TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 941
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....ngs, it was noted by the AO that the assessee earned exempt dividend income of Rs. 7,77,882/-, but, did not offer any disallowance u/s 14A of the Act. Applying the provisions of Rule 8D, he computed disallowance under this section at Rs. 89,19,576/-. The ld. CIT(A) confirmed the same. The assessee is aggrieved against the sustenance of this addition. 4. We have heard both the sides and perused the relevant material on record. At the outset, the ld. AR contended that no incriminating material was found during the course of search in respect of the assessment year under consideration. Relying on the judgment of the Hon'ble jurisdictional High Court in the case of Kabul Chawla vs. CIT (2016) 380 ITR 573 (Del), it was argued that the addition made u/s 14A, which is not based on any incriminating material, be deleted. 5. This was opposed by the ld. DR, who submitted that the question of jurisdiction has not been raised by the assessee in its ground of appeal and, hence, the invocation of the judgment in the case of Kabul Chawla (supra), should not be permitted. 6. We find that ground No.2 raised by the assessee challenges the disallowance of Rs. 89,19,576/- made by the Assessing ....
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....concluded that: 'If some incriminating material is found in respect of such assessment years for which the assessment is not pending, then, the total income would be determined by considering the originally determined income plus income emanating from the incriminating material found during the course of search'. That is how, the additions made u/s 2(22)(e), which were not based on any incriminating material found during the course of search, were held to be unsustainable in law and, hence, deleted. The Hon'ble High Court approved the view taken by the Tribunal. It summarized the legal position in para 37 of its judgment as under :- 'On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search s....
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....sments as on the date of the search are concerned, the same are to be repeated as increased by additions, only if, based on incriminating material found during the course of search. In other words, if no incriminating material is found during the course of search, then, the amount of total income determined under the earlier completed assessments is to be adopted in a fresh assessments u/s 153A without making any further addition. 10. Adverting to the facts of the instant case, we find that the A.Y. 2009- 10 falls in the category of 'completed assessments'. It is an admitted position that no incriminating material was found during the course of search concerning the disallowance u/s 14A of the Act. In that view of the matter, the assessment cannot embrace any fresh disallowance otherwise than supported by any incriminating material found during the course of search. In such a situation, the originally determined income has to be repeated in the assessment u/s 153A of the Act. As there is no mention of any disallowance having been made in the original assessment u/s 143(3) of the Act in any of the orders of the authorities below, we hold that the disallowance made by the Assessing....
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....ion' by the AO. It is pertinent to mention that the assessee categorically stated before the Assessing Officer that: 'the expenses relating to exempt or non-exempt incomes cannot be segregated.' It further stated vide para 3, as reproduced on page 2 of the assessment order that it: 'engaged the services of an exclusive employee for the purpose of taking investment decisions in respect of shares and units.' Despite the above assertion, it did not offer any disallowance u/s 14A of the Act, not even the remuneration etc. of the employee, who was admittedly an 'exclusive employee' for taking investment decisions. The Assessing Officer categorically recorded satisfaction in terms of section 14A in para 4.2 of his order, when he mentioned : 'that the assessee has not quantified/attributed the expenses u/s 14A of the IT Act and not disallowed in the P&L account himself which are related to the exempt income not forming part of the total income. While certain expenses like managerial expenses, bank charges etc. must have been incurred by the assessee to earn the exempt income in the shape of dividend of Rs. 7,72,918/- which has been claimed exempt u/s 10(34) of the I.T. Act, 1961. Thus, I ....