CZAR INFRASTRUCTURE PVT. LTD.,NEW DELHI vs. ACIT, CENTRAL CIRCLE- 17, NEW DELHI

The only grievance of the assessee is that the CIT(A) erred in confirming the disallowance of Rs.374021/- made by the Assessing Officer u/s 14A of the Income Tax Act.

Briefly stated the facts of the case are that during the course of the scrutiny of assessment proceedings, the Assessing Officer noticed that the assessee has earned certain income which it has claimed to be exempt from tax. The Assessing Officer further found that the assessee made investments in shares and therefore disallowance u/s 14A of the Act has to be made. The Assessing Officer found that the assessee has calculated the disallowance made u/s 14A at Rs.166809/-.

Applying rule 8D the Assessing Officer computed the disallowance at Rs.540830/- and after deducting of Rs.166809/- disallowance of Rs.374021/- was made. The assessee carried the matter before the CIT(A) but without any success.

Before me the counsel for the assessee vehemently stated that the suo-moto disallowance of Rs.1,66,809/- should be sufficient for any disallowance u/s 14A of the Act. Per contra the DR supported the findings of the Assessing Officer.

I have carefully considered the orders of the authorities below. There is no dispute that the assessee has suo-moto disallowed of Rs.166809/-. I find that the Assessing Officer has not recorded any dissatisfaction in so far as the accounts of the assessee are concerned. I find that the Assessing Officer has mechanically applied rule 8D without recording any dissatisfaction. In my considered opinion without recording any dissatisfaction the Assessing Officer should not have proceeded by applying section 14A r/w Rule 8D. I am of the opinion that the suo-moto disallowance of Rs.1,66,809/-should meet the ends of justice. I accordingly direct the Assessing Officer to delete the disallowance of Rs.3,74,021/-.

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