M/S. PARAMOUNT PRODUCTS PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

(A) For the sake of convenience these two appeals are disposed of through this consolidated order as common issue is involved. Grounds of appeal are as under :- ITA No.-187/Del/2017, A.Y. 2012-13

“1. On the facts and circumstances of the case and in law the authorities below has erred in confirming the disallowance of expense of Rs. 35,46,812/- u/s 14A of the Act. The action of authorities below is wrong, illegal, misconceived, unjustified and bad at law therefore it should be quashed.

2. The appellant craves the right to add/alter/amend/delete all or any of the ground of appeal at the time of hearing.”

ITA No.-188/Del/2017, A.Y. 2013-14

2. The appellant craves the right to add/alter/amend/delete all or any of the ground of appeal at the time of hearing.”

(B) For assessment year 2012-13, assessment order u/s 143(3) dated 10.03.2015 was passed determining total income of the assessee at Rs. 18,16,18,664/- as against returned income of Rs. 17,79,04,610/-. In this assessment order, the total disallowance computed by the Assessing Officer u/s 14A of Income Tax Act read with Rule 8D of Income Tax Rules was Rs. 37,14,054/-, which was in addition to an amount of Rs.88,240/- suo moto disallowed by the assessee. Relevant portion of the assessment order is reproduced as under :-

(B.1) The assessee filed appeal against the aforesaid assessment order dated 10.03.2015 for A.Y. 2012-13, before the Ld. CIT(A). Vide impugned appellate order dated 18.11.2016 the Ld. CIT(A) upheld the disallowance u/s 14A read with Rule 8D, to the extent of Rs. 35,46,812/- as against aforesaid Rs. 37,14,054/- computed by the Assessing Officer; and deleted the remaining disallowance amounting to Rs. 1,67,242/-. The relevant portion of the order of the Ld. CIT(A) is reproduced as under :-

(C) In assessment year 2013-14, assessment order u/s 143(3) of Income Tax Act was passed by the Assessing Officer on 27.01.2016 wherein total income was determined at Rs. 16,26,41,018/- as against returned income of Rs. 15,85,47,480/-. In this assessment order, the disallowance u/s 14A read with Rule 8D of Income Tax Act was computed at Rs. 40,93,538/- which was in addition to Rs. 89,888/- suo moto disallowed by the assessee. The relevant portion of the assessment order is reproduced as under :-

(C.1) The assessee filed appeal before the Ld. CIT(A) against the aforesaid assessment order dated 27.01.2016 for A.Y.2013-14. Vide impugned separate appellate order, also dated 18.11.2016, the Ld. CIT(A) restricted the disallowance to Rs. 40,69,447/- as against aforesaid Rs. 40,93,538/- computed by the Assessing Officer and deleted the remaining disallowance of Rs. 24,091/-.The relevant portion of the order of the Ld.CIT(A) is reproduced asunder :-

(D) The present appeals before us have been filed by the assessee against the aforesaid two separate impugned appellate orders, each dated 18.11.2016, for assessment years 2012-13 and 2013-14. In the course of appellate proceedings in ITAT, a consolidated paper book containing the following particulars was filed from the assessee side: S.No. Particulars (A) Assessment Year 2013-14 1. Copy of acknowledgment of ITR (ITR-V) and Computation of Total Income along with Balance Sheet with its Annexures, Profit & Loss account and Tax Audit Report (Form 3CA/3CD) for the year ended 31.03.2013.

(D.1) Moreover, two separate compendia of judgments was also filed from the assessee side containing copies of decisions in the following cases :-

S. Particulars No. 1. Principal Commissioner of Income-tax, Central- 1 Vs. Moonstar Securities Trading and Finance Co. (P.) Ltd. reported at 105 taxmann.com 275 (Hon'ble SC). 2. Principal Commissioner oflncome Tax Vs Hero Corporate Services Ltd. reported at 103 taxmann.com 200 (Hon'ble SC) 3. H.T Media Ltd. Vs Principal Commissioner of Income Tax-IV, New Delhi reported at 85 taxmann.com 113 (Hon’ble High Court of Delhi)

Supreme Court of India) 11. Maxloop Investment Ltd. Vs. Commissioner of Income Tax, New Delhi reported at 91 taxmann.com 154 (Hon’ble Supreme Court of India)

