M/S CD EQUIPFINANCE PVT. LTD.,KOLKATA vs. DCIT, CIR-7(1), KOLKATA, KOLKATA

This appeal by assessee is arising out of revision order of CIT-3, Kolkata vide M.No. CIT-3/Kol/263/2014-15/6033-35 dated 18/19.03.2015. Assessment was framed by DCIT, Circle-7, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2010-11 vide his order dated 26.10.2012.

We have heard this matter ex parte. None is present for and on behalf of the revenue and no adjournment petition filed. We find that the revenue is not serious in appearing before Tribunal and for that purpose none is present on behalf of revenue while hearing is fixed for this appeal. This is an appeal against revision order passed by CIT u/s. 263 of the Act and this being a priority appeal, it should be disposed of at the earliest to avoid multiplicity of proceedings. Accordingly, we proceeded to decide it ex parte qua revenue. 3. The only issue in this appeal of assessee is against the revision order passed by CIT u/s. 263 of the Act holding the assessment order as erroneous and prejudicial to the interest of revenue for the reason that the AO failed to determine book profit u/s. 115JB of the Act in respect to disallowance u/s. 14A of the Act read with Rule 8D of the I. T. Rules, 1962 (hereinafter referred to as the ‘Rules’). 4. Briefly stated facts are that the assessee is engaged in trading and investment in shares and securities and precious stones and also running financial consultancy services. The assessee filed its return of income for the relevant AY 2010-11 on 14.10.2010 and assessment was originally framed u/s. 143(3) of the Act by DCIT vide his order dated 26.10.2012. The assessment u/s. 143(3) of the Act was framed at a total income of 2 M/s. C.D Equifinance (P) Ltd., AY 2010-11 Rs.9,51,64,413/-. Subsequently, CIT-3, Kolkata issued show cause notice vide no. DCIT/HQRS-3/u/s.263/2014-15/3734 dated 05.01.2015 wherein he was of the opinion that the disallowance of an amount of Rs.37,67,250/- u/s. 14A of the Act read with Rule 8D of the Rules has to be made while computing income u/s. 115JB of the Act. The relevant para of the show cause notice reads as under: “The assessment in the case was completed u/s. 143(3) by DCIT, Circle-7, Kolkata on 26.10.2012 determining total income of Rs.9,51,64,413/-. On perusal of the assessment records vis-à-vis the return and other document submitted it is seen that an amount of Rs.37,67,250/- was disallowed u/s. 14A while computing total income under normal provisions of the Act whereas, as the assessee has paid tax u/s. 115JB, such disallowance was not added back in the computation of book profit. The wrongful act on the part of the AO on the point discussed above has made the assessment order erroneous and prejudicial to the interest of revenue. Section 263 envisages “the Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.” The assessment order passed u/s. 143(3) dated 26.10.2012 appears to be erroneous and prejudicial to the interest of Revenue on this point for the reasons discussed above.” The assessee before CIT replied that the disallowance made by AO u/s. 14A of the Act read with Rule 8D of the Rules cannot be the subject matter of disallowance while making adjustment in the book profit u/s. 115JB of the Act. But the CIT finally directed vide para 6 as under: “The facts remains that the assessee itself has disallowed the expenditure u/s. 14A in computing the income under the normal provisions. Moreover, the law on this issue is debatable and has not reached finality. Considering the above facts and law, the assessment order passed u/s. 143(3) dated 26.10.2012 is set aside for fresh application of mind for the Assessing Officer and fresh assessment.”

We find from the above facts and circumstances that the CIT himself admitted that the disallowance of expenditure u/s. 14A of the Act read with Rule 8D of the Rules whether to be adjusted in the book profit while computing income u/s. 115JB of the Act is a highly debatable issue. This finding is evident from the above reproduced para of CIT’s order. And it is also a fact that all the details were available before the AO during the course of 2