NALINKUMAR RAMNIKLAL SHAH,AHMEDABAD vs. INCOME TAX OFFICER, WARD-3, SURENDRANAGAR

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed by the assessee against the order of the CIT(A)-XVI, Ahmedabad (‘CIT(A)’ in short), dated 12.09.2014 arising in the assessment order dated 23.08.2011 passed

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by the Assessing Officer under s. 143(3) r.w.s. 147 of the Income

Tax Act, 1961 (the Act) concerning A.Y. 2006-07.

“1. The ld. CIT(A) has grievously erred in rejecting the ground of appeal disputing the validity of notice u/s. 148 of the Act and the reassessment order u/s.143(3) r.w.s. 147 of the Act passed in pursuance of the said notice, the same based on invalid notice u/s.148 of the Act issued on mere change of opinion and on the same set of facts without any further material brought on record. The impugned reassessment order thus requires to be quashed as void-ab-initio as held by the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. 320 JTR 561 CSC) and Hon'ble Guiarat High Court in the case of Mihir Textiles Ltd. Vs. 3t CTT (2010) Tax LR 417 (Guj.). 1.1 The ld. CIT(A) failed to properly consider and appreciate the binding decision of the jurisdictional court of law i.e. Hon'ble Gujarat High Court in the case of Reckitt Benckiser Healthcare India Ltd. vs. ACIT (2014) 360 ITR 427 (Guj.), wherein inter alia, it is held by the Hon'ble Court on identical facts that reopening of assessment for disallowance of expenditure U/S.14A on the basis of formula provided in Rule 8D would amount to change of opinion and accordingly quashed the notice u/s.148 of the Act and the reassessment proceedings pursuant thereto. The impugned assessment in case of the appellant having been reopened merely on the ground of disallowance U/S.14A, the same requires to be quashed. 1.2 The ld. CIT(A) has further erred in not appreciating the fact that order u/s.143(3) of the Act having been passed after due application of mind and verification of the details submitted as well as available on record and there being no failure on part of the appellant to disclose fully and truly all material facts necessary for his assessment, the reopening of assessment on the same set of facts without bringing on record any new material is not permissible. The impugned reassessment order thus requires to be quashed. 2. The ld. CIT(A) has also erred in not commenting upon or adjudicating the appellant's contention that since the AO has failed to pass a speaking order against the objections raised against the issuance of notice u/s.148 of the Act before proceeding with the reassessment as laid down by the Hon'ble Supreme Court in the case of GKN Driveshaft India Ltd. vs. ITO 259 ITR 19 (SC), the assessment could not be sustained as held by the jurisdictional High Court i.e. Hon'ble Gujarat High Court in the case of MGM Exports vs. Dy. CIT(2010)323 ITR 331 (Guj.). 3. The ld. CIT(A) has also erred in not commenting upon or adjudicating the appellant's contention that the assessment having been

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reopened on the basis of Audit Objection, the same cannot form a basis for the Assessing Officer to believe that the income chargeable to tax has escaped assessment as held by the jurisdictional court of law i.e. Hon'ble Gujarat High Court in the case of Adani Exports v. DCIT, 240 ITR 224 and Cadila Healthcare Ltd. vs. Dy. CIT (2010) 133 CTR 573 (Guj.). Accordingly, the impugned reassessment even otherwise requires to be quashed. 4. The ld. CIT(A) has grievously erred in dismissing and not adjudicating the Grounds of Appeal No. 2, 2.1 and 2.2 regarding the addition of Rs.2,50,980/-made by the AO u/s.40A(3) of the Act by incorrectly stating that the appellant has nowhere made any submission on merits of the case or given any working to show why the disallowance made by the AO is not correct. 4.1 The appellant states that since the appellant having filed elaborate submissions on merits of the addition made by the AO as appearing on Page No. 14 to 24 of Written Submissions dated 17/09/2013, the observation and reasoning of the ld. CIT(A) being grossly contrary to facts and material available on record, the impugned addition of Rs.2,07,038/- made U/S.14A r.w.r. 8D requires to be deleted keeping in view the elaborate facts, submissions and evidences filed. In the alternative, issue be set-aside to the file of the ld. CIT(A) for fresh decision.”

that the assessee does not seek to press ground no. 1 to 4 noted

above and the solitary grievance of the assessee is towards

excessive disallowance of Rs. 2,07,038/- made under s. 14A towards

administrative and common expenses by invoking Rule 8D(2)(iii) of

the Rules.

straightway notice that assessment year in question is A.Y. 2006-07

when Rule 8D had not come into force. Hon’ble Bombay High

Court in Godrej & Boyce Mfg. Company Ltd. 328 ITR 81 (Bom.)

has held that Rules 8D is prospective in nature and would apply for

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A.Y. 2008-09 onwards. Thus, would not apply to A.Y. 2006-07. In

such a situation, we resort to a fair and reasonable estimate of

expenditure attributable to earning of exempt income. The assessee

has declared the exempt income of Rs. 56,930/- by way of dividend

from investments. In the light of several judicial pronouncements,

we deem it appropriate to estimate in the vicinity of 10% of the

exempt income to be reasonable and attributable to earning of such

exempt income. The disallowance thus in our view should be fairly

restricted to 5,500/-. The AO is directed accordingly to modify the

assessment.

This Order pronounced in Open Court on 11/07/2019

Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 11/07/2019 TANMAY TRUE COPY आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।