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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri J. Sudhakar Reddy & Shri S.S. Viswanethra Ravi
ORDER Shri S.S.Viswanethra Ravi, JM:
This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), 10, Kolkata dt. 30-08-2016 for the A.Y 2012-13.
The only issue raised in the appeal whether the CIT-A was justified in deleting the addition made u/s. 14A r.w.r 8D without considering the decision of Hon’ble Jurisdictional High Court of Calcutta in the case of Dhanuka & Sons Vs. CIT reported in (2011) 339 ITR 319 (Cal)in the facts and circumstances of the case.
At the outset, the ld. AR submits that the issue raised in the appeal by the revenue is against the deletion of disallowance made by the AO by invoking the provisions of Rule 8D(2)(i),(ii) and (iii) of the Income Tax Rules 1962. He further submits that the issue in hand is covered by the order dt. 16-08-2017 of the co-ordinate Bench of this Tribunal, Kolkata in assessee’s own case, for A.Y 2010-11, copy of the same is on record and referred to page 86 of the paper book filed before us and argued that the Tribunal upheld the order of the CIT-A in deleting the disallowance made by the AO in addition to disallowance suo moto made by the assessee. The ld.AR in this regard referred to paras 6 & 7 of the said order and argued that the assessee has got sufficient funds, which is several times more than the investments and disallowance made by the AO U/Rule 8D(2)(ii) is not maintainable. Regarding the disallowance under Rule 8D(2)(ii), we find that the assessee already disallowed Rs.15,00,000/- out of the total expenditure of Rs.35,44,116/-. The AO did not record any satisfaction why the said disallowance made by the assessee on her own is incorrect and prayed to dismiss ground raised by the revenue in the appeal.
The ld.DR did not controvert the above submissions of the ld.AR. However, he relied on the orders of the AO.
Heard both the parties and perused the material on record including the case laws relied on by the assessee and detailed paper book as filed before us. On perusal of record, we find that the assessee suo moto made disallowance of Rs. 15,00,000/- u/s. 14 of the Act. The AO further disallowed by invoking Rule 8D(2)(ii) & (iii) of Rs.84, 81,555/- and Rs.27,47,055/- respectively to a sum of Rs. 97,28,610/- [Rs.1,12,28,610 – Rs.15,00,000]. We find that the co- ordinate bench of this Tribunal in assessee’s own case for the A.Y 2010-11 held that the assessee has got sufficient funds, which is more than the investment made and which is not controverted by the ld.DR. Thus, we find force in the arguments of ld.AR that disallowance made U/Rule 8D(2)(ii) by the AO is unwarranted and it is liable to be deleted. We find that the AO did not record satisfaction in respect of disallowance made under (iii) of Rule 8D(2), where the co-ordinate bench held that AO can not invoke automatically Rule 8D(2) and he should record the satisfaction in respect of accounts of assessee why suo moto disallowance is incorrect. The relevant portion of the said order dt. 16-08-2017 is reproduced herein below for better understanding:-
“6. We have heard the rival submission and we find that primary argument advanced by the Ld. DR that netting principle of interest considered by the Ld. CIT(A) would become irrelevant as admittedly the assessee in the instant case has got sufficient own funds which is several times more than the investments made by her. These details are very much available in the order of the Ld. CIT(A) and had not been controverted by the Revenue before us. Hence, we hold that the Ld. CIT(A) had rightly deleted the disallowance made u/s. 14A read with Rule 8D(2)(ii) of the Rules.
7. With regard to disallowance made towards administrative expenses under Rule 8D(2)(iii), we find that the assessee on her own had disallowed a sum of Rs. 5 lacs in the return of income out of total administrative expenses of Rs. 40,73,576/-. The Ld. AO had not given any satisfaction as to how the disallowance made by the assessee is incorrect having regard to the accounts of the assessee in terms of Section 14A(2) read with Rule 8D(1) of the Rules. In our considered opinion, without doing the same, the Ld. AO cannot mechanically resort to Rule 8D of the Rules and in the instant case, the disallowance made by the assessee in the sum of Rs. 5 lacs is reasonable having regard to the accounts of the assessee and accordingly, the Ld. CIT(A) had rightly deleted the further disallowance made by the Ld. AO in this regard. Hence, we do not find any infirmity in the order of the Ld. CIT(A) in this regard. Accordingly, the grounds raised by the Revenue are dismissed.”
In view of the above, we are of the view that the CIT-A was correct in deleting the impugned additions made by the AO u/s. 14 A r.w.r 8D. We find that the disallowance of Rs. 15,00,000/- made by the assessee on her own is reasonable. Ground no. 1 raised by the revenue in the appeal is dismissed. Ground no. 2 is general and requires no adjudication and hence, it is dismissed.
In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 09-04-2018