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TMI Blog2025 (5) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,89,56,740/-. 3. The CIT(A) erred in ignoring CBDT's Circular No. 5 of 2014 dated 11.02.2014. 4. The CIT(A) erred in ignoring the Supreme Court decision in the case of CIT Vs Walfort Share of Stock Brokers Pvt Ltd (326 ITR 1), wherein it was held that the mandate of section 14A was to curb the practice of claiming deduction of expenses incurred in relation to exempt income against taxable income and at the same time avail of the tax incentive by way of exempt income without making any apportionment of expenses incurred in relation to exempt income. 5. The CIT(A) erred in deleting the disallowance u/s 36(1)(va) r.w.s 2(24)(x) of Rs. 29,45,613/-. 6. The CIT(A) erred in ignoring CBDT's Circular No. 22 of 2015 dated 17.12.2015. 7. Any other ground that may be urged at the time of hearing. 3. Ground No. 1 is regarding non-payment of self- assessment tax. At the time of hearing, the learned DR has accepted the fact that the assessee has already paid the self - assessment tax and therefore, this ground becomes infructuous. In view of the fact that the assessee paid the tax due on return of income, therefore, no specific finding is required on Ground No. 1 of Revenue&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e but the investment, in question, as shown in the balance sheet of the assessee are only in pursuant to the share held by the assessee in foreign companies including the foreign subsidiaries and therefore, the dividend from foreign companies is taxable. He has further submitted that except the shares in one Indian company namely Lanco Net Ltd, all other investment are in the subsidiaries of the assessee which are foreign company. Even the Indian company Lanco Net Ltd has not declared any dividend and the investments are made in the earlier years and not during the year under consideration. 6. We have considered the rival submissions as well as the relevant material available on record. The Assessing Officer has not disputed the fact that the assessee has not earned any dividend income from the investment in shares of the subsidiaries companies of the assessee as well as in the shares of M/s. Lanco Net Ltd. Though the Assessing Officer has not given the details of the investment except the total amount of investment shown in the balance sheet, however, this fact has been accepted by the Assessing Officer that the assessee has not received any dividend income during the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the total income and is exempt from tax. This triggers the applicability of Section 14A of the Act which is based on the theory of apportionment of expenditure between taxable and non-taxable income as held in Walfort Share and Stock Brokers P Ltd. case. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. 40. We note from the facts in the State Bank of Patiala cases that the AO, while passing the assessment order, had already restricted the disallowance to the amount which was claimed as exempt income by applying the formula contained in Rule 8D of the Rules and holding that section 14A of the Act would be applicable. In spite of this exercise of apportionment of expenditure carried out by the AO, CIT(A) disallowed the entire deduction of expenditure. That view of the CIT(A) was clearly untenable and rightly set aside by the ITAT. Therefore, on facts, the Punjab and Haryana High Court has arrived at a correct conclusion by affirming the view of the ITAT, though we are not subscribing to the theory of dominant intention applied by the High Court." 8. We further note that in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the due date prescribed in the respective enactments, cannot be allowed as a deduction. Accordingly, the impugned order of the learned CIT (A) qua this issue is set aside and the order of the Assessing Officer is also restored. ITA No.1769/Hyd/2018 (Assessee's appeal) 12. In assessee's appeal, the following grounds are raised: M/s. Lycos Internet Limited, Asst. Year 2012-13 GROUNDS OF APPEAL 1. The order u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ' Act') passed by the Ld. Pr. Commissioner of Income Tax is erroneous both in law and on facts. 2. The Pr. CIT erred in passing order u/s 263 of the Act without affording reasonable opportunity of being heard to the appellant. 3. The Ld. Pr. CIT erred in rejecting the submissions of the appellant merely on presumption that neither the Assessing Officer examined the issue in question nor the appellant furnished any explanation on the issue during the course of scrutiny proceedings, without appreciating the fact that the A.O is not bound to record each and every event of assessment proceedings. 4. The Ld. Pr. CIT erred in treating that the order passed by the A.O u/s 143(3) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the assessment was completed u/s 143(3) of the Act without examining/verifying the above issue. Therefore, the order passed by the Assessing Officer without making inquiries or verification which should have been made is erroneous and prejudicial to the interest of the Revenue. Accordingly, a show-cause notice u/s 263 of the Act, dated 20/12/2017 was issued by the learned Pr. CIT. The assessee filed a reply to the show-cause notice and questioned the jurisdiction of the learned Pr. CIT to invoke provisions of section 263 of the I.T. Act, 1961 when the Assessing Officer has duly carried out the inquiry by issuing notice u/s 142(1) of the Act which were duly replied by the assessee by furnishing the relevant record and details. It was contended by the assessee that the Assessing Officer was satisfied with the reply filed by the assessee and hence it is not a case of lack of inquiry on the part of the Assessing Officer. The learned Pr. CIT was not impressed with the reply of the assessee and passed the impugned order whereby the order of the Assessing Officer has been held as erroneous on account of lack of inquiry on the part of the Assessing Officer on the issue of discr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ply filed by the assessee he has accepted the book profit u/s 115JB of the Act though various additions have been made in computation of income under the normal provisions of the Act which were challenged before the learned CIT (A) by the assessee. He has further contended that the assessment order passed by the Assessing Officer can be revised only after satisfying the twin conditions namely (i) the order of the Assessing Officer sought to be erroneous and (ii) it is prejudice to the interest of the Revenue. These conditions are mutually exclusive. He has further contended that during the course of assessement proceedings, the Assessing Officer has examined all the issues including the issue in question, taken by the learned Pr. CIT in the proceedings u/s 263 of the Act. Thus, the assessment order was passed by the Assessing Officer after due application of mind. The assessee explained the issue before the learned Pr. CIT, however, the same was rejected merely on the presumption that there was no inquiry by the Assessing Officer about the discrepancy between the net profit as per P&L Account forming part of Annual Report and schedule to profit & loss account of ITR-6. