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TMI Blog2024 (11) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoked the provisions of section 14A with the observation that investments do have potential to earn exempt income in the future and it has hidden and embedded expenses in making such investments which are exempt from tax. Accordingly we are inclined to set aside the order passed u/s 263 of the Act and ld. PCIT has not brought on record any mistake apparent on record or the action of the assessing officer is against the law. Assessee appeal allowed. - Shri S.Rifaur Rahman, Accountant Member And Shri Sudhir Pareek, Judicial Member For the Assessee : Shri Salil Agarwal, Sr. Advocate, Shri Shailesh Gupta, Advocate For the Revenue : Shri Kanv Bali, Sr. DR ORDER PER S.RIFAUR RAHMAN, AM: 1. This appeal is filed by the assessee against the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Cheminvest Ltd versus ITO (ITAT, SB Del) 121 ITD 318 and Pradeep Kar case 319 ITR 416, in which it was held that the expenditure in relation to exempt income is to be disallowed under section 14A of the Act even when no exempt income is earned during the year. Further, he observed that the investments do have potential to earn income which is tax-free. Accordingly he directed the assessing officer to disallow 1% of the average value of investment, to the extent of Rs. 83,11,376/ . 4. Aggrieved, the assessee preferred an appeal before us raising following grounds of appeal :- 1 That having regard to the facts and circumstances of the case and in law, the assessment order passed by ld AO u/s 143(3) is neither erroneous nor prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and material placed on record. We observed that the assessee has not declared any exempt income during the year even though it has made several investments as recorded in its balance sheet. As far as disallowance of section 14A is concerned, it is settled law, as per which no disallowance can be made wherein no exempt income is declared by the assessee during the year. It is fact on record that assessee has not earned any exempt income during the year and ld. PCIT has invoked the provisions of section 14A with the observation that investments do have potential to earn exempt income in the future and it has hidden and embedded expenses in making such investments which are exempt from tax. Therefore, the decision relied by him also overrule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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