2025 (3) TMI 2240

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....ised in both the appeals, hence, these appeals were heard together and are being disposed of by this common order for the sake of convenience, by dealing with the facts of the assessment year 2017-18 as lead case, and the decision thereof will apply mutatis mutandis to assessment year 2018-19 as well. 2. The brief facts of the case are that in this case return of income was e-filed on 30.11.2017 declaring income of Rs. 80,61,630/-. The case of the assessee was selected for complete scrutiny through CASS and after issue of statutory notices, and after considering the replies thereof submitted by the Assessee, the declared return of income of Rs. 80,61,630/- was accepted. Ld. PCIT noted from the assessment record that assessee had made inv....

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....ed the total income and also directed to issue notice of demand. 3. Against the above order, assessee has preferred an appeal before us. 4. At the time of hearing, Ld. AR for the assessee submitted that Ld. PCIT has erred in computing the disallowance u/s. 14A read with Rule 8D(2) of the Act ignoring the fact that the assessee has not earned any exempt income and has not incurred any expenditure in relation to exempt income. It was further submitted that Ld. PCIT has erred in invoking and passing the order u/s. 263 of the Act, without appreciating that revisionary proceedings under section 263 cannot be invoked unless the conjunctive conditions that assessment order passed is erroneous in law as well as prejudicial to the interests of....

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....rence. 6. After hearing both the sides and perusing the records, we note that in this case the return of income was e-filed on 31.10.2018 declaring income of Rs. NIL. The case of the assessee was selected for complete scrutiny through CASS. The statutory Notice u/s. 143(2) of the Act was issued on 23.09.2019 through electronic mode fixing the case for hearing on 08.10.2019. Accordingly, notices u/s. 142(1) alongwith questionnaire dated 4.3.2020 and others were issued to the assessee electronically through ITBA portal. In response to the same, the assessee filed its replied online from time to time and the extract of the same have been taken and placed on record by the AO. Based on the facts of the case and document/ information submitted....

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....r the Explanation to Section 14A of the I.T Act as well as the fact that on this issue SLP of the department is pending before the Hon'ble Supreme Court in the case of IL & FS Energy Development Co. Ltd. However, it is undisputed fact that newly inserted Explanation to Section 14A was effective prospectively and not retrospectively and on the same issue the Hon'ble Delhi High Court in the case of PCIT (Central) vs. Era Infrastructure (India) Ltd. (2022) 141 taxmann.com 289 (Delhi) has held that upto and including AY 2021-22 no disallowance could be made u/s 14A if no exempt income was earned by an assessee after considering insertion of Explanation to Section 14A vide Finance Act, 2022. The amendment thus cannot empower the PCIT to order fo....