(E) At the time of hearing before us, the Ld. Authorised Representative submitted that u/s 14A(2) of Income Tax Act read with Rule 8D(1) of Income Tax Rules the Assessing Officer is required to record satisfaction for invoking Rule 8D of Income Tax Rules for the purpose of computation of disallowance u/s 14A of IT Act. He contended that although the Assessing Officer has recorded satisfaction in the assessment order for both the years, the satisfaction recorded by the Assessing Officer was in general terms and does not meet the requirements of Section 14A(2) of Income Tax Act read with Rule 8D(1) of Income Tax Rules. He placed strong reliance on H.T. Media Ltd. vs. Pr. CIT (supra) for his contention. The Ld. Authorised Representative, relying on Arnav Gruh Ltd. vs. DCIT, Central Circle-36 [2018] 89 taxmann.com 189 (Mumbai- Trib.] further submitted that the satisfaction recorded by the Assessing Officer in the assessment order cannot be improved upon by the Ld. CIT(A) in appellate proceedings before the Ld. CIT(A). The Ld. Departmental Representative, on the other hand, relied on the orders of the Assessing Officer and the Ld. CIT(A).

(F) We have heard both sides. We have perused the materials on record. We have also considered the judicial precedents brought to our attention or referred to in the records. On perusal of the assessment orders for both the years, relevant portion of which have already been reproduced in foregoing paragraphs (B) and (C) of this order; we find that the Assessing Officer has recorded detailed satisfaction, in assessment orders for both the assessment year 2012-13 and 2013-14, for invoking Rule 8D of Income Tax Rules for the purpose of computing disallowance u/s 14A of Income Tax Act. In view of detailed satisfaction recorded by the Assessing Officer in assessment orders for both assessment years 2012-13 and 2013-14; we reject the contention made by the Ld. AR that the satisfaction recorded by the Assessing Officer does not meet the requirements of Section 14A(2) of Income Tax Act read with Rule 8D(1) of Income Tax Rules. We are of the view that the satisfaction recorded by the Assessing Officer in both the assessment years 2012-13 and 2013-14 is sufficient compliance of Section 14A(2) of IT Act read with Rule 8D(1) of IT Rules. The reliance placed by the Ld. AR on Arnav Gruh Ltd. vs. DCIT (supra) is of no help to the assessee in view clearly distinguishable facts. In Arnav Gruh Ltd. vs. DCIT (supra) the Assessing Officer had not recorded any satisfaction; whereas in the present appeals before us the Assessing Officer has recorded detailed satisfaction for invoking Rule 8D for the purpose of computing disallowance u/s 14A of Income Tax Act. Similarly the reliance placed by the Ld. AR on Associated Law Advisers vs. ITO (supra) also does not advance the case of the assessee, because of clearly distinguishable facts. In Associated Law Advisers vs. ITO (supra), the assessee was following cash system of accounting and the Assessing Officer had failed to satisfy himself about correctness of assessee’s claim. However, in the present appeals before us, the assessee is following mercantile system of accounting and the Assessing Officer has recorded detailed satisfaction for computing disallowance u/s 14A of Income Tax Act, in accordance with Rule 8D of Income Tax Rules. Though the Ld. AR placed heavy reliance on H.T.Media Ltd. Vs. Pr. CIT (supra) for the contention that the satisfaction recorded in the assessment orders was of broad and general nature and did not meet the requirement of Section 14A(2) of Income Tax Act read with Rule 8D of Income Tax Rules; however, in the facts before us, it is our categorical finding of fact, that the satisfaction recorded by the Assessing Officer is not of broad and general nature; but is detailed satisfaction taking into account the specific facts and circumstances of the case; and meets the requirements of Section 14A(2) of I.T.Act read with Rule 8D(1) of IT Rules, for both the assessment years, A.Y. 2012-13 as well as AY 2013-14. Therefore the order in the case of H T Media Ltd. vs. Pr. CIT (supra) fails to advance assessee’s case. (F.1) We have further noticed that the Ld. CIT(A), in the aforesaid impugned appellate orders each dated 18.11.2016 has already granted partial relief and has deleted disallowances amounting to Rs. 1,67,242/- in assessment year 2012-13 and Rs. 24,091/- in assessment year 2013-14 respectively. The Ld. CIT(A) has passed detailed speaking order for partly upholding the disallowances made by the Assessing Officer and partly deleting the remaining portion of the disallowances. (F.2) In view of the foregoing, we are of view that the impugned appellate orders, each dated 18.11.2016, of the Ld. CIT(A) for assessment years 2012-13 and 2013-14, are just, proper and in accordance with law having regard to specific facts and circumstances of the case. We are also of the view that the satisfaction recorded by the Assessing officer in the assessment orders for assessment year 2012- 13 and 2013-14 are sufficient compliance of requirements of Section 14A of I.T. Act, read with Rule 8D of IT Rules. Therefore, we decline to interfere with the impugned appellate orders of the Ld. CIT(A) and dismiss the assessee’s appeals for assessment year 2012-13 and 2013-14, both. (F.2) In the result, both the appeals are dismissed.

Order pronounced in the open court on 16.01.2020.