BIJAL ASHOK SHAH,MUMBAI vs. ACIT CEN CIR 8, MUMBAI

The Learned Assessing Officer and CIT (Appeals) - 52 erred in reopening the assessment u/s 147 based on change of opinion though the facts were on record and the Assessing Officer has consciously accepted the claim that there were no expenses relating to earnings of exempt income while passing an order u/s 143(3) dated 20.12.2011.

The Learned Assessing Officer and CIT (Appeals) - 52 erred in applying rule 8D without giving any finding as to why the contention of the assessee that there are no expense relating to earning exempt income is incorrect. 3. The Learned Assessing Officer and CIT (Appeals) - 52 erred in disallowing interest expenses of Rs.3,16,781/- under rule 8D without considering the contention of the assessee that the entire interest bearing funds were used for the purpose of earning taxable income and the investments were made from capital and interest free loans available with the assessee. 4. The learned Assessing officer and CIT(A)-52 erred in not following the binding judgment of the Bombay High court in the case of HDFC Ltd. 368 ITR 377 (Bom), inspite of it being brought to the notice and all the relevant details also filed before him. 5. The learned Assessing officer and CIT (A) -52 erred in disallowing Rs.l 87787-under section 14A r.w.r 8D (2)(iii) without considering the fact that all the expenses are incurred for the purpose of earning taxable income and that there were no expenses incurred as the dividend was directly credited in the bank account. 3. The issue in this appeal relates to disallowance u/s. 14A. Upon hearing both the counsels and perusing the record I note that in this case, the ld. Counsel of the assessee has contended that the assessee has raised following as ground no. 3 before the ld. CIT(A): 3. The learned Assessing Officer erred in disallowing interest expenses of Rs.3,16,781/- under clause (ii) of rule 8D without considering the contention of the assessee that the entire interest bearing funds were used for the purpose of earning taxable income and the investments were made from capital and interest free loans available with the assessee.

However, it is the contention of the ld. Counsel of the assessee that ld. CIT(A) has not at all dealt with this issue in his appellate order. In this regard, the ld. Counsel 3 Bijal Ashok Shah vs. ACIT of the assessee submitted the issue that when there is sufficient non-interest bearing funds to make the investment, no disallowance is called for u/s. 14A has been duly upheld by the Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. 368 ITR 377 (Bom).

Upon careful consideration, I note that it is the assessee’s contention that the assessee has sufficient non-interest bearing funds to make tax free investments. This issue was duly raised before the ld. CIT(A), but he has not adjudicated upon the issue. Hence, the order of the ld. CIT(A) is not complete to this extent. Hence, in order to enable the ld. CIT(A) to complete his appellate order, I remit this issue to the file of the ld. CIT(A). The ld. CIT(A) is directed to consider this issue and pass a speaking order thereupon after giving the assessee proper opportunity of being heard. Since, the above said issue is being remitted to the file of the ld. CIT(A), and the same goes to the root of the matter, the other issues raised under this appeals are not being commented upon. The assessee is at liberty to raise them at the appropriate stage, as he deems fit.