BAIJANATH MANIRAM,MUMBAI vs. DCIT CENT. CIR. 6, MUMBAI

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ITA 5212/MUM/2016Status: DisposedITAT Mumbai12 May 2017AY 2009-104 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the AO to re-examine the disallowance under Section 14A, considering the total expenses debited in the Profit & Loss Account and ensuring the disallowance does not exceed these expenses. The CIT(A)'s order was set aside.

What were the facts?

The assessee's original assessment included a disallowance under Section 14A. Following a search, a notice under Section 153A was issued. The Assessing Officer (AO) completed the assessment under Section 143(3) r.w.s. 153A, maintaining the original loss figure which included the Section 14A disallowance.

What were the issues?

Whether the disallowance under Section 14A was correctly confirmed by the CIT(A) and the extent to which such disallowance can be made in relation to exempt income.

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3),Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI

Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN

For Appellant: Mr. Gaurav Kabra, AR
For Respondent: Ms. Anju Goradia, DR
Hearing: 13/04/2017Pronounced: 12/05/2017

ORDER

PER N.K. PRADHAN, AM

1.

This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order of the Commissioner of Income Tax (Appeals) – 47, Mumbai and arises out of the order u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (the ‘Act’).

2.

The ground of appeal filed by the assessee reads as under:

On the facts and circumstances of the case as well as in law, the Ld. CIT(A) has erred in confirming the action of Learned Assessing Officer in disallowing of expenses u/s. 14A of the Income Tax Act, 1961 of Rs. 36,93,307/- without considering the facts and circumstances of the case.

3.

Briefly stated, the facts of the case are that the assessee- company filed its original return of income for the impugned assessment year on 28.09.2009 declaring total loss of Rs. 90,21,270/-. Original assessment u/s 143(3) was completed vide order dated 23.12.2011 determining total loss at Rs. 53,27,960/- because of disallowance of Rs. 36,93,307/- u/s 14A of the Act. Thereafter, subsequent to search operation conducted on 29.04.2011 on the Arya Group of Companies, notice u/s 153A was issued to the assessee- company. The assessee-company filed return of income on 18.07.2017 declaring total loss at Rs. 84,29,185/- . During the assessment proceedings, the Assessing Officer (A.O.) noted that the income assessed as a consequence of the original scrutiny proceedings was loss of Rs. 53,27,960/- and that the said order was pending before the CIT(A). Accordingly, the A.O. did not accept the loss of Rs. 84,29,185/- shown in the return of income and completed the assessment u/s 143(3) r.w.s. 153A vide order dated 27.03.2014 at the originally assessed loss of Rs. 53,27,960/-. The assessee filed appeal before the CIT(A) against the assessment order passed by the A.O. u/s 143(3) r.w.s. 153A vide order dated 27.03.2014. The learned CIT(A) dismissed the appeal filed by the assessee on the ground that the said disallowance did not emanate from the order u/s 143(3) r.w.s. 153A dated 27.03.2014.

4.

We have heard the rival submissions and perused the relevant material on record. As mentioned here-in-above, the A.O. has made the disallowance of Rs. 36,93,307/- u/s 14A in the original order dated 23.12.2011 passed u/s 143(3) of the Act. In the assessment made u/s 143(3) r.w.s. 153A of the Act vide order dated 27.03.2014 the A.O. has assessed the income as pursuant to the erstwhile assessment order dated 23.12.2011 u/s 143(3) at Rs. 53,27,960/-. Similar issue arose before the Co-ordinate Bench in the assessee’s own case for the A.Y. 2009-10 (ITA No. 6340/Mum/2012). The Tribunal held as under:

“We have heard the rival submissions and also perused the relevant finding given in the impugned order. From the perusal of P&L Account of the assessee, it is evident that assessee has debited total expenses of Rs.6,83,066/-. Out of the said expenses, there are certain expenses which are directly attributable to the business of the assessee. Some of the expenses can be said to be attributable for the earning of the exempt income. Assessing officer is required to examine the account of the assessee and having regard to such accounts and the expenditure claimed, he is required to satisfy himself about the correctness of the claim and then only he can proceed to make a disallowance. In any case while making a disallowance on account of indirect expenses, the disallowance u/s 14A cannot be exceed overall expenses claimed by the assessee in its P&L Account. The purpose of section 14A as provided in sub-section 1 is that, while computing the total income, no deduction should be allowed in respect of expenditure incurred by the assessee in relation to the exempt income. The phrase “expenditure incurred” has to be reckoned with the expenditure claimed by the assessee. Thus the entire matter is restored back to the file of the AO, to examine the accounts of the assessee and then after having been satisfied on the nature of expenditure should proceed to make the disallowance u/s 14A. It is made clear that while making the disallowance, the same should not exceed the overall of indirect expenditure debited by the assessee. Thus, the ground raised by the assessee is treated as partly allowed for statistical purposes.”

5.

Facts being similar and assessed loss being same, we follow the order of the Co-ordinate Bench and set aside the order of the learned CIT(A) and restore the same to the file of the A.O. to make a fresh assessment in the light of the direction mentioned at para 4 here-in- above after giving a reasonable opportunity of being heard to the assessee.

6.

In the result, the appeal is allowed for statistical purposes.

Order pronounced in the open Court on 12/05/2017

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