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TMI Blog2024 (8) TMI 1522X X X X Extracts X X X X X X X X Extracts X X X X ..... eady had discharged its statutory duty cast upon him by making inquiry on the same proposal as made by the Ld. PCIT during the course of assessment proceedings, branding the same as erroneous so far as it is prejudicial to the interest of revenue made by the Ld. PCIT under the order impugned issued under Section 263 is, therefore, found to be arbitrary, whimsical, not sustainable in the eyes of law and thus, liable to be set aside. The assessee's appeal is therefore allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 00000 14. Supreme Placement Services Pvt. Ltd. 82500000 82500000 15. Venus Jupiter Pvt. Ltd. 89550000 89550000 16. Trustworthy Cement Pvt. Ltd. 35020000 35020000 17. Marvelous Cement Pvt. Ltd. 72491000 72000000 18. Remarkable Consumer Electronics Pvt. Ltd. 72593000 72000000 Total 112,79,18,600/- 112,68,34,600/- 4. Finally, considering the explanation to the provision of Section 14A of the Act, introduced by the Finance Act, 2022 the Ld. PCIT came to a finding that non-disallowance of expense relating to exempt income under Section 14A of the Act has resulted in under assessment of the income to the extent of Rs. 1,12,73,766/-. While doing so the Ld. PCIT observed as follows: "3. Finance Act, 2022 has clarified the provisions of section 14A of I.T. Act by inserting Explanation as under:- "Explanation For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific queries raised by the Ld. AO and the reply to the same filed by the assessee along with all details as asked for the issue appears to have been adjudicated by the Ld. AO during the course of the assessment proceeding, the contention as made by the Ld. Counsel with the corroborative documents mentioned hereinabove has not been able to be controverted by the Ld. D.R. 8. He has further relied upon the profit and loss account of the assessee company at page 13 of the paper book filed before us where no exempt income earned by the assessee is reflecting. Apart from that the ld. A.R raised objection to the invocation of Explanation 2 of Section 263 of the Act by the Ld. CIT(A). The explanation 2 inserted by the Finance Act, 2022 w.e.f 01.04.2022 is as follows: "(7) Further Explanation 2 to Section 263 Section 263 of the Act which is relevant in the instant case provides that "for the purposes of this section, 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 Principal Commissioner of Commissioner. (a) the order is passed without making inquiries or verifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) dated 16.01.2020 (Pages 40 to 43 of the PB) in regard to the application of Section 14A in the case of the assessee, the contents whereof is as follows: Government of India Ministry of Finance Income Tax Department Office of the Assistant Commissioner of Income Tax Central Circle 3, Delhi To, JAGRITI JOB FINDER PRIVATE LIMITED 134A, 1ST FLOOR SOMDUTTA CHAMBERS-1,5, NEW DELHI 110066, DELHI, INDIA PAN: AABCJ5974E AY: 2018-19 Dated; 16/01/2020 DIN & Notice No: ITBA/AST/F/142(1)/201920/1023924836(1) Notice under sub-section (1) of Section 142 of the Income Tax Act, 1961 Sir/Madam/ M/s In connection with the assessment for the assessment year 2018-19 you are required to: a) Furnish or cause to be furnished on or before 23/01/2020 at 11:30 AM the accounts and documents specified overleaf b) Furnish and verified in the prescribed mariner under Rule 14 of 1.7 Rules 1962 the information called for as per annexure and on the points or matters specified therein on or before 23/01/2020 at 11:30 AM c) The above mentioned evidence/information is to be fumished online electronically in E Proceeding facility through your account in 'e-filing' website of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the F.Y. 2017-18. In case of deviation in method of accounting, please mention and give. 6. Please furnish all addresses where offices / godowns are situated Also give details of ownership of such properties 7. Please furnish details of the Bank Accounts including Fixed Deposits in the name of the individual/firm as well as those in the names of the partners in the following format: Name & Address of the Bank with Branch Account in the name of Account No. Account type (i) (ii) (iii) (iv) 8. If applicable, please submit true copy of assessment order passed u/s 143(3) (scrutiny assessment) of the Act during the last 3 years If there is no such assessment order, kindly mention the same 9. Complete name, addresses & bank accounts of the Directors of the company and of all the shareholders having shareholding of more than 10% along with details of shareholding of the company. 10. Please furnish the details of any income tax demand stands pending against your name 11. Please furnish all the details regarding properties/premises/assets held by the company in given format : - Location and address of the property Purchased/inherited Usage of the property Fair mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Assessment Year 2,96,500/- Grand Total 10,84,000/- In this connection, copy of the relevant bank statement reflecting the payment made during the relevant Assessment Year are enclosed herewith. 