GODREJ PROPERTIES LTD ,MUMBAI vs. THE ASSESSING OFFICER. NFAC, MUMBAI

Ground Nos. 1 to 4 raised by the assessee are interrelated and interconnected and relate to challenging the order of the learned CIT(A) in rejecting the contention of the assessee for restricting the disallowance under section 14A of the Income-tax Act, 1961 (“the Act”) to the amount of exempt dividend income of Rs. 36,227/- earned during the year under consideration. Therefore, we have decided to adjudicate these grounds together.

We have heard the learned counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we notice that the only contention raised by the assessee relates to challenging the order of the learned CIT(A) in rejecting the contention of the assessee for restricting the disallowance under section 14A of the Act to the amount of exempt dividend income of Rs. 36,227/-.

In this regard, it was submitted that the Coordinate Bench of the Tribunal, in the assessee’s own case, had restricted the disallowance to the extent of dividend income earned during the year vide order passed for Assessment Year 2012-13. Thus, in these circumstances, the principles laid down by the Coordinate Bench of the Tribunal should have been followed by the learned CIT(A) while adjudicating the appeal of the assessee.

On the contrary, we notice that the learned CIT(A) rejected the contention of the assessee by holding that the assessee had itself suo motu made a disallowance of Rs. 12,77,553/- and had not filed a revised return of income to restrict the suo motu disallowance to the extent of exempt income. The learned CIT(A) further observed that this issue was neither discussed before the Assessing Officer nor had the Assessing Officer made any addition on the issue now disputed by the assessee.

After having heard the learned counsels for both the parties at length and upon perusing the material placed on record, we find that during the assessment proceedings, the assessee, as per its averments, vide letter dated 28.02.2021, had raised the contention that since the exempt dividend income actually earned during the year under consideration aggregated to Rs. 36,227/-, the disallowance under section 14A of the Act was required to be restricted to Rs. 36,227/- in accordance with the order of the Coordinate Bench of the Tribunal in the assessee’s own case for Assessment Year 2012- 13.

However, the AO disregarded the said contention raised by the assessee and accepted the suo motu disallowance made by the assessee under section 14A of the Act while filing the return of income for the year under consideration.

It is well settled that the disallowance under section 14A of the Act cannot exceed the exempt income earned by the assessee during the year under consideration. The Coordinate Bench of the Tribunal in the assessee’s own case for Assessment Year 2012-13 has already restricted such disallowance to the extent of the exempt dividend income. Further, the powers of the appellate authorities are not curtailed merely because the claim was not made by way of a revised return of income.

Thus, respectfully following the precedent of the Coordinate Bench in the assessee’s own case and the settled legal position, we direct the Assessing Officer to restrict the disallowance under section 14A of the Act to the exempt dividend income of Rs. 36,227/- earned during the year. Consequently, the impugned order of the learned CIT(A) on this issue is set aside.

In the result, the appeal filed by the assessee is allowed.