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आदेश/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 14.09.2018 of the Commissioner of Income Tax (Appeals)-3, Ludhiana [hereinafter referred to as CIT(A)].
The assessee in this appeal has taken following grounds of appeal:- 1. That Ld. Commissioner of Income Tax (Appeals) is not justified in law and facts of the case by confirming disallowance of expenses to the tune of Rs. 291564/- on account of disallowance made u/s 14A read with rule 8-D in Appellant's case.
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That Ld. Commissioner of Income Tax (Appeals) has misconstrued and misapplied the provisions of section 14A of the Income Tax Act 1961 in Appellant's case. In the Appellant's case Ld. Assessing Officer without pointing out any inaccuracy or deficiency in expenses furnished by the assessee and without recording any satisfaction that how these expenses are not acceptable straightway concluded that Assessing officer is not satisfied with the expenses claimed by the assessee.
That the Ld. Commissioner of Income Tax (Appeals) is grossly erred by holding that once the assessee has earned exempt income, the provisions of section 14A are attracted and disallowance has to be worked out by applying rule 8D. Whereas. It is settled by various judicial pronoun-cements that invoking Rule 8D is not mandatory, it will be resorted only if Ld. Assessing Officer is not satisfied as to the correctness of the claim of expenses made by the assessee as stipulated and mandated in section 14A: and invoking Rule 8D is not automatic.
It is well settled law that no disallowance of expenses can be made unless it is proved that the related expenses were incurred to earn exempt income. Whereas the Ld. Assessing Officer failed to discharge such nexus. In the absence of nexus of expenditure incurred and income earned, disallowance cannot be made.
That the order of the Ld. Commissioner of income Tax (Appeals) is contrary to Law and facts of the case. 6. That the Appellant craves leave to add, amend or alter any grounds of Appeal before the Appeal is heard and disposed off.”
The sole issue raised through the above grounds of appeal is
against the disallowance made by the Assessing Officer of Rs.
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2,91,564/- u/s 14A of the Income Tax Act, 1961 (in short 'the Act') read
with Rule 8D (2)(iii) of the Income Tax Rules, 1962.
The Ld. counsel for the assessee, at the outset, had submitted that
the issue is squarely covered with the earlier common order dated
29.04.2019 of the Tribunal in the own case of the assessee bearing ITA
No. 288/Chd/2018 for assessment year 2010-11 and ITA No.
1085/Chd/2017 for assessment year 2011-12, wherein, while dealing
with the identical issue of disallowance u/s 14A, the ITAT held that
Assessing Officer had not recorded satisfaction with regard to the
accounts of the assessee that the suo motu disallowance made by the
assessee u/s 14A of the Act was not correct, hence, the mandate of
section 14A has not been followed. In the case in hand, the assessee,
for the year under consideration, earned dividend income of Rs.
8,06,912/- and suo motu offered disallowance u/s 14A of the Act at Rs.
1,13,938/-. There is no disallowance made by the Assessing Officer out
of any interest expenditure as all the investments were made by the
assessee from his own funds. The total turnover of the assessee for the
year under consideration was at Rs. 12,73,97,046/- and the total
administrative expenses claimed by the assessee were to the extent of
Rs. 20,47,817/-. Out of the administrative expenses, the assessee suo
motu disallowed a sum of Rs. 1,13,938/- u/s 14A of the Act read with
rule 8D(2)(iii) of the I.T. Rules. The Assessing Officer while making the
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disallowance has not followed the guidelines of objective satisfaction as
laid down in the decision of the Hon'ble Supreme Court in the case of
‘Godrej and Boyce Mfg. Co. vs DCIT ’ (2010) 81 taxmann.com 111 (SC)
and further in the case of ‘Maxopp Investment Ltd. vs CIT’ (2018) 91
taaxman.com 154 (SC). The Assessing Officer without recording any
reasoning for his dis-satisfaction with regard to the working of the suo
motu disallowance made by the assessee straight away applied Rule 8D
of the I.T. Rules against the mandatory provisions of section 14A of the
I.T. Act. We, therefore, do not find any justification on the part of the
lower authorities in making / confirming further disallowance over and
above the disallowance suo motu offered by the assessee.
We, therefore, restrict the disallowance u/s 14A of the Act in this
case to the extent of suo motu offered by the assessee.
The appeal of the assessee stands allowed.
Order pronounced in the Open Court on 23.08.2019
Sd/- Sd/- (संजय गग� / SANJAY GARG) (एन. के. सैनी / N.K. SAINI) उपा�य� /Vice President �या�यकसद�य/ Judicial Member Dated : 23.08.2019 “आर.के.” आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील�यआ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड�फाईल/ Guard File
ITA No. 1581-c-18 Shri Rajnish Garg, Ludhiana 5
आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar