9911796707
TMI Blog2024 (8) TMI 1522X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income at Rs. 11,66,380/- which was processed under Section 143(1) of the Act on 05.11.2019. In fact, the case was taken up for limited scrutiny and notice under Section 143(2) dated 21.09.2019 followed by notice under Section 142(1) along with detailed questionnaire dated 16.01.2020 and further notice under Section 142(1) of the Act along with specific questionnaire was issued on 28.01.2021. Due compliance was made by the assessee to the said notices by filing submissions to the queries made and upon considering the information, details and/or clarification so filed by the assessee, the returned income was accepted by the Ld. AO and assessment proceeding was finalized under Section 143(3) of the Act on 31.05.2021. 3. Thereafter, a show cause notice dated 12.02.2024 under Section 263 of the Act has been issued by the Ld. PCIT considering the fact that the assessee made investment in the equity shares as reflected from balance sheet but had not deducted any expense related to exempt income. Further that the AO did not disallow any expense related to such exempt income under Section 14A of the Act. The details of assessee's investment in equity shares made in the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as per the rule 8D as under: - Investment at the beginning of year Rs 112,68,34,600 Investment at the end of the year Rs 112,79,18,600 Average investment during the year Rs 112,73,76,600 Amount to be disallowed as per under 14A 1% of the average investment of Rs. 1,12,73,766" 5. In that view of the matter the assessee was directed to explain as to why proceeding under Section 263 should not be initiated for revision of assessment order for Assessment Year 2018-19 and as to why the income should not be enhanced by Rs. 1,12,73,766/- on account of failure of the AO to disallow these expenses. 6. The Ld. Counsel appearing for the assessee joins issue here. At the very threshold, it was submitted by him that the assessee does not have any exempt income. Further that during the course of assessment proceeding, notice under Section 142(1) of the Act was issued on 16.01.2020 wherein applicability of Section 14A has been directed to be specified by the Ld. AO. Further that the assessee was directed to submit the computation for disallowances, if any, under Section 14A r.w.Rule 8D before the said Assessing Officer. In this regard, he has drawn our attention to pages 40 to 43 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." 9. In this regard, he has relied upon the judgment passed by the Hon'ble Delhi High Court in the case of PCIT Vs. Era Infrastructure India Ltd., reported in (2022) 141 taxman.com 289 (Del) wherein it has been held that up to and including Assessment Year 2021-22 no disallowance could be made under Section 14A if no exempt income is earned by an assessee. Further that amendment made by the Finance Act, 2022 to Section 14A by inserting a non-obstante clause and explanation will take effect from 01.04.2022 and cannot be presumed to have retrospective effect. In that view of the matter since the issue involved in the order impugned passed under Section 263 of the Act i.e non disallowance of expenses relating to exempt income under Section 14A of the Act has already been verified and examined by the Assessing Officer during the assessment proceedings and thus, finalization of the assessment proceedings accepting return filed by the assessee cannot be held to be erroneous only upon invocation of Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available). e) In cases where order has to be passed under section 153A/153C of the Income Tax Act, 1961 read with section 143(3), assessment proceedings would be conducted manually Yours faithfully, SATHISH G CENTRAL CIRCLE 3, DELHI ANNEXURE Please refer to your Return of Income filed for the A.Y. 2018-19. In this connection you are requested to fumish the following details / information to substantiate your income and justify the expenses debited in the P&L account financial year relevant to this assessment year 1. Please provide details of interest expenses made during the year and explain whether these expenses are attributable to investments made by the company. 1.1. Please provide details of source of above investments. 1.2. Please specify applicability of section 14A of IT Act, 1961 in your case. If yes, please submit computation for disallowances u/s 14A rw Rule 8D. 1.3. Expenses debited to Profit & Loss Account for earning exempt income as per schedule of ITR is significantly lower as compared to investments made to earn exempt income Please justify and explain as to why disallowance u/s 14A of the 1.T. Act may not be made as per Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition Result of 1st appeal Result of 2nd appeal Arrears due 11. Further that upon perusal of the reply reflecting at pages 44 to 47 of the paper book filed before us which was furnished before the Ld. DCIT in accordance with notice issued under Section 142(1) dated 16.01.2020 we find that the assessee has taken the trouble in explaining the issue with calculation and further took the support of different judicial pronouncements from different forums in favour of the assessee in the following manner: Date: 14.04.2021 The Dy. Commissioner of Income Tax, Centre Circle -3 Delhi, Reg: Assessment Proceedings in the case of M/s