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Smt. Vijaya Srinivasan Flat No.33 & 34, Rishikesh Apartments, No.38, G..N. Chetty Road, T. Nagar, Chennai 600 017 vs The Assistant Commissioner of Income Tax, Circle II,Chennai
October, 24th 2013
                      `C ' BENCH : CHENNAI


                       Assessment year   : 2008-2009

      Smt. Vijaya Srinivasan       vs     The Assistant Commissioner of
      Flat No.33 & 34,                    Income Tax,
      Rishikesh Apartments,               Circle ­ II,
      No.38, G..N. Chetty                 Chennai
      T. Nagar,
      Chennai 600 017

      [PAN ACEPV1779M]
      (Appellant)                         (Respondent)

         Appellant by                   : Shri. K. Balasubramanian
         Respondent by                  : Shri.Alka Rajvanshi Jain (CIT)

          Date of Hearing               : 08-10-2013
          Date of Pronouncement         : 09-10-2013



                    This appeal of the assessee for assessment year

2008-09 ,emanates from the order dated 25.03.2013 passed by the

CIT-IV, Chennai in C.No.46(16)/CIT-IV/2012-13, in proceedings under

section 263 of the Income Tax Act 1961 [in short the "Act"].
                                :- 2 -:             I.T.A.No.644/Mds/2013

2.    The facts of the case are in a very narrow compass. The

assessee is an `individual'. She is engaged in the business of share

trading. On 28.07.2008, the assessee had filed her `return' declaring

income   of   Rs.58,50,180/-   which      was   `summarily'   processed.

Thereafter, the Assessing Officer framed `regular' assessment in her

case vide order dated 31.12.2010 treating long term capital gain

`exempt' income under section 10(38) amounting to Rs.1,78,11,947/-.

The assessee had also earned dividends under section 10(34) of the

Act an Rs.29,34,251/-.   In assessment order, the Assessing Officer

specifically observed that no disallowance under section 14A was

required since entire long term capital gain claim was treated as

business income. In this manner, the assessment was finalized.

3.    Coming to the present case, on 12.03.2013, the CIT issued a

notice after observing that since the Assessing Officer had not

considered making any disallowance under section 14A of the Act qua

the assessee's exempt income of Rs.29,34,251/-, the assessment was

erroneous causing prejudice to the interest of the Revenue.

Thereafter, in the order under challenge, he has held that the

Assessing officer had wrongly not considered the issue of disallowance
                                  :- 3 -:            I.T.A.No.644/Mds/2013

under section 14A of the Act and            directed him to pass fresh

assessment order.

                    Therefore, the assessee is in appeal.

4.     In the course of hearing, the only argument advanced by the

assessee is that in the assessment order, the Assessing Officer had

duly considered the issue of disallowance under section 14A of the

Act which was not made by observing that entire long term capital

gains had been treated as business income.             To buttress her

submissions, the assessee had drawn our attention to the assessment

order and prayed for acceptance of the appeal.

5.    The Revenue draws support from the order under challenge and

prays for confirmation thereof.

6.   We have heard both parties and perused the case file. It is

evident to us that the CIT had issued notice under section 263 only on

the ground that the Assessing Officer; while finalizing the assessment,

had not considered the issue of disallowance under section 14A of the

Act qua the assessee's exempt income of Rs.29,34,252/-.       However, a

perusal of the assessment order shows that in para 3, the
                                   :- 4 -:            I.T.A.No.644/Mds/2013

  Assessing Officer had duly considered the very issue but did not make

  disallowance because entire long term capital gains were treated as

  business income. In these circumstances, the only reason quoted by

  the CIT in invoking jurisdiction under section 263 of the Act appears to

  be contrary to the facts on record. We make it clear that in section

  263 proceedings, the validity thereof is to be judged qua the reasons

  stated in the show cause notice which in the instant case turns out to

  be against the record. So, we hold that the CIT has wrongly assumed

  jurisdiction under section 263 of the Act in directing the Assessing

  Officer to pass a fresh assessment order keeping in mind the

  provisions of section 14A of the Act. Therefore, the relevant contention

  of the assessee challenging the CIT's order stands accepted.

  7.      In the result, the appeal of the assessee is allowed.

         Order pronounced on Wednesday, the 9th of October, 2013, at

           Sd/-                                           Sd/-
(DR. O.K. NARAYANAN)                                (S.S. GODARA)
   VICE PRESIDENT                                  JUDICIAL MEMBER

  Dated: 09th October, 2013.
  Copy to: Appellant/Respondent/CIT(A)/CIT/DR
:- 5 -:   I.T.A.No.644/Mds/2013
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