TaxTMI 
TaxTMI 
2022 (9) TMI 1090
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....as failed to make adequate inquiry w.r.t. to section 14A disallowance and merely accepted assessee's submission. 3. The Ld. PCIT has wrongly invoked explanation -2 to section 263 of the IT. Act. 4. That, the Revision u/s 263 is made on the basis incorrect legal provisions and therefore the order u/s 263 is bad-in-law." 3. The brief facts of the case are that the assessee filed its return of income for assessment of 2017-18 declaring total income of Rs. 7,34,55,550/- . The assessment was completed under section 143(3) of the Act determining the total income of Rs. 7,41,16,473/-. The Principal Commissioner of Income Tax (Principal CIT) observed that the assessee had made investments of Rs. 5, 96,90,880/- in unquoted shares which can earn exempt income. The assessee has reported interest expenses amounting to Rs. 5,26,64,254/- and also shown fixed assets of Rs. 1,62,84,184/- against the proprietor's capital of Rs. 142,83,93,492/-. Hence the assessee has made investment in unquoted shares of Rs. 5, 96,90,880/- from interest-bearing funds. Further, in view of CBDT Circular number 05/2014 dated 11-02-2014 clarifying that under Rule 8D rws 14A of the Act, the disa....
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....cordance with the following formula, namely:- B= the average of value of investment, income from which does not or shall not form part of total income as appearing in the balance sheet of the assesses, on the first and last day of the previous year." 8. The above facts indicate that AO has not conducted any inquiries in respect of disallowance required to be made under section 14A of the IT Act, 1961, Such cases where the assessment has been completed without conducting any inquiries tantamount to erroneous orders as also order prejudicial to the interest of Revenue. For such proposition of law. Reliance is made on following cases: 1. Rampyari Devi Sarogi Vs. CIT (SC) 67 ITR 84 2. Malabar Industrial Co. Ltd. Vs, CIT(SC) 243 ITR 83 3. Swarup Vegetable Products Industries Ltd. Vs. CIT (ALL) 187 ITR 412 4. Gee Vee Enterprises Vs. Addl.CIT&Ors (Del.) 99 ITR 375 5. Rajalakshmi Mills Ltd. Vs. ITO (ITAT, SB-Chennai) 121 ITD 343, 313 ITR(AT) 182 6. SRM Systems & Software Pvt. Ltd, Vs. ACIT 2010-TIOL-646- HC- MAD-IT. 7. Shakti Credits Ltd Vs. CIT 2015 Tax Pub (DT) 3058 (Luck,'A' Trib) 8. Shorel....
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....uestionnaire, in reply to which submissions have been made but AO did not applied his mind nor did he conduct any enquiry while accepting claim of assessee although he recorded in note sheet that reply filed by the assessee was not satisfactory and did not explain the facts, the assessment order was held to be erroneous and prejudicial to the interest of revenue. 10. It may be mentioned that with effect from 01/06/2015, Explanation 2 to the section 263(1) has been inserted which reads as under- "Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, it, in the opinion of the Principal Commissioner or Commissioner. (a) The order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision....
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....invoked. The counsel for the assessee further submitted that during the impugned year, the assessee had interest free capital of Rs. 1,53,73,45,614/- and therefore merely 5% of capital has been utilised for interest-free advances. The assessee had provided a detailed explanation along with nexus of the interest-free funds used in investment in partnership firms. Therefore, the total investment in the partnership firm is out of assessee's own capital and not out of any borrowed fund or interest-bearing fund. The assessee further submitted that no new investments were made during the impugned year and the assessee had duly explained the source of the investments generating tax-free income. He further submitted that even in the previous assessment years, no disallowance under section 14A were made. In response, the Ld. DR relied upon the observations made by the Principal CIT in the 263 order. 5. We have heard the rival contentions and perused the material on record. 5.1 Before deciding the issue, it would be useful to refer to some Supreme Court decisions on this subject which would throw useful light on the scope of enquiry under Explanation (a) to section 263 of the Act. 5....
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....under section 69A in respect of onmoney receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revisional order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view that Assessing Officer had carried out detailed inquiries which included assessee's onmoney transactions and Tribunal thus set aside revisional order passed by Commissioner. The High Court upheld Tribunal's order. The Supreme Court while dismissing the SLP filed by the Department held as under: "We have heard learned counsel for the Revenue and perused the documents on record. In particular, the Tribunal has in the impugned judg....
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....out detailed enquiries and taken a view which was a plausible view. Accordingly, Tribunal set aside revisional order passed by Commissioner. The High Court upheld order passed by Tribunal. The Supreme Court on consideration of above facts held that SLP filed against High Court's order was to liable to be dismissed. The Supreme Court made the following observations, while passing the order: "It is by now well settled that, the Commissioner can exercise revisional powers under Section 263 of the Act only when it is found that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue. In the present case, the Tribunal noted the observations of the Assessing Officer in the order of remand to the effect that Jain munis do not advocate spread of religion through use of computers, source of electronic media is usually shunned, very small section of the community uses computer technology for religious purposes as plenty of printed literature is available in the market. All these factors led to the market value of the CDs declining dramatically. It was on account of these reasons, that the assessee had incurred substantial loss arising ou....