Gruh Finance Ltd., Ahmedabad V. The Addl.CIT.,Circle-4, Ahmedabad

ITA 646/AHD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67726 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M G PATEL
• Keywords: Earning of tax free income
• Section: 43B; 143(3); 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SRI D.K TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTA NT MEMBER GRUH FINANCE LTD. GRUH MITHAKHALI SIX ROADS, ELLISBRIDGE, AHMEDABAD-380006 PAN: AAACG7010 K (APPELLANT) VS THE ADDL. COMMISSIONER OF INCOME TAX, RANGE- 4, AHMEDABAD (RESPONDENT) ASSESSEE BY: SRI M.G. PATEL, A.R. REVENUE BY: SRI SUBHASH BAINS, CIT-D.R . DATE OF HEARING : 18-09-2013 DATE OF PRONOUNCEMENT : 27-09-20 13 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER:- THIS IS THE ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT-II AHMEDABAD PASSED U/S. 263 OF THE ACT DATED 11-01-2 013. ITA NO.646/AHD/2013 ASSESSMENT YEAR 2008-09 I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 2 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED IN THIS CASE DETERMINING THE TOTAL INCOME OF ASSESSEE AT RS. 53,61,37,830/-. SUBSEQUENTLY, LD. CIT ISSUED FOLLO WING SHOW CAUSE NOTICE U/S. 263 OF THE ACT. '2. THE ASSESSMENT U/S. L43(3) OF THE ACT WAS FINAL IZED ON 29/10/2010 BY THE ACIT, CIRCLE-4, ABMEDABAD DETERMINING TOTAL INCOME AT RS. 53,61,37,83Q/- WHICH IS REASSESSED U/S.250 AT RS. 5 2,80,20,720/- ON 30/01/2032. SUBSEQUENTLY, ON VERIFICATION OF RECORD S IT IS NOTICED BY THE A.O. THAT THE ASSESSEE HAD EARNED DIVIDEND INCO ME OF RS. 1,89,42 , 065/- WHICH WAS CLAIMED AS EXEMPT AND THE ASSESSEE ITSELF HAD DISALLOWED AN AMOUNT OF RS.9,45,960/- U/S. 14A OF T HE ACT. HOWEVER, AS PER THE PROVISIONS OF SECTION 14A R.W.S. 8D OF T HE I T. RULES, THE DISALLOWANCE SHOULD HOVE BEEN WORKED OUT TO RS. L,2 2 , 25,394/-. THUS, THE INCOME OF THE ASSESSEE HAS BEEN UNDER ASSESSED BY AN AMOUNT OF RS. 1,12, 79,434/-. 3. CONSIDERING THE FACTS AND CIRCUMSTANCES AS MENTI ONED ABOVE, IT APPEARS THAT THE ORDER DATED 29/10/2010 PASSED BY T HE ACIT, CIRCLE- 4, AHMEDABAD IS ERRONEOUS INSOFAR AS IT IS PREJUDIC IAL TO THE INTEREST OF REVENUE. YOU ARE, THEREFORE, HEREBY GIVEN AN OPP ORTUNITY TO REPRESENT YOUR CASE FIND SHOW CAUSE AS TO WHY ACTIO N UNDER THE PROVISIONS OF SECTION 263 OF THE ACT SHOULD NOT BE TAKEN IN YOUR CASE. YOU ORE REQUESTED TO ATTEND THE OFFICE OF THE UNDER SIGNED ON 31.10.2012 AT 12.00 PM EITHER PERSONALLY OR THROUGH AN AUTHORIZED REPRESENTATIVE AND MAY ALSO FILE WRITTEN SUBMISSION S, IF ANY, ON THE SAID DATE..' 3. IN RESPONSE TO THIS NOTICE ASSESSEE FILED FOLLOW ING WRITTEN SUBMISSIONS:- '1. WITH REFERENCE TO THE ABOVE, WE ARE IN RECEIPT OF YOUR FETTER DATED 16.10.2012, WHEREIN IT HAS BEEN STATED BY YOUR HONO UR THAT THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 BY ADDL. COMMISSIONER OF INCOME TAX, CIRCTE-4 ON 29.10.2010 ASSESSING THE TOTAL INCOME AT RS.53,61,37,830/-, WH ICH IS REASSESSED UNDER SECTION 250 OF THE INCOME TAX ACT, 1961 AT RS . 