PASAND SOAP & CHEMICALS INDUSTRIES ,RAJKOT vs. ITO, WARD-2(1)(2), RAJKOT, RAJKOT

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ITA 246/RJT/2026Status: DisposedITAT Rajkot09 July 2026AY 2021-224 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had already made a suo motu disallowance of Rs. 16,347/- under Section 14A, which was correctly computed and supported by documentation. The rectification order by the AO was therefore not justified.

What were the facts?

The assessee, a partnership firm, filed its return of income for AY 2021-22. The AO passed an order under Section 154, making an adjustment of Rs. 2,12,67,857/- on account of disallowance under Section 14A.

What were the issues?

Whether the disallowance under Section 14A was correctly computed and offered by the assessee, and if the subsequent rectification under Section 154 was justified.

Which sections of the Income-tax Act were involved?

Section 14A,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Rajkot Bench, Rajkot

Before: Dr. Arjun Lal Saini & Shri Sonjoy Sarma

For Appellant: Shri Mehul Ranpura, Ld. AR
For Respondent: Shri Ganesh Iyer, Ld. Sr. DR
Hearing: 08/07/2026Pronounced: 09/07/2026

आयकर अपीलीय अिधकरण, राजकोट �यायपीठ, राजकोट। In The Income Tax Appellate Tribunal, Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member And Shri Sonjoy Sarma, Judicial Member

आयकर अपील सं./ITA No. 246/RJT/2026 [ �नधा�रण वष�/Assessment Year: 2021-22 ] M/s. Pasand Soap & Chemical The Income-tax Officer, Ward-2(1)(2), Industries Rajkot Vs. Opp. Rajkot Milk Dairy, Dudhsagar Aayakar Bhavan, Race-Course Ring Marg, Rajkot-360001 Road, Rajkot-360001 Gujarat Gujarat �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AACFP4321P (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Shri Mehul Ranpura, Ld. AR Respondent by : Shri Ganesh Iyer, Ld. Sr. DR

Date of Hearing : 08/07/2026 Date of Pronouncement : 09/07/2026

:: ORDER :: Per, Shri Sonjoy Sarma, JM:

Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2021-22, is directed against the order under section 250 of the Income- tax Act, 1961 [hereinafter referred to as ‘the Act’] passed by the Commissioner of Income Tax(Appeal) [hereinafter referred to as ‘Ld.CIT(A)’], dated 30.12.2025, which in turn arises out of an order passed by assessing officer u/s. 154 of the Act, dated 09.01.2024.

ITA No. 246/RJT/2026 Pasand Soap Chemical Industries

2.

Brief facts of the case are that the assessee is a partnership firm engaged in the business of manufacturing chemical products. The return of income for the Assessment Year 2021-22 was filed declaring a total income of Rs.9,76,370/-. The return was processed under Section 143(1) of the Income-tax Act, 1961. Subsequently, an order under Section 154 of the Act was passed, whereby an adjustment of Rs.2,12,67,857/- was made on account of disallowance under Section 14A of the Act. Consequently, the total income of the assessee was determined at Rs.2,30,17,680/-, as against the returned income.

3.

Aggrieved by the rectification order, the assessee preferred an appeal before the CIT(A). It was contended that while filing the return of income, the assessee had itself made a suo motu disallowance under Section 14A amounting to Rs.16,347/-. The disallowance was computed at 1% of the annual average of the monthly average opening and closing balances of investments. However, the CIT(A) rejected the contention and upheld the action of the Assessing Officer.

4.

Dissatisfied with the above order assessee is in appeal before this tribunal. At the time of hearing the Ld. AR submitted that the assessee had correctly computed the disallowance under Section 14A of the Act in accordance with the applicable provisions. Attention was invited to page 8 of the paper book, wherein the computation of income clearly reflected the suo motu disallowance of Rs.16,347/-. It was further submitted that page 95 of the paper book contained the detailed working showing that the total monthly average value of investments was Rs.1,96,16,778/-, the annual

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ITA No. 246/RJT/2026 Pasand Soap Chemical Industries average monthly investment worked out to Rs.16,34,732/-, and 1% thereof came to Rs.16,347/-. Thus, the assessee had correctly offered the disallowance in its return of income itself. It was argued that these facts and supporting documents were not considered either by the CPC while passing the order under Section 154 or by the CIT(A) while disposing of the appeal.

5.

On the other hand, the Ld. DR relied upon the orders of the lower authorities but could not controvert the factual submissions or the computation placed on record by the assessee. We have heard the rival submissions and perused the material available on record. From the documents placed before us, particularly page 95 of the paper book, it is evident that the assessee had already made a suo motu disallowance of Rs.16,347/- under Section 14A of the Act by computing 1% of the annual average of the monthly average opening and closing balances of investments. The computation is duly supported by the working furnished by the assessee and forms part of the return of income.

The Revenue has not disputed the correctness of the working furnished by the assessee. The Ld. DR was also unable to controvert the factual position emerging from the paper book. In our considered opinion, once the assessee had already made the appropriate disallowance in the return of income and the computation is borne out from the records, the rectification made under Section 154 of the Act by making a further adjustment was not justified. The authorities below failed to appreciate the documentary evidence produced by the assessee. Accordingly, we find merit in the submissions advanced on behalf of the assessee. The addition/disallowance

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ITA No. 246/RJT/2026 Pasand Soap Chemical Industries made through the order passed under Section 154 of the Act is directed to be deleted.

6.

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

Order pronounced in the open court on this 9th day of July, 2026.

Sd/- Sd/- [ Dr. Arjun Lal Saini ] [ Shri Sonjoy Sarma ] लेखा सद�य/Accountant Member �याियक सद�य/Judicial Member राजकोट/Rajkot िदनांक/ Date: 09/07/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Rajkot 6. Guard File By order //True Copy// Sr. Private Secretary ITAT, Rajkot

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