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Facts
The Assessing Officer (AO) made an addition of Rs.13,01,267/- on account of disallowance under Section 14A of the Income Tax Act, 1961, for the Assessment Year 2017-18. The Assessee contended that they had provided the necessary calculations and submissions for disallowance and also submitted audited financial statements.
Held
The Tribunal noted that the Assessee claimed to have provided submissions and computations for disallowance under Section 14A and also submitted audited balance sheets. The Tribunal found the facts peculiar and decided to remand the case to the Assessing Officer for fresh adjudication.
Key Issues
Whether the disallowance under Section 14A was correctly computed and whether the Assessee provided sufficient calculation/submissions for the same.
Sections Cited
14A, 250, 143(3), 8D(2)(iii)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI PRABHASH SHANKAR
O R D E R
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 05.08.2025, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
In the instant case, the AO vide assessment order dated 13.11.2019 under Section 143(3) of the Act, has made an addition of Rs.13,01,267/- being 1% of the average investments of Rs.13,01,26,690/-, mainly on the reason that the Assessee has failed to provide calculation/submissions and also, in the computation of total income, has not disallowed any expenditure attributable to the earning of exempt income as required under the 2 Macwear provision of Section 14A of the Act. The Ld. Commissioner, on the aforesaid reasons, dismissed the appeal of the Assessee, affirming the addition made by the AO. Thus, the Assessee has preferred the instant appeal.
The Assessee on the contrary has submitted that it has duly provided the calculation and/or submissions in respect of disallowance under Section 14A of the Act. Further the Assessee has also submitted the audited balance sheet along with annexure no.7, wherefrom it clearly appears that the Assessee has computed the disallowance u/s.14A of the Act to the tune of Rs.43,79,752/- and also depicted investments made by the Assessee, as well as, dividend (tax free) earned to the tune of Rs.20,25,585/- and administrative expense incurred however, reason best known to the authorities below, they side lined the aforesaid submissions and documents. The aforesaid facts mentioned by the Assessee are not in denial by the Ld. A.R.
We have heard the parties and perused the material available on record. Considering the above peculiar facts and circumstances in totality, for just and proper decision of the case and substantial justice, we deem it appropriate to remand the instant case to the file of the Jurisdictional Assessing Officer for decision afresh, by considering the calculation made qua disallowance under Section 14A of the Act, already filed, which the Assessee undertakes to file again before the jurisdictional Assessing Officer. Thus, in view of the above, the case is remanded to the file of the Ld. Jurisdictional Assessing Officer for decision afresh, suffice it to say, by considering the aforesaid documents and submissions filed by the Assessee pertaining to the disallowance/investments made and dividend, if any, earned as tax free income. Further, to restrict the disallowance under Section 14A of the Act, qua only investments, which actually 3 Macwear yielded the exempt income, but not otherwise, specifically in view of the decision of Hon’ble Delhi High Court in ACB India Ltd. vs. CIT (2015) 374 ITR 108 (Del) and Special Bench of the ITAT, in the case of ACIT Vs. M/s. Vireet Investment (P.) Ltd., (2017) 82 taxmann.com 415 (Delhi – Trib.) (SB) wherein also it has been held that the average value of investments, for the purposes of Rule 8D(2)(iii), should be confined to those securities in respect of which exempt income is earned.
In the result, Assessee’s appeal is allowed for statistical purposes.
Order pronounced in the open court on 21.01.2026.