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2021 (10) TMI 69 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D - assessee had suo moto disallowance - HELD THAT - If a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raised for the first time before the appellate authority without resorting to revising the return before the AO. It has further held that any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when the facts necessary to examine such ground, contention or claim are held on record. It has further held that income tax proceedings are not strictly adversarial in nature and the intention of the Revenue should be to tax the real income. Thus in the absence of any exempt income, no disallowance u/s 14A of the Act could not made, we are of the view that the assessee cannot be denied to withdraw the suo moto disallowance u/s 14A - Decided in favour of assessee.
Issues involved:
1. Disallowance made under section 14A r.w. Rule 8D of the Income Tax Act. 2. Permissibility of withdrawing the suo moto disallowance made by the assessee. Analysis: Issue 1: Disallowance made under section 14A r.w. Rule 8D of the Income Tax Act: The case involved the assessee, a company primarily earning income from rent, filing a return of loss for Assessment Year 2012-13. The Assessing Officer (AO) noticed investments by the assessee and made a disallowance under section 14A of the Act, calculating it as per Rule 8D of the Income Tax Rules. The AO considered the suo moto disallowance made by the assessee and arrived at a net disallowance amount. The assessee appealed to the Commissioner of Income Tax (Appeals) challenging the disallowance. The CIT(A) upheld the suo moto disallowance but deleted the additional disallowance made by the AO. The assessee further appealed to the ITAT Delhi, arguing that in the absence of any exempt income, no disallowance under section 14A of the Act was warranted. The ITAT Delhi, considering the legal position and the decision of the Hon’ble Delhi High Court, allowed the assessee to withdraw the suo moto disallowance, directing the AO accordingly. Issue 2: Permissibility of withdrawing the suo moto disallowance made by the assessee: The ITAT Delhi analyzed the timeline of events, noting that the decision by the Hon’ble Delhi High Court, which supported the assessee's claim for withdrawal of disallowance, was rendered after the filing of the original return and the expiry of the time limit for revising the return of income. The ITAT Delhi referred to legal precedents emphasizing that a claim available in law, not made due to inadvertence or complex legal positions, could be raised before appellate authorities without revising the return before the AO. The tribunal highlighted that the purpose of assessment proceedings is to determine the correct tax liability in accordance with the law, and that the intention should be to tax the real income. Based on these considerations and the absence of exempt income, the ITAT Delhi allowed the assessee to withdraw the suo moto disallowance under section 14A of the Act, overturning the decisions of the lower authorities. In conclusion, the ITAT Delhi allowed the appeal of the assessee, directing the AO to permit the withdrawal of the suo moto disallowance made under section 14A of the Income Tax Act.
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