HEMANT KUMAR RUIA,MUMBAI vs. ACIT-18(1), MUMBAI, MUMBAI

The grounds of appeal

In this case the ITAT had earlier passed an ex-parte order in which it was noted that the assessee proposed to go for Vivad se Vishwas Scheme. Hence, assessee’s appeal was treated as dismissed vide order dated 8.2.2021. However, subsequently, assessee requested to recall the said order of the ITAT. However, despite notice none appeared before the ITAT. Hence, I dispose off the appeal by hearing learned Departmental Representative and perusing the records. The sole issue relates to disallowance under section 14A of the Act. The Assessing Officer noted that the assessee has made investment into funds which yield or may yield exempt income. Hence he wanted to inquire whether any income attributable to earn exempt income has been disallowed or not. The assessee responded that it was carrying on the business of trading in shares and securities and hence it pleaded that no disallowance under section 14A of the Act can be done. However, Assessing Officer rejected the same and made the computation under section 14A read with rule 8D of the Act.

Against the above order assessee appealed before learned CIT(A). Learned CIT(A) upheld the order of the Assessing Officer.

Against this order the assessee has filed appeal before the ITAT.

I have heard learned Departmental Representative and perused the record. I note that the assessee’s plea before the Assessing Officer that the assessee is trading in shares hence, no disallowance under section 14A should be done not sustainable on the touchstone of the Hon'ble Supreme Court Maxopp Investment Ltd. Vs. CIT (91 Taxmann.com 154). However, assessee’s plea that disallowance should be restricted to exempt income earned is sustainable. Accordingly I direct that the disallowance in this case should be restricted to exempt income earned.

In the result, appeal by the assessee stands partly allowed.