2007 (9) TMI 644

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.... the assessing officer to disallow the expenditure attributable to exempt income from dividend in view of the introduction of Section 14A of the Income Tax Act and as such an order has been passed disallowing the expenditure attributable to the exempted income. Aggrieved by the order of the assessing officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) on the ground that the reopening was contrary to the proviso appended to Section 14A. The Commissioner of Income Tax (Appeals) allowed the appeal. The Revenue in turn took the matter before the Income Tax Appellate Tribunal and the Tribunal dismissed the appeal. Aggrieved by the order of the Tribunal, the present tax case appeal is filed by formulating the ....

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....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 either to reassess under Section 147 of pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April 2001) 6. The said proviso was incorporated with the intention of avoiding litigation in the issue in respect of all the assessment years prior to assessment year 2002-03. The relevant assessment year in this case is 2001-02, which is unequivocally covered by the proviso. The proviso prohibits reassessment for the assessme....

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....ssments, having attained finality, on the basis of newly inserted provisions of section 14A is likely to cause hardship to a large number of taxpayers and would result in increasing avoidable litigation. 4. The Board have considered this matter and hereby directs that the assessments where the proceedings have become final before the first day of April, 2001 should not be re-opened under section 147 of the Act to disallow expenditure incurred to earn exempt income by applying the provisions of newly inserted section 14A of the Act. 5. This may be brought to the notice of all officers in your region immediately. Yours faithfully, (Sd.) Rahul Navin, Under Secretary (TPL-I)," 7. From the reading of the above Circular, it is very....