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2015 (11) TMI 1558 - ITAT MUMBAI

2015 (11) TMI 1558 - ITAT MUMBAI - TMI - Disallowance u/s 14A - Held that:- There is no justification for invoking of section 14A of the Act to disallow any expenditure on account of application of Rule 8D(2)(iii) of the Rules. There is no material on record to negate the factual assertions which have been made by the assessee consistently from the level of the Assessing Officer, which is to the effect that the investments made are in her personal capacity and are reflected in her personal accou .....

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e deem it fit and proper to restore the matter back to the file of Assessing Officer for a decision afresh after allowing the assessee a reasonable opportunity of being heard in support of the amount of ₹ 17,526/- found in the AIR information. - Decided in favour of assessee by way of remand. - ITA No. 3345/MUM/2015 and ITA No. 3348-50/MUM/2015 - Dated:- 30-11-2015 - SHRI G.S. PANNU, ACCOUNTANT MEMBER. Appellant by : Shri Mayur Kishnadwala Respondent by : Shri T. Sasi Kumar ORDER PER G.S. .....

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at assessee was also, inter-alia, covered in such search and seizure operation. As a consequence, assessments for the captioned assessment years were finalized by the Assessing Officer under section 143(3) r.w.s. 153C of the Act, wherein the income assessed was higher than the returned income and such difference is the subject matter of controversy before me in the captioned appeals. 3. In so far as the appeals, which relate to the assessment years 2005-06, 2008-09 and 2009-10 are concerned, the .....

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ollowing disallowance u/s.143(3) r.w.s. 153C of the Act in absence of any incriminating seized material found during the course of search and the disallowance are bad in law: (a) ₹ 56,912/- being Disallowance u/s.14A. 4. The relevant facts relating to Assessment Year 2008-09 are as follows. In pursuance to the search and seizure action under section 132 of the Act on 16/12/2010, assessee was served with a notice under section 153C of the Act calling for filing her return of income. In resp .....

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on of ₹ 56,912/- made by the Assessing Officer by invoking section 14A of the Act on the ground that during the year assessee had earned exempt income of ₹ 2,93,920/- and had invested ₹ 80,59,685/- in the shares, bonds and mutual funds. Before the Assessing Officer as well as before the CIT(A), the disallowance under section 14A of the Act was resisted on facts and in law. Pertinently, it was asserted by the assessee that she was carrying on business of readymade garments as pr .....

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es by applying the formula prescribed in Rule 8D(2)(iii) of the Income Tax Rules, 1962 ( in short the Rules ) 5. In this background, the Ld. Representative for the assessee submitted that by way of an Additional Ground of appeal, the assessee seeks to challenge the jurisdiction of the Assessing Officer to make the impugned disallowance in the proceedings under section 143(3) r.w.s. 153C of the Act on the ground that during the course of search no incriminating material was found and seized. The .....

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oresaid Additional Ground is concerned, the Ld. Departmental Representative appearing for the Revenue has not made any cogent reasoning to oppose the plea of the appellant. Moreover, in my considered opinion, the aforesaid Additional Ground involves a question of law which arises from the facts already available on record and the same is also relevant to determine the correct tax liability of the assessee. Therefore, following the ratio of the judgment of Hon ble Supreme Court in the case of Nat .....

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that in the context of the original return filed under section 139(1) of the Act on 30/09/2008, no notice under section 143(2) of the Act was issued within the prescribed period i.e. 30/09/2009 and, therefore, the assessment stood completed, and, in any case as, on the date of search i.e. 16/12/2010, the assessment for the impugned assessment year of 2008-09 was not pending. On the basis of the aforesaid, the Ld. Representative for the assessee explained that the assessment for the year under co .....

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mpany Pvt. Ltd. vs. ACIT, ITA NO.1074/PN/2007 order dated 03.10.2012 (v) B.R. Machine Tools Pvt. Ltd. vs. ACIT, ITA No.4174 to 4177/Mum/2013 order dated 06.12.2013. (vi) Gurinder Singh Bawa, ITA No.2075/Mum/2010 order dated 16/11/2012 (vii) Raksha Chhadwa vs. ACIT, ITA No.8576& 8577/Mum/2010 for A.Y 2003-04 & 2005-06 order dated 17.10.2014 8. On the other hand, Ld. Departmental Representative appearing for the Revenue has defended the action of the income tax authorities and pointed out .....

