TaxTMI 
TaxTMI 
2018 (8) TMI 1042
X X X X Extracts X X X X
X X X X Extracts X X X X
....On the facts and in the circumstances of the case and in law, the learned Principal Commissioner of Income Tax erred in passing an order u/s.263 of the Income Tax Act, 1961 being void ab-initio and bad in law and thereby erred in setting aside the assessment and directing the Id. Assessing Officer to make fresh assessment. 1(b) The Id. Pr. Commissioner of Income Tax erred in invoking the revisionary power under section 263(1) of the Income Tax Act, 1961 without appreciating the fact that the Id. Assessing officer after making all possible enquiries, examining the facts and proper application of mind, completed the assessment of the assessee u/s 143(3) of the Income Tax Act, 1961, which was in accordance with the provisions of law. 2(a) The Ld. Principal Commissioner of Income Tax erred in invoking revisionary power u/s 263, in respect of disallowance u/s 14A despite the fact that appellant's claim for exempt income was subsequently disallowed by the Ld. AO by suo-moto passing an order u/s 154 of the Act.. 2(b) On the facts and in the circumstances of the case and in law the Id. Pr. Commissioner of Income Tax erred in directing the Id. AO to re-examine the issue of disallo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....how cause notice No. Pr. CIT-1/263/Show cause notice/2017-18 dated 27.12.2017 required the assessee as to why the expenses relatable to exempt income be not disallowed by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules. The PCIT computed the disallowance at Rs. 1,43,98,016/-. According to Principal CIT(1) Mumbai, the disallowance under section 14A of the Act is to be carried out with reference to Rule 8D of the Rules for the relevant AY 2013-14 and the disallowance restricted @ 2% by following the Tribunal's decision for AY 2006-07, the provisions of Rule 8D of the Rules were not applicable. The PCIT directed the AO to reframe the assessment after apply the Rule 8D of the Rules as non-applying of Rule 8D, the assessment is both erroneous and prejudicial to the interest of the Revenue. For this he observed at Para 11 and 12 as under: - "11. I have carefully considered the submission made by the assessee and have also gone through the facts of the case. The fact remains that the restriction on using Rule SD is limited only for years proceeding A.Y. 20082009 and not the succeeding years the Hon'ble Bombay High Court held that "Whether provision o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and accepted consistently in all the earlier years. Certain receipts earned by assessee are taxable under the provisions of the Act. Brief details along with the nature of expenses claimed against the said receipts are as under - Particulars of income Head of income Expenses claimed Relevant Section Of The Act Rent of office and shops Income from House Property Municipal taxes, Standard Deduction @30% of NAV S.23& S.24 Capital Gains Capital Gains Cost of Acquisition/Indexed Cost of Acquisition S. 48 Rent from Leasehold plots and Licensed plots Income from Other Sources Municipal taxes, Ground Rent S. 57 Hire charges of Micro Amplifier Charges, Furniture, sale of scrap Income from Other Sources Nil S. 57 Interest Income from Other Sources Nil S.57 From the above your table, your goodself will appreciate that the assessee has claimed deductions only in respect of those expenses which are related to earning of income offered for tax. All other expenses incurred during the year have not been claimed against the income offered for tax. Thus the assessee has not claimed any expenditure relating to exempt income while computin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t such income. Accordingly, no deduction has been claimed in respect of any expenditure incurred in relation to earning of tax free income and hence there cannot be any disallowance/addition u/s. 14A to the total income. iii) That for invoking provisions of S.14A there should be some claim for deduction in respect of any expenditure incurred in relation to exempt income and since the assessee-club has not claimed any deduction in respect of expenditure incurred for earning exempt income while computing its taxable income, the question of disallowance under section 14A does not arise. Accordingly, Rule 8D cannot be applied in the instant case to work out the disallowance u/s. 14A of the Act, as there cannot he any disallowance u/s.14A in the absence of any claim for allowance. In other words, the exercise of determining the expenses in relation to earning of exempt income will have no impact to the taxable income. This is more important in the given case as expenses which have been wholly and exclusively incurred, and have direct nexus with the corresponding income that has been offered to tax. Thus, in absence of any nexus between expenditure claimed as deduction and earning of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch circumstances, whether the order can be treated as erroneous so as to prejudicial to the interest of the Revenue and warrants revision under section 263 of the Act or not. Hon'ble Bombay High Court in the case of Gabriel India Ltd. (supra), has considered this issue and held as under:- "10. The power of suo motto revision under sub-section (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., ( i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions 'erroneous', 'erroneous assessment' and 'erroneous judgment' have been defined in Black's Law Dictionary. According to the definition/erroneous', means 'involving error; deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is, therefore, invalid, and is a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ust be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed." 8. Similarly, Hon'ble Supreme Court in the case of Max India Ltd. (supra) has also considered this issue and held as under: - "2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the revenue" under section 263 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the revenue. For example, when the 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 interest of the revenue, unless th....