52,80,20, 720/- ON 30.01.20L2, IS ERRONEOUS FOR THE REASON THAT WE HAVE EARNED I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 3 DIVIDEND INCOME OF RS. L , 89 , 42,065/- , WHICH IS EXEMPT INCOME, AND THEREFORE, AS PER PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D OF INCOME TAX RULES, THE DIS ALLOWANCE OUGHT TO HAVE BEEN WORKED OUT AT RS.1,22,25,394/- INSTEAD OF RS. 9,45,960/- DISALLOWED BY GRUH WHILE FILING THE RETURN OF INCOM E. THUS, ACCORDING TO YOUR HONOUR UNDERASSESSMENT HAS BEEN M ODE BY RS.1,12,79,434/-. IN THIS REGARD, GRUCH STRONGLY OB JECT YOUR PROPOSED ACTION AS UNDER: 2. IN THE PRESENT CASE, THE RETURN OF INCOME WAS FILED ON 29.09.2008 AND IN THE STATEMENT OF INCOME, DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH RULE 8D AT RS.9 , 45 , 960/- HAS BEEN MADE. THE STATEMENT OF INCOME IS PLACED ON PAGE 1 T O 5 OF THE PAPER BOOK. 3. IN THE TAX AUDIT REPORT ALSO, THE AUDITOR IN D OUSE NO- 17(I) OF THEIR REPORT IN FORM 3CD HAS DULY MENTIONED DISALLO WANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 READ WITH R ULE 8D AT RS.9,45,960/-. THE TAX AUDIT REPORT UNDER SECTION 44AB OF THE INCOME TAX ACT, 1961 IS PLACED ON PAGE 6 TO 26 OF T HE PAPER BOOK AND RELEVANT PAGE IS 10 OF THE PAPER BOOK. 4. THE ASSESSMENT PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER AND HE ISSUED DETAILED QUESTIONNAIRE FOR FU RNISHING VARIOUS DETAILS AND AT SR. NO. IV OF THE QUESTIONNAIRE, THE ASSESSING OFFICER CALLED FOR THE EXPLANATION FOR THE DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE INCOME TAX ACT 1961 READ WITH RU LE 8D. COPY OF QUESTIONNAIRE IS PLACED ON PAGE 28 TO 30 OF THE PAP ER BOOK AND RELEVANT PAGE IS 28 OF THE PAPER BOOK. 5. IN RESPONSE TO THE SAID QUESTIONNAIRE, GRUH HAS, VIDE LETTER DATED 01.07.2010 ADDRESSED TO ASSESSING OFFICER, SU BMITTED DETAILED WORKING OF DISALLOWANCE UNDER SECTION 14A OF THE IN COME TAX ACT, 1961 READ WITH RULE 8D AND HAVE STATED THAT THE SAM E IS DULY DISALLOWED IN THE RETURN OF INCOME. THE WORKING OF DISALLOWANCE IS PLACED ON PAGE 36 OF THE PAPER BONK. 6. IT SEEMS THAT THE DISALLOWANCE WORKED OUT BY YOU HONOUR AT RS.L,22,25,394/-IS AS PER BALANCE SHEET AS ON 31.03 .2008, WHEREIN I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 4 INVESTMENT DETAILS ARE MENTIONED. IN THE SCHEDULE O F INVESTMENTS, THE INVESTMENTS WHICH ARE MENTIONED, THE INCOME OF WHIC H IS RECEIVED BY GRUH IS TAXABLE AND GRUH HAS DUTY OFFERED THE SAME IN THE COMPUTATION OF INCOME WHILE FILLING THE RETURN OF I NCOME. SUCH DETAILS ORE PLACED ON PAGE 37 TO 38 OF THE PAPER BOOK. AS P ER THE PROVISIONS OF SUB-RULE (2) OF RULE 8D, THE WORKING OF DISALLOW ANCE IS TO BE MADE AT AGGREGATE OF THE FOLLOWING: I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPE NDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRE CTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTE D IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY:- AXB C WHERE A = AMOUNT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I ) INCURRED DURING THE PREVIOUS YEAR; B = THE AVERAGE OF VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOR OR SHALL NOT FORM PART OF THE TOTAL INCOME , AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; C= THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAS T DAY OF THE PREVIOUS YEAR; (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FORM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALAN CE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE FAST DAY OF THE PREVIOUS YEAR. 6.1 IN THE PRESENT CASE, GRUH HAS NOT INCURRED ON LY DIRECT EXPENDITURE FOR EARNING THE EXEMPT INCOME, AND THER EFORE, AS PER THE FIRST ITEM, NO DISALLOWANCE IS REQUIRED TO BE MODE. 6.2 WORKING AS PER SECOND ITEM IS TO BE MADE AFTER TAKING AVERAGE VALUE OF INVESTMENT INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME AS APPEARING IN THE BALANCE SHEET ON THE FIR ST DAY AND THE LAST DAY OF THE PREVIOUS YEAR, IN PRESENT CASE, THE INVE STMENT MENTIONED IN I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 5 THE SCHEDULE OF THE BALANCE SHEET ARE SUCH THAT THE INCOME OF THE SAID INVESTMENT IS TAXABLE INCOME AND NO INVESTMENT WHOS E INCOME IS EXEMPT ARE APPEARING IN THE OPENING AS WELL AS CLOS ING LIST OF INVESTMENT, AND THEREFORE, AS PER THIS FORMULA, TH E DISALLOWANCE WILL COME TO RS. NIL. WE HAVE PREPARED A LIST OF INVESTM ENTS WHICH ARE SHOWN IN BALANCE SHEET, THE INCOME OF WHICH IS TAXA BLE AND THE SAME IS PLACE ON PAGE 38 OF THE PAPER BOOK. DETAILS OF O PENING AND CLOSING INVESTMENT ARE GIVEN IN BALANCE SHEET. SEE INTERNAL PAGE NO. 38 OF BALANCE SHEET. 6.3 WORKING AS PER THIRD ITEM IS TO BE MADE A T 0.5% OF AVERAGE INVESTMENT AFTER CONSIDERING OPENING AND CLOSING IN VESTMENTS AS PER BALANCE SHEET, THE INCOME OF WHICH IS EXEMPT. AS M ENTIONED ABOVE, SUCH INVESTMENTS ARE NOT APPEARING IN THE BALANCE S HEET, AS PER THIS CLAUSE ALSO DISALLOWANCE WILL BE NIL. 6.4 THUS, EVEN IF THE DISALLOWANCE IS TO BE W ORKED OUT AS PER RULE 8D, THE RESULTANT FIGURE COMES TO RS. NIL ONLY. HOW EVER, WHILE FILING THE RETURN OF INCOME, GRUH HAS CONSIDERED PROPORTIO NATE EXPENDITURE IN RELATION TO EXEMPT INCOME, AND ACCOR DINGLY, SUO MOTO DISALLOWANCE HAS BEEN MADE BY GRUH IN THE RETURN OF INCOME. 6.5 IT IS ALSO SUBMITTED THAT THE FUNDS UTILIZ ED FOR EARNING EXEMPT INCOME DURING THE YEAR UNDER CONSIDERATION ARE OWN FUNDS ONLY AND NO BORROWED FUNDS ORE UTILIZED FOR THE PURPOSES OF MAKING INVESTMENT IN EXEMPT INCOME. THIS IS EVIDENT FROM RESERVE AND SURPLUS IN SCHEDULE 1 AND 2 OF THE BALANCE SHEET. PLEASE SEE I NTERNAL PAGE 32 OF BALANCE SHEET WHICH SHOWS SHARE CAPITAL OF RS. 34,6 4,76,990/- AND RESERVE AND SURPLUS SHOWS RS.155,61,88,327/- TOTALI NG TO RS.190,26,65,317/-. IN VIEW OF THIS ALSO, NO DISAL LOWANCE IS REQUIRED TO BE MADE AS PER RULE 8D. 7. IT IS SUBMITTED THAT THUS ALL THE DETAILS IN RESPECT OF DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE IN COME TAX ACT, 1961 WERE ON RECORD OF THE ASSESSING AFTER CONSIDER ING AND EXAMINING THE SAME, THE ASSESSING OFFICER HAS FINALIZED ASSES SMENT IN QUESTION WHICH IS IN ACCORDANCE WITH THE LAW. IT IS TWO CIRC UMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE THE PO WER OF REVISION UNDER THIS SUB-SECTION, VIZ. (I) THE ORDER