TaxTMI 
TaxTMI 
2012 (9) TMI 626
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....ermined by the AO was Rs. 13.99 Crores which included various disallowance and additions. After the assessment was framed, a notice was issued under Section-263 of the Income Tax Act by the Commissioner. This was in respect of disallowance as far as it concerns a dividend income of Rs. 6,93,69, 402/- [for which an exemption has been claimed under Section 10 (33)] received by the assessee. The dividend had been received from DLF Power Limited, a sister concern. After considering the submissions of the assesse, and the views of the Revenue, the Commissioner held as follows: - "In the instant case, it is clear from the assessment records that the Assessing Officer has not examined in the course of the assessment proceedings the issue relating to disallowance of expenditure relating to exempted dividend income Rs.6,93,20,030/- as was required u/s 14A. In the circumstances, the assessment order dated 31.03.2005 u/s 143 (3) of the I.T. Act, 1961, for the A.Y. 2002-03, is held to be erroneous and prejudicial to the interests of revenue within the meaning of section 263. However, in order to take a final view on this issue, further enquiries will be necessary which can be conducted only....
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....lear and must capable of being ascertained. There was not specific finding by the CIT to the effect that any particular expenses has been incurred for earning the exempted income, he only asked the AO to make inquire and find out the proportionate expenses which can be disallowed u/s 14A. The issue with regard to disallowance of proportionate expenditure has been dealt by the ITAT Delhi Bench in case of Wimco Seeding 293 ITA 216 and Impulse Pvt. Ltd. 22 SOT 368, wherein it was observed that the provisions of Section-14A has been introduced to disallow the expenses identified has having been incurred for earning exempted income. On plain construction of Section-14A, it is very much clear that only the expenditure which have been proved to be incurred in relation to earning of tax free income can be disallowed and the section cannot be extended to disallow even the expenditure which is assumed to have been incurred for earning tax free income. While applying the section, there is no authority conferred by the section upon the Assessing Officer to deem or assume certain expenditure to have been incurred in relation to the tax free income. Accordingly, common expenditure incurred canno....
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....le dividend cheque of Rs. 6,93,69, 402/-. The materials on record clearly showed that the AO had called for particulars and held proceedings on a number of occasions. The materials were clearly before him as also was in the nature of investment i.e. in a subsidiary company for a purpose of business. Such being a case, the question of there being any error much less one prejudicial to the interest of Revenue did not arise. 7. It was argued next that the Tribunal's order should not be interfered with because if enquiries are conducted by the Commissioner, he cannot go into or scrutinize the question of appropriateness of the previous proceedings before the AO. It was submitted in this regard that the judgment of this Court in CIT v. M/s Sunbeam Auto Ltd, 332 ITR 167 shows that there can be no roving and fishing enquiry by the Commissioner and he has to merely confine himself to the materials on record of the proceedings called for by him. In other words, if the AO makes an assessment acting in accordance with law that cannot be branded as erroneous. Reliance was also placed upon the judgment reported as CIT v. Anil Kumar Sharma, 335 ITR 72 (Del). It was further argued that whereve....
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....ral justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not conferred to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income Tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the assessing officer. Every loss of revenue as a consequence of an order of assessing officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income Tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view....