2015 (12) TMI 905 - HC - Income Tax

Disallowance u.s 14A - CIT(A) deleted the disallowance as confirmed by ITAT - Held that - While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case, it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at % of the total value. In view of the above and respectfully following the coordinate bench decision in the case of J.K. Investors (Bombay) Ltd., 2013 (5) TMI 580 - ITAT MUMBAI we uphold the order of CIT (A) and ITAT - Decided against revenue

Summary

Issues:
Challenge to Tribunal's order under section 14A of the Income Tax Act.

Analysis:
The High Court of Calcutta dealt with an appeal challenging a Tribunal's order dated 14th May, 2013, where the Revenue's appeal was dismissed. The Assessing Officer applied Rule 8B of the Income Tax Rules under section 14A without first recording dissatisfaction with the expenditure claim by the assessee. The Commissioner of Income Tax allowed the assessee's appeal, directing the deletion of the disallowance under section 14A. The Revenue then approached the Tribunal, which upheld the Commissioner's order, emphasizing the need for the Assessing Officer to provide cogent reasons for rejecting the assessee's claim regarding exempted income. The Tribunal dismissed the Revenue's appeal, citing a previous decision and upholding the Commissioner's order. The High Court found no fault in the Tribunal's decision and dismissed the appeal and application.

This case highlights the importance of the Assessing Officer providing valid reasons for rejecting an assessee's claim related to exempted income under section 14A of the Income Tax Act. The Tribunal's decision was based on the failure of the Assessing Officer to consider the assessee's claim before proceeding to compute the disallowance under Rule 8D of the Rules. The Court upheld the Tribunal's decision, emphasizing the necessity for the Assessing Officer to justify the rejection of the assessee's claim with sound reasoning. The judgment underscores the procedural requirements and the need for proper assessment before applying disallowances under section 14A of the Income Tax Act.