AON CONSULTING PRIVATE LIMITED,GURGAON vs. DCIT CIRCLE-1(1), DELHI

The present appeal of the assessee is arising out from the order of Ld. Assessing Officer dated 22nd April, 2022 having DIN No. ITBA/AST/S/143(3)/2022-23/1042842904(1) and relates to Assessment Year 2018-19.

The assessee has raised four grounds with respect to disallowance made by the AO by invoking the provisions of 14A r.w. rule 8D and has raised four grounds with respect to the certain adjustment which has not been made by the AO while framing the assessment. The assessee has raised other two grounds which are relates to the credit of TDS as well as initiation of proceedings u/s 270A of the IT Act. So far as initiation of proceedings u/s 270A of the Income Tax Act concerning this ground is premature and, hence, dismiss accordingly.

So far as grounds relates to disallowance of 14A r.w. Rule 8D is concern, it is the contention of the Ld. Counsel for the assessee that similar issue has been decided by the Co-ordinate Bench in assessee’s own case for Assessment Year 2020-21 in ITA No.4415/Del/2024.

Ld. DR relied upon the orders of the lower authorities below and pointed out certain observations made by the Ld. DRP. Ld. DR vehemently contended that the Assessing Officer has duly recorded the satisfaction before invoking the provisions of 14A and, hence, the impugned order is justifiable.

We have heard the rival submissions and perused the material available on record. Certain facts which are relevant for deciding the issue of satisfaction are that in this case, the assessee has earned dividend income to the tune of Rs.1,30,476,759/- and disallowed an amount of Rs.3,020,006/-. The Ld. AO while applying the provisions of Rule 8D(2)(ii) has taken the figure of dividend income at Rs 137,55,00,000/- and computed the disallowance of rule 8D(2)(ii) @ 1% of this figure. We observed that figure of Rs. 137,55,00,000/- as taken by the AO is not related to the facts of assessee’s case. The fact of the matter is that the total dividend earned by the assessee is Rs.1,30,476,759/- and not Rs 137,55,00,000/-, which means the AO has committed a mistake while deciding the issue. This shows that the Assessing Officer has failed to examine the correctness of the assessee’s account and hence, it is a case where the AO has failed to point out any defect with respect to the suo-motto disallowance made by the assessee. It is settled positon of law that recording of satisfaction before invoking the provisions of section 14A is sine qua non. Further, Co-ordinate Bench of the Tribunal while dealing with the similar issue has observe as under: “11. We have heard the rival submission and perused the material available on record. With respect to the issue of section 14A, we observe that in this case, Ld. DR has failed to refute the argument of the assessee that no borrowed funds have been utilized by the Aon Consulting Private Limited vs. DCIT assessee for making investment in mutual fund. It is also an admitted position of the fact that the assessee has made suo-moto disallowance an amount of Rs.11,46,007/-. The Id. Assessing Officer while recording satisfaction, failed to point out any defect with respect of the disallowance made by the assessee, further the Assessing Officer has failed to point out as to why the accounts of the assessee are not correct. We also observe that the Assessing Officer has wrongly recorded the amount of Rs.30,20,006/ at the time of recording of satisfaction. It is settled position of law that recording of satisfaction is sine qua non before invoking the provisions of section 14A as held by the Hon'ble Delhi High Court in the case of H.T. Media Ltd. vs PCIT (supra) and Joint Investments (P.) Ltd. vs CIT (supra). In the case of H.T. Media Ltd., the Hon'ble High Court in para-35 has categorically held that "the Assessing Officer had to first record, on examining the accounts, that he was not satisfied with the correctness of the assessee's claim of Rs.3 lakhs being the administrative expenses. This was mandatorily necessitated by Section 14A(2) of the Act and read with Rule 8D(2) of the Rules". Hon'ble High Court further held that these type of observations made by the Assessing Officer are not done in the present case and hence the satisfaction recorded by the Assessing Officer is of no use. In the present case also, the Assessing Officer has failed to point out the incorrectness of the account of the assessee. Further, the assessee has not diverted any borrowed fund vis-a-vis investments in mutual fund, there is another aspect of the matter that is the assessee has invested in mutual funds, on which STT as applicable has also been deducted by the payee. Considering all these aspects, we are of the firm opinion that the Assessing Officer has wrongly invoked the provisions of section 14A. Hence, we delete the addition made by the Assessing Officer on this ground.” Following the verdict of the Co-ordinate Bench, we allow this ground of the assessee.

So far as other grounds are concerning i.e. adjustments which have not been made by the Assessing Officer as per the details provided by the assessee. It is the contention of the assessee that the AO has relied upon the figures which are coming out from the intimation order issued u/s 143(1) and has ignored the submissions of the assessee. Ld DR could not controvert this factual position. Therefore, in the interest of justice, we remand these issues to the file of AO for examining afresh in accordance with law.

So far as the ground related to the credit of TDS is concern, we direct the AO to verify the facts and figure once again and decide the issue in accordance with law.

In the result, the appeal of the assessee is allowed as indicated above. Order pronounced in the open court on 25/07/2025.