AJAYA JAIN HUF,MUMBAI vs. ACIT CIRCLE-12(3), MUMBAI

Aforesaid appeal by assessee for Assessment Year [in short referred to as ‘AY’] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-55, Mumbai [in short referred to as ‘CIT(A)’], Appeal No. CIT(A)- 55/IT-141/17-18 dated 17/05/2018 on following grounds of appeal: -

We have heard and considered the rival submissions and perused relevant material on record and also deliberated on judicial pronouncements as cited before us. Our adjudication to the issue would be as given in succeeding paragraphs.

Facts on record would reveal that the assessee being resident HUF, stated to be engaged in the business of trading in derivatives contracts, was assessed for year under consideration u/s. 143(3) on 18/03/2014 wherein the assessee was saddled with disallowance u/s 14A for Rs.2.93 Lacs in view of the fact that it earned exempt dividend income of Rs.7.26 Lacs. The assessee submitted that no expenditure was incurred to earn the exempt income. However, disregarding the same, Ld. AO made impugned disallowance, in terms of Rule 8D, as submitted by the assessee during the course of assessment proceedings. The stand of Ld. AO, upon confirmation by learned first appellate authority, is under challenge before us.

Upon careful consideration, we find that it was the submissions of the assessee that no expenditure was incurred by it to earn the exempt income. However, Ld. AO did not consider the same having regards to the accounts of the assessee. In our considered opinion, it was incumbent on the part of Ld. AO to arrive at judicious and objective satisfaction as to why the assessee’s submissions were not acceptable. Non-recording of the said satisfaction would oust the jurisdiction of Ld. AO to compute the disallowance in terms of Sec. 14A r.w.r. 8D since statutory provisions mandate Ld. AO to record such satisfaction before proceeding to compute the disallowance in terms of Rule 8D. The perusal of Profit & Loss Account, as placed on record, would reveal that, besides statutory taxes and levies, the assessee has debited expenditure of Rs.8,273/- only on account of audit fees. Therefore, in the given factual matrix, the impugned disallowance could not be sustained under law. By deleting the same, we allow the appeal.

The appeal stands allowed. Order pronounced in the open court on 17th December, 2019. (Vikas Awasthy) (Manoj Kumar Aggarwal) "ाियक सद" / Judicial Member लेखा सद" / Accountant Member