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M/s Jamna Auto Industries Ltd. Versus The C.I.T., Panchkula

Revision u/s 263 - disallowance under section 14A - Held that:- From the perusal of Balance Sheet as on 31.3.2009 placed at Paper Book 74, we see that further investment of ₹ 194.99 lacs was made during the year in equity shares of Jai Suspension System Limited. Further, on perusal of the same Balance Sheet, we see that the total investments are ₹ 721.99 lacs while the owned funds are amounting to ₹ 12,371.46 lacs, which further proves the fact that these investments were also .....

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he decision taken by the Assessing Officer. Since it is AO’s satisfaction which matters for making such a disallowance. On the facts and circumstances of the case, the Assessing Officer did not find it appropriate to carry on any elaborate investigation. It is Assessing Officer’s prerogative to decide the extent of enquiry or investigation to be carried out by him. There is no law which directs the Assessing Officer the extent of enquiry to be made in such a case. This is, undoubtedly, not a cas .....

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against the order of learned Principal Commissioner of Income Tax, Panchkula dated 26.3.2015, passed under section 263 of the Income Tax Act, 1961 (in short the Act ) for assessment year 2010-11. 2. Briefly, the facts of the case are that the assessment under section 143(3) of the Act was made as on 28.1.2013. After perusing the case records for the relevant assessment year, the learned Commissioner of Income Tax observed that the assessee had made investment of ₹ 5,24,99,200/- in the equ .....

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rned Commissioner of Income Tax, the assessee made elaborate submissions as regards the investment in Spring India Ltd. and also in Jai Suspension System Limited. Since no adverse view was formed by the learned Commissioner of Income Tax with regard to the investment in Spring India Ltd., we will not be referring to the facts in this regard. As regards Jai Suspension System Limited, it was stated before the learned Commissioner of Income Tax that the investment amounting to ₹ 1,96,98,880/- .....

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he year. Further, the investment of ₹ 1,94,98,880/- in assessment year 2009-10 was made out of the share capital raised during the year and amount of ₹ 1912.59 lacs received on account of share capital and share premium. The assessee had not taken any loan to make these investments. In fact, during the financial year 2008-09, the assessee had repaid the money of the loans raised by it in earlier years. It proves that no fresh loans were utilized for the purposes of making the investm .....

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Further, on the jurisdiction of the Commissioner of Income Tax invoked under section 263 of the Act, it was submitted that the Assessing Officer vide para 20 of the questionnaire dated 24.2.2012 for the year under consideration has raised a query in response to which the assessee vide para 12 of letter dated 18.5.2012 filed details of dividend income in which it was specifically pointed out that the source of investment in shares of Jai Suspension System Limited from whom the dividend income has .....

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11-12. All these facts show that the Assessing Officer has properly applied his mind on the issue of disallowance under section 14A of the Act. 4. After considering the submissions of the assessee, the learned Commissioner of Income Tax did not find force in the same. He found that the share capital and share premium raised by the assessee had been utilized for the purposes of repaying the loans and the assessee has raised fresh loans amounting to ₹ 18.12 crores, out of which investment in .....

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assessee are not applicable to the present case. On the argument taken by the assessee as regards the application of mind by the Assessing Officer, it was observed that the Assessing Officer had only enquired about the details of dividend income and nowhere asked the assessee specifically with respect to the disallowance of proportionate interest under section 14A of the Act. In view of this, the learned Commissioner of Income Tax held that the order passed by the Assessing Officer dated 28.1.2 .....

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he learned counsel for the assessee was that the learned Commissioner of Income Tax did not have jurisdiction to revise the order framed by the Assessing Officer as the same was passed after due application of mind by the Assessing Officer. In this regard, our attention was invited to Paper Book pages 11 to 16, whereby in a questionnaire dated 24.2.2012, the assessee was asked to furnish the details of investment, source of investment in Jai Suspension System Limited and dividend earned on such .....

