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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI ABY T VARKEY & SHRI OM PRAKASH KANT
PER OM PRAKASH KANT, AM
This appeal has been preferred by the assessee against the revision order dated 31.03.2021 passed by the Ld. Pr. Commissioner of Income-tax -1, Mumbai (in short ‘the PCIT’) for assessment year 2016-17, raising following grounds: “GROUND NO. I: INVOKING REVISION PROCEEDINGS US 263 OF THE ACT WITHOUT JURISDICTION:
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1. On the facts and in the circumstances of the case and in On the facts and in the circumstances of the case and in On the facts and in the circumstances of the case and in law, the learned CIT erred in invoking the provisions of law, the learned CIT erred in invoking the provisions of law, the learned CIT erred in invoking the provisions of section 263 of the Act and directing to revise the order section 263 of the Act and directing to revise the order section 263 of the Act and directing to revise the order passed by the Assistant Commissioner of Income Tax, passed by the Assistant Commissioner of Income Tax, passed by the Assistant Commissioner of Income Tax, Central Circle 2(3), Mumbai ("the Central Circle 2(3), Mumbai ("the AO") on the alleged AO") on the alleged ground that the AO did not make any verification of facts ground that the AO did not make any verification of facts ground that the AO did not make any verification of facts and there was no application of mind by the AO while and there was no application of mind by the AO while and there was no application of mind by the AO while completing the assessment. completing the assessment. 2.
He failed to appreciate and ought to have held that the 2. He failed to appreciate and ought to have held that the 2. He failed to appreciate and ought to have held that the AO had duly made the enquiry on the is AO had duly made the enquiry on the is AO had duly made the enquiry on the issue of disallowance W/s 14A disallowance W/s 14A, and thereafter chose to not make , and thereafter chose to not make any addition. Therefore, it is not a case of "lack of inquiry' any addition. Therefore, it is not a case of "lack of inquiry' any addition. Therefore, it is not a case of "lack of inquiry' 3. 3. The Appellant prays that the action of the CIT in 3. The Appellant prays that the action of the CIT in 3. The Appellant prays that the action of the CIT in invoking jurisdiction ws 263 of the Act is ab inito or invoking jurisdiction ws 263 of the Act is ab inito or invoking jurisdiction ws 263 of the Act is ab inito or otherwise void. otherwise void.
WITHOUT PREJUDICE TO GROUND I ABOVE PREJUDICE TO GROUND I ABOVE GROUND NO. I: INVOKING REVISIONARY PROCEEDINGS US 263 GROUND NO. I: INVOKING REVISIONARY PROCEEDINGS US 263 GROUND NO. I: INVOKING REVISIONARY PROCEEDINGS US 263 OF THE ACT IN ABSENCE OF ERROR OR PREJUDICE: OF THE ACT IN ABSENCE OF ERROR OR PREJUDICE: OF THE ACT IN ABSENCE OF ERROR OR PREJUDICE:
1. On the facts and in the circumstances of the case and in On the facts and in the circumstances of the case and in On the facts and in the circumstances of the case and in law, the Ld. CIT erred invoking the provisions of section law, the Ld. CIT erred invoking the provisions of section law, the Ld. CIT erred invoking the provisions of section 263 of the Ac 263 of the Act to revise the order passed by AO on the t to revise the order passed by AO on the alleged ground that the order was erroneous and alleged ground that the order was erroneous and alleged ground that the order was erroneous and prejudicial to the interest of the revenue. prejudicial to the interest of the revenue.
