AJAY GIRDHARILAL BHARTIYA,MUMBAI vs. DEPUTY COMMISSIONER OF INCOMETA-TAX 7(3)(2), MUMBAI
What did the Tribunal hold?
The Tribunal held that the Assessing Officer cannot make a disallowance under Section 14A without the assessee claiming any expenditure. The disallowance was deemed far-fetched and without material support.
What were the facts?
The assessee, an individual with salary, rental, and other income, filed a return of income. The Assessing Officer disallowed expenses under Section 14A, applying Rule 8D, despite the assessee not claiming any expenditure related to income.
What were the issues?
Whether disallowance under Section 14A is permissible when the assessee has not claimed any expenditure related to income.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHIR KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Harsh Kothari Shri Manoj Kumar Sinha
O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter in short “Ld.CIT(A)”] dated 19.09.2022 for the A.Y.2014-15.
2 (A.Y: 2014-15) Ajay giridharilal Bhartiya 2. Brief facts of the case are, assessee filed return of income for the A.Y. 2014-15 declaring total income of ₹.89,65,270/- on 30.09.2011. The return was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). The case was selected for scrutiny under CASS and notice u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. In response AR of the assessee attended and submitted the relevant information as called for.
3. During the assessment proceedings, Assessing Officer observed that assessee has exempt income and also investments which yielded exempt income as well as business assets in the balance sheet. He observed that assessee has not shown any disallowance u/s. 14A of the Act and the assessee was asked to explain why the disallowance u/s. 14A should not be made. In this regard, Assessing Officer proceeded to make the disallowance applying section 14A r.w. Rule 8D by treating average value of total investments and applying 0.5% of the average value of investments as expenses relating to exempt income under Rule 8D2(iii) of I.T. Rules. Aggrieved assessee preferred an appeal before the Ld.CIT(A) and Ld.CIT(A) sustained the addition made by the Assessing Officer.
“1. The Learned Commissioner of Income-tax (Appeals) ("CIT(A)") erred in not deleting the disallowance of Rs. 3,10,686 made by the Assessing Officer under section 14A of the Income-tax Act, 1961 (the Act).
The Learned CIT(A) erred in not appreciating that the appellant has not claimed any expenditure while computing his income chargeable to tax under any heads of income and, therefore, there is no question of making any disallowance under section 14A of the Act.
The appellant craves leave to add, amend, alter or delete and/or modify the above grounds of appeal.”
At the time of hearing, Ld. AR of the assessee submitted that assessee is a salaried employee and having income from salary, rental income and income from other sources. He submitted that there is no dispute that assessee has earned income as declared in return of income and nowhere assessee has claimed any expenditure relating to any income. Therefore, the provisions of section 14A has no application.
On the other hand, Ld.DR relied on the orders of the lower authorities.
Considered the rival submissions and material placed on record, we observe from the record that assessee is an individual earning income from salary, rental income and income from other sources. On going
4 (A.Y: 2014-15) Ajay giridharilal Bhartiya through return of income we observe that assessee has not claimed any expenditure pertaining to any income earned by the assessee. When there is no expenditure claimed by the assessee either on taxable and non-taxable income the Assessing Officer cannot proceed to make disallowance without there being any claim from the assessee. Therefore, the disallowance made by the Assessing Officer is far-fetched and without any material on record to suggest that assessee has actually claimed expenditure. From the assessment record, we observe that Assessing Officer proceeded to make the disallowance with the perception that assessee is running a business and assessee has not offered any disallowance u/s. 14A of the Act. Therefore, the finding of the tax authorities is not proper. Accordingly, ground raised by the assessee is allowed and we direct the Assessing Officer to delete the disallowance made u/s. 14A of the Act.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 31st March, 2023
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