COMMISSIONER OF INCOME TAX Vs. CHEMSWORTH PVT. LTD.

JUDGEMENT

(1.) This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment year 2007-08. The appeal was admitted by a bench of this Court vide order dated 12.08.2014 on the following substantial question of law:

(2.) Facts leading to filing of the appeal briefly stated are that the assessee is engaged in business of investment and sale of filtration, equipment and spares and service. The assessee filed the return of income on 26.10.2007 for Assessment Year 2007-08 and declared a total income of Rs.80,93,859/-. The Assessing Officer by an order dated 30.09.2009, without considering the expenditure which was not allowable under Section 14A of the Act proceeded to complete the assessment. The Commissioner of Income Tax, on examination of the records, found that the assessee had earned dividend income, which was exempt from tax. The Assessing Officer without examining the quantum of expenditure incurred by the assessee for earning the exempt income, proceeded to complete the assessment. It was further noticed that expenditure incurred for earning exempt income has to be disallowed under Section14A of the Act.

(3.) Thereupon, the Commissioner of Income Tax issued a notice under Section 263 of the Act to the assessee and held that non consideration of disallowable expenditure under Section 14A of the Act is erroneous and is prejudicial to the interest of the revenue. Accordingly, the Commissioner of Income Tax by an order dated 11.01.2012 set aside the order of the Assessing Officer and remitted the matter to the Assessing Officer to re do the assessment. Being aggrieved, the assessee approached the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). The Tribunal by an order dated 19.04.2013 inter alia held that the Commissioner of Income Tax erred in setting aside the order passed by the Assessing Officer merely on the ground that the enquiry conducted by the Assessing Officer is inadequate. In the aforesaid factual background, this appeal has been filed by the revenue.