SHRIRAM TRANSPORT FINANCE COMPANY LIMITED,CHENNAI vs. ACIT CORPORATE CIRCLE-6(1), CHENNAI

This appeal filed by the assessee is directed against the order of the ld. Principal Commissioner of Income Tax-Chennai 3,Chennai dated 31.03.2022 relevant to the assessment year 2017-18 passed under section 263 of the Income Tax Act, 1961 [“Act” in short].

Facts are, in brief, that the assessment for the assessment year 2017-18 was completed under section 143(3) of the Act on 31.12.20109 assessing the total income of the assessee at ₹.2168,69,90,409/- by making an addition of ₹.82,16,52,689/-. Subsequently, the ld. PCIT, by invoking the powers conferred under section 263 of the Act, issued notice to the assessee that the Assessing Officer has not considered the disallowance under section 14A of the Act and completed the assessment under section 143(3) of the Act dated 31.12.2019. The assessee has filed a detailed reply before the ld. PCIT. By considering the entire facts, the ld. PCIT has noted on perusal of the details in respect of non-current investment from the balance sheet, the average value of investment was ₹.1362,78,79,482/-. However, the assessee company had stated that since there was no fresh investment during the year, disallowance under section 14A of the Act is not warranted. Since the Assessing Officer has failed to make the disallowance under section 14A of the Act while completing the assessment, the ld. PCIT has held that the assessment order passed under section 143(3) of the Act dated 31.12.2019 is erroneous and prejudicial to the interest of the Revenue and set aside the assessment to the file of the Assessing Officer to examine this issue after affording sufficient opportunities to the assessee.

On being aggrieved, the assessee carried the matter in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that the Assessing Officer has examined the issue in detail and after that the assessment was completed under section 143(3) of the Act. The ld. Counsel pointed out from paper book page No. 39, wherein, the Assessing Officer has asked the assessee to give details of any tax-free income earned, if any. He also pointed out from paper book page No. 43, wherein, the assessee by letter dated 27.11.2019 explained the details of tax free income as NIL. Again he has pointed from paper book page No. 45 being notice issued under section 142(1) of the Act dated 19.12.2019, wherein, the Assessing Officer asked to explain as to “why recent judgement passed by the Hon’ble Supreme Court of India in the case of Maxopp Investment vs. CIT (2018) 91 taxmann.com 154(SC) should not be applied for calculating 14A disallowance in your own case based on the Theory of apportionment as enumerated in the case law cited supra.” In its reply dated 20.12.2019, the assessee gave detailed reply at page No. 52 of the paper book. By considering the same, the Assessing Officer passed the assessment order under section 143(3) of the Act. Therefore, the ld. Counsel for the assessee has submitted that the assessment order passed by the Assessing Officer cannot be said as erroneous and prejudicial to the interest of the Revenue.

On the other hand, the ld. DR relied on the order passed by the ld. PCIT.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the ld. PCIT has issued a show-cause notice dated 01.03.2022 by exercising the power conferred under section 263 of the Act that the Assessing Officer failed to examine application of section 14A of the Act. We find from paper book page 39 that the Assessing Officer has specifically asked the assessee to give details of any tax-free income earned, if any. In response to the above, by letter dated 27.11.2019, as per paper book page 45, the assessee has explained that the tax free income as NIL. Again, the Assessing Officer issued notice under section 142(1) of the Act dated 19.12.2019 and specifically asked the assessee to explain as to “why recent judgement passed by the Hon’ble Supreme Court of India in the case of Maxopp Investment vs. CIT (supra) should not be applied in assessee’s case. In its reply dated 20.12.2019, the assessee gave detailed explanation at page No. 52 of the paper book and submitted that the judgement of the Hon’ble Supreme Court in the case of Maxopp Investment v. CIT (supra) has no application by relying upon the judgement in the case of CIT v. Chettinad Logistics P. Ltd. 80 Taxmann. com 221 Madras HC, against which the SLP filed by the Department was dismissed by the Hon’ble Supreme Court in SLP (Civil) Diary No. 15631 of 2018 dated 02.07.2018 [95 taxmann.com 250(SC)]. By considering the detail explanations of the assessee and after making necessary enquiry, the Assessing Officer has completed the assessment order under section 143(3) of the Act. Therefore, we are of the considered opinion that the assessment order passed by the Assessing Officer cannot be said that it is erroneous and prejudicial to the interest of the Revenue. In view of the above, the revision order passed by the ld. PCIT is quashed.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 03rd May, 2023 at Chennai.