INCOME TAX ACT, 1961

Section 14A Section 263

Revision under section 263 - Erroneous and prejudicial order - No interest expenditure disallowed by AO under section 14A read with rule 8D(2)(ii) - Assessee not having earned exempt income during the year

CIT held assessment order to be erroneous and prejudicial to the interest of revenue on the ground of AO not having disallowed interest expenditure under section 14A read with rule 8D(2)(ii), especially when suo moto disallowance offered by the assessee was inadequate. Assessee's case was that no exempt income was earned during the year under consideration.Held: Assessee furnished detailed reply raising the contention that assessee had not earned any exempt income, there should not be any disallowance under section 14A, though assessee out of abundant caution made a suo-moto disallowance. Despite the firm stand of assessee that no exempt income, was earned and no disallowance under section 14A was warranted. CIT has not examined the fact about non-receipt of exempt income whereas AO during assessment proceedings had duly examined the issue and adopted a possible view for not making any disallowance under section 14A, accordingly assessment order could not be held as erroneous and prejudicial.

Relied:Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC) : 2000 TaxPub(DT) 1227 (SC), Redington (India) Ltd. v. Addl. CIT (2017) 392 ITR 633 (Mad) : 2017 TaxPub(DT) 0345 (Mad-HC) and Cheminvest Ltd. v. CIT-VI (2015) 378 ITR 33 (Del.) : 2015 TaxPub(DT) 3520 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

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