TMI Blog2022 (12) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions of the assessee including the comparative position of investments at the beginning and at the end of year which shows that there are no fresh investments made during the year, the AO has not made any disallowance towards interest expenditure u/s. 14A - we find that it is not the case of the ld. PCIT that the investments made in the earlier years were made out of interest bearing funds and interest cost thereof continue to be claimed during the year and which has escaped attention of the AO. Nothing has been brought on record to this effect either in the impugned order or during the course of hearing before us including any disallowances made u/s 14A in the earlier years. We find that there are justifiable basis to invoke the provisions of section 263 as the order passed by the AO cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue and the order so passed by the ld. PCIT is hereby set-aside and that of the AO is sustained. - ITA No. 415/Chd/2022 - - - Dated:- 6-12-2022 - SMT. DIVA SINGH , JM And SHRI. VIKRAM SINGH YADAV , AM Assessee by : Shri Ashok Goel , CA Revenue by : Shri Sandip Dahiya , CIT , DR ORDER Per V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that case was not converted in complete scrutiny, cash deposited during demonetization not verified, share premium not enquired was without jurisdiction and without any notice and against the CBDT direction as in the case of limited scrutiny these points cannot be enquired. Hence the CIT finding that the order passed is without enquiry is erroneous and setting aside is not as per law. 7. That the case law which have been cited by the worthy PCIT Chandigarh are not applicable to the facts of the case. 8. That the worthy PCIT has erred in applying the Explanation 2 to Sec 263 of the I.T. Act, as the concerned assessing officer had duly made appropriate enquiry and applied his mind and correctly disallowance u/s. 14A as per Act and as per the decision of Hon'ble Supreme court and Punjab Haryana High court. 9. The appellant craves leave to add amend alter any of the ground of appeal or to take any additional ground of appeal before the appeal is finally disposed off. 2. Briefly the facts of the case are that the assessee company had filed its return of income declaring total income of Rs. 18,93,710/-. The case of the assessee was selected under limited scru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue for adjudication before the Bench relates to invocation of Section 14A of the Act. 4.1. Referring to the findings of the Ld. Pr. CIT wherein in para 10 of the impugned order, it has been stated that the AO has failed to call for the details of the balance sheet for F.Y. 2016-17 and certain vital information is missing and further, it has been stated that the audit report is incomplete, there is no clarity on what terms and conditions the funds were available to the assessee and were utilized. Similarly, it has been stated that no details have been provided regarding Short Term Borrowings, Fixed Assets, Long Term Loans Advances etc., and thereafter in para 11, it has been stated that the assessee has not correctly represented its accounts, it was submitted that the said findings of the Ld. Pr. CIT are factually incorrect as the detailed financial statement including the relevant annexures as well as audit report are available on the e-filing portal of the Income Tax Department and which can very well be examined even today. It was further submitted that these observations have been made without even confronting the same to the assessee during the course of revisionary procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income, it was submitted that it was not a simple acceptance on the part of the AO rather he has issued specific queries during the course of assessment proceedings and which have been responded to by the assessee and thereafter, taking into consideration the information, documents submitted by the assessee and after due application of mind, the AO has accepted the returned income. In this regard our reference was again drawn to the notice under section 142(1) dt. 12/06/2019 wherein AO has asked for the details of investment made during the year alongwith supporting documents, details of expenses incurred for earning exempt income and to show cause as to why disallowance under section 14A may not be made in your case. In response, the assessee submitted that there are no fresh investments made during the year and reference was drawn to Schedule -8 of the balance sheet which gives comparative basis of the investment made during last financial year and the financial year under consideration. Further it was submitted that Rs. 8206/- being the D-Mat Expenditure have been incurred by the assessee and which had been disallowed in the computation of income. It was further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of Rule 8D, the AO simply accepted the meagre disallowance of Rs. 8,267/- made by the assessee Suo moto. 17. The assessee did not present any apportionment, nor did the AO call for one. The AO, therefore, did not call for the requisite explanation and did not carry out the basic test for the application of rule 8D. The mere fact that the AO asked a question on the expenses incurred towards earning of exempt income does not imply that he made the enquiry mandated by the Law. The material information necessary to examine the issue at hand was never called for by the AO, and the assessee falsely contended that it had made investment out of interest free funds, and, as proof, merely relied on the point that the interest earned was greater than the interest paid. The AO thus allowed the assessee to withhold material facts that could have established the nexus between the interest expenditure and the Investment in Securities, and rendered an assessment that is erroneous, and thus prejudiced against the Revenue. 18. It is evident from the given facts of the case that the very purpose of the limited scrutiny for which the case was selected, was not met, leave alone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng borrowed funds have been utilized during the year to fund the non-current investments as evident from the steep increase in the finance cost during the year which doesn't stand justified with reference to revenue from operations and it is accordingly held that the finance cost is incurred during the year to sustain its non-current investments which call for disallowance u/s. 14A of the Act and which the AO has failed to enquire during the course of assessment proceedings. The submission of the assessee, on the other hand is that there are no fresh investment made during the year in respect of non-current investments and our reference was drawn to the assessee's balance sheet where total non-current investments as on 31.03.2016 stood at Rs. 10,63,92,004/- and as on 31.03.2017, stood at Rs. 10,60,92,004/-. Further, referring to the details of individual investments, our reference was again drawn to comparative positions in the two years and it was submitted that there are no fresh investment in any of the stocks/shares during the year rather the assessee has sold investment worth Rs. 3 lacs as recorded in the books of accounts during the year. It was submitted that during ..... X X X X Extracts X X X X X X X X Extracts X X X X
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