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TMI Blog2022 (1) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... le to furnish evidences during the assessment proceedings u/s. 143(3) and the proceedings u/s. 263 of the Act. 3. Appellant craves to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. Briefly stated, the relevant material facts are as follows. The assessee, (Smt. Neetuben Pradeep Dhingra), had filed her return of income for assessment year (A.Y.) 2014-15 on 25.02.2015 declaring income at Rs. Nil. The assessee was engaged in textile business under proprietary concern, M/s. Siddhant Fabrics. During the year under consideration, the assessee had derived income from House Property and Embroidery job work. The Scrutiny assessment under section 143(3) of the Act was finalized on 23.11.2016 at assessed income of Rs. 2,92,880/- by way of making additions of Rs. 2,92,880/- on account of disallowance of expenditure under section 14A of the Act. 3. Later on, Learned Principal Commissioner of Income Tax-1, [in short "the ld. PCIT"], has exercised his jurisdiction under section 263 of the Income Tax Act 1961. On perusal of Scrutiny records, Ld. PCIT noticed that assessee has shown an amount of Rs. 29,90,030/- under the head "income from other so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Land & Factory Building for purpose of rent: Rs. 77,68,223/- Shop at WTC (including furniture) for purpose of rent: Rs. 7,75,830/- Siddhant Fabrics (proprietary concern) for business : Rs. 25,13,612/- Shop at Millennium Market (incl furniture) for business: Rs. 15,35,700/- Sidhant Creation Pvt. Ltd for interest income : Rs. 2,23,42,201/- From the above analysis, ld PCIT noted that assessee had not utilized whole of the interest bearing funds to earn interest income during the year under consideration and in earlier years. Hence the amount of expenses of Rs. 37,04,113/- claimed under the heading income from other sources was not justified as the same was not incurred/utilized for earning the income under the head 'income from other sources' and therefore while finalizing the assessment, same was required to be disallowed u/s. 57(iii) of the Act which reads as under: Deductions 57. The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely:-- iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore not being repeated for the sake of brevity. 10. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials brought on record. We note that solitary grievance of ld Counsel is that order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue, as the assessing officer has conducted necessary enquiry therefore, jurisdiction exercised by ld PCIT under section 263 of the Act is bad in law. Therefore, first of all, let us examine whether Assessing Officer has examined the issue, in his assessment order, which was raised by the ld. PCIT under section 263 of the Act. The relevant para of assessment order is reproduced below: "The assessee has filed her return of income on 25.02.2015 declaring therein total income of NIL. The return of income was processed u/s. 143(1) of the Income-tax Act, 1961. The case was selected for scrutiny. Accordingly, a notice u/s. 143(2) of the Act was issued on 21.09.2015 and duly served upon the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of the aforesaid expenditure which is incurred in relation to income exempt from tax then the assessing officer shall determine the quantum of such expenditure in accordance with Rule 8D. In the case of assessee, no exempt income was earned by the assessee, and also no expenditure was incurred to earn the exempt income and therefore, sec. 14A is not applicable. The investment made by the assessee is Rs. 6,900 in quoted share and unquoted shares of Rs. 32,00,000/- and the capital of the assessee as on 31.03.2013 is Rs. 45,86,072/-. This shows that all the investment made in shares is out of owned capital of the assessee. Reliance is placed on judgment of the Honourable Gujarat High Court in the case of CIT-1 vs. UTI Bank Ltd. (2014) 45 taxman.com 365 (Gujarat) Held that "Where assessee had sufficient income free funds to meet it tax free investment yielding exempt income, it could be presumed that such investment were made from interest free fund and no from loaned Fund, and thus no disallowance under section 14A being warranted. Further the assessee has not made any claim for exemption of any income from payment of tax, disallowance u/s. 14A cannot be made". 5.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k the assessee to submit details of expenses of Rs. 37,04,113/-, which were incurred by assessee to earn other income Rs. 29,90,030/-. 13. However, Assessing Officer has issued further notice under section 142(1) dated 22.07.2016, wherein Assessing Officer asked details about deduction under section 57 of the Act and details of interest received (vide at page 5 of PB). In response to the notice, the assessee replied by letter dated 29.07.2016. However, we note that it is a general reply of interest received and paid. The Ld. Counsel did not submit the details of interest with reference to under the head 'income from other sources' nor expenses details which were mentioned with reference to section 57 of the Act. That is, there is no any working submitted by the assessee in respect of general expenses of Rs. 37,04,113/-, that against which interest income such general expenses were incurred by the assessee. That is, nexus is absent. To earn the interest income of Rs. 29,90,030/-, the assessee has claimed to have incurred general expenses of Rs. 37,04,113/-, which is not believable. To collect the interest income from customers only some collection charges to be incurred, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein is found prejudicial to the interest of revenue and for this proposition of law, we place reliance on the decision of Hon'ble Madras High Court in the case of Indian Textiles Vs. CIT, 157 ITR 112 (Madras). Further, it is also important to mention here that the provisions of section 263 can be invoked even where full facts are disclosed but the Assessing Officer has not examined these details as per correct provisions of law. In support of this proposition, we place reliance on the decision of the Hon'ble Rajasthan High Court delivered in the case of CIT Vs. Emery Stone Manufacturing Company, 213 ITR 843 (Rajasthan). In the assessee's case under consideration, the assessing officer did not make enquiry in respect of expenses of Rs. 37,04,113/- and did not try to establish the nexus that such expenditure has been incurred by the assessee to earn interest income of Rs. 29,90,030/-. No doubt, assessee has filed some details during the assessment proceedings, but the AO did not raise query to dig the truth. The assessing officer should examine the details filed by the assessee and must reach on right conclusion, which the AO has failed to do so in the assessee's case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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