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2021 (8) TMI 516 - HC - Income TaxRevision u/s 263 - Addition u/s 14A - HELD THAT:- We find that what was intended to be said by the Tribunal is that Section 14A of the Act has been functionally made operative on introduction of Rule 8D and the said Rule was inserted by Income-tax (Fifth Amendment) Rules, 2008 with effect from 24.03.2008 and therefore, Section 14A read with Rule 8D is not applicable to the impugned assessment year 2002-03. In this background, it was held that Section 14A(1) itself has been brought into the statute book by Finance Act, 2006 with effect from 01.04.2007. In fact, there appears to have been typographical error, since it should be Section 14A(2) and not Section 14A(1) - on a reading of paragraph 7, it is seen that the Tribunal has reiterated that the functional operation of Section 14A is not applicable to the assessment year, which was impugned before it. Thus, we find that the finding rendered by the Tribunal in paragraph 7 sets out the correct legal position. The Tribunal, not stopping with that, examined the scope of enquiry made by the CIT to examine as to whether the revision order is sustainable or not. On taking into consideration the factual position, the Tribunal held that general observations are not sufficient to hold an assessment order erroneous and prejudicial to the interests of the Revenue. It noted the submission of the assessee that dividend income has been received from its hundred per cent subsidiary and the assessee has not incurred any expenditure whatsoever in earning that dividend income and therefore, there was no occasion for the assessee to claim any such expenditure in computing its taxable income. The Tribunal found fault with the CIT by observing that when such was the stand taken by the assessee, it is necessary for the CIT to at least record a prima facie finding that certain amount claimed by the assessee as deduction in its computation of income de facto related to earning of tax-free income. Thus, it was held that in the absence of any such prima facie finding, the reassessment was erroneous. Thus, we find that the Tribunal rightly held in favour of the assessee.
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