RAJAMANI RAJKUMAR,CHENNAI vs. DCIT, CHENNAI

आदेश / O R D E R

PER SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER:

Grounds No. 1 & 4 are general in nature needing no specific adjudication.

Facts apropos are that the assessee an individual, had filed 3. a return disclosing an income of �22,65,880/- and assessment was completed u/s.143(3) of the Income Tax Act, 1961 (herein referred as ‘the Act’) on 7.12.2010. Notice u/s.148 of the Act was issued on 28.03.2013 reopening the assessment and assessee vide letter dated 30.04.2013 requested ld. Assessing Officer to treat original return filed by him as one filed in pursuance to such notice. Assessee also requested the ld. Assessing Officer to provide reasons for reopening which was duly communicated by ld. Assessing Officer. During the course of the re-assessment proceedings, the ld. Assessing Officer noted that assessee had received dividend income of �12,76,488/- which was claimed as exempt income u/s.10(34) of the Act. In the original assessment, assessee had not made any disallowance u/s.14A of the Act against such income. As per ld. Assessing Officer, assessee failed to make a disallowance as contemplated in Sec.14A of the Act in relation to the earning to the above exempt income. He treated 10% of the exempt income, as expenditure incurred for earning such income. A disallowance of �1,27,648/- was made. :- 3 -: Aggrieved, the assessee moved in appeal before ld. 4.

Commissioner of Income Tax (Appeals). Apart from assailing the reopening, assessee also submitted before ld. Commissioner of Income Tax (Appeals) that he had not incurred any expenditure directly or indirectly for earning the dividend income. In so far as, reopening was concerned, contention of the assessee was that such reopening was attempted on same set of facts without any tangible new materials. Ld. Commissioner of Income Tax (Appeals) after considering the submissions of the assessee was of the opinion that reopening having been done within four years from the end of the impugned assessment year was not hit by first proviso of Sec. 147 of the Act. As per ld. Commissioner of Income Tax (Appeals) the reopening done was valid. In so far as merit of the disallowance was concerned, ld. Commissioner of Income Tax (Appeals), while concurring with the decision of a Co-ordinate Bench in the case Super Auto Forge (P) Ltd vs. ACIT (2016) (157 ITD 0467) held that disallowance of direct and indirect expenditure was inbuilt up in the scheme of computation of such disallowance u/s.14A of the Act. He sustained the disallowance.

Now before us, the ld. Authorised Representative strongly 5. assailing the order of the ld. Commissioner of Income Tax (Appeals) submitted that no new tangible evidence was placed before Assessing :- 4 -: Officer for qualifying a reopening. Apart from that, as per ld.

Authorised Representative, ld. Commissioner of Income Tax (Appeals) having placed reliance on the decision of Co-ordinate Bench in the case of Super Auto Forge (P) Ltd (supra) failed to follow it. As per the ld. Authorised Representative in the said decisions this Tribunal had restricted disallowance u/s.14A of the Act to 2% of the exempt income, considering introduction of Rule 8D to be prospective and not applicable for the assessment year 2008-2009.

.. Per contra, the ld. DR strongly supported the orders of the 6. authorities below.

147 of the Act was not applicable. In other words, there was no requirement of failure to make full and true disclosure of all material particulars necessary for the assessment, to be applied as a criteria for attempting the reopening. In the case before us, in original assessment the ld. Assessing Officer had omitted to consider application of Sec. 14A of the Act, despite claim of exempt dividend of �12,76,488/-. We do not find any error in the reopening done for the impugned assessment year. However, so far as quantum of :- 5 -: disallowance is concerned even if, we consider Rule 8D to be prospective and not applicable for impugned assessment year, Sec.

14A of the Act was very much there in the statute. In the case of Super Auto Forge (P) Ltd (supra) on which reliance has been placed by the ld. Commissioner of Income Tax (Appeals), the Co-ordinate Bench had held that by virtue of judgment of the Delhi High Court in the case of Maxopp Investment Ltd vs CIT 347 ITR 272, Rule 8D could only be considered as prospective and prior to that disallowance of 2% of exempt income could suffice. We are therefore, of the opinion that for impugned assessment year disallowance u/s.14A should be restricted to 2% of exempt dividend income of �12,76,488/-. In other words, disallowance in excess of �25,530/- stands deleted.

Order pronounced on Friday, the 30th day of September, 2016, at Chennai.