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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
This appeal filed by the assessee is directed against the order of the CIT(A), Trivandrum dated 23/08/2019 for the assessment year 2009-10.
The assessee has raised the following grounds of appeal:
1. The CIT(A) erred in confirming the disallowance of Rs.10,94,621/- u/s. 14A towards estimated expenditure incurred for earning dividend income, overlooking the fact that the appellant had produced sufficient material to establish that they have not incurred any expenditure for earning dividend income.
2. The CIT(A) erred in not directing the Assessing Officer to allow relief for Rs.10,74,03,603 representing the reduction in balances in subsidy accounts. OTS pending appropriation, RR collection pending, appropriation and Suspense accounts, overlooking the fact that this has already been assessed as income for the AY 2008-09 and the Assessing Officer had agreed at the time of addition to allow relief as and when it is adjusted in the books of accounts by the assessee and CIT(A) also for the AY 2008-09 had directed Assessing Officer to give appropriate relief as and when this is adjusted in the books of accounts.
3. Regarding Ground No. 1, the facts of the case are that the assessee had received dividend income and income from Mutual Fund during FY 2008-09 and the assessee had not disallowed the expenditure incurred in relation to exempt income.
On enquiry by the Assessing Officer, the assessee submitted that it had not incurred any expenditure in relation to the exempt income. However, the Assessing Officer rejected the argument of the Assessing Officer and computed the disallowance u/s. 14A of the Act at Rs.10,94,621, i.e., Rs.10,05,371 under Rule 8D(ii) and Rs.89,250 under Rule 8D(iii) of the I.T. Rules.
On appeal, regarding disallowance under Rule 8D(ii), the CIT(A) was of the opinion that necessary evidence was not produced before the Assessing Officer regarding usage of own funds. Before us, the Ld. AR pleaded that one more opportunity of producing necessary evidence in support of the availability of own funds in making investments in exempted income yielding assets. We are of the opinion that it is appropriate to remit this issue to the file of the CIT(A) for fresh consideration with a direction to the assessee to produce the fund flow statement before him, showing availability of own funds as on the date of investment. Thus, this ground of appeal of the assessee is allowed for statistical purposes.
4.1 With regard to the disallowance u/s. 14A of the I.T. Act r.w. Rule 8D(iii) of the I.T. Rules, the income tax authorities have applied Rule 8D(iii) as follows:
(iii) an amount equal to one-half per cent of the average of the value of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and last day of the previous year.
Being so, we do not find any infirmity in the order of the CIT(A) and the same is confirmed at Rs.89,250/-. Thus, this ground of appeal of the assessee is dismissed.
5. Regarding Ground No. 2, the facts of the case are that the Assessing Officer had not allowed relief for the reduction in balance of following accounts:
Particulars Balance as on Balance as on Difference (Rs.) 31.03.2008 31.03.2009 OTS account 9,97,88,621 72,27,033 9,25,61,588 BR account 2,88,95,081 1,40,53,066 1,48,42,015 Total 12,86,83,702 2,12,80,099 10,74,03,603 5.1 On appeal, the CIT(A) observed that the assessee had not explained under which provision of the Act the said claim for allowance of reduction in balances is allowable. In the absence of such information, the CIT(A) dismissed the ground of appeal of the assessee.
5.2 Against this, the assessee is in appeal before us. The Ld. DR relied on the orders of the income tax authorities.
5.3 We have heard the rival submissions and perused the record. In our opinion, the order of the CIT(A) is very cryptic. He has not given any finding in his order as required u/s. 250(6) of the I.T. Act. The CIT(A) being a quasi-judicial authority, should have given a finding on the issue with reasons for confirming the disallowance on account of reduction in balance of the above accounts made by the AO. Being so, in the interest of justice, we remit the entire issue in dispute to the file of the CIT(A) for fresh consideration and to pass a speaking order on the same.
Thus, this ground of appeal of the assessee is allowed for statistical purposes.