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Before: Shri A. Mohan Alankamony & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 11, Chennai, dated 29.06.2017 relevant to the assessment year 2009-10. The assessee has raised the following grounds:
1. For that the order of the ld. CIT(A) is contrary to law, facts and circumstances of the case.
2. For that the ld. CIT(A) erred in confirming the Assessing Officer order u/s 154 of the Act on debatable issues.
3. For that the ld. CIT(A) erred in confirming the disallowance of ₹38,61,193/- u/s 14A r.w. Rule 8D.
4. For that the ld. CIT(A) erred in confirming the levy of interest u/s 234A in consequence to the above addition. For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon’ble Tribunal may be pleased to pass such other orders as the Hon’ble Tribunal may deem fit.” 2. Brief facts of the case are that the assessee is an individual, carrying on a business of money lending and also runs a proprietary business of juice shop on retail basis in the name of “Squash D”. The assessee filed his return of income on 30.09.2009 admitting income of ₹.18,00,050/-. The return filed by the assessee was processed under section 143(1) of the Income Tax Act, 1961 [“Act” in short]. Thereafter, the case of the assessee was selected for security and notice under section 143(2) of the Act was issued on 23.10.2010. In response thereto, the assessee filed details. After verification of details filed by the assessee and considering the submissions, the assessment was completed under section 143(3) of the Act by assessing total income of the assessee at ₹.2,06,41,954/- after making various disallowances. Subsequently, notice under section 154 of the Act dated 06.10.2015 was issued and the assessee was requested to show-cause: “1. As to why disallowance u/s. 14A r.w.r. 8D of ₹.38,61,193/- should not be made as against ₹.97,463/- disallowed in order u/s. 143(3) passed on 30.12.2011. 2. As to why interest u/s. 234A should not be levied for 2 months as the last date for filing the return of income for A.Y. 2009-10 was 3 31.07.2009, whereas the assessee had filed the return on 30.09.2009.” Since there was no response from the assessee nor filed any objection, the Assessing Officer proceeded to modify the assessment order passed under section 143(3) of the Act by assessing total income of the assessee at ₹.2,44,05,684/- after making disallowance of ₹.37,63,730/- i.e., [₹.38,61,193- ₹.97463].
3. Aggrieved, the assessee carried the matter in appeal before the ld. CIT(A). After considering the various submissions of the assessee, the ld. CIT(A) dismissed the appeal filed by the assessee.
On being aggrieved, the assessee is in appeal before the Tribunal.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The assessee has claimed dividend income of ₹.19,49,256/- as exempt. However, the Assessing Officer has noticed that the assessee has not disallowed any reasonable expenditure incurred in earning this exempted income. The assessee was asked to explain as to why Rule 8D should not be applied in computing the disallowance under section 14A of the Act. On examination of the details submitted by the assessee, the Assessing Officer estimated reasonable expenditure @ 5% of the dividend income and accordingly disallowed ₹.97,463/-. Subsequently, by issuing notice under section 154 of the Act, the 4 Assessing Officer passed rectification order under section 154 of the Act by disallowing ₹.38,61,193/- since there was no response or any objection filed by the assessee against the above notice. On appeal, the ld. CIT(A) confirmed the rectification order passed by Assessing Officer.
5.1 Even though the Assessing Officer asked the assessee to explain as to why Rule 8D should not be applied in computing the disallowance under section 14A of the Act, neither the Assessing Officer brought on record the reply of the assessee nor determined the expenditure component as per the provisions of Rule 8D. The assessment order did not speak the necessity to estimate the reasonable expenditure @ 5% of dividend income when various steps required to be adopted while determining the expenditure component has been clearly given under Rule 8D. Further, in the rectification order, without giving any computation details, the Assessing Officer determined the disallowance under section 14A r.w.r. 8D of ₹.38,61,193/-. Admittedly, the assessee has earned dividend income of ₹.19,49,256/-. For making investments, whether the assessee had own funds or utilized borrowed funds are not emanating from the assessment order and the assessment order is very cryptic. Otherwise also, against the dividend income of ₹.19,49,256/-, the disallowance under section 14A r.w.r. 8D of ₹.38,61,193/- cannot be made in view of the judgement of the Hon’ble Delhi High Court in case of Joint Investments Pvt. Ltd. v. CIT 372 ITR 694. In the absence of 5 any detailed paper book filed by the assessee, until and unless a detailed order is passed against the determination of disallowance under section 14A r.w.r. 8D, it is not possible to arrive whether the issue is debatable issue or not, to pass a rectification order. The ld. CIT(A) has not discussed against the computation of quantum. Accordingly, we set aside the order of the ld. CIT(A) and remit the matter to the file of the Assessing Officer to pass a detailed speaking order in accordance with law after allowing an opportunity of hearing to the assessee.
With regard to the levy of interest under section 234A of the Act, the Assessing Officer was of the opinion that due date for filing of return was 31.07.2009 whereas, the assessee has filed his return of income on 30.09.2009 and therefore, he levied interest under section 234A of the Act. It was the submission of the assessee that the assessee did not have business income during the assessment year under consideration and therefore, the Assessing Officer was not justified in holding that the due date for filing of return of income was 31.07.2009 instead of 30.09.2009 and levying interest under section 234A of the Act. On appeal, prima facie, the ld. CIT(A) accepted the above submissions of the assessee and directed the Assessing Officer to charge the interest under section 234A of the Act after giving an opportunity to the assessee.
6.1 In the assessment order at para 4, the Assessing Officer held that the incomes of the assessee should be taxed under the head, income from “other sources” and income from “capital gains”, since there was no mention about the “business income”. It was the submission of the assessee that against the quantum addition, the income of the assessee as to whether “business income” or income from “other sources” is pending for adjudication before the ld. CIT(A). Once the issue is pending before the ld. CIT(A) for adjudication, the Assessing officer has not considered the above clarification during the course of rectification proceedings. Under these circumstances, the ld. CIT(A) has directed the Assessing Officer to charge the interest under section 234A of the Act as per law after giving an opportunity of hearing to the assessee. Thus, we find no infirmity in the order passed by the ld. CIT(A) on this issue and accordingly, the ground raised by the assessee is dismissed.