1.2 As regard Your Honour's regarding applicability of section 14A read with Rule BD of the Income-tax Act 1961, In this regard, it is submitted that the Assessee Company has not earned any exempt income hence the provisions of Section 14A of the Income tax Act, 1961 are not applicable to the Assessee Company In this connection reference may be made to the following case laws including judgements of Hon'ble Supreme Court wherein it has been clearly held that in the absence of any exempt income no disallowance u/s 14A of the Income-tax Act, 1961 is called for Principal Commissioner of Income tax, Patiala v State Bank of Patiala [2018] 99 taxmann.com 286 (SC); Maxopp Investment Ltd v/s CIT [402 ITR 640 (SC)] PCIT v. GVK Project and Technical Services Ltd [(2019) 106 taxmann.com 181(SC)]; Commissioner of Income Tax (II), Kanpur vs Shivam Motors Pvt Ltd in ITA No. 88 of 2014 for A/Y 2008-09 vide order dated 05-05-2014 (Allahabad High Court); CIT vs Corrtech Energy Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany is authorised to carry on or for any other purposes which may seem directly or indirectly calculated to benefit this Company or to promote or advance the interests or this Company 6. As desired, details of registered address of the Assessee Company is enclosed herewith 7. As desired, details of bank accounts along with bank statement for the relevant Assessment Year is enclosed herewith 8. As desired copy of Assessment order passed u/s 143 (3) for the Assessment year 2017-18 is enclosed herewith. 9.(a) As desired, details of directors as on 31.03.2018 is enclosed herewith (b) As desired, details of shareholders with their shareholding pattern for the relevant Assessment Year is enclosed herewith 10. As regard your Honour's query regarding details of income tax demand. It is submitted that demand of Rs 2287 is due for the Assessment year 2010-11 11. As regard Your Honour's query regarding properties/ premises/ assets held by the company, it is submitted that the Assesssee Company has not held any properties/ premises/ assets as on 31.03.2018. 12. As desired, details of Income tax Assessments for the earlier 2 years in the prescribed format is enclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CJT(O.R.) and heard both the parties at length. We find that the Assessing Officer had made detailed inquiries and examined the entire block of fixed assets. A brief note on capital work in progress was also filed and queries regarding the manner in which the depreciation was claimed was also raised. Further the assessee is following a settled accounting policy/principle for capitalization of expenses including interest expenses to both the fixed assets as well as capital work in progress. This method was forming part of the audited financial statements which were filed before the Assessing Officer as well. We also find that the free reserves were also more than sufficient to cover up the investment in fixed assets/capital work in progress. Further the assessee society has generated sufficient internal cash flows to meet with the cost of fixed assets as well as capital work in progress. In spite of this fact the assessee has capitalized a sum of Rs. 7.09 crores in the books of accounts. The learned Pr. CIT has also not disputed that the total investments were merely 10% of the interest-free funds available with the assessee society. We also find that a consistent view has ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of the Act." 12. For the above reasons, this Court is of the considered view that no substantial question of law arises for consideration from the impugned order of the ITAT. The appeal is, accordingly, dismissed but in the circumstances, with no orders as to costs." 14. So far as the invocation of Explanation 2 of Section 263 is concerned we find that the judgment relied upon by the Ld. A.R in the case of PCIT Vs. Era Infrastructure reported in (2022) 141 taxmann.com 289 (Delhi) holds the field. It is categorically decided that amendment by Finance Act, 2022 to Section 14A by inserting a non-obstante clause and Explanation will take effect from 01.04.2022 and the same cannot be presumed to have retrospective effect. Thus, having regard to the entire aspect of matter we find that the issue raised and decided by the Ld. PCIT in the order impugned under Section 263 of the Act has already been enquired and examined/verified by the Ld. AO during the course of assessment proceedings and only upon which the assessment proceedings has been finalized upon accepting return. 15. The assessment order cannot be held to be erroneous insofar as it is prejudicial to the interest of the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally upheld by the Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd. Vs. CIT, reported in (2000) 243 ITR 83 (SC) also relied upon by the Ld. A.R. 18. Thus, having regard to the entire aspect of the matter the order passed by the Ld. CIT(A) is found to be bad in law in holding the order passed by the Ld. A.O erroneous so far as it is prejudicial to the interest of the revenue not only on merit considering the aspect of not having been any exempt income earned by the assessee in the year under consideration but also on wrong invocation of Explanation 2 of Section 263 of the Act in view of the Judgment passed by the Hon'ble Delhi High Court in the case of Era Infrastructure (India) Ltd. (supra) as discussed above. The Ld. Assessing Officer when already had discharged its statutory duty cast upon him by making inquiry on the same proposal as made by the Ld. PCIT during the course of assessment proceedings, branding the same as erroneous so far as it is prejudicial to the interest of revenue made by the Ld. PCIT under the order impugned issued under Section 263 is, therefore, found to be arbitrary, whimsical, not sustainable in the eyes of law and thus, liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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