SHOULD B E ERRONEOUS; AND (FT) I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 6 BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE MU ST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVENUE. AN ORDER C ANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF ASSESSING OFFICER ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MOM ELABORATELY. THIS SECTION DOE S NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER FOR THAT OF THE ASSESSING OFFICER, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASE MAY BE VISUALIZED WHERE THE ASSESSING OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACC OUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUM STANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE A CCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER ON PERUSAL OF THE RECORDS MAY BE OF OPINION THAT THE ORDER MADE BY TH E ASSESSING OFFICER CONCERNED WAS NOT PROPER AND LEFT TO THE CO MMISSIONER, HE WOULD HAVE HELD OTHERWISE. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE INCOME HIMSELF. THIS IS BECAUSE, THE ASSESSING OFFICER HAS EXERCISE D THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH THE LAW AND ARRIVED AT A CONCLUSION AND SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATIS FIED WITH THE CONCLUSION. 7.1 PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT , 1961, CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAK E OR ERROR COMMITTED BY THE ASSESSING OFFICER. IT IS ONLY WHE N AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. WHEN AN ASSESSING OFFICER ADOPTS ONE OF THE COURSES PERMISSIBLE IN LA W AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TOKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 7.2 OUR ABOVE CONTENTION IS SUPPORTED BY THE FOLLOW ING DECISIONS: (I) CIT V. GABRIEL INDIA LTD. [203 ITR 108 (BOM)] (II) CIT V. ARVIND JEWELLERS [259 ITR 502 ( GUJ)] I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 7 (III) CIT V. G.R. THANGAMALIGAI [259 ITR 128 MAD)] (IV) CIT V. GOVINDO CHOUDHARY & ORS. [203 ITR 880 (SC)] (V) CIT V. HASTINGS PROPERTIES [253 ITR 124 (CA L)] (VI) CIT V.MEHROTRA BROTHERS [(270 ITR 167 (M P)] (VII) CIT V. MACNEILL MAGORE LTD. [232 ITR 945 (CAL)] (VIII) CIV V. SMT. D. VALLAMMAL [230 ITR 695 ( MAD)] (IX) J. K. INDUSTRIES LTD. V. ACIT [283 ITR 1 01 (KOL)] 8. IN VIEW OF THE ABOVE, IT IS ESTABLISHED BEY OND DOUBT THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER CA N NOT BE CONSIDERED AS PREJUDICIAL TO THE INTEREST OF REVEN UE, AND THEREFORE, WE HAVE TO REQUEST YOUR HONOUR TO DROP PROCEEDINGS INI TIATED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961'. 4. A FURTHER WRITTEN SUBMISSION WAS ALSO FILED BY T HE ASSESSEE WHICH READS AS UNDER:- 'DURING THE COURSE OF LAST HEARING, YOUR GOODSELF H AVE ASKED TO PROVIDE A NOTE ON WORKING CARRIED OUT FOR CALCULATI NG THE DISALLOWANCE MADE UNDER SECTION 14A OF THE INCOME T AX ACT, 1961. IN THIS RESPECT, WE WOULD LIKE TO SUBMIT THAT IN THE P APER BOOK ON PAGE NO. 5, DETAILED STATEMENT OF CALCULATION OF DISALLO WANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1962 HAS BEEN GIVEN. THE SAME IS SUMMARIZED HEREUNDER AGAIN FOR READY REFERENCE. 