TMI Blog2017 (4) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... om the order of assessment for A.Y. 2011-12, and he took a possible view that no disallowance was called for on interest, ostensibly in respect of rule 8D(2)(ii) of the Rules and that disallowance was called for under rule 8D(2)(iii) of the Rules; the mere fact that the CIT is not in agreement with the view adopted by the AO, would not render the order of assessment erroneous and prejudicial to the interest of Revenue. - Decided in favour of assessee - ITA No. 3062/Mum/2016 - - - Dated:- 12-4-2017 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member For The Appellant : Shri Vipul Joshi and Ms. Dinkle Hariya For The Respondent : Ms. S. Padmaja ORDER Per Jason P. Boaz, A.M. This appeal by the assessee is directed against the order of the Principal CIT 9, Mumbai passed under section 263 of the Income Tax Act, 1961 (in short 'the Act') vide order dated 14.03.2016 for A.Y. 2011-12. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, a company engaged in the business of market research services, brand building activities and knowledge services, filed its return of income for A.Y. 2011-12 on 30.09.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op the proceedings initiated under section 263 of the Act. The assessee s arguments/submissions, however, did not find favour with the learned Principal CIT and he proceeded to pass the impugned order of revision under section 263 of the Act dated 14.03.2016, holding that the order of assessment passed by the AO under section 143(3) of the Act dated 26.02.2014 to be erroneous and prejudicial to the interests of Revenue and accordingly set aside/cancelled the same, directing the AO to frame a fresh assessment order, after determining in accordance with law and relevant judicial pronouncements, the head under which the interest debited in the Profit Loss account is allowable under section 36(1)(iii) or under section 57(iii) of the Act and/or considering the disallowance, if any, required to be made in determining the total income of the assessee under section 14A of the Act r.w. rule 8D(2)(ii) of the Rules. 4.1 Aggrieved by the order of the Principal CIT-9, Mumbai passed under section 263 of the Act, the assessee has preferred this appeal raising the following grounds: - 1. BREACH OF THE PRINCIPLES OF NATURAL JUSTICE 1.1 The Learned Commissioner of Income - tax - 9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case, and in law, no such revision was called for even on merits also. 4. The Appellant craves leave to add, alter, delete or modify all or any the above ground at the time of hearing. 4.2.1 The learned A.R. of the assessee argued and contended that the Learned Principal CIT had erroneously and illegally invoked the revisionary jurisdiction under section 263 of the Act. According to the learned A.R., a perusal of paras 4 to 4.3 of the order of assessment, to which he drew the attention of the Bench, would establish that the exercise of scrutiny proceedings was almost entirely devoted to examination and consideration of the issue of the disallowance under section 14A r.w. rule 8D to be made in the case on hand for the year under consideration. It was submitted that details called by the AO were filed by the assessee, inquiries thereon were made by the AO specifically with regard to the issue of disallowance under section 14A r.w. rule 8D and much of this finds mention in the order of assessment sought to be revised. It was further submitted that the assessee had not incurred any interest cost as it was having sufficient own funds for making inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry or verification was required by the learned Principal CIT and he proceeded directly to conclude on the basis of the very same records that disallowance under rule 8D(2)(ii) of the Rules was called for; without assigning any reasons why such disallowance was called for, as if it was to be applied automatically without having regard to the particular facts of the case. 4.2.3 It has been contended that the impugned order under section 263 of the Act is bad in law, as the learned Principal CIT has travelled beyond the issue on the basis of which the show cause notice was issued. As can be seen from the impugned order, the learned Principal CIT has taken a totally new ground, i.e. the applicability of the provisions of section 36(i)(iii)/section 57(iii) of the Act; of which there was not even a mention in the show cause notice dated 16.12.2015 or in the course of revision proceedings. This, the learned A.R. argues, is clearly contrary to the settled legal position that a revision order cannot be passed on an issue different from the issue mentioned in the show cause notice. In support of this proposition, the learned A.R., inter alia, placed reliance on the following judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but however held that disallowance was called for under rule 8D(2)(iii) of the Rules, the learned CIT could not assume jurisdiction under section 263 of the Act merely because he had a different opinion in the matter; reliance was, inter alia, placed on: - (i) Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) (ii) CIT vs. Anil Kumar Sharma (2011) 335 ITR 83 (Del) (iii) CIT vs. New Delhi Television Ltd. (2014) 360 ITR 44 (Del) 4.26 It was further argued that without prejudice to the main objections, the provisions of section 14A and section 36(i)(iii) of the Act are mutually exclusive. In as much as, to the extent interest expenditure is found to be incurred