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Income Tax Appellate Tribunal, DELHI BENCH “E”: NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI L.P. SAHU
order of Ld. CIT(Appeals)-6, Delhi in relation to the penalty proceedings u/s 271(1)(c) for the assessment year 2008-09. The revenue is aggrieved by levy of penalty of Rs. 18,54,000/- on account of disallowance made u/s 14A read with rule 8D.
On perusal of the assessment order it is seen that the exempt income earned by the assessee by the way of dividend was only Rs. 1,40,576/-, however the AO after applying rule 8D has made huge disallowance of Rs.54,56,177/-. The assessee did not contest this disallowance owing to heavy loss and nil tax effect in this year. Now on such disallowance, AO has levied penalty of Rs. 18,54,555/-.
Ld. CIT(A) has deleted the penalty on the ground that AO has mechanically applied rule 8D without giving any specific finding about the expenditure incurred in relation to exempt income and no ‘satisfaction’ has been recorded in terms of provision of Section 14A (2)
& (3). Further there is nothing to suggest that assessee has furnished any inaccurate particulars of income or entire expenditure debited has not been truly disclosed. After relying upon various judgments he has deleted the penalty.
4. After hearing both the parties and on perusal of the impugned orders, we find that when the exempt income itself is Rs. 1,40,576/-, then how such a huge disallowance for sum of Rs. 54,56,177/- has been made under rule 8D. This ostensibly shows that disallowance has not only been made in a mechanical manner but also without following the mandatory requirement of section 14A (2) and Rule 8D (1), that is, AO has to first record his ‘satisfaction’ having regard to the accounts maintained by the assessee as well as examining the nature of expenditure debited which can be said to be attributable for the earning of such exempt income. Apart from that, it has also been pointed out that by the Ld. Counsel that on similar disallowance penalty was levied in assessment year 2007-08, wherein the Tribunal has deleted the said penalty in vide order dated 16.11.2017. Thus, under the facts and circumstances of the case, the deletion of the penalty by the Ld. CIT (A) is upheld and grounds raised by the revenue are dismissed.
In the result appeal of the revenue is dismissed.