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TMI Blog2020 (8) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... r dissatisfaction and not made any attempt to carry out the exercise which was proposed by the Tribunal in assessment year 2009-10. In view of the identical dissatisfaction recorded by the AO, which has been held as not proper by the Tribunal we respectfully following the finding of the Tribunal in assessment year 2009-10, delete disallowance in dispute in instant year. Disallowance on account of the personal expenses out of the vehicles, depreciation, telephone and telex and travelling expenses - AO has made disallowance at the rate of 1/10 of the expenses on estimate basis in view of the non-production of the logbook of the vehicles - HELD THAT:- AO has not pointed out any other defects in the vouchers under other heads of expenditure. We find that the assessee has already admitted 1/20th of the expenses against the disallowance made under the head vehicle maintenance, depreciation telephone and telex and travelling expenses, therefore we feel it appropriate to restrict the disallowance to 1/20th of the expenses under the heads corresponding to the disallowance which was made by the AO. - Appeal of the assessee is partly allowed. - ITA No.6904/Del./2017 - - - Dated:- 27-8- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence such findings are vitiated and deserves to be deleted. It is therefore prayed that the additions/disallowance made and upheld by the learned Commissioner of Income Tax (Appeals) is not in accordance with law and therefore the additions so made along-with interest levied be kindly deleted and appeal of the appellant be kindly allowed. 2. Briefly stated facts of the case are that the assessee is an individual an advocate by profession. The return of income for the year under consideration, filed on 22/09/2014 declaring income of ₹ 7,39,62,550/-, was selected for scrutiny assessment and statutory notices were issued and complied with. The assessment under section 143(3) of the Income-tax Act, 1961 (in short the Act ) was completed on 18/11/2016 after making certain additions/disallowances and total income was assessed at ₹ 7,54,64,840/-. The Ld. CIT(A) partly allowed the appeal filed by the assessee. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Before us, the parties appeared through videoconferencing facility. The assessee filed paper-book and other documents electronically. 4. In gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of internet if portfolio management is web based, cost computer its depreciation, computer operator, consequent electricity, use of office premises, fee charged by Mutual Fund agents/bankers (Annual Fee) portfolio record maintenance and its tracking to ensure timely sale/purchase of investments. 3.8 Since no disallowance has been done by the assessee and as per the facts and circumstances of the case, I have reasons to arrive at the satisfaction for disallowance u/s 14A of the Act, r/w Rule 8D of the Rules, that there are expenses relatable to the earning of exempt income by the assessee. Since, the assessee has invested its money for such investment, which is capable to generate income which does not or shall not form part of total income of the assessee and indirect cost in the form of administrative expenditures etc. is involved in this process. There is direct and proximate nexus between the exempted income, which the investments shall generate and the expenditures directly or indirectly involved in earning the said income. Hence, I am fuly satisfied to invoke the provisions of section 14A read with Rule 8D to work out disallowance of expenditures. 5.1 Before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 87 ITR 349 (SC). 6.8 The appellant has been trying to justify that it has given money to mutual funds managers who remit net expenses. However, AO has given reasoning that such justification of the appellant is not acceptable (ref. para-3.6, 3.7 and 3,8). The ratio of Hon ble Delhi High Court in case of Indiabulls Financial Services Ltd. Vs. Deputy Commissioner of Income-tax, Circle -11(1) [2016] 76 taxmann.com 268 (Delhi) is directly applicable. Hon'ble Delhi High Court has held that where the elaborate analysis carried out by the Assessing Officer as indeed the three important steps indicated by him in the order, shows that all these elements were present in his mind, that he did not expressly record his dissatisfaction in these circumstances, would not per se justify this court in concluding that he was not satisfied or did not record cogent reasons for his dissatisfaction to reject the Assessing Officer s conclusion. To insist that the Assessing Officer should pay such lip service regardless of the substantial compliance with the provisions would, in fact, destroy the mandate of section 14A (ref. para-8 of the judgment). 6.9 In view of the above, I have no doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion recorded by the Assessing Officer is identical to the dissatisfaction, which was recorded by the Assessing Officer in assessment year 2012-13. The Tribunal in assessment year 2012- 13, following earlier years, held that the dissatisfaction recorded on the claim of the assessee of no exempted income was not proper and therefore deleted the disallowance. The relevant finding of the Tribunal (Supra) is reproduced as under: 7. We have heard the rival submissions and perused the material available on record. We find that the assessee has engaged Portfolio Management Service to manage his investments. The amount of exempt income is received after deductions expenses by the Citi Bank. Therefore, the assessee has not claimed any expenditure in relation to exempt income. We, further find that the issue is squarely covered by the decision of Tribunal ITA No.5822/Del/2015 for A.Y. 2011-12 dated 23.04.2019 in the case of assessee wherein the ITAT has given its finding in para 13 to 17 as under: 13. On ground no. 3 assessee challenged the disallowance of ₹ 6.08,180/- u/s 14A of the Act read with Roe 8D(2)(iii) of the Act. The AO noted that assessee has earned income exempt f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as under: 8. We nave gene through the fndings of the Ld. Assessing Officer on this aspect. Ld. Assessing Office, recorded that the assessee made heavy investments for earning of exempt income and being a busy professional, he requires the management of such a portfolio by incurring expenses, diversion of man-power/staff for indulging in investment activities to various activities like visiting banks, use of vehicle and telephone, use of internet if portfolio management is web 9 based, cost of computer and its depreciation, computer operator, consequent electricity, use of office premises, fee charged by mutual fund agents/bankers (annual fee), portfolio record maintenance and its tracking to ensure timely sale/purchase of mutual fund units etc. Except making this statement and reading all the possible expenses that involve in investment process, Ld. Assessing Officer is not specific as to what exactly the probable expenditure in this matter the assessee could have incurred. According to the assessee the investment was made in mutual funds and the expenses were already directed by the operators and a certificate to that extent was submitted before the Ld., Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cludible in total income. 14A. (1) . (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. 5.4 Thus, the issue-in-dispute involved in the case is whether the dissatisfaction recorded by the Assessing Officer on the correctness of the claim of expenditure is proper within the requirements of section 14A(2) of the Act. 5.5 We find that the Tribunal in the assessment year 2012-13 has followed the finding of the Tribunal in the case of the assessee for assessment year 2009-10, wherein also the Tribunal has found the dissatisfaction recorded by the Assessing Officer as not proper, which is required under the provisions of the Act. In the assessment year 2009-10, the Assessing Officer recorded that the assessee made heavy investment for earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and submitted that the disallowance may be restricted to 1/20th of the expenses on those account. The Learned CIT(A) held that some personal expenditure has been accepted by the assessee and thus held that although the appellant had shown nonsatisfaction on the estimate made by the Assessing Officer, however there was no sanctity of the estimate proposed by the assessee either and he upheld the disallowance of ₹ 3,95,539/-. Before us, the Learned Counsel submitted that identical disallowance have been deleted by the Tribunal in earlier years. The learned DR relied on the order of the lower authorities. 8. We have heard rival submission of the parties on the issue in dispute. The Assessing Officer has made disallowance at the rate of 1/10 of the expenses on estimate basis in view of the nonproduction of the logbook of the vehicles. The Assessing Officer has not pointed out any other defects in the vouchers under other heads of expenditure. We find that the assessee has already admitted 1/20th of the expenses against the disallowance of ₹ 3,95,539/- made under the head vehicle maintenance, depreciation telephone and telex and travelling expenses, therefore we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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