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TMI Blog2025 (2) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... hed such information in the reply filed during the course of the assessment proceeding.
Therefore, it appears that during the course of the regular assessment, the Assessing Officer has accepted the explanation and reply filed by the petitioner and the return income was accepted.
AO was not required to record any reason for not making any disallowance u/s 14A of the Act while passing the Assessment Order.
The impugned show-cause notices and impugned orders cannot be sustained. The petitions therefore succeed and are accordingly allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the show-cause notice is beyond the period of limitation from the date of the Assessment Order passed under Section 143 (3) of the Act as the issue of disallowance under Section 14A of the Act was already processed by the Assessing Officer in the regular assessment proceedings. It was further contended that the assuming for a while that the impugned show-cause notice was within the period of limitation, the CIT (Appeals) - the respondent no. 1 could not have assumed the jurisdiction under Section 263 of the Act as it would amount to mere change of opinion. It was also contended that against the order passed by the Assessing Officer, the petitioner had preferred an appeal before the CIT (Appeals) and as such, the Assessment Order has merged with the order of the CIT (Appeals), more particularly when the order of the CIT (Appeals) is prior in point of time. 10. However, the respondent no. 1 passed the impugned orders dated 29th December, 2017 and dated 30th March, 2021 holding that the Assessment Orders under Section 143 (3) of the Act read with Section 147 of the Act dated 29th December, 2017 passed by the Assessing Officer is erroneous so far as it is prejudicial to the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was already processed during the regular course of assessment and therefore, it has achieved the finality as the Assessing Officer accepted the return income without making any disallowance for the same. It was therefore submitted that during the course of re-assessment proceedings, the respondent - Assessing Officer could not have made any inquiry with regard to disallowance under Section 14A of the Act as the re-assessment proceedings were confined only to disallowance on the basis of the materials seized during the course of search in Venus Group. In support of her submissions, reliance was placed on the decision of CIT Chennai vs Alagendran Finance Limited, reported in (2007), 162 Taxman 465 SC. Reliance was also placed on the decision of the Hon'ble Madras High Court in case of Indira Industries versus PCIT reported in (2018) 95 Taxman.com 103 (Madras) and decision of this Court in case of Commissioner of Income Tax. vs Nirma Chemicals Works (P) Limited reported in (2009) 182 Taxman 183 (Gujarat) and the decision of Delhi High Court in case of Commissioner of Income Tax, Delhi - 1 vs Bharti Airtel Limited reported in (2013) 37 Taxmann.com 218 (Delhi) Referring to the above dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment Year 2014-15 and in both the years, the petitioner preferred an appeal before the CIT (Appeals) and therefore, as per the provision of principles of doctrine of merger, both the Assessment Orders for both the years would be merged into the order of CIT (Appeals), which was passed on 30th October, 2019, whereby the addition made was deleted. 18. It was further submitted that when the re-assessment order is not in existence, the respondent no. 1 could not have assumed the jurisdiction to pass an order under Section 263 of the Act for revision of the same. 19. On the other hand, learned Senior Standing Counsel Ms. Maithili Mehta for the respondent submitted that the respondent no. 1 assumed the jurisdiction under Section 263 of the Act as the respondent - Assessing Officer has not made any inquiry regarding the disallowance under Section 263 of the Act while passing the re-assessment order. 20. Learned Senior Standing Counsel Ms. Maithili Mehta, in support of her submissions, referred to and relied upon the averments made in the affidavit-in-reply filed on behalf of the respondents. 21. It was further submitted that during the course of re-assessment proceedings, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as receipt of share application money is concerned." 23. Referring to the above observations, it was submitted that the respondent no. 1 has already considered the aspect of proposed disallowance under Section 14A of the Act and has categorically held that the issue was never examined by the Assessing Officer and upon lack of such inquiry / verification, the Assessment Order becomes erroneous and prejudicial to the interest of revenue. 24. It was therefore submitted that no interference is called for while exercising extraordinary jurisdiction under Article 227 of the Constitution of India. 25. Having heard the learned advocates for the respective parties and considering the facts of the case as well as the impugned show-cause notices and orders passed by the respondent authorities, it is not in dispute that during the course of the regular assessment carried out under Section 143 (3) of the Act, the queries were raised with regard to the issue of disallowance under Section 140 of the Act with Rule 8D of the Rules and the petitioner was called upon to furnish the details of expenses claimed in respect of any exempt income, working of disallowance under Section 14A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of mind as to eligibility or otherwise under Section 80-I of the Act requires to be noted to be rejected. An assessment order cannot incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic tome. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and, Secondly, the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with." 28. In view of the above, the Assessing Officer was not required to record any reason for not making any disallowance under Section 14A of the Act while passing the Assessment Order. 