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2021 (7) TMI 1201 - AT - Income TaxDisallowance of provision for payment of ex-gratia - liability and ascertainment of the quantum of liability with reasonable certainty - HELD THAT:- The payment is in reference to the Financial Year 2008- 09 relevant to Assessment Year 2009-10. The order of Managing Director approving payment is stated to be dated 31.03.2010. Prima facie it appears that the quantification of the liability at ₹ 18,90,000/- by the assessee to be true to the extent of ₹ 18,66,328/- which is the actual payment made towards ex-gratia and approved by the Government. We are, however, of the view that the assessee has to furnish the evidence on the basis of which he quantified the liability at ₹ 18.90 lakhs and what is the Rules / Policy under which ex-gratia payments are made and how the quantification made by the assessee is in accordance with the Rules / Policy of the Government in this regard. We therefore deem it fit and appropriate to remit the issue to the AO for fresh consideration with the direction to the assessee to establish conditions necessary for considering the liability in question as ascertained liability on the basis of the principles laid down by the Hon’ble Supreme Court in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT] The AO will afford opportunity of being heard to the assessee before deciding the issue. Thus the relevant grounds of appeal of the assessee are treated as allowed for statistical purposes. Disallowance u/s 14A - HELD THAT:- The explanation given by the assessee before us is not sufficient to avoid the disallowance in terms of Rule 8D(2)(ii) of the Rules. The assessee has to establish by necessary fund flow statements that burrowed funds on which interest paid was not utilized for the purpose of making investments with yielded tax free income. In these circumstances, we are of the view that the disallowance made by the Revenue authorities by invoking the provisions of section 14A of the Act read with Rule 8D(2)(ii) and 8D(2)(iii) of the Rules deserves to be upheld and the same is upheld. The grounds of appeal are accordingly dismissed. Computation of tax liability under section 115JB - HELD THAT:- We are of the view that the computation of income under section 115JB of the Act is automatic and the conditions laid down in section 115JB of the Act are satisfied. It is not the case of the assessee that in computing the income under section 115JB of the Act, there has been violation of the provisions of those sections. Validity of proceedings under section 148 - It is the plea of the assessee that having initiated proceedings under section 154 of the Act, the AO cannot issue notice under section 148 of the Act on the ground of belief regarding escapement of income - HELD THAT:- We are of the view that the provisions under section 154 and 148 of the Act are for different purposes and so long as conditions for initiating proceedings under section 148 of the Act are satisfied, the initiation of proceedings cannot be held to be invalid. We therefore concur with the view of the CIT(A) on this issue.
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