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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI SUNIL KUMAR YADAV & SHRI ARUN KUMAR GARODIA
O R D E R
Per Shri A.K. Garodia, Accountant Member
This appeal is filed by the assessee and the same is directed against the order passed by the ld. Pr.CIT, Bangalore-3, Bangalore dated 29.01.2018 u/s. 263 of the IT Act for Assessment Year 2013-14.
The grounds raised
by the assessee are as under. “1. The order passed by the learned Pr. C.I.T. u/s 263 of the Act, in so far as it is against the appellant, is opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned Pr. C.I.T. failed to appreciate that there was no error much less an error prejudicial to the interest of the revenue in the order passed by the learned Assessing Officer warranting revision u/s.263 of the Act and consequently, the order passed by the pr. C.I.T. is opposed to law and facts of the appellant's case and requires to be cancelled.
3. The learned Pr.CIT ought to have appreciated that the issues pointed out by him in the notice issued u/s. 263 of the Act was already examined by the learned A.O. in the assessment proceedings and that the fresh directions issued to make the disallowances were bad in law Page 2 of 4 and cannot be regarded as error prejudicial to the interest on Revenue to take action u/s. 263 of the Act.
Without prejudice to the above, the learned Pr.CIT is not justified in directing the learned A.O. to make a disallowance of Rs. 419,545/- u/s 14A rws 8D of the Act after holding that the Assessing Officer had not looked into the aspects for considering the disallowance as noted in the impugned order under the facts and in the circumstances of the appellant's case.
5. The learned Pr.CIT is not justified in directing the A.O. to consider the same disallowance directed to be made u/s 14A for purposes of computing the income u/s. 115JB of the Act for making the addition contemplated under explanation [f] to section 115JB [2] of the Act under the facts and in the circumstances of the appellant's case.
The learned Pr.CIT is not justified in directing the learned A.O. to make a disallowance of the donation of Rs. 1,00,000/- debited to profit and loss account under the facts and in the circumstances of the appellant's case.
For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
In the course of hearing before us, it was submitted by ld. AR of assessee that assessee’s main grievance is regarding direction of Pr. CIT as per which he directed the AO to compulsorily make addition of Rs. 4,19,545/- u/s. 14A of IT Act. He submitted that if the direction is modified to the effect that the AO should decide this issue afresh after providing adequate opportunity to the assessee, then the assessee has no grievance. He further pointed out that in respect of the second issue i.e. in respect of donation debited to P&L Account, Pr. CIT has restored the matter back to AO and the AO is directed to examine this issue and pass order in accordance with the law after giving opportunity of being heard to assessee. He submitted that on this issue the assessee has no grievance but for the first issue also, the directions of Pr. CIT should be modified in the same line. The ld. DR of revenue although supported the order of Pr. CIT but he did not raise any serious objection against this request of ld. AR of assessee to modify the direction of Pr.CIT to AO in respect of first issue.
Page 3 of 4 4. We have considered the rival submissions. We find that as per para 2 of the impugned order passed by Pr. CIT, it is noted by him that as per the assessment records, it is seen from the financial statement that the assessee has shown total investment of Rs. 8,12,27,374/- as at 31.03.2013 and Rs. 8,65,90,746/- as at 31.03.2012 and as per the Pr. CIT, as per Rule 8D r.w.s. 14A of IT Act, an amount of Rs. 4,19,545/- should have been disallowed and brought to tax and since the AO has failed to disallow the same, it has been directed by Pr. CIT to the AO that he should make this disallowance of Rs. 4,19,545/-. In this regard, we are of the considered opinion that in all the cases, the disallowance to the extent of 0.5% of the average investment in shares is not justified and before making such disallowance, various aspects has to be examined. The first aspect to be examined is this as to whether there was actual receipt of dividend in the present year or not because it has been held by Hon’ble Delhi High Court in the case of Cheminvest Pvt. Ltd. Vs. CIT as reported in (2015) 378 ITR 33 that if there is no exempt income in the present year, there cannot be disallowance u/s. 14A in the present year. There is no finding of Pr. CIT in the impugned order whether the assessee was having any exempt income in the present year or not. Similarly even if the assessee is having exempt income and disallowance has to be made, quantum of disallowance is to be determined as per law. There are several judgements on this issue that if at all some disallowance has to be made for making investments in shares of various companies then only those investments should be considered from which the dividend was actually received in the present year. On this aspect also, there is no finding of Pr. CIT in the impugned order. There is one more aspect to be seen as to whether the deduction for administrative expenses was claimed by the assessee in the P&L account in the present year out of which this disallowance of Rs. 4,19,545/- can be made because if it is found that the administrative expenses debited in P&L account is less than this amount, then the disallowance cannot exceed the actual administrative expenses debited in P&L account because section 14A talks of disallowance out of expenses claimed by the assessee and this is not a section for making any addition even if there is no claim by the assessee for any expenses. Hence we feel it proper to modify the direction of Pr. CIT. We Page 4 of 4 do so. We direct the AO to decide this issue of disallowance u/s. 14A afresh after providing adequate opportunity of being heard to assessee and he should pass a speaking and reasoned order as per law.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open court on the date mentioned on the caption page.