not for the purpose of business, but incurred for the purpose of earning tax free income, to that extent section 14A of the Act gets attracted. Conversely, to the extent the interest expenditure is found to be related not to the earning of exempt income, the same would be allowable under section 36(i)(iii) of the Act if the same is incurred for the purposes of assessee s business. It is contended that there is no scope for invoking both the sections 14A and 36(i)(iii) of the Act simultaneously as this would amount to maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . of the assessee submitted that it is well settled that if any enquiry is conducted by the AO in assessment proceedings, it will not give jurisdiction to the CIT to pass revisionary orders merely because he has a different view or opinion in the matter. He has to demonstrate that a patent error has been committed in assessment proceedings resulting in prejudice to Revenue, otherwise it will tantamount to giving the AO a second innings to re-examine and re-adjudicate concluded issues. The learned A.R. submits that the Hon'ble Bombay High Court in the case of Gabriel India Ltd. (1993) 203 ITR 108 (Bom) has observed that where it is found that the AO had examined and considered the relevant issue and material in the course of assessment proceedings, as has been evidently done by the AO in the case on hand, it would not be open to the CIT to invoke revisionary powers just to re-examine issues on the ground that the AO had not inquired into the matter properly. 4.2.9 The learned A.R. submitted that identical issue of revision under section 263 of the Act was considered by a Coordinate Bench of this Tribunal in one of the assessee s group companies, i.e. M/s. Future Corporate Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is both erroneous and prejudicial to the interest of Revenue. If, however, there are two possible views on an issue and the AO has taken one of the possible views, then there is no occasion for the CIT to exercise the powers of revision. Further, the revisionary powers under section 263 of the Act cannot be exercised by the CIT for directing a full inquiry to find out if the view taken by the AO is erroneous, when a view has already been taken in the matter after an inquiry has been undertaken. The power of revision can be exercises only when no inquiry, as required under law, is carried out. However, even in case of inadequate inquiry by the AO, the order of the AO cannot be reviewed. 4.4.2 We have carefully perused the order of assessment passed under section 143(3) of the Act vide order dated 26.02.2014 for A.Y. 2011-12. On perusal thereof, we find that the issue of disallowance under section 14A r.w rule 8D of the Rules has certainly been the subject matter of inquiry and was taken up in detail by the AO in assessment proceedings as can be seen at paras 4 to 4.3 of the order. In fact, it appears to us that the scrutiny proceedings was entirely devoted to the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tely for furnishing inaccurate particulars of income. 4.4.3 A perusal of paras 4.2 and 4.3 of the order of assessment for A.Y. 2011-12 (extracted supra) clearly establishes that after consideration of the assessee s explanations the AO has not accepted the assessee s contention that no disallowance under section 14A r.w. rule 8D of the Rules is called for. The AO observes that from the details filed and explanations put forth by the assessee, that the assessee had not incurred interest cost on investments as it had sufficient own funds for making the investments, including strategic investments made in its group/subsidiary concerns for the purposes of its business and therefore proceeded to hold that no disallowance on account of interest is to be considered for the purpose of disallowance under section 14A r.w. rule 8D of the Rules as the assessee had sufficient own funds to cover the investments made. In our view, this establishes beyond doubt that the AO, in fact, called for, examined and verified the details/submissions filed by the assessee, before holding that no disallowance is to be made from out of interest, ostensibly under rule 8D(2)(ii) of the Rules, as the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for thereon (ostensibly under rule 8D(2)(ii) of the Rules) since almost the entire investment was made strategically in group concerns for the purposes of the assessee s business, but proceeded beyond the show cause notice he issued to the assessee by directing inquiry to be carried out under section 57(ii) of the Act also alongwith the disallowance to be made under rule 8D(2)(ii) of the Rules. We also find that the learned CIT/learned D.R. for Revenue have also not controverted the judicial pronouncements cited by the assessee in support of its various contentions, on jurisdiction as well as on merits. In this factual and legal matrix of the case as laid out above, we are of the opinion that, since it is clear to us that inquiry in respect of the requirement of disallowance of interest under section 14A r.w. rule 8D of the Rules was conducted by the AO in the assessment proceedings, as is evident from the order of assessment for A.Y. 2011-12, and he took a possible view that no disallowance was called for on interest, ostensibly in respect of rule 8D(2)(ii) of the Rules and that disallowance was called for under rule 8D(2)(iii) of the Rules; the mere fact that the CIT is not in ag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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