Swati Atul Rege, Mumbai vs Assessee

The assessee has filed this appeal challenging the order dated 14/12/2012 passed by Ld CIT(A)-18 Mumbai for assessment year 2009-10 in respect of following issues:-

(a) Validity of re-opening of assessment

(b) Disallowance made u/s 14A of the Act.

2. The facts relating to the case are that the assessee filed her return of income on 29-09-2009 declaring a total income of Rs.3,24,280/- and the same was processed u/s 143(1) of the Act. Subsequently, the AO noticed that the assessee had declared dividend income of Rs.1,24,377/-, but did not make any disallowance u/s 14A of the Act. Hence, the AO re-opened ITA No.1492/M/13 2

the assessment by issuing notice u/s 148 of the Act on 15.11.2010. The assessee filed a letter dated 24.11.2010 stating that the return of income filed on 29-09-2009 may be taken on record. Thereafter, the AO completed the assessment by working out the disallowance u/s 14A of the Act as per Rule 8D of the IT Rules at Rs.8,04,312/-.

3. In the appellate proceedings, the Ld CIT(A) upheld the reopening of the assessment as well as the addition made by the AO u/s 14A of the Act. Aggrieved, the assessee has filed this appeal before us.

4. We heard the parties on the issue relating to the validity of re- opening of assessment. According to the assessee, she is a trader in shares and securities and she has held the shares as her Stock in trade. It was further submitted that the interest expenditure was fully allowable against her business income and hence the disallowance u/s 14A of the Act was not required to be made. Accordingly, it was contended that there was no case to show that there was escapement of income. On the contrary, the Ld D.R placed reliance on the order of Ld CIT(A) in this regard.

5. We notice that the return of income filed by the assessee was processed u/s 143(1) of the Act. Hence, there is no question of forming of any opinion by the assessing officer in the original assessment proceeding. Further, it is a fact that the assessee had declared dividend income of Rs.1,24,377/- and she did not make any disallowance u/s 14A of the Act, even though the provisions of sec. 14A is applicable to the year under consideration. Under these set of facts, we are of the view that the assessing officer had reason to believe that there is escapement of income and hence the Ld CIT(A) was justified in upholding the action of re- opening of assessment.

ITA No.1492/M/13 3 6. The next issue relates to the disallowance made u/s 14A of the Act. In this regard, we agree with the contentions of the assessee that the assessing officer has to first consider the claim of the assessee by having regard to the accounts of the assessee. Only thereafter the assessing officer, if he is not satisfied with the correctness of the claim, shall proceed to determine the disallowance to be made u/s 14A of the Act in accordance with the provisions of Rule 8D. In this regard, we may refer to the decision of Hon'ble jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd (328 ITR 81) and also the decision rendered by Hon'ble Delhi High Court in the case of Maxopp Investment Ltd (347 ITR 272).

7. In the instant case, apparently, both the tax authorities have not examined the claim of the assessee or the accounts of the assessee. Hence, we are of the view that this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine the claim of the assessee by having regard to her accounts and take appropriate decision in accordance with the law. Needless to mention that the assessee should be given necessary opportunity of being heard.

8. In the result, the appeal filed by the assessee is treated as partly allowed for statistical purposes.

The above order was pronounced in the open court on 14th Jan, 2015.

घोषणा खल ु े यायालय म दनांकः14th Jan, 2015 को क गई ।

sd sd

(जो ग दर संह/JOGINDER SINGH) (बी.आर. बा करन,/ B.R. BASKARAN) या यक सद य / Judicial Member लेखा सद य/Accountant Member

मुंबई Mumbai: 14th Jan,2015. ITA No.1492/M/13 4

व. न.स./ SRL , Sr. PS

आदे श क त ल प अ े षत/Copy of the Order forwarded to :

1. अपीलाथ / The Appellant

2. यथ / The Respondent.

3. आयकर आयु त(अपील) / The CIT(A)- concerned

4. आयकर आयु त / CIT concerned

5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai concerned

6.

गाड फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, true copy सहायक पंजीकार (Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई /ITAT, Mumbai