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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: S/SHRI B.R.BASKARAN & AMARJIT SINGH
.. (अपीलाथ� /Appellant) (��यथ� / Respondent) Assessee by: Shri Ronak Doshi Department by: Shri Sujit Banjar सुनवाई क� तार�ख / Date of Hearing: 26.08.2015 घोषणा क� तार�ख /Date of Pronouncement: 18.11.2015 आदेश / O R D E R PER AMARJIT SINGH, JM:
The appeal filed by the assessee is directed against order dated 17.02.2012 of the learned Commissioner of Income Tax (Appeals)-2, Mumbai [hereinafter referred to as the learned “CIT(A)”] it related to the assessment year 2005-06. The ground by the assessee give rise to following issues:-
A. Validity of reopening of assessment B. Computation of disallowance u/s. 14A of the Act. Assessment Year: 2005-06 2. We have heard the parties and perused the records. The return of income filed by the assessee was processed u/s. 143(1) of the Act. Subsequently, the assessing officer reopened the assessment by issuance of notice u/s 147 of the Act, on account of audit objection with regard to computation of disallowance made u/s 14A of the Act. In the reopened assessment, assessing officer adopted the disallowance worked out by the audit party at Rs.15379624/-. Accordingly, he disallowed the same u/s 14A of the Act. Before learned CIT(A) the assessee challenged the validity of reopening as well as the disallowance computed by the Assessing Officer, but could not succeed, hence, the assessee has filed this appeal before us.
First issue relates to the validity of reopening of assessment. We have noticed that the assessing officer has reopened the assessment by recording following reasons:-
In this case the return of income has been filed on 28.10.2006 declaring total income of Rs.1,26,17,125/- and adjusted book profit u/s.115JB of Rs.2,89,73,877/- which has been processed u/s.143(1) of the I.T.Act, 1961 on 30/03/2006 on the returned income of Rs.1,26,17,125/- and adjusted book profit of Rs.2,89,73,877/-. From the records, it is noticed that the assessee has made disallowance of Rs.1,29,97,468/- u/s.14A of the I.T. Act, 1961 in respect of interest paid for earning exempt income instead of disallowance of Rs.1,41,75,539/-. This has resulted into under assessment of book profit of Rs.23,82,156/- as well as under assessment of income of Rs.23,82,156/-. In these circumstances, I have reason to believe that the assessment of the assessee for AY. 2005-06 has escaped assessment to the extent of Rs.23,82,158/- in respect of book profit computed u/s.115JB of the I.T. Act
Perusal of the above said reasons would show that the assessing officer has applied his mind on the audit objection and has taken an independent view to come to the conclusion that there is an escapement of income. However the original assessment filed by the assessee was processed u/s 143(1) of the Act. Under this circumstance, we are of the view that Ld. CIT(A) was justified in upholding the validity of reopening of assessment. Assessment Year: 2005-06 5. The next issue relates to computation of disallowance u/s. 14A of the Act. We have noticed that the assessing officer simply adopted the working given by the audit party without properly considering the explanation furnished by the assessee. We, further, notice that the Ld. CIT(A) has upheld the computation made by the assessing officer without critically analysing the same. We have also noticed that the learned CIT(A) has made reference to the provision of rule 8D but the Hon’ble Jurisdictional Bombay High court in the case of Godrej Boyce Mfg. Co. 328 ITR 81 (Bombay) has upheld that rule 8D shall have operation prospectively from assessment year 2008-09 onwards, unless the disallowance has to be computed on a reasonable basis. Hence, the action of Ld. CIT(A) in referring to provision to rule 8D for the year under consideration does not seem justifiable. Since the explanations of the assessee with regard to the working of disallowance u/s. 14A of the Act were not considered properly and since the assessing officer did not refer to the accounts of the assessee, we are of the view that this issue requires fresh examination at the end of assessing officer. Accordingly, we set aside the order of the Ld. CIT(A) on this issue and refer this matter to the file of assessing officer for fresh consideration after providing necessary opportunity of being heard to the assessee.
In the result, the appeal of the assessee is hereby partly allowed for statistical purposes.