inserted by the Finance Act, 2022, though stated to be clarificatory, pertains specifically to the treatment of expenditure related to exempt income, and several judicial authorities, including the Co-ordinate Bench in N.K. Proteins Ltd. (supra) have held that such amendments apply prospectively and not retrospectively. 7.5. Therefore, in light of the consistent judicial view including the decisions of the Hon ble Supreme Court and various High Courts, the amendment to Section 14A of the Act introduced by the Finance Act, 2022, cannot be applied retrospectively to the assessment year under consideration. The revisionary order under Section 263 of the Act, based on the assumption of retrospective applic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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