JAGRITI JOB FINDER PRIVATE LIMITED for A.Y. 2018-19 Sir, This is with reference to notice dated 16/01/2020 issued under section 142(1) ofthe Income-tax Act 1961 wherein certain documents/information/clarification are desired by Your Honour's. With respect to specific queries raised by Your Honour's, the point wise reply are being enclosed herewith:- 1. As regard Your Honour's query regarding the details of interest expenses made during the year, it is submitted that the Assessee company had paid Rs 10,689/ as interest during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Haryana)] In view of the above discussion and ruling of Hon'ble Supreme Court, it is submitted that in the absence of any exempt income no disallowance can be made under section 14A read with Rule 8D of the Income tax Act 1961 1.3 As regard Your Honour's query regarding expenses debited to Profit and Loss Account for earning exempt income, it is submitted that there is no exempt income earned during the relevant Assessment year, so this point is not applicable. Further, Your Honour's query regarding various documents and clarifications, it is submitted as under:- 1. Power of Attorney is enclosed herewith 2.(a) Copy of Audited Annual accounts for the year ended 31 03 2018 alongwith relevant Annexures and Schedules is enclosed herewith. (b) Copy of the Tax Audit Report filed for the relevant Assessment Year is enclosed herewith 3. Copy of ITR Acknowledgement alongwith Income tax Return for the relevant Assessment Year is enclosed herewith 4. As desired, copy of form 26AS for the relevant Assessment Year is enclosed herewith 5. As regard Business Activity of the Assessee Company, it is submitted that the Assessee Company is engaged in the business to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar proposal made by the Ld. PCIT in the order impugned under Section 263 of the Act, i.e the issue of disallowance of expenses under Section 14A of the Act and only thereafter, the assessment has been finalized, such inquiry and verification made by the Ld. AO cannot be said to be insufficient and issuance of order under Section 263 of the Act holding such order erroneous as prejudicial to the interest of revenue is not called for. We further note that having regard to the specific queries raised by the Ld. AO mentioned hereinabove and the reply filed by the assessee to the same along with all details as asked for, the issue therefore clearly appears to have been adjudicated by the Ld. AO in its proper perspective during the course of assessment proceedings, as contended by the Ld. Counsel appearing for the assessee with corroborating documents annexed to the paper book filed before us mentioned hereinabove has not been able to be controverted by the Ld. D.R. 13. In this regard, we have carefully considered the judgment passed by the Hon'ble Delhi High Court in the case of Indian Farmers & Fertilizers Co-operative Ltd. in ITA No. 597/2017. While dealing with this particular asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of CIT v. Reliance Utility and Power Ltd. 313 ITR 340. 16.1 In light of the above discussions as well as factual matrix, we have no hesitation in holding that the order passed by the learned Pr CIT is bad in law for the following reasons. (a) That, as discussed above, detailed inquiries were made by the Assessing Officer with regard to the capitalization of interest to fixed assets as well as capital work in progress. (b) That, even on the facts of the case the assessee had sufficient interest-free funds to meet with the capital expenditure and, therefore, following the ratio of the decision of the Hon'ble Bombay High Court in Reliance Utility and Power Ltd. (supra), по disallowance u/s 36(1)(iii) is called for (c) That, the assessee had already discharged its onus of proving non- diversion of funds borrowed for working capital towards capital work in progress and fixed assets by submitting a certificate of an independent statutory auditor and proved availability of own funds and internal accruals which was not rebutted by Ld. Pr.CIT." 11. Lastly, it was urged by Mr. Manchanda that the ITAT failed to note the changed position as a result of the inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous in so far as it is prejudicial to the interests of the revenue to pass such orders thereon as the circumstances of the case may justify including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. However, such a power can be executed only after giving the Assessee an opportunity of being heard and after making or causing to be made such enquiry as he may deem necessary. It cannot be over emphasized here that the Commissioner can revise the order passed by the Assessing Officer only if he considers that the order passed is "erroneous in so far as it is prejudicial to the interests of the revenue" within the parameters laid down in Explanation 2 thereto. 16. However, we note that invocation of Explanation 2 of Section 263 of the Act by the Ld. PCIT cannot be allowed to have a freehand to reopen the issue particularly when the said Provision of Law in the year under consideration is found to be not sustainable in view of the above judgment. 17. We also note that Assessing Officer when acting in accordance with law and make a certain assessment, the same cannot be branded as erroneous simply because the order should ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
