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2006 (4) TMI 229 - AT - Income TaxExpenditure Incurred, not to be included in total income - Reopening of assessment under section 147 of the Income-tax Act, 1961 - violation of section 14A of the Act or not - Restriction on deduction under section 80P(2)(e) to the net receipts by reducing the expenditure from the gross receipts for the assessment year 1996-97 - HELD THAT:- The provisions of section 14A of the Act is introduced retrospectively with effect from 1st April, 1962 by the Finance Act, 2001 for the purposes of computing the total income under Chapter IV and no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such exempted income. But the provisions of section 14A of the Act do not speak about the deductions to be made in computing the total income as per the provisions of Chapter VI-A (sections 80A to 80U), even though as a result of such deductions, the taxable income is reduced wholly or partially. In the present case in hand, the reopening was done as the income escaped due to excess claim of deduction under section 80P(2)(e) of the Act by allowing full by the Assessing Officer in the original assessment order passed under section 143(3) of the Act. In the given facts and circumstances of the case, we fairly feel that the reopening by the Assessing Officer is perfectly within the provisions of the law. Accordingly, we feel that the proviso to section 14A of the Act and circulars cited above will not apply to the claim of deductions as provided in Chapter VI-A from sections 80A to 80U of the Act. The CIT(A) has erred in quashing the reassessment proceedings under section 147/148 of the Act by holding that the proviso to section 14A of the Act and circulars issued by the Board will apply. Accordingly, the CIT(A)'s order on jurisdiction is set aside but it is seen that the CIT(A) has not passed any order on merits. The revenue's appeals are allowed for statistical purposes.
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