2021 (1) TMI 12 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - AO computed the disallowance at 1% of the average monthly balance of the investment - Suo moto disallowance by assessee - HELD THAT - While invoking Rule 8D of the I.T. Rules, 1962 the AO has not pointed out/identified any specific infirmity in the disallowance so offered by the appellant/assessee. A single sentence explanation of the assessee was considered, but not acceptable has been made instead of giving specific reason for such non acceptance. It is evident from the records particularly the order passed by the Ld. AO that without recording satisfaction about the correctness of the claim of assessee u/s. 10(34) of the Act, the Ld. AO has made the quantum of disallowance by invoking the Rule 8D of the Income-tax Rules, 1962. The accounts of the assessee has been examined, in absence of which the order of disallowances and Ld. AO is not sustainable. It appears from the documents submitted before us that for the AYs. 2010-11, 2011-12 and 2012-13 though such query in respect of disallowance under section 14A/Read with Rule 8D was raised by the AO, after examining the same manner and method of working out disallowance of administrative expenses no further disallowance was made by the AO accepting the same as fair and reasonable. Under the circumstances of the case, we find no reason as to why the suo motu disallowance made by the assessee to be disturbed in the same set of factual position - no reason for such disallowance and the same is hereby deleted. This ground of appeal filed by the assessee is, thus, allowed. Disallowing credit for advance tax paid and full TDS credit - HELD THAT - As considered the enclosed copy of 26 AS, from which it appears that the assessee is entitled to avail such relief. We find that though such additional ground was raised by the assessee before the Ld. CIT(A), but the same was not adjudicated by him. We direct the Ld. AO to grant relief to the assessee in respect to the additional ground in accordance with law.

Summary

Issues involved:
- Disallowance made under section 14A read with Rule 8D of the Income-tax Rules, 1962
- Admission of additional grounds of appeal related to credit for advance tax and TDS

Issue 1: Disallowance under section 14A read with Rule 8D:
- The appeals were against separate orders arising from assessment years 2013-14 and 2014-15.
- The appellant had shown dividend income claimed as exempt under section 10(34) of the Income Tax Act.
- The appellant had made a suo motu disallowance of &8377; 4,69,487, but the Assessing Officer (AO) further disallowed &8377; 2,62,38,194.
- The appellant argued that the disallowance by the AO was arbitrary and mechanical.
- The Tribunal found that the AO did not point out specific reasons for rejecting the appellant's explanation and invoking Rule 8D.
- Referring to a previous case involving REI Agro Ltd., the Tribunal held that the AO must indicate cogent reasons for disallowance under Rule 8D.
- The Tribunal noted that the amendment dated 02.06.2016 was prospective and not applicable to the assessment years in question.
- Emphasizing the rule of consistency, the Tribunal upheld the appellant's claim and deleted the disallowance.
- The Tribunal also cited the judgment in Radhasoami Satsang vs. CIT to support its decision.
- Consequently, the disallowance was deleted, and the appeal on this issue was allowed.

Issue 2: Admission of additional grounds of appeal related to credit for advance tax and TDS:
- The appellant sought admission of additional grounds regarding the non-allowance of credit for advance tax and full TDS credit.
- The Tribunal found that the appellant was entitled to avail the relief based on the evidence provided.
- The Tribunal directed the AO to grant relief to the appellant in accordance with the law.
- The appeal for the assessment year 2013-14 was allowed for statistical purposes.
- The appeal for the assessment year 2014-15 was also allowed for statistical purposes, following the same decision as the previous appeal.

In conclusion, the Appellate Tribunal ITAT Kolkata allowed both appeals for statistical purposes, addressing issues related to disallowance under section 14A read with Rule 8D and the admission of additional grounds concerning credit for advance tax and TDS. The Tribunal emphasized the need for specific reasons for disallowance, upheld the rule of consistency, and directed the AO to grant relief to the appellant as per the law.