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2012 (6) TMI 568 - AT - Income TaxDisallowance of interest u/s 14A in respect of exempt income from dividends - assessee contested that disallowance made by invoking sec. 14A according to which, AO cannot enhance the assessment or reduce the refund for any asst. year beginning on or before 1.04.2001 - Held that:- Considering the Proviso to sec. 14A inserted by the Finance Act, 2002 with retrospective effect from 11.05.2001 and CBDT Circular No.14 of 2001 dated 12th December, 2001 no deduction shall be made in respect of any expenditure incurred by the assessee in relation to income which does not form part of total income under the Income-tax Act and were assessments proceedings have become final before 1.04.2001, the assessment should not be reopened under sec. 147/154 of the Act to disallow expenditure relatable to exempt income by applying the provision of sec. 14A. In the case of the assessee, processing under sec. 143(1) was made and thereafter AO issued notice u/s 143(2) in order to verify the claims made in the return of income. Therefore, the assessee's case has not been reopened under sec. 147 nor the settled issues have been intended to be upset u/s 154 - the AO was justified in disallowing the claim of interest u/s 14A - against assessee.
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