THE PR. COMMISSIONER OF INCOME TAX PATIALA vs. STATEBANK OF PATIALA, PATIALA

The appellant-revenue has filed the instant appeal under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 12.01.2017, Annexure A.7, passed by the Income Tax Appellate Tribunal, Division Bench, Chandigarh (in short, “the Tribunal”) in ITA No. 1203/CHD/2016, for the assessment year 2010-11, claiming following substantial question of law:- “Whether in the facts and circumstances of the case, the Hon’ble ITAT, Chandigarh is legally correct in deleting the addition of ` 19.70 crores (` 7,03,49,029/- made under Section 143(3) + ` 12,67,00,000/-, made under Section 143(3) r.w.s 263) made on account of apportionment of expenses against exempted income under Section 14A of the Income Tax Act, 1961 read with rule 8D of the Income Tax Rules, 1962 when the revenue has not accepted the order of the Hon’ble High Court against quashing the order under Section 263 of the Income Tax Act, 1961 and SLP is recommended?”

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. Assessment under Section 143(3) of the Act was made by the Assessing Officer vide order dated 15.03.2013, Annexure A.1, for the assessment year 2010-2011 by making addition of ` 7,03,49,029/- on account of apportionment of expenses against exempted income under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 (in short, “the Rules”) alongwith making additions on various other issues. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax Appeals [CIT(A)]. Vide order dated 09.01.2015, Annexure A.2, the CIT(A) confirmed the addition of ` 7,03,49,029/- on this issue. On 18.03.2014, Commissioner of Income Tax, Patiala (the CIT), passed order under Section 263 of the Act holding aforesaid assessment order dated 15.03.2013 to be erroneous and prejudicial to the interest of the revenue and set aside the assessment order with a direction to enhance income of the assessee by ` 19.70 crores by making addition of ` 12.67 crores on account of apportionment of expenses against exempted income under Section 14A of the Act read with rule 8D of the Rules. Accordingly, order under Section 143(3) read with Section 263 of the Act was made by the Assessing Officer on 07.11.2014, Annexure A.4, and further addition of ` 12,67,00,000/- was made under Section 14A of the Act, in compliance to the order under Section 263 of the Act dated 18.03.2014 passed by the CIT. Feeling aggrieved against the order dated 09.01.2015 passed by the CIT(A), confirming addition of ` 7,03,49,029/-, the assessee filed an appeal before the Tribunal on this issue alongwith some other issues. The assessee also challenged the order under Section 263 of the Act passed by ITA No. 359 of 2017 3

We have heard learned counsel for the appellant-revenue.

It is not disputed by the learned counsel for the appellant- was recorded as under:- “After hearing learned counsel for the parties, we notice that the issue on merits has been decided in favour of the assessee in State Bank of Patiala’s case (supra) [(2017) 78 Taxman.com 3]. The amount of disallowance under Section 14A was restricted to the amount of exempt income only and not at a higher figure. Once that was so, we do not consider it appropriate to discuss the scope of Section 263 of the Act as the same has been rendered academic in view of the issue being answered in favour of the assessee on merits. Thus, no substantial question of law arises. Consequently, the appeal stands dismissed.” ‘gs’