2. He failed to appreciate and ought to have held that the He failed to appreciate and ought to have held that the He failed to appreciate and ought to have held that the Appellant has suo moto made a disallowance in its return Appellant has suo moto made a disallowance in its return Appellant has suo moto made a disallowance in its return of income of income as per section 14A r.w.r. 8D of the Income Tax r.w.r. 8D of the Income Tax
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Rules, 1962 ("the Rules"), and no further disallowance is Rules, 1962 ("the Rules"), and no further disallowance is Rules, 1962 ("the Rules"), and no further disallowance is warranted warranted 3. The Appellant prays that it be held that the order passed The Appellant prays that it be held that the order passed The Appellant prays that it be held that the order passed by A0 is not erroneous and accordingly the action of Ld. by A0 is not erroneous and accordingly the action of Ld. by A0 is not erroneous and accordingly the action of Ld. CIT in invoking the provi CIT in invoking the provisions of section 263 is void ab sions of section 263 is void ab intio and bad in law. intio and bad in law. WITHOUT PREJUDICE TO GROUND I & II ABOVE WITHOUT PREJUDICE TO GROUND I & II ABOVE GROUND NO. III: PROVISIONS OF SECTION 144 R.W.R. 8D GROUND NO. III: PROVISIONS OF SECTION 144 R.W.R. 8D GROUND NO. III: PROVISIONS OF SECTION 144 R.W.R. 8D CANNOT BE INVOKED WITHOUT RECORDING INVOKED WITHOUT RECORDING AN OBJECTIVE AN OBJECTIVE SATISFACTION:
1.
1. On the facts and in the circumstances of the On the facts and in the circumstances of the case and in case and in law, the Ld. CIT erred in directing the A to invoke the law, the Ld. CIT erred in directing the A to invoke the law, the Ld. CIT erred in directing the A to invoke the provisions of section 14A r.w.r. 8D without appreciating provisions of section 14A r.w.r. 8D without appreciating provisions of section 14A r.w.r. 8D without appreciating that to do so, an objective satisfaction with a justifiable that to do so, an objective satisfaction with a justifiable that to do so, an objective satisfaction with a justifiable reason is to be recorded for rejecting the computation of reason is to be recorded for rejecting the computation of reason is to be recorded for rejecting the computation of disallowance disallowance made by the Appellant.
2. The Appellant prays that the direction of Ld. CIT to invoke The Appellant prays that the direction of Ld. CIT to invoke The Appellant prays that the direction of Ld. CIT to invoke the provisions of section 14A r.w.r. 8D be quashed. the provisions of section 14A r.w.r. 8D be quashed. the provisions of section 14A r.w.r. 8D be quashed.
2. Briefly stated, facts of the case are that in the case the Briefly stated, facts of the case are that in the case the Briefly stated, facts of the case are that in the case the assessment u/s 143(3) of the Act was completed by the Assessing assessment u/s 143(3) of the Act was completed by the Asses assessment u/s 143(3) of the Act was completed by the Asses Officer on 06.12.2018 u/s 143(3) of the Income Officer on 06.12.2018 u/s 143(3) of the Income-tax Act, 1961 (in tax Act, 1961 (in short ‘the Act’) accepting the return of income short ‘the Act’) accepting the return of income, which which was filed by the assessee on 15.10.2016 declaring total income at ₹ Nil. The Ld. the assessee on 15.10.2016 declaring total income at the assessee on 15.10.2016 declaring total income at PCIT called for the record and after examination o PCIT called for the record and after examination of the record f the record, he was of the view that the A was of the view that the Assessing Officer did not carry ssessing Officer did not carry out the Wealthy Millennium Investment & Trading Pvt. Wealthy Millennium Investment & Trading Pvt. 4 Ltd. ITA No. 1207/M/2021 requisite inquiry on the issue of disallowance under the provision of requisite inquiry on the issue of disallowance under the provision of requisite inquiry on the issue of disallowance under the provision of section 14A of the Act. Accordingly, he issued show cause notice to section 14A of the Act. Accordingly, he issued show cause notice to section 14A of the Act. Accordingly, he issued show cause notice to the assessee and after considering t the assessee and after considering the submission of the assessee, ion of the assessee, the Ld. PCIT held the assessment order passed by the Assessing he Ld. PCIT held the assessment order passed by the Assessing he Ld. PCIT held the assessment order passed by the Assessing Officer as erroneous in so far as prejudicial to the interest of the Officer as erroneous in so far as prejudicial to the interest of the Officer as erroneous in so far as prejudicial to the interest of the Revenue observing as under: Revenue observing as under:
“6. I have carefully considered the submissions made 6. I have carefully considered the submissions made 6. I have carefully considered the submissions made by the asses by the assessee and have also gone through the facts of see and have also gone through the facts of the case and do not find any force in assessee the case and do not find any force in assessee the case and do not find any force in assessee submission for the following reasons: submission for the following reasons:
6.1 The assessee has argued that the Assessing Officer 6.1 The assessee has argued that the Assessing Officer 6.1 The assessee has argued that the Assessing Officer had made enquiries before passing the assessment had made enquiries before passing the assessment had made enquiries before passing the assessment order under considerati order under consideration, but on perusal of records it on, but on perusal of records it can be seen that the assessee has assessee has can be seen that the assessee has assessee has can be seen that the assessee has assessee has claimed exempt income on account of interest income of claimed exempt income on account of interest income of claimed exempt income on account of interest income of Rs.81,63,809/ Rs.81,63,809/- and dividend income Rs.23,34,076/ and dividend income Rs.23,34,076/-, but there is no corresponding disallowance made by the but there is no corresponding disallowance made by the but there is no corresponding disallowance made by the Assessing Offic Assessing Officer as per the provisions of section 14A er as per the provisions of section 14A r.w.r 8D of the Income Tax Act, 1961. r.w.r 8D of the Income Tax Act, 1961.
