MILKY INVESTMENT & TRADING COMPANY,DELHI vs. NATIONAL E ASSESSMENT CENTRE, DELHI

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ITA 224/DEL/2026Status: DisposedITAT Delhi21 April 2026AY 2018-194 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO had not recorded satisfaction regarding the inadequacy of the assessee's voluntary disallowance. Following a coordinate bench's decision in the assessee's own case for a prior AY, the Tribunal deleted the AO's addition.

What were the facts?

The assessee, a non-banking finance company, claimed deductions and incurred expenses for earning exempt income. The Assessing Officer (AO) made a disallowance under Section 14A read with Rule 8D, which was confirmed by the CIT(A). The assessee had voluntarily disallowed a portion of expenses.

What were the issues?

Whether the AO properly recorded satisfaction for disallowance under Section 14A, and if the voluntary disallowance was sufficient.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI

For Appellant: Shri M. P. Rastogi, Adv
For Respondent: Shri Om. Prakash, Sr. D.R
Hearing: 21.04.2026Pronounced: 21.04.2026

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’, NEW DELHI BEFORE SH. SATBEER SINGH GODARA, JUDICIAL MEMBER AND SH. NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 224/Del/2026 (Assessment Year : 2018-19) Milky Investment & Trading Vs. National E Assessment Company Centre 4th Floor Punjabi Bhawan Delhi – 110 002 10 Rouse Avenue, Delhi – 110 002 PAN No. AAACM 0584 A (APPELLANT) (RESPONDENT) Assessee by Shri M. P. Rastogi, Adv. Revenue by Shri Om. Prakash, Sr. D.R. Date of hearing: 21.04.2026 Date of Pronouncement: 21.04.2026

ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER : This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Exemption)-NFAC, Delhi [‘CIT(A)’ in short] dated 08.12.2025 arising from the assessment order under section 143(3) read with section 144B of the Act passed by the National E- Assessment Centre, Delhi for Assessment Year 2018-19 on 03.05.2021.

ITA No. 224/DEL/2026 [A.Y 2018-19] Milky Investment & Trading company vs. National E-Assessment Centre 2. Brief facts of the case are that the assessee is a non banking finance company and filed its return of income on 30.10.2018 declaring income of Rs.54,05,180/-. The case was selected for Complete Scrutiny under the E-assessment Scheme, 2019 on the issues of claim of deductions in Schedule BP, and expenses incurred for earning exempt income. Notice u/s 143(2) dated 22/09/2019 and notice u/s 142(1) dated 18/12/2020 along with a detailed questionnaire were issued and duly served. During assessment proceedings, the assessee submitted details of investments and stated that it had voluntarily disallowed Rs.46,17,899/- u/s 14A of the Act. After examining the investment pattern, the Assessing Officer held that earning exempt income involved managerial decisions and indirect expenditure, and therefore provisions of section 14A r.w. Rule BD were applicable. Based on Rule 8D, the AO computed the disallowance at Rs.1,17,95,841/- and, after reducing the voluntary disallowance, made an addition of Rs.71,77,952/-. The assessment was completed u/s 143(3) at a total income of Rs.1,25,83,132/- Aggrieved with the order of AO, assessee filed appeal before the CIT(A), which was dismissed. Now the assessee before the ITAT with the following grounds of appeal: 1. “That the learned Commissioner of Income Tax (Exemption) has erred on facts and in law in confirming the disallowance of Rs.71,77,952/- under section 14A of the Act. 2. That the learned Commissioner of Income Tax (Exemption) has erred in confirming the action of the AO who had computed the above disallowance in a routine manner, without recording any Page 2 of 5

ITA No. 224/DEL/2026 [A.Y 2018-19] Milky Investment & Trading company vs. National E-Assessment Centre finding/satisfaction as to why the su-moto disallowance of Rs.46,17,889/- was incorrect. 3. that the ld. CIT(A) has erred in holding that the AO has made analysis before proceedings to compute disallowance under section 14A and has followed the procedure prescribed under Rule 8D.”

3.

We are called upon to adjudicate on the issue of disallowance u/s 14A in the instant year. At the outset, learned Counsel of the assessee stated that the AO has not recorded satisfaction while disallowing the sum of Rs.71,77,952/-. It is further submitted that the learned AO has not pointed out any item of expense to show that the suo moto disallowance of Rs.46,17,889/- was not justified. Further learned Counsel pointed out that the ITAT in assessee’s own case for A.Y. 2016-17 has decided the issue of disallowance under section 14A in assessee’s favour. 4. Per contra, learned DR relied on the order of the AO. 5. We have heard the rival submissions and perused the material available on record. We find that the AO has not recorded any satisfaction as to how the suo moto disallowance made by the assessee u/s 14A is unjustified. Further, we find that the Co-ordinate Bench of ITAT, Delhi has decided the issue in assessee’s own case for A.Y. 2016- 17 in favour of the assessee. Following the same, we delete the addition made by the AO and hold that the suo moto disallowance of Rs.46,17,889/- would suffice the provision of law. Appeal of the assessee is allowed. Page 3 of 5

ITA No. 224/DEL/2026 [A.Y 2018-19] Milky Investment & Trading company vs. National E-Assessment Centre

6.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on 21.04.2026

Sd/- Sd/- (SATBEER SINGH GODARA) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 28.04.2026 Priti Yadav, Sr. Ps* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

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