RIGHT AID CONSULTANTS PVT. LTD.,KOLKATA vs. ITO, WARD - 4(1), KOLKATA, KOLKATA

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ITA 1608/KOL/2018Status: DisposedITAT Kolkata01 May 2019AY 2013-143 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the AO cannot recompute the disallowance under Rule 8D without recording dissatisfaction with the assessee's suo motu offer. Therefore, the disallowance made by the AO and confirmed by the CIT(A) was deleted.

What were the facts?

The assessee offered a disallowance of Rs. 50,881/- under Section 14A for exempt dividend income. The AO, without recording dissatisfaction, recomputed the disallowance to Rs. 2,91,348/- using Rule 8D, leading to an additional disallowance of Rs. 2,40,467/-. The CIT(A) confirmed this.

What were the issues?

Whether the AO can recompute disallowance under Section 14A read with Rule 8D without recording dissatisfaction with the assessee's suo motu offer.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA BENCH ‘(SMC

Before: Shri P.M. Jagtap, KZ]

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘(SMC)’, KOLKATA [Before Shri P.M. Jagtap, Vice President, KZ] Assessment Year: 2013-14 Right Aid Consultants Pvt. Ltd..................................………………………….......................Appellant 313, Todi Chambers, 2, Lal Bazar Street, Kolkata – 700 001. [PAN: AACCR 3937 Q] ITO, WARD – 4(1) Kolkata...................…………………………………………………............Respondent P-7, Chowringhee Square, Kolkata – 700 069. Appearances by: Shri Yashvardhan Baid, Advocate appearing on behalf of the Assessee. Shri Baij Nath Singh, JCIT, Sr. DR appearing on behalf of the Revenue. Date of concluding the hearing : April 25, 2019 Date of pronouncing the order : May 01, 2019 ORDER

This appeal filed by the assessee is directed against the order of Ld. CIT(A) – 2, Kolkata dated 06.06.2018.

2.

In Ground No. 1, the assessee has challenged the disallowance of Rs. 2,40,467/- made by the AO and confirmed by the Ld. CIT(A) u/s 14A of the Income Tax Act, 1961 read with Rule 8D of Income Tax Rules.

The assessee in the present case is a company which is engaged 3. in the business of share trading and other financial activity. The return of income for the year under consideration was filed by it on 04.09.2013 declaring a total income of Rs. 5,596/-. In the said return, dividend income of Rs. 3,95,960/- received during the year under consideration was claimed to be exempt from tax by the assessee and Assessment Year: 2013-14 Right Aid consultants Pvt. Ltd. disallowance of Rs. 50,881/- was offered by the assessee on account of expenses incurred in relation to the exempt income as required by section 14A. The AO however applied Rule 8D to work out the expenses incurred by the assessee in relation to the exempt income at Rs. 2,91,348/- and a further disallowance of Rs. 2,40,467/- was made by him u/s 14A read with Rule 8D in the assessment completed u/s 143(3) vide an order dated 20.02.2016. On appeal, the Ld. CIT(A) confirmed the said disallowance made by the AO.

4.

I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly contended by the learned counsel for the assessee, when disallowance on account of expenses incurred in relation to the exempt income was suo moto offered by the assessee u/s 14A of the Act, the AO cannot recompute such disallowance by applying Rule 8D unless he records his dissatisfaction regarding the correctness of the claim made by the assessee in relation to expenditure incurred in relation to the exempt income. In the present case, such dissatisfaction was not recorded by the AO and even the learned DR has not been able to rebut or controvert this position which is clearly evident from the assessment order. I, therefore, delete the disallowance made by the AO and confirmed by the Ld. CIT (A) u/s 14A read with Rule 8D and allow Ground No. 1 of the assessee’s appeal.

5.

Ground No. 2 relating to the disallowance of Rs. 84,617/- made on account of foreign travel expenses is not pressed by the learned counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed.

Assessment Year: 2013-14 Right Aid consultants Pvt. Ltd.

6.

In the result, the appeal of the assessee is partly allowed Order Pronounced in the Open Court on 1st May, 2019.

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