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ought the source of investment made in shares of Jai Suspension System Limited, which was duly filed before the Assessing Officer by submitting that source of investment was assessee s own funds from the profits of the company. The Assessing Officer had duly applied his mind while passing the order under section 143(3) of the Act and, therefore, not made disallowance of interest under section 14A of the Act with regard to investment in Jai Suspension System Limited. Our attention was further inv .....

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ules at pages 33 to 41. The submission of the learned counsel for the assessee in this regard was that it appears that the Assessing Officer being satisfied with the submission of the assessee no order under section 154 of the Act was passed. Another argument put forward by the learned counsel for the assessee was that since the investments in Jai Suspension System Limited were being made from earlier years, no disallowance under section 14A of the Act was either made in earlier years or in the .....

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ed on in proceedings under section 263 of the Act includes not only the record as it stands at the time when the assessment order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the learned Commissioner of Income Tax. Reliance was placed on the judgment of Hon'ble Delhi High Court in the case of Globus Infocom Ltd. Vs. CIT, 369 ITR 14. It was stated that the assessment order for the year under consideration cannot be held to be e .....

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by the learned counsel for the assessee was that the order for the year under consideration could not be held to be erroneous and prejudicial to the interest of the Revenue since the assessee had made strategic/business investment in shares of Jai Suspension System Limited. Another interesting argument made by the learned counsel for the assessee was that the order passed by the learned Commissioner of Income Tax under section 263 of the Act is self-contradictory and, therefore, illegal because .....

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of Income Tax under section 263 of the Act be quashed. 6. The learned D.R. relied on the order of the learned Commissioner of Income Tax and further submitted that the issue of disallowance under section 14A of the Act was not investigated by the Assessing Officer, therefore, the order becomes erroneous to the extent prejudicial to the interest of the Revenue. Reliance was placed on the order of the Chandigarh Bench of the I.T.A.T. in the case of Vodafone South Ltd. Vs. CIT for the proposition .....

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nting to ₹ 1,99,99,000/- in the equity shares of Jai Suspension System Limited. Interest expenditure have also been debited to the Profit & Loss Account. The disallowance under section 14A of the Act may be called for in such circumstances, but the question to be decided by us is whether the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue so as to give the Commissioner of Income Tax the jurisdiction to revise the same under section 263 of the .....

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. 9. An order is said to be erroneous in case the Assessing Officer failed to make any enquiry on an issue which leads to a loss of revenue to the Department. In case the Assessing Officer makes the enquiry with regard to the issue in question and forms an opinion in this regard, just on the basis of an inadequate enquiry, the Commissioner of Income Tax cannot hold the order to be erroneous. However inadequate an enquiry may be, the Commissioner of Income Tax cannot impose his opinion over that .....

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which reads as under : 20. Please furnish detail of dividend income amounting to ₹ 2,99,98,000/- in the following proforma : S.No. Amount of Dividend Name of the company from which dividend received No.of share held /year of acquisition other Original investment Source of investment 10. From the above, it is quite clear that the Assessing Officer intended to raise the query regarding dividend received by the assessee not only to the extent of amount of dividend but also with regard to the .....

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profits of the company. Thereafter no further query in this regard was raised by the Assessing Officer and he preferred not to make any disallowance under section 14A of the Act. 11. As regards the investments having been made out of owned funds of the assessee, our attention was invited to the Balance Sheet of the assessee as on 31.3.2008, which shows that an amount of ₹ 2 lacs was invested in the shares of Jai Suspension System Limited. On perusal of Paper Book page 47, we see that the a .....

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while the owned funds are amounting to ₹ 12,371.46 lacs, which further proves the fact that these investments were also made out of owned funds only. In view of the above, it is true that the assessee has made investments out of owned funds and no borrowed funds were used for such investments. In such a scenario, no disallowance under section 14A of the Act is called for. 12. Now, the situation emerges that the Assessing Officer raised a query which was duly replied by the assessee. The A .....

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