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TMI Blog2015 (2) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) erred in not deleting fully the disallowance made by the AC. u/s 14A of the Income-Tax Act, 1961 in a sum of Rs. 1,77,529/- and instead in confirming the same at Rs. 1,00,000I- in spite of extensive quotation of case-laws favourable to the appellant. 2(b).On the facts and in the circumstances of the case as also in law, the decision of the C 11(A) is arbitrary, based on his subjective standard and, therefore, is not legally sustainable. The appellant craves leave to add, amend, alter or delete any of the above grounds." Vide its letter dated 10.04.2013,the assessee has raised additional ground of appeal as ground no.1.It was stated that in the appellate proceedings,it had raised only one issue but in the statement of facts it had rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1,77,529/- had escaped assessment and issued a notice u/s. 148 to the appellant. During the proceedings u/s. 143(3) read with Sec. 147, the AO did not accept the appellant's contention that no disallowance u/s. 14A was called for in its case. He held that since no deduction shall be allowed in respect of expenditure incurred in relation to income which did not form part of the total income as per Sec.14A of the Act and it had exempt income being dividend income and had not quantified any amount of expenditure attributed to the exempt income, disallowance u/s.14A read with Rule 8D had to he made.Accordingly, he proceeded,to work out the amount disallowable. According to AO, no amount was disallowable as per clause (i) of Rule 8D(2), and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not satisfied with the correctness of the claim of the assessec in respect of expenditure in relation to exempt income,that in the assessment order, the AO had not recorded any such satisfaction,that the disallowance should be deleted. After considering the arguments of the assessee and the assessment order the FAA held that the AO had made disallowance of Rs. 1,77,529/- u/s.14A read with Rule 8D,that in para 2 of assessment order reasons for disallowance had been discussed in detail,that the AO had recorded his satisfaction for invoking the provisions of the section 14 A of the Act,that in view of the judgment of Hon'ble jurisdictional High Court, Rule 8D-was not applicable for the year under appeal,that Hon'ble High Court had held that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kelvinator of India Ltd. (320 ITR 561) (iv) Kelvinator of India Ltd.(256 ITR 1) (v) Foramer France (264 ITR 566) & Foramer France (247 ITR 436). Departmental Representative(DR)supported the order of the FAA. 5.We have heard the rival submissions and perused the material on record.We find that the AO had issued a notice u/s.148 of the Act,as he was of the opinion that the taxable income has escaped assessment.We would like to reproduce the reasons recorded by the AO on 09.11.2012, before issuing the notice and same read as under: "In the present case, return of income was filed on 31.10.2007 declaring loss of Rs. 3,59,738/-. Assessee's income comprised of the following: i. income from capital gain Rs. 4, 79,432/- ii.Loss from business/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ethod for determining of an amount of expenditure in relation to the income not included in the total income. Computation of amount disallowable in terms of Rule 8D is as under: XXXXX 6.On the facts of the case, I have reason to believe that expenditure attributed to exempted part of income have remained to be disallowed and as such income to that extent has escaped assessment within the meaning of section 147 of the IT Act, 1961. Such income has escaped due to failure on the part of the assessee to put forth correct particulars of income after disallowing expenditure within the meaning of section 14A and enhancing income accordingly. 7.In the present case escaped income within the meaning of section 14A is worked out to Rs. 1,51,042/- a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons cannot be improved upon or supplemented much less substituted by affidavit or oral submissions." We are unable to find any tangible material in the reasons recorded by the AO.He has at the time of original assessment already deliberated upon the issue of disallowance to be made u/s.14A of the Act.Therefore,it can safely be held that in the case under consideration there was no tangible material.In these circumstances,we are of the opinion that the reassessment proceedings were initiated due to change of opinion of the AO and not because there was tangible material.Courts are of the view that if a notices is issued u/s.148 because of change of opinion,then same is to considered bad in law and has to be quashed.Considering the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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