6.2 Also, the Assessing Officer while finalizing the 6.2 Also, the Assessing Officer while finalizing the 6.2 Also, the Assessing Officer while finalizing the impugned impugned impugned order order order under under under section section section 143(3) 143(3) 143(3) failed failed failed to to to adequately verify the applicability of provisions of adequately verify the applicability of provisions of adequately verify the applicability of provisions of section 14A r.w.r 8D of section 14A r.w.r 8D of the Act.
6.3 Further to this, the assessee has argued against the 6.3 Further to this, the assessee has argued against the 6.3 Further to this, the assessee has argued against the applicability of section 263 in this case. The Assessing applicability of section 263 in this case. The Assessing applicability of section 263 in this case. The Assessing officer while passing the assessment order under officer while passing the assessment order under officer while passing the assessment order under Wealthy Millennium Investment & Trading Pvt. Wealthy Millennium Investment & Trading Pvt. 5 Ltd. ITA No. 1207/M/2021 consideration failed to make proper enquiries and consideration failed to make proper enquiries and consideration failed to make proper enquiries and verification as per the provisions verification as per the provisions of law which were of law which were applicable This attracts the provisions of section 263, applicable This attracts the provisions of section 263, applicable This attracts the provisions of section 263, therefore the contention of the assessee is not therefore the contention of the assessee is not therefore the contention of the assessee is not acceptable, and the provisions of section 263 are acceptable, and the provisions of section 263 are acceptable, and the provisions of section 263 are squarely applicable in this case. squarely applicable in this case.
Considering the facts of this case, it is 7. Considering the facts of this case, it is apparent that apparent that the assessment made by the Assessing officer on the the assessment made by the Assessing officer on the the assessment made by the Assessing officer on the issues raised in the Show Cause Notice, needed issues raised in the Show Cause Notice, needed issues raised in the Show Cause Notice, needed examination and verification. As per explanation 2 to examination and verification. As per explanation 2 to examination and verification. As per explanation 2 to section 263 of the I.T. Act section 263 of the I.T. Act -For the purpose of this For the purpose of this section , it is hereby declared that section , it is hereby declared that an order passed by an order passed by the Assessing Officer shall be deemed to be erroneous the Assessing Officer shall be deemed to be erroneous the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, in so far as it is prejudicial to the interest of the revenue, in so far as it is prejudicial to the interest of the revenue, if, in the opinion of the Principal Commissioner or if, in the opinion of the Principal Commissioner or if, in the opinion of the Principal Commissioner or commissioner commissioner- a) the order is passed without making inquiries or a) the order is passed without making inquiries or a) the order is passed without making inquiries or verification which should have been made; rification which should have been made; (b) The order is passed allowing any relief without (b) The order is passed allowing any relief without (b) The order is passed allowing any relief without inquiring into the claim inquiring into the claim
The assessment order passed on 30.12.2018 under 8. The assessment order passed on 30.12.2018 under 8. The assessment order passed on 30.12.2018 under section 143(3) for A.Y. 2016 section 143(3) for A.Y. 2016-17 is found to be erroneous 17 is found to be erroneous in so far as it is prejudicial in so far as it is prejudicial to the interest of the revenue. to the interest of the revenue. The AO needs to examine the above issues and should The AO needs to examine the above issues and should The AO needs to examine the above issues and should make inquiries and necessary verification make inquiries and necessary verification
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It has also been held in many cases that the It has also been held in many cases that the It has also been held in many cases that the Commissioner is not necessarily required to record a Commissioner is not necessarily required to record a Commissioner is not necessarily required to record a final conclusion on the point final conclusion on the point on the issue in hand. An on the issue in hand. An order found erroneous will generally be prejudicial to order found erroneous will generally be prejudicial to order found erroneous will generally be prejudicial to the interest of revenue, if it has implication of revenue the interest of revenue, if it has implication of revenue the interest of revenue, if it has implication of revenue escapement. escapement.
