AACHMAN VANIJYA PVT. LTD,MUMBAI vs. DCIT , CENTRAL CIRCLE-8(4) , MUMBAI

Per contra, the Ld. Departmental Representative supported the 13. disallowance made by the Assessing Officer under Section 14A of the Act by placing reliance upon the order passed by the Assessing Officer and the CIT(A).

We have heard the rival contention and perused the material on 14. record. On perusal of the Assessment Order, we find that the Assessing Officer has made disallowance of INR 14,51,111/- under Section 14A of the Act recording as under: “6.2 Disallowance u/s 14A On perusal of the details filed, it is observed that the assessee has earned Dividend income of Rs. 29,42,875/- and has been claimed exempt. Vide order sheet entry, the assessee was requested working of disallowance u/s 14A r.w.r. 8D. The assessee company has vide letter dated 19.12.2019 furnished its submissions on the disallowance u/s 14A r.w.r. 8D of the I.T. Act, 1961. Based on the submission made by the assessee, the working of disallowance u/s 14A read with rule 8D is calculated as under: [ 8D(2)(i) Direct Expenses 50,772/- 8D(2)(ii) 0.5% of Average investments : : Rs. 14,95,874 0.5% of Rs. 29,91,74,757/- Total Disallowance u/s 14A r.w.r. : Rs. 15,46,646/- 8D & 1510//Mum/2021 Assessment Year 2016-17 & 2017-18 The assessee has made suo-moto disallowance u/s 14A to the extent of Rs. 95,535/- in the computation of total income, therefore, the balance amount of Rs. 14,51,111/- is disallowed u/s 14A read with Rule 8D and added to the total income of the assessee.” On perusal of above, we find that the Assessing Officer has failed to 15. record dissatisfaction regarding suo moto disallowance of INR 95,535/- made by the Appellant under Section 14A of the Act. The Hon'ble Supreme Court had, in the case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT: 394 ITR 449, observed that it was only after the Assessing Officer had recorded his dissatisfaction as regards the correctness of the claim of the Assessee that the provisions of Section 14A of the Act read with Rule 8D could be invoked. We note that identical facts and circumstances disallowance made by the Assessing Officer under Section 14A of the Act for the Assessment Year 2018-19 was deleted by the Tribunal in appeal for the Assessment Year 2018-19 [ITA No. 1511/Mum/2021, dated 22/11/2022]. In view of the aforesaid disallowance of INR 14,51,111/- made by the Assessing Officer under Section 14A of the Act read with Rule 8D of the Rules is deleted. Ground No. 2 raised by the Appellant is allowed. (Assessment Year: 2017-18) We would now take up appeal for the Assessment Year 2017-18 16. which has been preferred by the Appellant challenging the order, dated 13/08/2021, passed by the CIT(A), whereby the Ld. CIT(A) had dismissed the appeal of the Assessee against the Assessment Order, dated 28/12/2019, passed under Section 153A read with Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). & 1510//Mum/2021 Assessment Year 2016-17 & 2017-18 The Assessee has raised following ground of appeal in ITA No. 17. 1510/Mum/2021: “1. On the facts and in the circumstances of the case and in the law the Hon’ble CIT(A) erred in upholding addition of Rs. 25,21,476/- made by the Ld. AO by wrongly invoking provisions of Section 14A r.w.r. 8D of the Act and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under.” During the course of hearing, both the sides agreed that for the 18. Assessment Year 2017-18, in facts and circumstances identical to Assessment Year 2016-17, the Assessing Officer had made disallowance under Section 14A of the Act read with Rule 8D of the Rules recording as under: ““6.1 Disallowance u/s 14A: On perusal of the details filed, it is observed that the assessee has earned Dividend income of Rs. 24,83,606/- and has been claimed exempt. Vide order sheet entry, the assessee was requested working of disallowance u/s 14A r.w.r. 8D. The assessee company has its submissions on the disallowance u/s 14A r.w.r. 8D of the I.T. Act, 1961. Based on the submission made by the assessee, the working of disallowance u/s 14A read with rule 8D is calculated as under:

8D(2)(i) Direct Expenses 62,403/- 8D(2)(ii) 1% of Average investments : Rs. : Rs. 25,54,078 25,54,078/- Total Disallowance u/s 14A r.w.r. : Rs. 26,16,481/- 8D

The assessee has made suo-moto disallowance u/s 14A to the extent of Rs. 95,005/- in the computation of total income, therefore, the balance amount of Rs. 25,21,476/- is disallowed u/s 14A read with Rule 8D and added to the total income of the assessee. Penalty proceedings u/s 270A(2) of the Act is separately initiated for under- reporting of income.”

On perusal of above, we find that the Assessing Officer has failed to 19. & 1510//Mum/2021 Assessment Year 2016-17 & 2017-18 record dissatisfaction regarding suo moto disallowance of INR 95,005/- made by the Appellant under Section 14A of the Act. Therefore, our findings/adjudication in relation to Ground No. 2 raised in appeal for the Assessment Year 2016-17 shall apply mutatis mutandis. Accordingly, in view of the judgment of the Hon'ble Supreme Court in the case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT: 394 ITR 449, and the decision of the Tribunal in the case of the Assessee in appeal for the Assessment Year 2018-19 [ITA No. 1511/Mum/2021, dated 22/11/2022], the disallowance of INR 25,21,476/- made by the Assessing Officer under Section 14A of the Act read with Rule 8D of the Rules is deleted. Ground No. 1 raised by the Appellant is allowed.

In result, both the appeals preferred by the Assessee are treated as 20. allowed for statistical purposes.

Order pronounced on 27.02.2024.