PATTON INTERNATIONAL LIMITED,KOLKATA vs. ACIT, CIRCLE 7(1), , KOLKATA

The CIT (A) (NFAC) erred in law as well as on the fact, by affirming, the addition made by AO under section 14A read with rule 8D(2)(ii) for Rs. 1,45,94,658 against the provisions of Section 14A and rule 8D, hence the addition be deleted.

The CIT (A) (NFAC) erred in law, as well as in fact by not considering the submission of the applicant about the disallowance under rule 8D(2)(ii) amount of expenditure related to earning of the exempt income for ₹16,29,044 only and rather affirming the amount of rupees 1,45,94,658 determined by the assessing officer. Hence the disallowance be restricted to Rs. 16,29,044. 4. The CIT(A) NFAC erred in law in affirming the addition of Rs. 6,70,929 made by AO despite of fact that same amount has been already added back by the assessee while computing the returned income under rule 8D(2)(i) of the Act. Hence this addition made twice be deleted.

The CIT (A) (NFAC) was wrong in adjudicating the appeal for non- submission of details of investment on which the taxable income are also earned which are not the intention of the legislature and also not the provision of the law.

That the grounds raised hereinabove are independent and without prejudice to one another and the Appellant seeks leave of this Hon'ble Tribunal to raise such other and further grounds of challenge as may be available to them during the hearing of the appeal.

The appellant also crave leave to submit the evidences which were not filed earlier before the Hon'ble Tribunal by following the rules and regulations" II. ITA No. 1045/KOL/2025; AY 2020-21:

That the Ld. CIT (A) NFAC erred in law as well as on facts to deny the claim of the assessee for 100% deduction us 80G for the donation made to chief minister relief fund by not considering the submission and documentary evidence filed.

The Ld. CIT (A) erred in law by upholding that the decision of the AO, which was in contrary to the principle of justice and equity.

The appellant craves leave to press any additional grounds or submit additional evidences during the course of hearing.” We shall first take up ITA No. 1044/KOL/2025 for adjudication.

Brief facts of the case are that the assessee company is a Government Recognized Export House having multi location manufacturing units and was engaged in export of industrial fasteners, builders hardware, conduit and cable fitting stamped & tubular products for export and for domestic market. The assessee filed its return of income for the AY 2018-19 showing total income of *49,30,29,010/-. The case was selected for complete scrutiny under Computer Assisted Scrutiny Selection (in short 'CASS') for verifying the issues relating to i. Depreciation Claim, ii. Duty Drawback, iii. Refund Claim, iv. Expenses Incurred for Earning Exempt Income and v. Deduction from Total Income under Chapter VI-A. During the year, the assessee had shown income under the head capital gains amounting to *87,36,580/-. The Assessing Officer (hereinafter referred to as Ld. 'AO') noted that the assessee had declared exempt income of ₹1,14,87,689/- as Interest Income and Dividend Income. It was observed by the Ld. AO from the balance sheet that the assessee had made certain investments in the form of quoted shares, unquoted shares and units of mutual fund. During the course of the assessment proceedings, the assessee failed to submit the bifurcation of funds/ledger month-wise and hence, the Ld. AO calculated the total disallowance as per Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 to ₹1,83,51,518/- Since, the assessee had already disallowed ₹37,56,860/- as expenditure incurred to earn exempt income, hence the sum of ₹1,45,94,658/- [₹1,83,51,518 - ₹37,56,860] was disallowed and added back to the total income of the assessee. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who, vide order dated 05.05.2025 dismissed the appeal of the assessee by holding as under in paragraph 6.1.3: “I have carefully examined the assessment order u/s. 143(3) of the Income Tax Act, written submissions of the appellant, Income Tax Return and related judicial rulings on the subject matter. The Appellant had declared exempt Income of Rs.1,14,87,689/- consisting of interest on tax free bonds of Rs.46,63,684/- and dividend on quoted equity shares of Rs.68,24,005/-. It had investment in Quoted Share, Unquoted Share and Unit of Mutual Fund of an amount Rs 141.53 crores. Appellant had disallowed Rs.37,56,860/- as expenditure incurred to earn exempt income. AO computed the disallowance as per Rule 8D to Rs. 1,83,51,518/- Appellant gave the working of disallowance Rs. 16,20,044/- based on investment on which dividend was earned. AO stated that the entire fund which is likely to have potential to earn exempt income is to be considered. The amount of disallowance is equal to 1% of annual average of monthly average of opening and closing balances of value of investment whose income is or shall be exempt. Since monthly average was not available with AO he took the annual value and took 1% of same. AO took opening and closing value of investment as Rs 136.93 crores and Rs 141.53 crores which gives average of Rs 139.23 crores and took 1% of it, which comes to Rs 1.39 crores. What appellant submitted before AO regarding monthly average value was investment on which dividend income was earned and not the total monthly average value on which dividend income could have been earned. Because of this reason AO did not rely on details submitted by the appellant. Appellant has been emphasising that AO did not consider the monthly average values submitted whereas it is clear that AO did not consider it as it contained investment from which dividend income has been earned and did not consider investment from which dividend income could have been earned. In fact appellant himself submitted part of Rule 8D which states annual average of monthly averages of value of investments income from which does not or shall not form part of the total income..