NIKITA JAJODIA,NEW DELHI vs. ITO, WARD- 52(5), NEW DELHI

ORDER PER H.S. SIDHU : JM Assessee has filed this Appeal against the impugned Order dated 28.09.2017 passed by the Ld. CIT(A)-18, New Delhi relevant to assessment year 2013-14 on the following grounds:-

1. The order passed by the Ld. CIT(A) is bad in law, wrong on facts and against the principles of natural justice. 2(a) That Ld. CIT(A) has erred in law in confirming the further disallowance of Rs. 1,37,282/- u/s. 14A read with Rule 8D(2) of the I.T. Rules, 1962 which is over and above the expenses of Rs. 5,714/- already disallowed in computation of income under Rule 8D(2)(ii) and 8D(iii), which needs to be deleted. (b) That Ld. CIT(A) has erred in not appreciating the fact that no such expenses of Rs. 1,37,282/- under Rule 8D2(ii) has been debited to profit and loss account and further disallowance made towards deemed hypothetical expenses.

(c) That Ld. CIT(A) has erred in confirming further disallowance even on value of foreign investments, of Rs. 56,40,968/- the income on which is fully taxable and thus the calculation of disallowance of Rs. 1,37,282/- is wrong. (d) That Ld. CIT(A) has referred to the expenses of Fund Manager/Pvt Equity Fund to whom generally expenses are paid towards annual fees and administrative expenses on mere suspicion and surmise because in appellant case, no such entity was engaged and no payment was made. The appellant craves leave to add, alter, amend, modify or forego any of the grounds of appeal before or at the time of hearing.

2. The brief facts of the case are that Assessee filed e-return on 30.7.2013 declaring income of Rs. 5,02,210/-. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter referred as the Act) and subsequently selected for scrutiny under CASS. Statutory notice u/s. 143(2) of the Act was issued on 02.9.2014 and served upon the assessee. Subsequently, notice u/s. 142(1) of the Act was issued on 17.8.2015. In response thereto, the A.R. of the assessee attended the assessment proceedings and filed the requisite details which were examined. AO observed that the assessee has earned income from business of financing and commission/ brokerage and dividend income from investment. The assessee has earned tax free dividend of Rs. 1,85,155/- and against this the assessee has disallowed in the computation total expenses amounting to Rs. 5,714/-. The A.R. of the assessee was asked vide order sheet entry dated 29.12.2015 to explain as to why the disallowance u/s. 14A of the Act amounting to Rs. 1,37,282/- may not be added to the income of the assessee. In response to the same, the vide his reply dated 29.1.2016 has submitted that out of the total expenses debited to 2 the profit and loss account amounting to Rs. 6,312/- the assessee has disallowed Demat charges amounting to Rs. 5618/- and misc. expenses amounting to Rs. 96/-, thus totaling to Rs. 5714/- (Rs. 5618 + 96) suo-motto while filing the income tax return had claimed only expenses amounting to Rs. 598/- in the income tax return. Thus, the assessee has disallowed all major expenses claimed in the profit and loss account u/s. 14A r.w.r. 8D while computing the taxable income. But the assessee has not accepted the expenses of the assessee and by applying the rule 8D(2(iii) read with Section 14A of the Act, the expenditure in relation to income not includible in total income was recalculated and made the addition of Rs. 1,37,282/- u/s. 14A r.w.r. 8D and assessed the income of the assessee at Rs. 6,39,490/- vide order dated 29.1.2016 passed u/s. 143(3) of the Act. Aggrieved with the assessment order dated 29.1.2016, the assessee preferred an appeal before the Ld. CIT(A), who vide impugned order dated 28.9.2017 has dismissed the appeal of the assessee. Against the impugned order dated 28.9.2017, assessee has filed the Appeal before the Tribunal.

3. Ld. Counsel of the assessee submitted that Ld. CIT(A) has erred in confirming the disallowance of Rs. 1,37,282/- u/s. 14A read with Rule 8D(2) of the I.T. Rules, 1962 which is over and above the expenses of Rs. 5,714/- already disallowed in computation of income under Rule 8D(2)(ii) and 8D(iii). Hence, the same may be deleted. It was further submitted that no such expenses of Rs. 1,37,282/- under Rule 8D2(ii) has been debited to profit and loss account and further disallowance made towards deemed hypothetical expenses and even on value of foreign investments, of Rs. 56,40,968/- the income on which is fully taxable and thus the calculation of disallowance of Rs. 1,37,282/- is wrong. It was further submitted that as per CBDT Notification No. 43/2016/F.No. 370142/7/2016 –TPL dated 02.6.2016 has also clarified that total expenditure disallowed under Rule 8D shall not exceed the total expenditure claimed by the assessee. In support of his contention, he relied upon the following case laws:-

- Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. vs. CIT (2012) 347 ITR 272 (Delhi) - ITAT, Delhi ‘C’ Bench decision dated 23.3.2012 in the case of M/s Gillette Group India Pvt. Ltd. (now known as Wella Haircosmetics India Pvt. Ltd.) vs. ACIT passed in (AY 2008-09) - ITAT, Mumbai ‘E’ Bench decision dated 02.3.2012 passed in the case of Search Envrio Ltd. vs. ACIT passed in ITA No. 3464/Mum/2011 (AY 2007-08).