29. The Hon'ble Apex Court, in the case of Alagendran Finance Limited (supra), after considering the decision in the case of CIT Vs. Sun Engineering Works Pvt Ltd. reported in (1992)198 ITR 297 (SC) and the decision of the Apex Court in case of Hind Wires Industries Limited versus CIT reported in 1995 212 ITR 639 has held as under :- "12. We may at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening the entire assessment for the purpose of redoing the same de novo. An assessee cannot agitate in any such reassessment proceedings matters forming part of the original assessment which are not required to be dealt with for the purpose of levying tax on that which had escaped tax earlier. Cases of underassessment are also treated as instances of escaped assessment. The order of reassessment is one which deals with the assessment already made in respect of items which are not required to be reopened, as also matters which are required to be dealt with in order to bring what had escaped in the earlier order of assessment, to assessment. An assessee who has failed to file an appeal against the original order of assessment cannot utilise the reassessment proceedings as an occasion for seeking revision or review of what had been assessed earlier. He may only question the extent of the reassessment in so far as the escaped assessment is concerned. The Revenue is similarly bound..."(p.263) The same principle was reiterated by a Division Bench of the Calcutta High Court in Commissioner of Income-Tax v. Kanubhai Engineers (P.) Ltd. [241 ITR 665]. 15. We, therefore, are cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of interest paid by the Assessee, as the loan amount has been diverted to the partners, the issue now raised in the impugned notice under Section 263 is not restricted to the disallowance of interest on loan alone. It deals with other aspects such as claims of the assessee regarding administrative, selling and distribution expenses made by the Assessee to the tune of Rs.3.23 crores and claim of bad debts written off to the tune of Rs.33.06 lakhs etc., 3(xvii) Therefore, as the impugned notice deals with several issues other than the one raised earlier, the limitation period in the instant case has to necessarily run from 31.3.2015 being the end of the financial year as 25.02.2015 is the date on which the scrutiny assessment was admittedly made for the Assessee under Section 143 (3) of the IT Act. 3(xviii) We therefore have no hesitation in holding that the reckoning date qua the impugned notice for the purpose of Section 263(2) of IT Act is not the date of re-assessment being 30.12.2016, but the date of scrutinizing the assessment i.e, 25.02.2015. 3(xix) As would be evident from the narration of facts and discussion supra, the impugned notice is dated 16.08.2017 and is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the petitioner has chosen to withdraw such appeal and preferred to pursue the writ-petitions filed before this Court. The Hon'ble Supreme Court in case of SJS Business Enterprises Link Pvt. Ltd. vs. State of Bihar and others reported in (2004) 7 SCC 166, which was relied upon by the petitioner for pursuing these petitions has held as under :- "12. The petitioner had thus obtained the rule and the interim order dated 9-4-2002, by suppressing a most vital fact, namely, pendency of the suit and the order dated 8-4-2002 passed thereon. The petitioner's conduct verges on fraud. The petitioner has, therefore, disentitled itself from any relief in the extraordinary prerogative writ jurisdiction. 13. Learned Counsel for respondent No. 2 is right in his submission that the petitioner has been a chronic defaulter and had paid a mere sum of Rs. 14.23 lacs till the institution of this writ petition, whereafter it deposited on 20-4-2002 a sum of ten lacs under the orders of this Court. Therefore, it has rightly been contended on behalf of respondent No. 2 that it acted with forbearance and gave more than sufficient opportunity to repay the debts. The petitioner owed a sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut hereinbelow for the facility of quick reference : "The bidders presents and bidding had offered Rs. 95.50 lacs after negotiations and agreed to increase of Rs. 1.00 crore (Rupees One Crore) to be paid in one installment. "Further take notice that this offer to purchase the said hotel as received by BICICO is being communicated with an offer to you to accept the same on the same terms and conditions. If this offer is acceptable to you, you are requested to give your acceptance alongwith Demand Drafts/Cheques for the above noted amount within 10 days of issue of this letter." Learned Counsel for the petitioner is, therefore, not right in his submission that the offer to retain the assets was made belatedly by letter dated 26-7-2002 (Annexure 'A' to the supplementary counter-affidavit of respondent No. 2). It appears to me on a plain reading of this letter that the same was really with respect to the petitioner's request for one time settlement. In any view of the matter, the officer had been promptly made by the aforesaid letter dated 31-3-2002 (Annexure-7). 15. Learned Counsel for the petitioner next submits that respondent No. 2 is failing in i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, it is not in dispute that the Assessing Officer has made inquiries with regard to disallowance under Section 14A of the Act read with Rule 8D of the Rules during the course of the regular assessment. Therefore, the Assessing Officer while carrying out the re-assessment proceedings could not have again made any inquiry for the said issue. (ii) Moreover, the order passed in the re-assessment proceedings was subject matter of Appeal before the CIT (Appeals) and therefore, as per the principle of merger, the order passed in the re-assessment proceedings has already merged. Moreover, assuming the contention of the petitioner that irrespective of the issue of limitation, the respondent no. 1 - Assessing Officer could not have assumed the jurisdiction by invoking explanation (ii) of Section 263 is also tenable as the issue of disallowance under Section 14A of the Act was already subject matter of inquiry and therefore, the issue as to whether the inquiry was insufficient or not, could not have been the subject matter of revisional proceedings as it would amount to mere change of opinion. 35. Therefore, on all the above issues, the impugned show-cause notices and impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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