M/S NEUTRAL PUBLISHING HOUSE LTD.,KOLKATA vs. DCIT-CIRCLE-7, KOLKATA, KOLKATA

This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-VIII, Kolkata dated 04.10.2013. Assessment was framed by DCIT, Circle-7, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 22.12.2011 for assessment year 2009-10. In the assessee’s appeal, the assessee has raised the following grounds:- “

Aggrieved, assessee preferred an appeal before Ld. CIT(A), before Ld. CIT(A) assessee submitted that there were a few entries in respect of investment in mutual fund and earning of dividend income, therefore as such no expenditure was incurred by assessee. However, Ld. CIT(A) rejected the plea of assessee by considering that some expenses are compulsory and required to be incurred towards the investment and administrative activity.

Before us Ld. AR submitted that authorities below have made the disallowance without recording any satisfaction in terms of provision of Sec. 14A of the Act. He further submitted that assessee has not incurred any expense in relation to dividend income as there were only seven entries for investment and five entries for dividend income which was through e-banking channel. He also submitted several case laws for consideration where the disallowance made by lower authorities was deleted.

We have heard the rival contentions and perused the materials available on record. We find that Assessing Officer has made the disallowance of expenses by applying the provision of Rule 8D of the IT Rule and subsequently confirmed the same by Ld. CIT(A). In our considered view, AO before resorting to the provision of Sec. 14A of the Act was required to record the satisfaction for the disallowance as per Rule 8D of the IT Rules in terms of the provision of Sec. 14A of the Act. But in the instant case the AO failed to do so. In this connection, we are putting our reliance in the case of ITO v. M/s Rajma Projects Pvt. Ltd. in dated 04-03-2016 of this Tribunal, wherein the Tribunal has held as under:- “6. We have considered the rival submissions and also perused the relevant material available on record. It is observed that in the computation of total income, disallowance of Rs.5.76 lakhs was offered by the assessee under section 14A of the Act on account of expenditure incurred in relation to the earning of exempt dividend income and there was no reason given by the Assessing officer, having regard to the accounts of the assessee, to show his dissatisfaction with the correctness of quantum of expenditure disallowed by the assessee under section 14A. in the case of REI Agro limited (supra) cited by the ld. counsel for the assessee, it was held by the Coordinate Bench of this Tribunal that where the assessee makes a claim that only a particular amount is to be disallowed under section 14A and if the Assessing Officer proposes to invoke section 14A, he has to M/s Neutral Publishing House Ltd. v. DCIT, Cir-7, Kol. Page 4 record the satisfaction as to how the claim of the assessee is not correct having regard to the accounts of the assessee. It was also held that if there is no satisfaction recorded by the Assessing Officer, no disallowance could be made by him by invoking the provisions of section 14A. keeping in view this decision of the Coordinate Bench of this Tribunal in the case of REI Agro Limited (supra), which has been affirmed by the Hon'ble Calcutta High Court, we hold that in the absence of requisite satisfaction recorded by the Assessing Officer showing how the disallowance offered by the assessee under section 14A was not correct having regard to its books of account, it was not permissible to the Assessing Officer in law to invoke section 14A and make a further disallowance. We, therefore, uphold the impugned order of the ld. CIT(Appeals) deleting such disallowance made by the Assessing Officer under section 14A although on different grounds and dismiss this appeal of the Revenue.”