1. THE TOTAL INCOME OF RS. 204,91,93,179/-HAS BEEN BIFURCATED INTO EXEMPT AND NON-INCOME AS UNDER: SR. NO PARTICULARS AMOUNT (RS.) (I) EXEMPT INCOME 1,89,42,065 (II) NON-EXEMPT INCOME (A) LONG TERM HOU SING INCOME 174,36,57,052 (B) NON LONG TERM HOUSING INCOME 28,65,94,062/- 203,02,51,114 I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 8 TOTAL INCOME 204,91,93,179 2. THEREAFTER, THE RATIO OF EXEMPT AND NON-EXEMPT INCOME HAS BEEN WORKED OUT VIS-A-VIS TOTAL INCOME, WHICH COMES AS UNDER: EXEMPT INCOME 0.92% OF TOTAL INCOME NON-EXEMPT INCOME 99.08% OF TOTAL INCOME 3. OUT OF TOTAL EXPENDITURE OF RS. 145,66,06,365/-, PRESUMING THAT PROPORTIONATE EXPENDITURE OUT OF STAFF EXPENSES OF RS. 8,13,14 R 575/- AND ESTABLISHMENT EXPENSES OF 2,28,80,940/- HAS BEE N INCURRED FOR EARNING EXEMPT INCOME AND ACCORDINGLY THE SAME HAS BEEN ALLOCATED BETWEEN EXEMPT AND NON-EXEMPT INCOME AS PER RATIO M ENTIONED ABOVE WHICH COME TO RS.9,63,149/-. OUT OF SAID EXPENDITU RE, ADDITIONS AND DEDUCTIONS AS PER THE PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT, 1961 HAS BEEN MADE SO AS TO TALL SAME WITH THE TOTA L RETURNED INCOME. THUS, THE NET FIGURE OF DISALLOWANCE UNDER 14A OF T HE INCOME TAX ACT, 1961CAME TO RS. 9,45,960/-. WE HAVE YOUR GOODSELF WILL FIND THE ABOVE INFORMATI ON IN ORDER. IN CASE ANY FURTHER CLARIFICATION OR INFORMATION IS RE QUIRED, WE SHALL BE GLAD TO PROVIDE THE SAME.' 5. AFTER TAKING INTO CONSIDERATION THE ABOVE SUBMIS SIONS OF THE ASSESSEE AND TAKING INTO CONSIDERATION VARIOUS DECISIONS OF VARIOUS HIGH COURTS, LD. CIT SET ASIDE THE ORDER PASSED BY ASSESSING OFFICER 6. AGGRIEVED BY THIS ORDER OF LD CIT, ASSESSEE HAS FILED THIS APPEAL BEFORE US. 7. AT THE TIME OF HEARING LEARNED COUNSEL OF THE AS SESSEE PLACING RELIANCE ON THE DECISIONS RELIED BY THE ASSESSEE BEFORE LD. CIT SUBMITTED THAT LD. I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 9 CIT WAS NOT JUSTIFIED IN HOLDING THAT ORDER PASSED BY AO WAS ERRONEOUS AS AO HAS TAKEN A POSSIBLE VIEW AFTER MAKING NECESSARY INQUIRIES THAT NO FURTHER DISALLOWANCE U/S. 14A OF THE ACT WAS WARRAN TED THEN SUO MOTO DISALLOWANCE MADE BY ASSESSEE HIMSELF. IN SUPPORT OF THIS SUBMISSION LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE COPY OF NOTICE ISSUED BY AO U/S. 142(1) DATED 17-05-2002 ALONG WITH QUEST IONNAIRE TO SHOW THAT AO DURING THE ASSESSMENT PROCEEDINGS DID MAKE INQUI RIES IN RESPECT OF DISALLOWANCE U/S. 14A OF THE ACT WHICH WAS DULY COM PLIED WITH BY THE ASSESSEE IN ITS REPLY DATED 01-07-2010 ADDRESSED TO AO. THEREFORE LD. CIT WAS NOT CORRECT IN HOLDING THAT NO INQUIRY AS SUCH WAS DONE BY THE AO IN RESPECT OF DISALLOWANCE U/S. 14A OF THE ACT THEREBY HOLDING THE ORDER PASSED BY AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. CONCLUDING HIS ARGUMENT LEARNED COUNSEL OF THE ASSESSEE SUBMIT TED THAT IT WAS NOT A FIT CASE FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT BY LD. CIT. LD. DR ON THE OTHER HAND SUBMITTED THAT NO INQUIRY ABOU T THE