SUNDHARAMS PVT. LTD., CHENNAI V. ACIT, CORPORATE CIRCLE-6(2), CHENNAI

ITA 226/CHNY/2022

AI Insights

The case involves Sundharams Pvt. Ltd., which appealed against the revisional jurisdiction exercised by the Principal Commissioner of Income Tax, Chennai-3, under section 263 of the Income Tax Act. The revision was based on the grounds that the original assessment did not consider certain current investments for disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962. The tribunal examined whether the Principal Commissioner was correct in invoking section 263 to direct a reassessment including these investments, which were initially overlooked by the Assessing Officer.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 134020 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-12-2022
• Assessment Year: misc
• Appeal Filed On: 12-05-2022
• Other Referred Cases: CIT, Central-1 Vs. Chettinad Logistics Pvt. Ltd. reported in 80 Taxmann221 (2017)
• Laws Referred To: Income Tax Act, Income Tax Rules, 1962
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Rule 8D
• Section: 263; 143(3); 14A; 2(A)

Judgement Text

आयकर अपीलीय अिधकरण ‘सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा01 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम1। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.226/Chny/2022 (िनधाBरण वषB / Assessment Year: 2017-18) Sundharams Pvt. Ltd. No.3, Smith Road (Off Mount Road), Chennai – 600 002. बनाम / V s. ACIT Corporate Circle-6(2), Chennai. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAAC S -4 9 4 9 -P (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri Saroj Kumar Parida (Advocate)-Ld. AR थ की ओरसे/Respondent by : Shri M. Rajan (CIT)–Ld. DR सुनवाई की तारीख/Date of Hearing : 05-12-2022 घोषणा की तारीख /Date of Pronouncement : 05-12-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee contest validity of revisional jurisdiction u/s 263 as exercised by learned Principal Commissioner of Income Tax, Chennai-3 [Pr. CIT] vide order dated 15-03-2022 against an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 12-12-2019 for Assessment Year (AY) 2017-18. The grounds taken by the assessee are as under: 1. The order passed by the Learned Principal Commissioner of Income Tax-3 ("PCIT") is contrary to law and facts of the case. 2. The Learned PCIT has grossly erred in assuming jurisdiction u/s 263 of the Act on the ground that the impugned assessment order is erroneous in so far as it is ITA No.226/Chny/2022 - 2 - prejudicial to the interest of the revenue when the subject matter of disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 was already dealt with by the Assessing Officer in the Assessment order after thoroughly taken into consideration all relevant and necessary facts and particulars furnished by the Appellant during the course of scrutiny assessment 3. The Learned PCIT has erred in coming to a conclusion that the order of the Assessing Officer passed u/s 143(3) of the Act is erroneous and prejudicial to the interests of the Revenue. 4. The Learned PCIT has erred in observing that the Appellant has not given any specific reasons for not considering the amount of Rs.6,15,69,239/- which is shown as "Current Investments" in item 2(a) of the balance sheet for disallowance u/s.14A read with Rule 8D without appreciating the detailed submission made by the Appellant on 05-02-2022 with a specific mention that only income yielding investments alone were considered for the said disallowance. 5. The Learned PCIT has erred in disregarding the fact that the Appellant itself disallowed a sum of Rs.10,79,805/- u/s 14A of the Act read with Rule 8D of Income-tax Rules, 1962, by taking into account all the investments which yielded income during the relevant assessment year. 6. The Learned PCIT has erred in invoking the powers under section 263 to give directions to the Assessing Officer to include current investments which have not yielded income during the year for the purposes of computing disallowance under Rule 8D which is contrary to the decision of jurisdictional High Court in the case of CIT, Central-1 Vs. Chettinad Logistics Pvt. Ltd. reported in 80 Taxmann221 (2017). Having heard rival submissions, the appeal is disposed-off as under. 2. The assessee offered suo-motu disallowance u/s 14A for Rs.10.79 Lacs by considering those investments which actually yielded exempt income during the year. However, Ld. AO, applying Rule 8D, computed disallowance of Rs.20.44 Lacs u/r 8D(2)(iii) @1% of annual average of monthly average of opening and closing balances of value of investments whose income is or shall be exempt. Accordingly, differential of Rs.9.64 Lacs was added to the income of the assessee while framing the assessment. 3. Subsequently, Ld. Pr. CIT sought revision of the order on the ground that current investments of Rs.615.69 Lacs as shown in the Balance Sheet was not considered in the computations and therefore, the order was erroneous and prejudicial to the interest of the revenue. ITA No.226/Chny/2022 - 3 - Accordingly, Ld. AO was directed to redo the assessment after considering the stated amount. Aggrieved, the assessee is in further appeal before us. 4. We find that in terms of Rule 8D(2)(ii), as amended w.e.f. 02.06.2016, Ld. AO has to compute disallowance for an amount equal to 1% of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income. Admittedly, the assessee as well as Ld. AO has computed disallowance by applying Rule 8D. However, Ld. AO has failed to consider the current investments as shown in the Balance Sheet while making the computations. To correct this error, Ld. Pr. CT has invoked powers u/s 263 which could not be faulted with for the reason that the computations have not been made by Ld. AO as per the prescribed formula. Therefore, we decline to interfere in the matter of revision. However, nothing in this order shall construe to have any expression on merits of the case which shall be considered by Ld. AO in the revisional proceedings. 5. The appeal stand dismissed. Order pronounced on 05 th December, 2022. Sd/- (MAHAVIR SINGH) उपा01 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated : 05-12-2022 EDN/- आदेश की Vितिलिप अ 6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF