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2019 (7) TMI 1209 - AT - Income TaxRectification of mistake u/s 254 - Disallowance u/s 14A without recording proper satisfaction - HELD THAT - AO before resorting to the computation mechanism provided in rule 8D of the rules had indeed recorded his satisfaction having regard to the accounts of the assessee that the claim of the assessee that no expenditure was incurred for earning dividend income could not be accepted. This goes to prove the compliance made by the AO of the decision rendered by the Hon ble Supreme Court in the case of Maxopp Investment 2018 (3) TMI 805 - SUPREME COURT which have been heavily relied upon by the ld. AR before us. We find that the assessee has been preferring this miscellaneous application for the second time on the very same issue without any substance and also trying to misuse the provisions of the Act by resorting to review of the order passed by this Tribunal in the guise of rectification. In our considered opinion, there is no mistake apparent on record within the meaning of Section 254(2) of the Act warranting any rectification as this Tribunal had duly addressed the arguments of the assessee and the intention behind introduction of Section 14A with rule 8D(2)(iii) in its order - Miscellaneous Application of the assessee is dismissed.
Issues: Disallowance u/s.14A of the Act, Recalling of Tribunal order, Compliance with rule 8D of the IT rules, Misuse of provisions of the Act.
Dispute Regarding Disallowance u/s.14A of the Act: The primary issue in the main appeal revolved around the disallowance made u/s.14A of the Act concerning the exempt income derived by the assessee in the form of dividends. The ld. AO invoked the third limb of Rule 8D(2) of the IT rules to compute the disallowance amounting to &8377; 1,31,316, being 0.5% of the average value of investments. The Tribunal, upon fresh adjudication, upheld this disallowance under rule 8D(2)(iii) despite the assessee's arguments that no disallowance was warranted as the investments were made out of own funds and for business purposes. The Tribunal dismissed the appeal, emphasizing the applicability of Section 14A due to the exempt nature of dividend income and upheld the disallowance made by the ld. AO and CIT(A). Recalling of Tribunal Order: The case had a history where the Tribunal initially disposed of the order for the relevant assessment year but later recalled it for fresh adjudication specifically on the issue of disallowance u/s.14A of the Act. Despite the assessee's contentions and reliance on certain decisions, the Tribunal found no merit in the arguments presented, highlighting the compliance made by the ld. AO with the Supreme Court's decision in the Maxopp Investment case. The Tribunal noted that the assessee had filed a second miscellaneous application on the same issue without substantial grounds, considering it an attempt to misuse the provisions of the Act by seeking a review under the guise of rectification. The Tribunal concluded that there was no mistake apparent on record warranting rectification under Section 254(2) of the Act, thereby dismissing the miscellaneous application. Compliance with Rule 8D of the IT Rules: The Tribunal observed that the ld. AO had appropriately recorded satisfaction before applying the computation mechanism under rule 8D, rejecting the assessee's claim that no expenditure was incurred for earning dividend income. The Tribunal reiterated the importance of Section 14A and rule 8D(2)(iii) in cases where the nature of expenses for earning exempt income is not identified, emphasizing the need for disallowance. The Tribunal found the disallowance made by the ld. AO and upheld by the CIT(A) to be justified, dismissing the grounds raised by the assessee. Misuse of Provisions of the Act: The Tribunal criticized the assessee for filing a second miscellaneous application on the same issue without substantial grounds, labeling it as an attempt to misuse the provisions of the Act by seeking a review under the guise of rectification. The Tribunal reiterated that the arguments had been duly addressed in the previous order, and there was no apparent mistake on record necessitating rectification under Section 254(2) of the Act. Consequently, the Tribunal dismissed the miscellaneous application, upholding its previous decision on the disallowance issue.
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