ASSOCIATED SOAPSTONE DISTRIBUTING CO PRIVATE LIMITED,JAIPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX -2, JAIPUR, JAIPUR

ITA 243/JPR/2023Status: DisposedITAT Jaipur04 March 2024AY 2018-1941 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the PCIT erred in assuming jurisdiction under Section 263 for all three issues raised. Regarding Issue No. 1 (Section 14A disallowance), the Tribunal found that no new investments were made in the year under consideration, the investments were made from interest-free funds exceeding the investment amount, and no exempt income was received. Therefore, the NFAC had not committed any error in not making the disallowance, and the PCIT's order was set aside. For Issue No. 2 (interest on delayed TDS), the Tribunal held that the NFAC had taken a plausible view by allowing the interest expense, and in cases where two views are possible, the AO's view cannot be deemed erroneous. Thus, the PCIT's assumption of jurisdiction was incorrect. For Issue No. 3 (excess MAT credit), the Tribunal agreed with the assessee that such a mistake could have been rectified under Section 154 by the AO, and Section 263 jurisdiction was not warranted. The Tribunal set aside the PCIT's order on this issue as well. The operative direction was to set aside the PCIT's order and restore the NFAC's order.

What were the facts?

The assessee, Associated Soapstone Distributing Co. (P) Ltd., filed its return of income for Assessment Year 2018-19. The Assessing Officer (AO), through the National Faceless Assessment Center (NFAC), passed an order under Section 143(3). The Principal Commissioner of Income Tax (PCIT) invoked Section 263, considering the AO's order erroneous and prejudicial to the revenue. The PCIT issued a show cause notice raising three issues: disallowance under Section 14A read with Rule 8D, non-deductibility of interest on delayed TDS payment, and excess Minimum Alternate Tax (MAT) credit for AY 2016-17. The assessee responded to the notice, and after considering the submissions, the PCIT passed an order under Section 263. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

The Income Tax Appellate Tribunal (ITAT) had to decide the following questions: 1. Whether the PCIT erred in assuming jurisdiction under Section 263 of the Income Tax Act, 1961, when the AO's order was neither erroneous nor prejudicial to the interest of the revenue, specifically concerning the disallowance under Section 14A read with Rule 8D? The assessee argued that no new investments were made in the current year, investments were from interest-free funds, and no exempt income was received, thus no disallowance was warranted. The revenue, through the PCIT, contended that investments in equities yielding exempt income necessitate disallowance under Section 14A, irrespective of income receipt in the year, citing CBDT Circular No. 5/2014. 2. Whether the PCIT erred in assuming jurisdiction under Section 263 regarding the disallowance of Rs. 55,810 as interest on delayed payment of TDS, which the AO had allowed? The assessee argued that such interest is compensatory and deductible under Section 37(1), relying on the Karnataka High Court judgment in CIT vs. Oriental Insurance Co. Ltd., and that the AO took a plausible view. 3. Whether the PCIT erred in assuming jurisdiction under Section 263 regarding the excess MAT credit of Rs. 96,13,814 pertaining to AY 2016-17, which the AO had allowed? The assessee contended that any rectification for MAT credit should be done under Section 154, not Section 263, as the allowability depends on pending appellate proceedings for AY 2016-17.

Which sections of the Income-tax Act were involved?

Section 14A,Section 36(1)(ii),Section 37,Section 43B(e),Section 195,Section 40(a)(i),Section 115AA,Section 115JAA,Section 154,Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR

Before: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM

For Appellant: Shri Rohan Sogani, CA
For Respondent: Shri Arvind Kumar, CIT-DR
Hearing: 05/12/2023

PER: SANDEEP GOSAIN, JM

This appeal filed by the assessee is directed against order of the Id. PCIT-2, , Jaipur, dated 30-03-2023 for the assessment year 2018-19 wherein the assessee has raised the solitary ground as under:-.

“In the facts and circumstances of the case and in law, the ld. PCIT has erred in assuming juri iction u/s 263 when the order of the AO is neither erroneous nor prejudicial to the interest of the Revenue. The action of the Id. PCIT is illegal, unjustified, arbitrary and

The order continues below.

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