CALCULATION OF DISALLOWANCE U/S. 14A MADE BY ASSESSEE HIMSELF WHIL E FILING THE RETURN OF INCOME WAS MADE BY AO. SINCE LD. CIT WAS OF THE VI EW THAT CALCULATION OF DISALLOWANCE U/S. 14A MADE BY ASSESSEE HIMSELF WHIC H WAS ACCEPTED BY AO DURING THE ASSESSMENT PROCEEDINGS WAS NOT CORRECT A ND AO DID NOT MAKE ANY INQUIRY IN THIS RESPECT, HE HELD THAT ORDER PASSED BY AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND THE SAME WAS SET ASIDE BY LD.CIT WITH THE DIRECTION THAT AO SHOULD PASS A FRESH ASSE SSMENT AFTER CONDUCTING NECESSARY INQUIRES AND AFTER GIVING PROPER OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. SINCE NO PREJUDICE IS CAUSED TO THE ASSE SSEE, THE ORDER PASSED BY LD. CIT U/S. 263 OF THE ACT MAY KINDLY BE UPHELD. I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 10 8. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD, WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT IN THE TAX AUDIT REPORT THE AUDITOR HAS CATEGORIZED THE EXPENSE OF RS. 9,45,960 /- BEING EXPENSE INADMISSIBLE IN TERMS OF SECTION 14A, HOWEVER THE S AME HAS NOT BEEN DISALLOWED BY THE ASSESSEE IN THE RETURN OF INCOME FILED BY HIM. SO AO SOUGHT ASSESSEES EXPLANATION IN THIS REGARD IN HIS NOTICE DATED 17-05-2010. IN RESPONSE TO THIS NOTICE ASSESSEE REPLIED THAT AS SESSEE HAS DULY DISALLOWED THE SUM OF RS. 9,45,960/- WHILE COMPUTING THE INCOM E. NO FURTHER INQUIRY IN RESPECT OF THIS DISALLOWANCE WHATSOEVER WAS MADE BY THE AO AND THE DISALLOWANCE OF RS. 9,45,960/- U/S. 14A MADE BY THE ASSESSEE IN HIS COMPUTATION OF INCOME WAS ACCEPTED BY HIM. LD. CI T HAS FOUND THIS ACTION OF THE AO ERRONEOUS AS AO HAS NOT MADE ANY INQUIRY REGARDING THE CALCULATION OF THIS DISALLOWANCE. ACCORDING TO HIM THIS DISALLOWANCE SHOULD HAVE BEEN OF RS. 1,22,25,994/- AS PER PROVISIONS OF SECTION 14A READ WITH RULE 8D OF I.T. RULES. IN VIEW OF THIS, IT CANNOT BE SAID THAT ASSESSING OFFICER HAS TAKEN A POSSIBLE VIEW IN THE MATTER AS THE SAME HAS BEEN DONE WITHOUT MAKING ANY INQUIRY AS TO HOW FIGURE OF DISALLOWANCE OF RS. 9,45,960/- HAS BEEN WORKED OUT BY THE ASSESSEE, AND THEREFORE THE CASE LAWS RELIED BY THE LEARNED COUNSEL OF THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THIS CASE. THE LAW IS SETTLED THAT IF AO HAD PASSED AN ORDER W ITHOUT PROPERLY CONDUCTING THE INQUIRY, THE SAME CAN BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. SINCE IN THIS CASE AS WE HAVE ALREADY SEEN THAT AO HAS ACCEPTED THE SUO MOTO DISALLOWANCE OF RS. 9, 45,960/- U/S. 14A OF THE ACT WITHOUT GOING INTO THE DETAILS AS TO HOW THIS F IGURE WAS WORKED OUT BY THE ASSESSEE AND NO QUERY BEING RAISED BY THE AO DU RING THE ASSESSMENT PROCEEDINGS IN THIS REGARD, WE ARE OF THE CONSIDERE D OPINION THAT LD. CIT HAS I.T.A NO.646/AHD/2013 A.Y. 2008-09 PAGE NO GRUH FINANCE LTD. VS. ACIT 11 RIGHTLY INVOKED THE PROVISION OF SECTION 263 OF THE ACT. THEREFORE THE ORDER PASSED BY LD. CIT U/S. 263 IS HEREBY UPHELD. 9. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER J UDICIAL MEMBER AHMEDABAD : DATED 27/09/2013 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,