The Bombay High Court ruled that once the taxpayer’s submissions with respect to section 14A was accepted by a tax officer, the Tribunal cannot send back the same matter for the tax officer’s re¬consideration.
Recently, the Bombay High Court in the case of Top star Mercantile Pvt. Ltd v. ACIT (2009-TIOL-458-HC-MUM-IT) has held that the Income-tax Appellate Tribunal (the Tribunal) was not justified in sending back the matter to Assessing Officer (AO) to consider the applicability of section 14A of the Income Tax Act, 1961 (Act) after applying the ratio of the decision in the case of ITO v. Daga Capital Management Pvt. Ltd  312 ITR (SB) (Mum) since the submissions made by the taxpayer in this regard was accepted by the tax officer during the assessment proceedings.
Facts of the case
The taxpayer earned dividend income which was exempt. The AO during the course of assessment proceedings made enquiry in respect of dis allowance of expenditure attributable to the exempted dividend income in view of section 14A of the Act. The taxpayer had made appropriate submissions in that regard. The AO did not record any findings with respect to the dis allowance of part of the expenditure under section 14A of the Act at the time of passing the assessment order. However, the AO disallowed interest expenditure to the extent of INR 15 million after holding it as not expended wholly and exclusively for earning business income. The Commissioner of Income-tax (Appeals) [CIT(A)] confirmed the dis allowance made by the AO.
The Mumbai Tribunal accepted the contentions of the taxpayer but the matter was sent back to the AO to reconsider the issues including that of the dis allowance of expenditure under section 14A of the Act after applying the ratio of Daga Capital Management Pvt. Ltd.
Issue before the High Court
Contentions of the taxpayer
Ruling of the Bombay High Court
The Bombay High Court has ruled that the Tribunal cannot send the matter back to AO to reconsider on a particular issue which was already accepted by AO while passing the assessment order.
This decision will help the taxpayers not only while dealing with section 14A issue but also for all those issues which are accepted by AO during the assessment proceedings on which the Tribunal wants to refer the matter back to AO.