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TMI Blog2012 (6) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 13,63,63,918/-against business income assessed in the assessment order. 2.1 That the assessing officer may be directed to allow set-off of brought forward business losses available with the appellant in accordance with the provisions of section 72 of the Income-tax Act, 1961." It has been submitted that the assessee filed return of income at business loss of Rs. 1,49,20,992/-. The assessee had also unabsorbed brought forward losses in accordance with provisions of sec. 72 of the Income-tax Act, 1961. However, since the return of income was filed at loss, no set off of brought forward losses was claimed in the return of income for the relevant assessment year. In the assessment order the Assessing Officer disallowed interest expenditure aggregating to Rs. 2,44,41,288/- under sec. 14A and accordingly assessed the business income at Rs.95,20,246/-. While completing the assessment the Assessing Officer did not allow set off of brought forward losses available to the assessee in accordance with provisions of sec. 72 of the Act. The aforesaid action of the AO was specifically challenged before the CIT(A) vide ground No.2. However, the learned CIT(A) while disposing of the appeal did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er applied the provisions of sec. 14A and disallowed the interest relatable to exempt income at Rs. 2,44,41,238/-. 5. On appeal the learned CIT(A) relying on various decisions observed that no deduction was allowable in respect of expenditure of interest in relation to income which does not form part of total income. The learned CIT(A) therefore, upheld the disallowance. 6. Before us the learned AR of the assessee submitted that Delhi High Court in the case of the assessee has decided the issue against the assessee. However, the assessee is agitating the disallowance which has been made by invoking the Proviso to sec. 14A according to which, the AO cannot enhance the assessment or reduce the refund for any asst. year beginning on or before 1.04.2001. He placed reliance on the following decisions:- (i) CIT v. Paul John, Delicious Cashew Co. [2011] 200 Taxman 154/12 taxmann.com 131 (Ker.). (ii) CIT v. PNB Finance & Industries Ltd. [2012] 340 ITR 50 (Delhi). (iii) CIT v. EWS Finance & Investment Ltd. [Tax Case (Appeal) No. 1205 of 2007, dated 6-9-2007]. (iv) V. Uppalaiah v. Dy. CIT [2005] 94 ITD 178 (Hyd.) (SMC). 7. On the other hand, learned CIT(D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Act, 1961, that 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. It as also clarified that assessments where 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 of the Act. The Finance Act, 2002 amended sec. 14A by inserting a Proviso that assessments where proceedings have become final before 1.04.2001, should not be reopened under sec. 147 of the Act to disallow expenditure relating to exempt income by applying the provisions of sec. 14A of the Act. The Proviso was inserted with retrospective effect from 11th May, 2001, i.e. the date on which the Finance Bill, 2001 received the assent of the President of India. From the language employed in Proviso it is clear that action under sec. 147 or 154 cannot be taken where proceedings have already been completed. In the case of the assessee, processing under sec. 143(1) was made. Thereafter, the AO issued notice under sec. 143(2) in order to verify the claims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder sec. 143(2) could not have been issued. This will be contrary to the scheme of assessment. 12. On the contrary Hon'ble Delhi High Court in the case of Honda Siel Power Products Ltd. (supra) has held that the object and purpose of Proviso to sec. 14A is to ensure that introduction of section 14A with retrospective effect is not made as a tool to reopen past cases which have attained finality. Proviso does not state that sec. 14A cannot be relied upon during course of original assessment proceedings. There is no dispute about the fact that assessment proceedings in this case are original assessment proceedings. The Assessing Officer has not reopened the assessment under sec. 147 or under sec. 154 of the Act. Therefore, as per decision of Hon'ble Delhi High Court in the case of Honda Siel Power Products Ltd. (supra), Proviso to sec. 14A will not be applicable during the course of original assessment proceedings. We will like to mention here that the decision of Hon'ble Delhi High Court in the case of PNB Finance & Investments Ltd. (supra) is dated 15th November, 2010 whereas the decision in the case of Honda Siel Power Products Ltd. (supra) is dated 14th February, 2011. Moreover ..... X X X X Extracts X X X X X X X X Extracts X X X X
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