Considering the same, in exercise of powers 10. Considering the same, in exercise of powers 10. Considering the same, in exercise of powers conferred us.263 of the Income Tax Act, 1961, I set conferred us.263 of the Income Tax Act, 1961, I set conferred us.263 of the Income Tax Act, 1961, I set- aside the order made uls. 143(3) of the I. T. Act, 1961 the order made uls. 143(3) of the I. T. Act, 1961 the order made uls. 143(3) of the I. T. Act, 1961 passed on 30.12.2018 on the issues discussed above. passed on 30.12.2018 on the issues discussed above. passed on 30.12.2018 on the issues discussed above. The A.O. is directed to reframe the assessment afresh The A.O. is directed to reframe the assessment afresh The A.O. is directed to reframe the assessment afresh after giving due opportunity to assessee before passing after giving due opportunity to assessee before passing after giving due opportunity to assessee before passing his order. The A.O. will complete the asses his order. The A.O. will complete the assessment in the sment in the light of the discussion made in this order after light of the discussion made in this order after light of the discussion made in this order after considering the prevailing Law. considering the prevailing Law.” 3. Before us, the Ld. Counsel of the assessee has filed a paper Before us, the Ld. Counsel of the assessee has filed a paper Before us, the Ld. Counsel of the assessee has filed a paper book containing pages 1 to 192. book containing pages 1 to 192.
The Ld. Counsel referred to queries raised by the Assessing 4. The Ld. Counsel referred to queries raised by the Assessing The Ld. Counsel referred to queries raised by the Assessing Officer during the assessment proceedings and submitted that fficer during the assessment proceedings and submitted that fficer during the assessment proceedings and submitted that assessee has duly assessee has duly responded all the queries and therefore, all the queries and therefore, the Assessing Officer are baseless allegation making no inquiries allegation making no inquiries by the Assessing Officer are baseless and thus order of the Ld. PCIT need and thus order of the Ld. PCIT needs to be set aside. to be set aside.
On the other hand, the Ld. Departmental Representative (DR) er hand, the Ld. Departmental Representative (DR) er hand, the Ld. Departmental Representative (DR) referred to the Paper book pages and submitted that the assessee referred to the Paper book pages and submitted that the assessee referred to the Paper book pages and submitted that the assessee failed to respond queries failed to respond queries raised by the Assessing Officer and by the Assessing Officer and Wealthy Millennium Investment & Trading Pvt. Wealthy Millennium Investment & Trading Pvt. 7 Ltd. ITA No. 1207/M/2021 therefore, without verifying or inquiry on the issue of disallowance therefore, without verifying or inquiry on the issue of disallowance therefore, without verifying or inquiry on the issue of disallowance u/s 14A of the Act, the order passed by the Assessing Officer has he order passed by the Assessing Officer has been correctly held by the Ld. PCIT as erroneous in so far as been correctly held by the Ld. PCIT as erroneous in so far as been correctly held by the Ld. PCIT as erroneous in so far as prejudicial to the interest of the Revenue. prejudicial to the interest of the Revenue.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. relevant material on record. We find that the assessee in its We find that the assessee in its submission/paper book submission/paper book has reproduced the questionnaire has reproduced the questionnaire, which were raised by the Assessing Officer during the assessment raised by the Assessing Officer during the assessment raised by the Assessing Officer during the assessment proceedings on paper book page 8 to 12. On page 12 at question proceedings on paper book page 8 to 12. On page 12 at question proceedings on paper book page 8 to 12. On page 12 at question No. 17, the Ld. Assessing Officer has No. 17, the Ld. Assessing Officer has asked the assessee to furnish asked the assessee to furnish details of expenses incurred in relation to earning s incurred in relation to earning exempt exempted income along with working of disallowance of expenses as per section 14A along with working of disallowance of expenses as per section 14A along with working of disallowance of expenses as per section 14A r.w.r. 8D. The Ld. Counsel of the assessee referred to the reply of r.w.r. 8D. The Ld. Counsel of the assessee referred to