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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI VIMAL KUMAR & SMT. RENU JAUHRI
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is against order dated 12.08.2025 of Learned Commissioner of Income Tax-3, Noida (hereinafter referred to as “Ld. CIT(A)") arising out of assessment order dated 27.12.2018 of the Learned Assessing Officer/Learned Assistant Commissioner of Income Tax (hereinafter "Ld. AO") under Section 143(3) of the Income Tax Act, 1961 ((hereinafter referred to as "the Act”)) Act for assessment year 2016-17.
Brief facts of the case are that the assessee filed Income Tax Return declaring total income of Rs.1,59,33,08,690/- under the normal provisions of the Act and book profit of Rs.2,25,92,70,948/- was filed on 30.11.2016. The case of the assessee was taken up for scrutiny. Notices under Sections 142(2) & 143(1) of the Act along with questionnaire were issued to the assessee. In response to the above notice, Shri Vipin Agarwal, CA and Sh. Raja Banerjee, Advocate/AR of the assessee, attended the proceedings and filed details which are placed on record. On completion of proceedings, Ld. AO vide order dated 27.12.2018 made additions of Rs.59,93,373/- and Rs.1,39,11,673/-.
Against order dated 27.12.2018 of Ld. AO, the appellant/assessee filed appeal before Ld. CIT(A) which was partly allowed vide order dated 12.08.2025.
Being aggrieved, appellant/assessee preferred present appeal with following grounds: “
1.That the Lower authorities erred on facts and in law by making disallowances of Rs.23,38,100/- u/s 14A(2) of the Income Tax Act, 1961 ('Act') read with rule 8D(2) (iii) without recording 'satisfaction' as contemplated under section 14A(2) of the 'Act' about claim of the assessee that no expenditure was incurred in relation to earning of exempt dividend income.
2. That the Lower authorities erred on facts and in law in making additions of a sum of Rs. 23,38,100/- under section 14A of the 'Act' read 8D while computing the Book profits under Section 115JB of the 'Act' 3. The appellant craves leave to add to, alter, delete, modify or vary the above grounds of appeal at or before the time of the hearing.”
5. Learned authorized Representative for the appellant/assessee submitted that the Ld. CIT(A) at internal page nos. 38 to 40 of the order, has categorically noted that the Hon'ble ITAT Vide to 1572/Del/for assessment years 2011-12 to 2014-15, in the appellant's own cases for assessment years 2011-12 to 2014-15, has decided the issue in favour of the appellant on the ground that no proper satisfaction had been recorded by the Assessing Officer, it is further pertinent to note that similar grounds were also adjudicated in favour of the appellant for assessment year 2010-11 as well vide and relevant para no 5.1. of Case Law PB). The learned CIT(A) has erred in law and on facts in partially confirming the addition of 23,38,100 under the normal provisions and simultaneously confirming the action of the Assessing Officer in making a corresponding addition under the MAT provisions. Such an adjustment in the computation of book profit is wholly contrary to the scheme and scope of section 115JB of the Income-tax Act, 1961. It is a well-settled principle of law that adjustments permissible under the normal provisions cannot be imported into, or read into, the computation mechanism prescribed under section 115JB. The MAT provisions constitute a self-contained code, and only those specific adjustments expressly provided in Explanation 1 to section 115JB(2) can be made to the book profit. This principle has been affirmed by the Hon'ble Special Bench of the Delhi ITAT in Vireet Investment (P) Ltd. [2017 (6) TMI 1124], wherein it was categorically held that disallowance made under section 14A under the normal provisions cannot be added back while computing book profit under section 115JB(Refer page no. 123-159 Of Case Law PB). The ratio squarely applies, and therefore, the addition sustained by the CIT(A) under MAT is untenable.
Learned Authorized Representative for the Department of Revenue relied on orders of Departmental Authorities.
From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. CIT(A) made disallowance of Rs.23,38,100/- under Section 14A(2) of the Act read with Rule 8D)2)(iii) without recording satisfaction as contemplated under Section 14A(2) of the Act is a condition precedent for determination of the amount of expenditure for earning the exempt income as formulated. 7.1 In assessee’s own case for assessment year 2011-12 to 2014-15 in in para no. 5.1 at page no. 325 of the paper books, it is held as under: "5.1 Since no satisfaction has been recorded by the Assessing Officer as per the mandate of section 14A (2), then no disallowance under Section 14A can be made and accordingly, disallowance worked out by the Assessing Officer under Rule 8D is deleted. In the result, grounds Nos. 1-