SHRI HARI PODDAR,ERODE vs. DCIT, COIMBATORE

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ITA 142/CHNY/2018Status: DisposedITAT Chennai04 December 2020AY 2013-143 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the AO failed to record due satisfaction before making the disallowance under Section 14A, as required by the Act and judicial precedents. Therefore, the disallowance was not justified.

What were the facts?

The Assessing Officer (AO) disallowed Rs. 1,68,189/- under Section 14A read with Rule 8D for dividend income received by the assessee, as no disallowance was made by the assessee. The CIT(A) dismissed the assessee's appeal.

What were the issues?

Whether the AO properly recorded satisfaction before disallowing expenses under Section 14A, and if the disallowance was justified based on the facts.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI V. DURGA RAO & SHRI S. JAYARAMAN

Hearing: 25.11.2020

आदेश / O R D E R PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:

1.

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-18, Chennai, in dated 14.11.2017 for the AY 2013-14.

2.

Shri Hari Poddar, the assessee, Proprietor of Aditya Trading Co., derives income from house property, business and other sources. While making the assessment for the AY 2013-14, the AO found that the assessee received dividend of Rs.2,22,374/- but has not made any disallowance u/s.14A r.w.r.8D. Therefore, he made a disallowance of Rs.1,68,189/- u/s.14A r.w.r.8D(ii) & (iii) and completed the assessment. Aggrieved, the assessee filed an appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal. Aggrieved against that order, the assessee filed this appeal.

3.

The case was heard through video conferencing. The Ld.AR submitted that the assessee had an opening capital as on 01.04.2012 at Rs.7.13 Crs.

The closing capital as on 31.03.2013 was at Rs.13.23 Crs. and admitted a total income of Rs.2.70 Crs. which included net interest income of Rs.17.51 lakhs. As against interest receipt of Rs.29.68 lakhs, the assessee paid interest of Rs.12.17 lakhs only. Therefore, there is no interest outgo. As against assessee’s capital of Rs.13.23 Crs. The total investments in shares and mutual funds were at Rs.2.19 Crs. only which were fully sourced through internal accruals/shares transferred from Pratibha Poddar. The disallowance under sub-rule (iii) is not warranted as the investments were made through a member of stock exchange and the cost of brokerage is not claimed as an expenditure, but formed part of the value of investment.

Therefore, the assessee has not incurred any expenditure in relation to the impugned income. The AO without recording due satisfaction as required u/s.14A as well as elucidated in the decision of the Hon’ble Apex Court in the case of Maxopp Investment Ltd. v. CIT reported in 402 ITR 640 and without any material, merely, disallowed Rs.1,68,189/- and hence pleaded to allow the appeal. Per contra, the Ld.DR submitted that since the assessee has not made any disallowance u/s.14A, the orders of the lower authorities are justified and thus supported them.

4.

We heard the rival submissions and gone through the relevant materials. While invoking the provisions of section 14A r.w.r.8D, the AO is required to record his satisfaction having regard to the kind of assessee’s financial affairs, how the assessee’s claim is not correct and then proceed for appropriate apportionment. It is clear from the assessee’s submissions, supra, and from the Assessment Order that there is no such satisfaction recorded. Therefore, the disallowance made by the AO is not justified and hence, we direct the AO to delete it. The corresponding grounds of the assessee’s appeal are allowed.

5.

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

Order pronounced on the 04th day of December, 2020, in Chennai.

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