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TMI Blog2022 (12) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... e and disallowance was made as per law and Hon'ble Supreme court decision and Punjab & Haryana High Court decision. 3. That the worthy PCIT Chandigarh has erred in setting aside the assessment order passed on the basis of decision of Hon'ble Supreme court in the case of South Bank limited, which has been summarized in order passed u/s. 263 of the income tax Act, which is factually incorrect and misconceived. 4. That the finding of worthy PCIT that quantum of such investment being greater than the interest free funds available with the assessee is against the facts and circumstances of the case and setting aside of the assessment is against law. 5. That the finding of worthy PCIT, that complete balance sheet and profit and loss account not filed is incorrect and further observation made that the loss amount does not tally with ITR, Detail of fixed asset not there, long term advance detail not there, earning per shares is miscalculated and inflated, assessee has not represented its accounts correctly, calculation of interest from funds on presumption and assumption observation that false statement made by the assessee that interest earned is greater than the interest pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend income. It was stated in the show-cause that given the above facts, the AO has failed to invoke provisions of Section 14A and failed to make proper verification and to disallow the expenses incurred by the assessee in relation to its exempt income. 2.1. In response to the show cause, the assessee filed its submissions before the Ld. Pr. CIT which were considered but not found acceptable and the assessment order passed under section 143(3) was held to be erroneous in so far as prejudicial to the interest of the Revenue as the same has been passed without making inquiry or verification which should have been made and without correct appreciation of facts and law and the assessment order so passed was set aside with direction to make requisite inquiry and verification after providing reasonable opportunity to the assessee. 3. Against the said findings and direction of the Ld. Pr. CIT, the assessee is in appeal before us. 4. During the course of hearing, the Ld. AR referring to the show cause notice issued by the Ld. Pr. CIT submitted that broadly two issues have been raised by the Ld. Pr. CIT, the first issue relates to invocation of provision of Section 14A of the Act and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e balance amount of Rs. 9,70,12,866/- has been used for financing the majority of its non current investments worth Rs. 10,60,92,004/- is again not factually correct. It was submitted that during the course of assessment proceedings, the AO has called for the details of investment made during the year along with supporting documentation vide notice under section 142(1) dt. 12/06/2019 and in response, it was submitted that there is no fresh investment made during the year and the reference was also drawn to Schedule -8 of the balance sheet. It was submitted that basis the said submission that there is no fresh investment made during the year and consequentially, no interest bearing funds were utilized for making any such investment, no disallowance was made by the AO towards the interest expenditure incurred during the year. It was submitted that the said vital piece of information and an undisputed fact borne out from the records has not been considered and appreciated by the Ld. Pr. CIT and ld. PCIT has gone ahead and has held that interest bearing borrowing funds were used during the year to fund the non current investments and the findings that the finance cost has been incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 86 (Guj HC) * DCIT Vs. Trade Apartments Ltd. 2018 ITL 6049 (Kol- Trib) * DCIT Vs. M/s. Universal Industrial Fund Ltd. 2018 ITL 572 (Kol- Trib) * ITO Vs. Karnavati Petrochem Pvt. Ltd. (ITA No. 2228/Ahd/2012 dt. 05/07/2013) * ITO Vs. DG Housing Projects Ltd. [2012] 343 ITR 0329 (Del HC) 5. Per contra, the Ld. CIT DR relied on the order passed by the Ld. Pr. CIT and our reference was drawn to the findings which are contained at para 16 to 20 of the impugned order which reads as under: "16. Going through the submissions made by the assessee before the undersigned as also during the assessment proceedings, it is seen that the assessee itself had admitted that section 14A was attracted in its case, and that it had, therefore, made a small disallowance to meet its obligation under the Statute. It was never contended by the assessee that it had not invested in securities, or that the securities did not yield tax-free income. Nor was it ever the assessee's case that no dividend income was earned. So all that the AO had to do was to call for an apportionment of the expenses incurred on taxable income, as well as for financing/maintaining the investment into securities that yie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found that the assessee has again not been able to controvert the proposition that Rule 8D applies to its case, given that it has invested out of mixed funds and its investments are far greater than the own funds (if at all it has any). The assessee has not been able to demonstrate that a part of its interest expenditure has not gone into financing/maintaining its investment in securities. A plain reading of the balance sheet submitted by the assessee before the AO makes it impossible to ignore that the quantum of investment is excessively larger than the own funds available with the assessee company. This is, therefore, a fit case for the apportionment of expenditure under Rule 8D, and the AO, in accepting the meager disallowance made by the assessee, has committed a grave error and made the assessment severely prejudicial to the Revenue. The assessee was thus wrongly allowed a "double benefit" as explained by the Honourable Supreme Court (refer para 8.3.1 above), defeating the purpose of insertion of section 14A into the Statute. 20. It is amply evident from the assessment records that the assessment has been made by the assessing officer in a summary and casual manner withou ..... 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