2023 (6) TMI 616 - AT - Income Tax

Disallowance u/s 14A r.w.r. 8D - contention of the assessee that he had inter alia suo moto worked out the disallowance - HELD THAT - As in the first round of appellate proceedings, CIT(A) had directed the AO to work out the disallowance as per the directions contained in the order dated 10.03.2015 which was not complied by the AO. Again in the second round of order, CIT(A) again directed the AO to work out the disallowance u/s 14A as per the directions contained therein but the same was also not complied with by the AO. It is the settled law that directions issued by a superior appellate authorities are binding on the AO and is required to strictly follow the directions of the appellate authorities and decide the issue as per the directions of the appellate authorities. It is not open to AO to ignore the directions of the appellate authorities unless the directions of the appellate authorities are overruled/ stayed by higher judicial forum. In the present case, we find that the directions given by CIT(A) has not been followed by AO. We therefore direct the AO to rework the disallowance u/s 14A r.w.r 8D as per the directions of CIT(A) in the first round of appeal and in accordance with law. Credit for TDS as claimed in the revised return as per 26AS statement denied - grievance of the assessee that despite the directions of CIT(A) to AO to grant the credit for TDS and prepaid taxes, the AO has not granted the same - HELD THAT - Whatever credit of taxes and TDS which has been deducted on behalf of the assessee and the credit for which the assessee is entitled, the assessee should be given the credit of those taxes and the assessee should not be made to enter into prolonged litigation on the issue more so, when the claim of the credits is not found to be bogus. We do not appreciate the conduct of the authorities for not granting the legitimate credit of the tax paid on behalf of the assessee and assessee should not be made to fight for getting the credit of the prepaid taxes and TDS which is rightfully due to it - We direct the AO to promptly grant the credit of the prepaid taxes including TDS which is allowable to assessee in accordance with law at the earliest. Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act.
2. Granting credit for TDS and prepaid taxes as per the 26AS statement.

Summary:

Disallowance under Section 14A:

The assessee, a company engaged in the manufacturing and sale of steel products, filed its original return of income for AY 2010-11 declaring an income of Rs. 9,58,330.01 lakhs, which was later revised to Rs. 9,57,228.23 lakhs. The assessment was framed under Section 143(3) of the Act, determining the total income at Rs. 9,84,952.18 lakhs. The assessee challenged the assessment order, and the CIT(A) provided partial relief and directed the AO to re-calculate the disallowance under Section 14A as per the jurisdictional High Court's decision. However, the AO did not comply with these directions in subsequent orders, leading to multiple rounds of appeals. The Tribunal noted that the directions of the CIT(A) were binding on the AO and must be followed. Therefore, the Tribunal directed the AO to rework the disallowance under Section 14A as per the CIT(A)'s directions and in accordance with the law, ensuring the assessee is granted sufficient opportunity to present required details.

Granting Credit for TDS and Prepaid Taxes:

The assessee also contended that the AO failed to grant credit for TDS and prepaid taxes as claimed in the revised return and reflected in the 26AS statement. Despite clear directions from the CIT(A) in multiple rounds of appeals, the AO did not address this issue. The Tribunal emphasized that directions from superior appellate authorities are binding on the AO and must be strictly followed unless overruled by a higher judicial forum. The Tribunal directed the AO to promptly grant credit for the prepaid taxes and TDS to the assessee, ensuring that the assessee is not subjected to prolonged litigation for legitimate tax credits. The AO was instructed to call for necessary documents from the assessee and promptly process the credit of prepaid taxes and TDS.

Conclusion:

The appeal of the assessee was allowed, with the Tribunal directing the AO to comply with the CIT(A)'s directions regarding both the disallowance under Section 14A and the granting of credit for TDS and prepaid taxes.