DIVYARTH LEASING & FINANCE P.LTD,NEW DELHI vs. PRCIT, CENTRAL CIRCLE-3, NEW DELHI

Per Dr. B. R. R. Kumar, Accountant Member:

2. Since, the issues involved in all these appeals are identical, which were heard together.

3. In following grounds have been raised by the assessee:

“1(a) That on the facts and in the circumstances of the case the regular assessment order dated 27-12-2016 had been passed by the Ld. AO after making all such enquiries as were warranted in the case and observations to the , 1183 & 1184/Del/2018 2 Divyarth Leasing & Finance Pvt. Ltd. contrary and the Ld. Pr. CIT was not justified in assuming jurisdiction under section 263 of the Act.

1(b) That on the facts and in the circumstances of the case the regular assessment order dated 27.12.2016 as had been passed by the Ld. AO fully in accordance with the provisions of the law and the order is neither erroneous not prejudicial to the interest of the revenue hence the same could not have been interfered with by the Ld. Pr. CIT in his supervisory jurisdiction under section 263, particularly in the peculiar facts and circumstances of the present case.

2(a) That on the facts and in the circumstances of the case provision of section 14A of the Act is not applicable in this instant case and the Ld. Pr. CIT was not justified either on facts or in law to direct the Ld. AO to make suitable checks and verification in the matter.

2(b) That on the facts and in the circumstances of the case no disallowance u/s 14A is applicable in this instant case as the appellant has not earned any exempt income and the Ld. Pr. CIT was not justified either on facts or in law to direct the Ld. AO to make suitable checks and verification in the matter.

2(c) That on the facts and in the circumstances of the case provision of section 14A along with circular is not applicable in this instant case and the Ld. Pr. CIT was not justified either on facts or in law to direct the Ld. AO to make suitable checks and verification in the matter.

3.0 That on the facts and in the circumstances of the case the order has been passed in utter disregard to the principal of nature justice and no opportunity was provided to explain the case.”

“Income tax record of M/s Divyarth Leasing & Finance Pvt. Ltd. reveal, for the assessment, year 2009-10, the A.O., Central Circle- 27, New Delhi passed an order u/s 153A read with section 143(3) of the Income-tax Act, 1961 on 27.12.2016, on the returned income of Rs.3 1,57,623/-. , 1183 & 1184/Del/2018 3 Divyarth Leasing & Finance Pvt. Ltd.

4. The submission of the assessee was considered and it is held that assessee has relied upon the decision of ITAT dated 01.09.2017 in the case of M/s Relgan Infrastructure Ltd. However, in the said order the Ld. ITAT has specifically held that the assessee has not earned exempt income and hence disallowance u/s 14A is not warranted. Moreover, the decision of Hon’ble ITAT Bench dated 01.09.2017 has not been accepted by the department and the same is being contested in High Court. As far as applicability of Circular No. 5/2014 is concerned, the said Circular specifically states vide para no. 6 which is reproduced below:-

Central Board of Direct Taxes, in exercise of its power under section 119 of the Act hereby clarifies that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where tax payer in a particular year has not earned any exempt income.

, 1183 & 1184/Del/2018 4 Divyarth Leasing & Finance Pvt. Ltd. Further Section 263 of the I.T. Act clearly states that:-

The [Principal Commissioner or] Commissioner………. considers that any order passed therein by the [Assessing Officer] Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Keeping in view of the above discussions, the objections of assessee is held not tenable and, therefore, rejected.

6. The assessment order passed by the Assessing Officer is field to be erroneous and prejudicial to the interest of revenue and, accordingly, the assessment order is hereby cancelled to the extent of disallowance of expenses related to exempt income. The A.O. is directed to decide the issue afresh and pass speaking order as per law after giving proper opportunity of being heard to the assessee.” Sd/- (Himalini Kashyap) Pr. Commissioner of Income-tax (Central)-3, New Delhi Dated: 30-10-2017

For the purposes of computing the total income under this chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.