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2020 (1) TMI 81 - AT - Income TaxDisallowance u/s 14A - assessee has made suo moto disallowance - HELD THAT - Assessee had offered suo-moto disallowance in its return of income, the basis of which was submitted to Ld.AO during assessment proceedings. However, Ld. AO did not consider the same and rejected the methodology adopted by the assessee to arrive at the said disallowance, having regards to the accounts of the assessee. It was incumbent on the part of Ld. AO to arrive at judicious and objective satisfaction as to why the disallowance offered / computed by the assessee was not acceptable. In para-5 of quantum assessment order, Ld. AO has merely recorded a fact of nonsatisfaction without adducing cogent reasons / elaborations as to why the methodology adopted by the assessee was not acceptable. Reliance could be placed on the recent decision of Hon ble Supreme Court in Maxopp Investment Ltd. V/s CIT 2018 (3) TMI 805 - SUPREME COURT wherein it has categorically been held that recording of satisfaction is a pre-requisite before invoking disallowance u/s 14A r.w.r. 8D. Thus we delete the additional disallowance as made by Ld. AO in the quantum assessment order. The appeal stands allowed.
Issues involved:
- Condonation of delay in filing appeals for AYs 2012-13 & 2014-15 - Disallowance u/s 14A for AYs 2012-13 to 2014-15 - Jurisdiction of Ld. AO in invoking provisions of Sec. 14A r.w.r. 8D - Disallowance computation based on Rule 8D - Rejecting suo-moto disallowance offered by the assessee - Legal satisfaction required before invoking disallowance u/s 14A r.w.r. 8D Analysis: 1. Condonation of Delay: The appeals for AYs 2012-13 & 2014-15 were filed with a delay of 179 days. The assessee sought condonation of delay supported by a condonation petition and an affidavit. The Tribunal considered the history of disallowance u/s 14A for several years and decided to condone the delay, allowing the appeal to be adjudicated on merits. 2. Disallowance u/s 14A: The disallowance u/s 14A for AY 2012-13 was contested due to the disallowance of &8377;16.57 Lacs by Ld. AO, which was computed using Rule 8D. The assessee offered a suo-moto disallowance of &8377;2.21 Lacs, but Ld. AO further disallowed &8377;18.79 Lacs. The Tribunal found that Ld. AO did not record objective satisfaction for rejecting the assessee's computation, leading to the deletion of the additional disallowance. 3. Jurisdiction of Ld. AO: The Ld. AR raised the issue that Ld. AO did not reject the suo-moto disallowance offered by the assessee, affecting the jurisdiction to invoke Sec. 14A r.w.r. 8D. The Tribunal referred to previous decisions and held that the absence of judicious satisfaction by Ld. AO rendered the disallowance invalid. 4. Disallowance Computation: For AYs 2013-14 & 2014-15, Ld. AO revised the disallowance amounts without considering the suo-moto disallowance offered by the assessee. The Tribunal found this approach incorrect and deleted the additional disallowances made for both years. 5. Legal Satisfaction Requirement: The Tribunal emphasized the necessity for Ld. AO to record satisfaction before invoking disallowance u/s 14A r.w.r. 8D, as per the decision of the Hon'ble Supreme Court. The Tribunal followed this principle in deleting the additional disallowance amounts made by Ld. AO. 6. Conclusion: All appeals were allowed by the Tribunal, emphasizing the importance of legal satisfaction and proper consideration of assessee's submissions in disallowance proceedings. This comprehensive analysis highlights the key issues addressed in the judgment, focusing on the condonation of delay, disallowance u/s 14A, jurisdictional aspects, disallowance computation, and the legal requirement for satisfaction before invoking disallowance provisions.
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