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder without conducting a proper inquiry on this issue. It is a clear case of lack of inquiry on the part of the Assessing Officer while passing the assessment order and therefore, the question of change of opinion, on the part of the learned Pr. CIT does not arise. He has relied upon the order of the learned Pr. CIT passed u/s 263 of the I.T. Act, 1961. 16. We have considered the rival submissions as well as the relevant material available on record. The learned Pr. CIT has invoked the provisions of section 263 of the I.T. Act, 1961, on the premises that there is a discrepancy in the net profit shown in the P&L Account forming part of the Annual Report in comparison to the P&L Account schedule to the ITR-6. The relevant reasons for invoking the provisions of section 263 are recorded in Para-2 of the impugned order: "2. On perusal of Return of Income and other financial statements filed by assessee company for the Asst. Year 2012-13, It seen that the net profit asper profit and loss account furnished in the Annual Report of the assessee company amounted to Rs. 59,84,33,318/- whereas as per P&L Ac furnished in the Return of Income (Part A P&L) the net profit amounted to Rs. 37 82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11-2012 and the schedule P&. account of ITR-6 filed for A.Y 2012-2013. Further, as seen from the replies furnished oy the assessee to the said notices, no information on the above discrepancies was furnished. Further, during the course of hearings conducted on 26.02.2016 and 29 03 2016 nether the assessing officer examined the above discrepancies nor the assessee furnished any reconciliation explaining the discrepancies. In the written submissions reproduced above it is not even contended by the assessee that the above discrepancies were inquired into or examined by the A.O. during the assessment proceedings. As the assessing officer failed to examine the above discrepancies, the assessment order passed by him u/s 143(3) of the Income Tax Act, 1961 on 29.03.2016 shall be deemed to be erroneous in So far it is prejudicial to the interests of Revenue as per clause(a) and (c) of Expl. 2 to Sec. 263 of the I.T Act, 1961. The same is therefore, set aside in terms of the provisions of section 263 of the I.T Act, 1961 and the assessing officer is directed to examine the above discrepancies and assess the correct income by redoing the assessment afresh after affording an opportunity of bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose and other compliances. Therefore, merely because the assessee is having an entity in the foreign country does not ipso fact liable to tax on the income, such entity assessable to tax in foreign jurisdiction. Further, the international transactions of the assessee were subject to transfer pricing proceedings and were found to be at Arms' Length and therefore, it is apparent that the Assessing Officer has conducted a thorough inquiry on all these issues including the issue of the income of US entity reported in the consolidated and standalone financial statements as per of the annual report. Once all the relevant record was available before the Assessing Officer as well as before the Pr. CIT, then the learned Pr. CIT ought to have given a conclusive findings as to how the discrepancy has resulted a loss of revenue falling in the ambit of prejudicial to the interest of Revenue. The learned Pr. CIT has not disputed that the income of the US based branch of the assessee is taxable in US and therefore, even if the said income is included in the income of the assessee, the assessee would get tax rebate as per the provisions of the Income Tax Act as well as DTAA between India an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 to the Assessing Officers letter dated 04.08.2008, giving details of dates of acquisition of the shares in question and dates of sale of shares. As such this material was available before the Assessing Officer. In its reply dt. 09-03-2011 to the revised show cause notice issued by the respondent also, the appellant had enclosed the list of transactions in relation to the scrips of M/s. Amara Raja Battery, M/s. Reliance Industries, M/s. Gujarat NRE Coke and M/s. Andhra Sugars Limited contending that having purchased the shares of the said companies, it had retained them for periods ranging from 1 year 2 months to 3 years 6 months before selling them. The counsel for the appellants has taken us through the said statements/list of transactions." 23. Therefore, merely because, the Assessing Officer has not given an elaborate reasoning and findings does not lead to the conclusion that the order of the Assessing Officer is erroneous for want of an inquiry. A similar view has been taken by the Hon'ble Bombay High Court in the case of CIT vs. Development Credit Bank (Supra). The Hon'ble Delhi High Court in the case of Income Tax Officer vs. DG Housing Projects Ltd (Supra) has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore, CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT v. Shree Manjunathesware Packing & Products Camphor Works [1998] 231 ITR 53/98 Taxman 1 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/ additional material/ evidence to show and state that the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 24. Therefore, once the Assessing Officer has adopted one of the courses permissible and available to him, and this has resulted in loss to the Revenue to which the learned Pr. CIT may not agree, the said order cannot be treated as an erroneous order prejudice to the interest of the Revenue unless the view taken by the Assessing Officer is unsustainable in law. In setting aside the matter, the learned Pr. CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and therefore, the order is erroneous. The setting aside the order for doing fresh exercise on the part of the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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