TMI Blog2021 (2) TMI 738X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and restore the assessment order u/s 143(3) of the Act dated 28.8.2016. The sole ground raised by the assessee is allowed. - ITA. No. 646/Ind/2019 - - - Dated:- 17-2-2021 - HON BLE KUL BHARAT , JUDICIAL MEMBER AND HON BLE MANISH BORAD , ACCOUNTANT MEMBER Assessee by : Shri Maneesh Vaidya Ms. Preeti Patwa, CAs Revenue by : Shri S.S. Mantri, CIT ORDER PER MANISH BORAD, A.M By the above captioned appeal assessee has challenged the jurisdiction assumed by the Ld. Pr. Commissioner of Income Tax-I (in short Ld. PCIT], Indore u/s 263 of the Act vide order dated 27.03.2019 raising following grounds of appeal:- 2. Assessee has raised following grounds of appeal:- 1.That the learned Pr. CIT erred in passing the order u/s 263(1) holding that the order passed by the Assessing Officer u/s 143(3) was erroneous in so far as it is prejudicial to the interests of the revenue. That on the facts and in the circumstances of the case and as per law, the order passed by the Assessing Officer u/s 143(3) was neither erroneous nor prejudicial to the interest of revenue as the same was passed after making required examination / investigations and after prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtunity to the assessee and take decision as per law. 5. Aggrieved by the said order of the Pr. CIT-I, Indore the assessee is in appeal before this Tribunal. 6. Ld. Counsel for the assessee apart from relying on the written submission placed on record, judgments placed in paper book of case laws (20 decisions) and the paper book running from page 1 to 72 filed on 16.12.2020 submitted that the issue raised in the show cause notice issued by Ld. PCIT is with regard to computation of disallowance u/s 14A of the Act. This issue has been examined thoroughly by the Ld. A.O after taking necessary information from the assessee and making disallowance of ₹ 79,019/- u/s 14A of the Act. 7. Per contra Ld. Departmental Representative vehemently argued supporting the order of Ld. PCIT submitted that with regard to huge interest expenses which have not been examined by Ld. A.O and in such circumstances Ld. PCIT has rightly directed the Ld. A.O to examine the issue of disallowance u/s 14A read with rule 8D of the Act. 8. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred and relied by the Ld. Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the same was duly verified and accepted by the Ld. AO. with his full wisdom as obliged upon him under section 14A(2). Further the applicability of Rule SB is not mechanical but it is required to be applied with satisfaction of the AO. as obliged by section 14A (2). It may also be noted that applicability of the section 14A is restricted to the investments of which income is expressly exempt from the tax. It is evident from above that the Ld. A O. has not simply accepted the submission of the Assessee but made disallowance strictly after satisfaction as obliged upon him u/s 14A(2) using his full wisdom and considering facts as well as law as ruled by the judiciaries. 2. Another reason noted that the Assessee has not submitted any details of unsecured loan of ₹ 13,82, 1791shown as paid in the books of Shivshakti. In the matter it is 'stated that the Assessee has not paid any such loan and it has furnished details of all the loans during the previous year as per para 13 of his submission dated 11/0612016 vide annexure 275-283 thereto. Submission dated 28.02.2019 7.Kind attention of your honour is also invited to clause (a) (b) to Explanation 2 to. sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he last day of the previous year; C = the average of total assets as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year; The above submission clearly renders that the provisions of sec. 263 could neither be invoked ob law nor on facts and it is therefore humbly requested to drop the further proceeding oblige. 10. Ld. PCIT duly considered the above submissions but was not satisfied and held the order of Ld. A.O u/s 143(3) of the Act dated 28.6.2016 as erroneous and prejudicial to the interest of revenue and directed the Ld. A.O to examine the issue of disallowance u/s 14A read with Rule 8D of the Act. 11. We find that Hon ble Apex Court in the case of CIT V/s Max India Ltd 295 ITR 282 after discussing the judgment of Hon ble Apex Court in the case of Malabar Industrial Co. Ltd v/s CIT CIT (SC) (2000) 243 ITR 083 held as follows:- The phrase prejudicial to the interest of the Revenue in section 263 of the Income- tax Act, 1961 has to be read in conjunction with the expression erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 27.4.2015 seeking various information placed at page 32 of the paper book. To this detailed reply was filed on 11.6.2016 which is placed at paper book page 33 to 36. In this reply assessee made following submissions answering to Question No.21 asked by the Ld. A.O with regard to disallowance u/s 14A of the Act since there were investment in equity shares as per the balance sheet and huge interest expenditure:- 21. Disallowance u/s 14A: There is no such disallowance in accordance with the mandatory requirements and conditions of sec, 14A. Please note that the application of Rule 80D is not automatic mechanical but the same has be applied in terms of such mandatory requirements and conditions laid down in section 14A, The various honourable High Courts and Tribunals has duly clarified the provisions of sec 14A from time to time in their pronouncements, Accordingly following conditi6ns must be satisfied before invoking the 'sec 14A i.. There should be direct nexus between any borrowing investment made by the Assessee as such portion of interest on borrowings could not only be disallowed which has direct nexus with the investments. *DCIT vs. COSMOS INTERNATIONAL LTD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neither intended to earn exempt income nor invested out of borrowed fund. This may be verified from the annexure and annexure II to calculation sheet as per rule 8A. And accordingly no substance is present to invoke section 14A in the present case. To more specifically clarify the above, calculation under rule 8D in accordance with the above mandatory conditions is attached which reveals no disallowance is warranted. 16. Along with this reply assessee also annexed computation of disallowance u/s 14A of the Act and submitted that no disallowance was called for. Assessee s this claim was based on the details placed before Ld. A.O which included break up of value of strategic investment value and value of investments of which income is taxable and the value of investment of which income is claimed as exempt. 17. There was another query letter issued by Ld. A.O dated 27.5.2016 containing 11 questions in which Question No.1 was specifically with regard to interest expenses and the same reads as follows:- 1. On perusal of balance sheet it is seen that you have made Long Term Investment in properties at ₹ 2,02,05,807/-, Long Term Unlisted Equity Shares at ₹ 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance. 21. The Ld. A.O after considering above stated replies given by the assessee to the specific queries raised by the Ld. A.O with regard to claim of huge interest expenses and disallowance u/s 14A of the Act made specific observation at para 4 of the assessment order u/s 143(3) of the Act dated 28.6.2016 and also reproduced the calculation of disallowance u/s 14A of the Act at ₹ 79,019/- and confirmed the disallowance and added to the income of the assessee. 22. In light of above stated facts there is no doubt that the Ld. A.O has raised specific query with regard to huge interest expenditure as to whether they were allowable as business expenditure and secondly issue of disallowance u/s 14A of the Act and to these specific queries detailed replies were filed by the assessee which are stated above and duly considered by Ld. A.O and he after discussing the issue in detail in the assessment order has confirmed the disallowance u/s 14A of the Act. It thus shows that the present case is neither of no enquiry or incomplete enquiry at the end of the Ld. A.O nor the order u/s 143(3) of the Act can be said to be erroneous so far as prejudicial to the interest of rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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