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As the aforesaid discussion shows, the pertinent point raised by the assessee before me is that the impugned addition has been made in the absence of requisite jurisdiction. The impugned assessment has been made by invoking Section 153C of the Act, which prescribes that the assessment is to be made in the manner provided in Section 153A of the Act. In order to appreciate the controversy, it is pertinent to observe that Section 153A of the Act postulates the assessment in cases of search or requ .....

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on (1) of section 153A of the Act, which is pending on the date of initiation of search or making of requisition as the case may be, shall abate. In other words, in so far as the pending assessments are concerned, the competence of the Assessing Officer to make the original assessment converges with the assessment to be made u/s.153A of the Act, i.e. only one assessment shall be made for such assessment years based on the findings of the search as well as any other material existing or brought o .....

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case of CIT vs. Continental Warehousing Corporation (Nhava-Sheva) 58 Taxmann.Com 78 (Bom) wherein the scope of an assessment under section 153A of the Act has been considered. One of the points addressed by the Hon ble High Court was whether the scope of assessment under section 153A of the Act envisages additions, which are otherwise not based on any incriminating material found during the course of search. As per Hon ble High Court, no addition could be made in respect of the assessment that h .....

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the course of search, because in such a case, the original assessment had become final. This proposition has been canvassed by the Ld. Representative for the assessee before me in order to assail the disallowance of ₹ 56,912/- made by the Assessing Officer by invoking section 14A of the Act. 9.1 Moreover, the Hon ble Delhi High Court in the case of CIT(Central)-III vs. Kabul Chawla in ITA 707/2014 dated 28/08/2015 has extensively considered the legal position and summarized it in the follo .....

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he search takes places. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search take place. The AO has the power to assess and reassess the total income of the aforementioned six years in separate assessment orders for each of the six years. In other words ther .....

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seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word assess in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word reassess to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make .....

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income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 9.2 Factually speaking, in the present case the assessment on the date of search stood completed in as much as the date for issuance of notice under section 143(2) of the Act in relation to return originally filed under section 139(1) on 30/09/2008 had lapsed. I have perused the assessment order and find that there is nothing brought on record .....

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alone any incriminating material. Therefore, in this factual background, I do not find any justification for the Assessing Officer to make the impugned addition in an assessment finalized under section 153A of the Act in the absence of any incriminating material having been found during the course of search, qua the impugned disallowance u/s. 14A of the Act. 9.3 In conclusion, I, therefore, hold that following the ratio of the judgment of the Hon ble Bombay High Court in the case of Continental .....

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ion of ₹ 56,917/- as the same is purported to be beyond the scope and ambit of assessment envisaged under section 153A of the Act. Thus, on this aspect, the assessee succeeds. 10. Since assessee has succeeded on the Additional Ground of appeal, the other Ground raised regarding merits of the disallowance of ₹ 56,912/- is not adjudicated as it is rendered academic. Thus, appeal for Assessment Year is allowed. 11. So far as the appeals for assessment year 2005-06 and 2009-10 are concer .....

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by CIT(A)-51, Mumbai dated 24/03/2015, which in turn has arisen from an order passed by the Assessing Officer dated 25/03/2013 under section 143(3) r.w.s. 153C of the Act. 13. The first issue in this appeal is with regard to a disallowance made by the Assessing Officer by invoking section 14A of the Act. Section 14A was invoked by the Assessing Officer on the ground that assessee had earned exempt income of ₹ 2,17,495/- and had invested ₹ 1,51,526/- in the shares, bonds and mutual fu .....

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Account for her proprietary business and so far as the impugned investments in shares, bonds and mutual funds was concerned, they were reflected in her personal account, which is distinct from her business account. The assessee also pointed out that neither have any expenses been booked nor claimed as a deduction in her personal account and that there are no borrowings. 13.2 On the other hand, Ld. Departmental Representative appearing for the Revenue contended that in spite of the investments b .....

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