AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 799
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....assed in name of Safal Organisers Pvt Ltd which is already ceases to exist after amalgamation with HN Safal Infra Developer Pvt Ltd with effect from 01.04.2021. The Appellant has already informed to the Department on the ITBA Portal and also stated in the response to revision proceeding which is violation to the settled position by the Hon'ble Supreme Court that no provision can be carried out in entity which do not exist. Thus, the entire proceeding is void and bad-in-law and required to be quashed. 2. In law and in the facts and circumstances of the Appellant's case, the Ld. PCIT erred in passing the revisional order dated 22-03-2024 under section 263 of the Act without appreciating that the order passed by the Ld. Assessing officer u/s 143(3) of the Act on 12-04-2021 was neither erroneous nor prejudicial to the interest of revenue and that the provision of section 263 of the Act invoked in the case of Appellant without complying the condition stated in the said section. 3. In law and in the facts and circumstances of the Appellant's case, the Id. PCIT erred in passing revisional order dated 22- 03-2024 under section 263 of the Act only on the surmis....
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.... 8. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal." 3. A perusal of the order of the Ld. PCIT reveals that the power of revision was exercised by the Ld. PCIT on the assessment order passed in the case of the assessee in the impugned year u/s.143(3) of the Act on the issue of disallowance of expenses incurred for the purpose of earning exempt income in terms of provisions of Section 14A of the Act. As per the Ld. PCIT, the AO ought to have made the disallowance of expenses and the AO ought to have made the disallowance of expenses by invoking Rule 8D of the Income Tax Rules, 1962 (in short 'IT Rules') and having not done so and made no disallowance, therefore, the assessment order, he held, was erroneous causing prejudice to the Revenue. The Ld. PCIT accordingly directed the AO to pass a fresh assessment order and compute the disallowance invoking provisions of Section 14A of the Act r.w.s. Rule 8D of IT Rules. 4. The facts noted by her from the assessment records leading to her finding of error in the assessment order in this regard are that the assessee had earned exempt income to the tune of Rs. 55,978/- from investment mad....
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....(2) of the Act-1961 prior to invoking rule 8D, he could not have made any disallowance by applying rule 8D of the Rules-1962." (ii) Principal Commissioner of Income-tax, Vadodara-1 V. Gujarat State Fertilizers And Chemicals Ltd. [2019] 108 taxmann.com 560 (Gujarat) "18. The language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the Assessing Officer is obliged to indicate that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income under the Act. To put it in other words, the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to Rule 8. In such circumstances, we are not impressed by the submission canvassed on behalf of the Revenue that once there are mixed funds, Rule 8 would be attracted automatically. 19. In the overall view of the matter, we are convinced that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugn....
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....veal that the PCIT assumed jurisdiction u/s.263 of the Act noting that while the AO ought to have disallowed expenses u/s.14A of the Act based on facts on record, he had not done so. The Ld. PCIT noted the assessee to have earned exempt income and incurred expenses but she found that no expenses were disallowed by the AO u/s. 14A of the Act and, accordingly, on this basis, she assumed jurisdiction u/s. 263 of the Act. This is revealed in the notice issued to the assessee u/s. 263 of the Act, copy of which, placed before us in the paper book paged nos. 32 to 35: "4. Further, on examination of case records during the year under consideration and scrutiny of P&L A/c, Balance sheet, ITR, computation of income and your submissions it is also observed that you had earned exempt income of Rs. 55,978/-(as per para 2.5-2.6 of your submission dated 08.03.2021, though this amount was not considered in the books of accounts as the exempted profit derived from the investment in M/s Safal Goyal Developer but at the time of finalizing your books, (the books of M/s Safal Goyal Developer were not finalized) from the investments in firms/LLPs. As such you had made various investments, incom....
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....ce the AO records his satisfaction that the explanation of the assessee with regards to the expenses disallowed or not disallowed,is not correct. Clearly the jurisdiction assumed, therefore, in the present case by the Ld. PCIT finding the assessment order erroneous for not having disallowed expenses u/s. 14A of the Act is not as per law and is in based on incorrect understanding and interpretation of law. The Ld. PCIT could not have assumed jurisdiction on the basis that disallowances expenses u/s. 14A of the Act is automatic, as consistently held by Courts, and for this reason alone the order passed in the present case needs to be set aside. However, we may add, that even her finding of error in the impugned year and thereafter directing the AO to disallow the expenses, is also not in accordance with law and, therefore, not sustainable. The Ld. PCIT's order reveals that during revisional proceedings, when confronted with the issue in the show cause notice, the assessee explained the reason for not disallowing any expenses u/s.14A of the Act,which included besides other reasons, that none of the expenses debited to its P&L account were incurred in relation to the earning of exem....