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Facts
The assessee appealed against ex-parte orders from the Ld. CIT(A) confirming disallowances under Section 14A read with Rule 8D for AYs 2012-13 & 2013-14. The disallowances made by the AO and confirmed by the CIT(A) significantly exceeded the actual exempt income earned by the assessee. The ex-parte orders were passed after the assessee sought an adjournment due to the COVID-19 pandemic affecting their AR's office.
Held
The Tribunal ruled that disallowance under Section 14A read with Rule 8D cannot surpass the exempt income, citing various High Court judgments. The Tribunal set aside the appeals to the Assessing Officer with instructions to restrict the disallowance to the exempt income. It declined to restore the matter to the CIT(A) despite the ex-parte order, considering it an 'open and shut case'.
Key Issues
Whether disallowance under Section 14A read with Rule 8D can exceed the actual exempt income, and the appropriate course of action for an ex-parte order passed by the CIT(A).
Sections Cited
14A, Rule 8D
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Income Tax Appellate Tribunal, “A(SMC
Before: SHRI RAJESH KUMAR, AM
These are appeals preferred by the assessee against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 14.05.2024 for the AYs 2012-13 & 2013-14.
The only issue raised by the assessee in the various grounds of appeal is against the confirmation of addition of ₹33,41,021/- by the ld. CIT (A) as made by the ld. AO u/s 14A of the Act r.w.r. 8D of the Rules.
The facts in brief are that this is a second round of litigation before us. The order passed by the ld. CIT (A) is an ex-parte order, for which the assessee filed the affidavit stating therein that only single notice for both the assessment years, was issued by the ld. CIT (A) for which the adjournment was sought by the assessee on the ground that office of the ld. AR was closed since the whole country was reeling under Covid pandemic. Thereafter, no notice was issued by the ld. CIT (A).
Considering the issue involved being an open and shut case in favor of the assessee, we are not inclined to restore the issue to the file of the ld. CIT (A) though the ld CIT(A) decided these appeals ex-parte. The issue involved in the present case is that the assessee has earned exempt income of ₹13,18,219/- against which the ld. AO made disallowance u/s 40(A) Rule 8D of the Rules of ₹33,41,021/-. In our opinion, the disallowance cannot exceed the amount of exempt income as has been held in the cases of Principal commissioner of Income Vs Reliance Chemotex Industries Ltd (2022) 138 tamann.com 199 (Cal) and Deputy Commissioner of Income Tax Vs Jite Shipyard Ltd.(2023) 157 taxmann.com 733(Delhi).Therefore, we set aside the appeal to the file of the ld. AO with a direction to restrict the disallowance to the exempt income. Accordingly, the appeal of the assessee is allowed for statistical purpose.
The issue raised by the assessee is against the confirmation of disallowance of ₹43,65,537/- by the ld. CIT (A) as made by the ld. AO u/s 14A of the Act.
The facts in brief are that the assessee had exempt income of ₹ Rs. 13,88,399/-while the disallowance made by the AO was ₹ 43,65,537/-.The identical issue has been decided by us in No. 1332/KOL/2024 A.Y. 2012-13 and same would be ,mutatis mutandis, applicable to this appeal as well. Consequently the appeal is allowed for statistical purpose.
Order pronounced in the open court on 01.04.2025.