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TMI Blog2018 (4) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)/HLD/2015-16; whereas ITA Nos. I.T.A Nos.5348/Del/2016 and 5768/Del/2016 relate to the assessment year 2009-10 filed by the assessee and the revenue respectively challenging the order dated 28.7.2016 passed by the ld. CITA) in Appeal No.192/CIT(A)/HLD/2015-16. Since the parties and the question of fact involved in this matter was substantially the same, we deem it just and convenient to pass a common order. 2. Briefly stated facts are that after conclusion of the assessment u/s 143(3) of the Income-tax Act, 1961 (for short "the Act") for respective years, learned AO recorded reasons dated 26.2.2015 and 19.2.2015 respectively in respect these two asstt. Years stating that subsequent to the completion of the assessment u/s 143(3) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, there should be a direct nexus between the earning of income and incurring of expenditure and the expenditure incurred should be in relation to income which does not form part of the total income and when the assessee denied to have the interest expenditure in relation to earning of investment in tax free bonds, attribution of any portion of interest without identifying which part of borrowed fund was utilized for investment in tax free bonds, is not envisaged in law. On this ground, he directed the learned AO to delete the additions made under Rule 8D(2)(ii) of the Rules. 4. Challenging the deletion of the addition by applying the Rule 8D(2)(ii) of the Rules, Revenue preferred these appeals whereas challenging the validity of reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Jamnadas Sheth (HUF) (2013) 221 Taxman 19 (Guj); and Dishman Pharmaceuticals & Chemicals Ltd. vs CIT (2012) 346 ITR 228 (Guj) for the proposition that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income u/s 14A, there was omission and failure on its part to disclose fully and truly material facts and hence, reopening of assessment was justified. 7. We have gone through the record. As a matter of fact Para 7 of the asstt. Order dated 24.11.2010 passed u/s 143(3) of the Act in respect of Asstt. Year 2008-09 reads as follows: " 7. Issue of disallowance u/s 14A: 7.0 During assessment proceedings an examination of the material available on record and also from the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to kindly do not initiate penalty proceedings. Thanking You, Yours faithfully, (RAVINDRA SAXENA) Chief Manager, Taxation Place: Nainital" Without prejudice to my separate finding on the issue of initiation of penalty the disallowance u/s 14A is computed as under: - As on 1.4.2007 As on 31.3.2008 MF 1,40,000/- 4,63,087/- Tax Free bonds 42,970/- 40,470/- Total 1,82,970/- 5,03,557/- 6,86,527/- Average Investment 687527/2 3,43,264/- Inadmissible exp. u/s 14A @0.5% 17,16,318/- As the assessee has not included inadmissible expenses u/s 14A neither in the original return nor in the revised return and it was only after pin pointing during assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income escaped assessment because assessee did not reveal the method of arriving at the disallowance made u/s 14A during the assessment proceedings. The assessment proceedings are meant for verification of such thing and to say that no income has escaped assessment in so far as the facts and figures revealed in the return of income. If the AO accepts a figure under Rule 8D of the Rules in the order u/s 143(3) of the Act inasmuch as Section 14A and Rule 8D there on the statute book, the AO cannot say that since the assessee did not disclose the method of calculation, income escaped from assessment. The method to be followed is available in the shape of the provisions of Rule 8D of the Rules. 10. In the circumstances, we are of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se all the material facts necessary for assessment and having accepted the same, the AO does not get jurisdiction to reopen the assessment beyond the period of four years and such a course is not permissible under law. In view of the facts and circumstances adverted to above and the case laws referred to, we are of the considered opinion that reopening of the proceedings in the matter are not in accordance with law and we find it difficult to sustain the same. 12. Even otherwise, in so far as the merits are concerned, there is no dispute as to the fact recorded by the learned CIT for both the years that there was an average balance in the current account of the assessee in bank to the tune of Rs. 142.51 crores for the Asstt. Year 2008-09 a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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