AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 1122
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....he facts and in the circumstances of the case, the learned CIT erred in canceling the assessment order passed by the Assessing Officer on 24th December, 2010 u/s. 143(3) of the IT Act and directing the Assessing Officer to make a fresh assessment." 2. An assessment order was passed u/s. 143(3), dated 24.12.2010 which according to the learned CIT was erroneous; insofar, it was prejudicial to the interest of the Revenue on account of following reasons: "The disallowance of expenditure related to earning exempt income has not been computed as envisaged u/s. 14A r.w.s. 8D(2)(iii). The said disallowance should be Rs.326.99 lakhs and not required to be restricted to administrative expenses of Rs.6.09 laksh." 2.1 In the impugned order, learned Commissioner has noted that while computing the disallowance u/s. 14A the assessee had voluntarily disallowed interest expenditure of Rs.4,81,13,923/-. The assessee has also disallowed certain expenditure amounting to Rs.7,28,548/-. Therefore, the aggregate disallowance as made by the assessee was Rs.4,88,96,471/- The computation of the assessee for the said disallowance as per Rule 8D was as under: "Rule 8D(2)(i) &nbs....
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....e amount of actual expenditure incurred. Whatever is the quantum worked out as per formula prescribed in the Rule, the same would represent the quantum of disallowance. Hence, the AO in restricting the disallowance to the amount of expenses claimed, has departed from the clear provisions of law in this regard. Therefore, the order would be unsustainable in the eyes of law. Accordingly, it is held that the A.O.'s order was not only erroneous but also prejudicial to the interests of Revenue." 2.3. In the result, the order of the AO for A.Y. 2008-09, dated 24.12.2010 was "cancelled" by learned Commissioner and the AO was directed to make a fresh assessment. This direction and the order of the learned Commissioner is now challenged before us. 3. From the side of the appellant, learned AR, Shri S.N. Soparkar & Mr. Vartika Chokshi appeared and vehemently argued that the order of the AO was correct because the assessee has claimed the expenditure in P&L A/c only to the extent of Rs.6,08,524/-, therefore, the AO has correctly computed the disallowance u/s. 14A as under: "Thus, I proceed to compute the expenditure incurred in relation to earning dividend income as per the pr....
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....ad with Rule 8D was incorrectly made by the AO, therefore, it was within his jurisdiction to invoke the provisions of Section 263 of IT Act. According to him, the scope of Section 263 is very wide as held in the case of Malabar Industrial Co., 243 ITR 83 (SC). 5. We have heard both the sides at some length. We have carefully perused the impugned order. As far as the scope of Section 263 is concerned, it is true that an incorrect assumption of fact or an incorrect application of law would justify the invocation of the provisions of Section 263 of IT Act. Naturally, if due to erroneous assessment order Revenue is loosing tax lawfully then such an order is certainly causing prejudice to the interest of the Revenue. But that "prejudice" should be examined judicially. The said expression as coined in Section 263 is required not to be construed in a pettifogging manner but it must be given a dignified construction so as to see whether there was some grievous error in the assessment order which in broad reckoning might set a bad trend by the AO so as to cause prejudice to the administration of Revenue. As far as the present position is concerned, this is not the case where the AO has not....
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....tal income. 14A. [(1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act.] [(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. [(3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act:] [Provided that nothing contained in this section shall empower the Assessing Officer eithe....