TaxTMI 
TaxTMI 
2024 (9) TMI 87
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....the assessment order dated 24.01.2022 is erroneous and prejudicial to the interest of Revenue and directed the Assessing Officer to pass fresh assessment order after making necessary enquiries and verification as per law as detailed in para 5.1 to 5.7 of the impugned order. 4. The ld. AR Shri S. Muralidhar, F.C.A. submits that the Assessing Officer completed the original assessment under scrutiny in detail. He drew our attention to the notice issued under section 142(1) of the Act at page 27 of the paper book and submits that the Assessing Officer requested the assessee to furnish the details of investments (current and non-current) and details of exempt income earned during the year vide para 15 & 16 at page 32 of the paper book. Further, he drew our attention to the reply in response to the notice under section 142(1) of the Act at page 36 of the paper book and submits that there was no exempt income earned during the year under consideration. Further, he drew our attention to the notice of hearing at page 6 of the paper book 2, 2.1, 2.1.2, 2.1.3 and 3 and argued that earning of no income was brought to the notice of the ld. PCIT vide its reply at page 13 of the paper book. He s....
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....ein are placed at page 32 of the paper book and in response to which, the assessee clearly stated that there is no exempt income earned during the year under consideration, which is at page 36 of the paper book. Considering the same, the Assessing Officer did not make any disallowance under section 14A of the Act r.w. Rule 8D of the Income Tax Rules, 1962. The case of the ld. PCIT is that the Assessing Officer passed the said original assessment order without verifying the applicability of provisions of section 14A of the Act r.w. Rule 8D(2) of the Income Tax Rules vide para 6 of the impugned order. We are not agreeable to confirm the said finding as the proof of examination of the said issue by the Assessing Officer is reflecting through notice under section 142(1) of the Act and also the reply furnished by the assessee. The ld. PCIT brought to the notice of the assessee, Explanation to section 14A of the Act through Finance Act, 2022 vide notice under section 263 of the Act, which is at page 6 of the paper book and in response to the hearing notice, the assessee filed written submission dated 15.03.2024, which was reproduced in the impugned order at page 13 of the paper book, whe....
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....stipulates that the amendment made to Section 14A will take effect from 1st April, 2022 and will apply in relation to the assessment year 2022-23 and subsequent assessment years. The relevant extract of Clauses 4, 5, 6 & 7 of the Memorandum of Finance Bill, 2022 are reproduced hereinbelow: "4. In order to make the intention of the legislation clear and to make it free from any misinterpretation, it is proposed to insert an Explanation to section 14A of the Act to clarify that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where exempt income has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the said previous year in relation to such exempt income. 5. This amendment will take effect from 1st April, 2022. 6. It is also proposed to amend sub-section (1) of the said section, so as to include a non-obstante clause in respect of other provisions of the Income-tax Act and provide that no deduction shall be allowed in relation to exempt income, notwithstanding anything to ....
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....nation.--For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for-- (a) service rendered in India; and (b) the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment, shall be regarded as income earned in India." The Finance Act, 1999 which followed the Bill incorporated the substituted Explanation to Section 9(1)(ii) without any change. 13. The Explanation as introduced in 1983 was construed by the Kerala High Court in CIT v. S.R. Patton [(1992) 193 ITR 49 (Ker)] while following the Gujarat High Court's decision in S.G. Pgnatale [(1980) 124 ITR 391 (Guj)] to hold that the Explanation was not declaratory but widened the scope of Section 9(1)(ii). It was further held that even if it were assumed to be clarificatory or that it removed whatever ambiguity there was in Section 9(1)(ii) of the Act, it did not operate in respect of periods which were prior to 1-4-1979. It was held that since the Explanation came into force from 1- 4-1979, it could not be relied on for any purpose for an anterior period. 14. In the appeal preferr....