the reply of r.w.r. 8D. The Ld. Counsel of the assessee referred to the reply of the assessee in respect the assessee in respect of questionnaire raised by the Assessing of questionnaire raised by the Assessing Officer which is available at page 16 to 18 Officer which is available at page 16 to 18 of paper book of paper book. However, we find that no response response has been filed by the assessee in respect of has been filed by the assessee in respect of working of disallowance against exempted income. Despite being working of disallowance against exempted income. Despite being working of disallowance against exempted income. Despite being specifically asked during the course of the hearing, the Ld. Counsel sked during the course of the hearing, the Ld. Counsel sked during the course of the hearing, the Ld. Counsel of the assessee could not substantiate that there was any response, of the assessee could not substantiate that there was any of the assessee could not substantiate that there was any which was filed by the assessee filed by the assessee specifically regarding working of specifically regarding working of disallowance towards earning exempted income disallowance towards earning exempted income. The Ld. Counsel . The Ld. Counsel only referred that in the return of income the assessee had made referred that in the return of income the assessee had made referred that in the return of income the assessee had made disallowance in respect of section 14A of the Act. In view of the disallowance in respect of section 14A of the Act. In view of the disallowance in respect of section 14A of the Act. In view of the above, it is evident that no inquiry or verification has been carried above, it is evident that no inquiry or verification has been carried above, it is evident that no inquiry or verification has been carried
Wealthy Millennium Investment & Trading Pvt. Wealthy Millennium Investment & Trading Pvt. 8 Ltd. ITA No. 1207/M/2021 out by the Ld. Assessing Officer on the issue of disallowance u/s out by the Ld. Assessing Officer on the issue of disallowanc out by the Ld. Assessing Officer on the issue of disallowanc 14A of the Act which he ought to have carried out in the facts and 14A of the Act which he ought to have carried out in the fact 14A of the Act which he ought to have carried out in the fact circumstances of the case. The Assessing Officer while framing circumstances of the case. The Assessing Officer while framing circumstances of the case. The Assessing Officer while framing assessment has dual assessment has dual role, first as an investigator, he has to carry , he has to carry out inquiry/verification and gather evidence out inquiry/verification and gather evidences on the issue before on the issue before him, then secondly, he has to act as adjudicator and decide the him, then secondly, he has to act as adjudicator and decide the him, then secondly, he has to act as adjudicator and decide the issue judiciously after appreciating the evidence. If he fails in his issue judiciously after appreciating the evidence. If he fa issue judiciously after appreciating the evidence. If he fa duty of investigator duty of investigator and don’t make enquiry which should be and don’t make enquiry which should be carried out the fact and circumstances of carried out the fact and circumstances of the case, in our opinion, the Ld. PCIT is justified in holding the assessment order as justified in holding the assessment order as justified in holding the assessment order as erroneous in so far as prejudicial to the interest of the Revenue. erroneous in so far as prejudicial to the interest of the Revenue. erroneous in so far as prejudicial to the interest of the Revenue. Therefore, the grounds raised by the assessee are accordingly Therefore, the grounds raised by the assessee are accordingly Therefore, the grounds raised by the assessee are accordingly dismissed.
7. In the result, the appea In the result, the appeal filed by the assessee is accordingly l filed by the assessee is accordingly dismissed.
Order pronounced in the open Court/under Rule 34(4) of Order pronounced in the open Court/under Rule 34(4) of Order pronounced in the open Court/under Rule 34(4) of the ITAT Rules, 1963 on the ITAT Rules, 1963 on 29/12/2022. Sd/- Sd/ Sd/- (ABY T VARKEY ABY T VARKEY) (OM PRAKASH KANT OM PRAKASH KANT) JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 29/12/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to Copy of the Order forwarded to : 1. The Appellant
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