9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (9) TMI 731 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - assessee has not claimed any expenditure against the investment - Held that - The assessee has not claimed any expenditure against the investment income. The AO has made the addition on estimate basis which is not permissible under the law. We have no reason to disagree with the claim of the assessee that no further expenditure over and above the expenses already disallowed in the return of income is required to be disallowed under section 14A of the IT Act. Accordingly, it is held that the disallowance made by the Assessing Officer under section 14A of the IT Act by application of Rule 8D of the IT Rules is directed to be deleted and accordingly, the grounds raised by the assessee stand allowed.
Issues:
1. Scope of enquiry under CASS and approval of senior authority for variations in returned income. 2. Disallowance under section 14A of the Income Tax Act. 3. Compliance with legal precedents and verification of expenses. 4. Application of Rule 8D of the IT Rules for disallowance. Scope of Enquiry under CASS and Approval of Senior Authority: The Assessee appealed against an order passed by the Ld. CIT(A)-XXVIII, New Delhi for the assessment year 2011-12. The Assessee contended that the assessment proceedings being under CASS should have limited the scope of enquiry by the AO to the notice and any variations to the returned income without approval of the senior authority. The Tribunal noted the absence of the Assessee during the hearing and decided the appeal ex parte. The Tribunal analyzed the grounds raised by the Assessee and held that the disallowance made by the AO without verifying the veracity of the Assessee's statement was unsustainable. Disallowance under Section 14A of the Income Tax Act: The dispute arose due to a difference of &8377; 80,182 between the assessed income and the returned income, attributed to a disallowance under section 14A read with Rule 8D of the Income Tax Act. The Ld. CIT(A) confirmed the disallowance, which the Assessee challenged before the Tribunal. The Tribunal referred to legal precedents set by the Delhi High Court and the Supreme Court regarding the applicability of Rule 8D and section 14A. It was held that the AO's addition was based on presumption and not actual expenditure, leading to the direction to delete the disallowance. Compliance with Legal Precedents and Verification of Expenses: The Tribunal emphasized the need for a proximate relationship between expenditure and income not forming part of the total income for disallowance under section 14A. Quoting judgments from the Bombay High Court and the Delhi High Court, the Tribunal highlighted the requirement of actual expenditure in connection with exempt income. In this case, as the Assessee did not claim any expenditure against investment income, the Tribunal found the AO's estimate-based addition impermissible under the law. Application of Rule 8D of the IT Rules for Disallowance: The Tribunal, after considering the legal position and precedents, concluded that the disallowance made by the AO under section 14A of the IT Act using Rule 8D of the IT Rules was not justified. Therefore, the Tribunal directed the deletion of the disallowance of &8377; 80,182, allowing the Assessee's appeal. The decision was pronounced in an open court on 13/09/2017.
|
