TMI Blog2016 (11) TMI 433X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment. - I .T.A. No.3587/Mum/2014 - - - Dated:- 21-9-2016 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Vipul Joshi For The Revenue : Shri A. Ramachandran ORDER PER RAMIT KOCHAR, Accountant Member This appeal, filed by the assessee company, being ITA No. 3587/Mum/2014, is directed against the order dated 28th March, 2014 passed by learned Commissioner of Income Tax- 2, Mumbai (hereinafter called the CIT ) u/s 263 of the Income Tax Act, 1961 (Hereinafter called the Act ), for the assessment year 2009-10, the proceedings initiated by the learned CIT u/s 263 of the Act is aimed at exercising revisionary powers directed against the assessment order dated 21st December, 2011 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Act. 2. The grounds of appeal raised by the assessee company in the memo of appeal filed with the Income Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1. The Learned Commissioner of Income - tax - 2, Mumbai [ Ld. CIT ], erred in framing the revisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the total loss at ₹ 95,22,971/-. On verification of the records , it was observed by the learned CIT that while calculating disallowance under section 14A of the Act read with Rule 8D of Income Tax Rules, 1962, the A.O. did not disallow the proportionate interest expenditure incurred at ₹ 98,42,238/- as it was stated by the assessee that the interest paid during the year was for the term loan from State Bank of India at Gandhidham. It was further stated that no fund was transferred out of borrowed funds to Mumbai wherein investments are held. The A.O. accepted the explanation of the assessee and did not disallow the interest expenditure u/s.14A of the Act for earning the exempted dividend income. It was observed by the learned CIT that the interest paid during the year for the term loan from State Bank of India at Gandhidham was only ₹ 13,51,398/- instead of ₹ 98,42,238/- and hence, the balance interest expenditure of ₹ 84,90,840/- was required to be considered for disallowance u/s 14A of the Act against the dividend income of Rs. l,16,56,557/- which is exempt from tax under provisions of the Act. Thus, it was observed by the learned CIT that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited v. CIT (2003)260 ITR 599(Mad. HC). The learned CIT held that the assessment framed by the A.O. was not correct and is required to be reframed and accordingly the learned CIT set aside the assessment order dated 21-12-2011 passed by the AO u/s. 143(3) of the Act for making fresh assessments denovo after undertaking proper enquiries, vide revisionary order dated 28.03.2014 passed by the CIT u/s 263 of the Act. 4.Aggrieved by the revisionary order dated 28.03.2014 passed by the ld. CIT u/s 263 of the Act, the assessee filed first appeal before the Tribunal. 5. The ld. Counsel for the assessee submitted that the assessee has submitted the entire details before the A.O. during the course of assessment proceedings u/s 143(3) read with the Section 143(2) of the Act conducted by the AO with respect to the disallowance u/s 14A of the Act. The said details before the AO are placed in paper book pages 43 to 75 filed with the Tribunal which were given vide written submissions dated 15-11-2011, 08-12-2011 and 08-12-2011. The ld. Counsel submitted that all the details were submitted before the A.O. with respect to the disallowance u/s 14A of the Act and the A.O. after applying his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f share capital of ₹ 48,51,200/- as at 31-03-2009 ( ₹ 48,51,200/- as at 31-03-2008) and Reserves and surplus of ₹ 20,66,00,771/- as at 31-03-2009 ( ₹ 20,48,91,228/- as at 31-03-2008) and hence presumption will apply that the assessee has invested its own funds in making investments in the securities which are capable of yielding exempt income in the absence of any finding by the Revenue that the assessee has diverted interest bearing funds for making investments in securities capable of yielding exempt income. Reliance was placed on the decision of Hon ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd., (2009)313 ITR 340(Bom. HC) and HDFC bank Limited v. DCIT (2016) 383 ITR 529(Bom. HC) and submitted that in the absence of any cogent material brought on record by the Revenue that interest bearing funds were diverted in making the investment in securities capable of yielding exempt income, the presumption shall apply that the assessee has invested own funds in making investment in securities capable of yielding exempt income as the assessee has sufficient own funds which are much more than the investments in securities capable of yi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same or have repaid loans raised earlier during the year. It was submitted that the assessee has duly submitted all the details before the A.O. hence the ld. CIT cannot invoke section 263 of the Act which is bad in law liable to be quashed. The assessee relied upon following judgments /orders: 1 CIT v. K Sera Sera Productions Limited (ITA no 1027 of 2013, order dated 18-03-2015)-Hon ble Bombay High Court 2. CIT v. Fortaleza Developers (2015) 374 ITR 510(Bom. HC) 3. CIT v. Nirma Chemicals Works Private Limited (2009) 309 ITR 67(Guj.) 4. Sonal Garments v. JCIT (2005) 95 ITD 363(Mum.Trib.) 5. Marico Industries Limited v. ACIT (2009) 312 ITR 259(AT) (Mum)-27 SOT 73(Mum-Trib.) 6. The ld. D.R., on the other hand, relied on the order of the ld. CIT. 7. We have considered the rival contentions and also perused the material placed on record including the case laws relied upon . The case of the assessee for the impugned assessment year was selected for scrutiny by the Revenue for framing the assessment u/s 143(3) of the Act read with Section 143(2) of the Act and the A.O. made enquiries with respect to disallowances u/s 14A of the Act before framing assessment u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31-03-2008) while the assessee s own funds are to the tune of ₹ 21,14,51,971/- as on 31-03-2009 ( ₹ 20,97,42,428/- as on 31-03-2008) as borne out from audited financial statements which is sufficient to cover the investments in securities made by the assessee and presumption as contemplated vide decision of Hon ble Bombay High Court in the case of Reliance Utilities and Power Limited(supra) shall apply in the absence of cogent evidence on record brought by Revenue. The additions made by the A.O. was deleted by the ld. CIT(A) in the appellate order dated 19.12.2012 passed by the learned CIT(A).The assessee had given separate break up of financials of Head Office and factory at Gandhidaham before the AO vide reply dated 08-12-2011 and the investments as reflected are mainly old investments wherein this year it is observed that investment of ₹ 40 lacs was made by the assessee which is held in the form of share application money as at 31-03-2009 in Oriental Power Cables Limited. It is also observed from the financials of the HO that no interest was incurred as expenditure during the preceding year, while in this year the incremental investment is only ₹ 40 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating on record whereby presumption is rebutted by the Revenue. We are of the considered view that invocation of provisions of section 263 of the Act is not warranted in the instant case as the AO took a plausible and possible view after considering replies of the assessee while framing assessment order u/s 143(3) of the Act which , and keeping in view the decision of the Hon ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd., (2009)313 ITR 340(Bom. HC) it cannot be said that the said view as taken by the AO was erroneous so far as it is prejudicial to the interest of Revenue to enable the CIT to exercise his extraordinary revisionary powers u/s. 263 of the Act. The assessment order was subject to challenge before the learned CIT(A) who has passed appellate order dated 19- 12-2012 whereby the learned CIT(A) deleted the additions made by the AO u/s 14A of the Act read with Rule 8D(2)(iii) of Income Tax Rules, 1962 . The Revenue invoked Section 263 of the Act by issuing notice dated 17-01-2013 u/s 263 of the Act post appellate order passed by the learned CIT(A) on 19- 12-2012 which was also on the same issue of disallowance of expenditure under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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