CHANDRAN BHAVANI,COIMBATORE vs. ITO, NCW-2(1), COIMBATORE

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ITA 3382/CHNY/2018Status: DisposedITAT Chennai19 November 2019AY 2012-134 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that reopening of assessment was valid as there was no application of mind in the original assessment regarding Section 14A. However, it was held that no disallowance under Section 14A was warranted as the only expenditure available for disallowance was Rs. 110/- (bank charges), and the proviso to Rule 8D limits disallowance to claimed expenditure.

What were the facts?

The assessee challenged the reopening of assessment and the disallowance made under Section 14A. The original assessment was completed under Section 143(3). The assessee argued that no specific expenditure was incurred for earning exempt income.

What were the issues?

Whether the reopening of assessment was valid and whether disallowance under Section 14A is permissible when no specific expenditure is incurred for earning exempt income.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO

Hearing: 19.11.2019

आदेश / O R D E R

PER SHRI GEORGE MATHAN, JUDICIAL MEMBER :

1.

This is an appeal filed by the assessee directed against the order of the learned Commissioner of Income Tax (Appeals)-2, Coimbatore (hereinafter called as ‘CIT(A)’) in Appeal No.116/17-18 dated 28.11.2018 for the assessment year 2012-13.

2 -: 2. In the assessee’s appeal, the assessee has challenged the reopening of the assessment in grounds 1.1 and 1.2.

3.

The learned Authorized Representative drew our attention to page Nos.12 to 14 of the paper book, which was the reply to the Assessing Officer in respect of the reasons recorded for reopening. It was a submission that the original assessment was completed u/s.143(3), all the details were available and consequently the reopening was unsustainable.

4.

In reply, the learned Departmental Representative vehemently supported the order of the learned Authorized Representative.

5.

We have considered the rival submission and perused the materials available on record.

6.

The assessee has not been able to point out anything to show that the Assessing Officer had arrived at an opinion when completing the original assessment u/s.143(3) in respect of the disallowance u/s.14A of the Income Tax Act, 1961. In the absence of application of mind and formation of opinion in respect of the disallowance made u/s.14A in the original assessment order, it cannot be said that there is a change of opinion. This being so, we are of the view that the reopening of the assessment has been validly done. Consequently, the grounds 1.1 and 1.2 of the assessee’s appeal stands dismissed.

7.

In respect of the grounds 2.1 to 2.3, it was submitted that the issue was against the disallowance u/s.14A of the Act.

8.

The learned Departmental Representative drew our attention to page No. 2 of the paper book, which was the statement of total income. In the said statement, the dividend exempted u/s.10(34) of the Act has been shown at Rs.1,13,62,330/-.

9.

The learned Authorized Representative further drew our attention to page No.4 of the paper book which was a copy of the Income and Expenditure Account for the year ended 31.03.2012. It was a submission that the total expenditure was in respect of the bank charges of Rs.110/-, towards car maintenance amounting to Rs.23,564/- and depreciation on the car to the extent of Rs.2,18,534/-. It was a submission that as no specific expenditure has been incurred by the assessee, though the disallowance is computed as

per the proviso of Rule 8D, no disallowance can be made as such expenditure is not available for disallowance.

In reply, the learned Departmental Representative vehemently 10. supported the order of the Ld. CIT(A).

11.

We have considered the rival submission and perused the materials available on record.

12.

The perusal of the income and expenditure statement shows that the maximum expenditure available for disallowance is only Rs.110/- representing

4 -: bank charges. The rest of the expenditure are relatable to car hire. The assessee has not incurred any other expenditure nor has she claimed any expenditure. In fact, the proviso to Rule 8D clearly provides that the disallowance is not to exceed the expenditure claimed. In the present case, no expenditure is available for disallowance except expenditure to the extent of Rs.110/- representing bank charges. This being so, no disallowance u/s.14A of the Act is called for in the assessee’s case. Consequently, the disallowance as made by the Assessing Officer and confirmed by the learned CIT(A) stands deleted.

13.

In the result, the grounds 2.1 to 2.3 stands allowed 14. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open Court on 19th November, 2019 in Chennai.

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