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TMI Blog2020 (10) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred to earn the exempt income. No books of accounts were examined in this regard. We nowhere found any illegality and infirmity in the order passed by the CIT(A) in question. - Decided against assessee. - I.T.A. No.1562/Mum/2019 - - - Dated:- 28-10-2020 - Shri M. Balaganesh, AM And Shri Amarjit Singh, JM For the Assessee : Shri S. C. Tiwari For the Revenue : Shri Dihashis (DR) ORDER PER AMARJIT SINGH, JM: The revenue has filed the present appeal against the order dated 27.12.2018 passed by the Commissioner of Income Tax (Appeals) -49, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2014-15. 2. The revenue has raised the following grounds: - i. On the facts and circumstances of the case and in law the Ld CIT(A) erred in deleting the disallowance under section 14A of the Act of ₹ 31,79,51,492/-, relying on the decision of Bombay High Court in the case of India Advantage Securities Ltd (1131 of 2013) dated 13.04.2015, even though the Hon ble Supreme Court in its judgment dated 12.02.2018 in Civil Appeal Nos. 104-109 of 2015, in the case of Maxopp Investment Ltd. vs. Commissioner of income- tax New Delhi, has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he closing stock of shares, securities and claims was in sum of ₹ 712,07,25,552/- (P.Y. ₹ 3,59,84,99,593/-). The assessee disallowed a sum of ₹ 41,49,114/- i.e. 20% of total expenditure as attributable to the exempt income. Subsequently withdrew the same at the time of assessment. The AO applied the provisions of Section 14A r.w. Rule 8D and assessed the expenditure to earn the exempt income in sum of ₹ 322,100,606/-. After the addition of expenses to earn exempt income already declared a sum of ₹ 41,49,114/-, the balance of ₹ 31,79,51,492/- was added to the income of the assessee. The total income of the assessee was assessed as nill. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who restricted the addition to the extent of 41,49,114/- already declared by assessee but the revenue was not satisfied, therefore, the revenue has filed the present appeal before us. 4. We have heard the argument advanced by the Ld. Representative of the parties and perused the record. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly relied upon the decision of the Hon ble Bombay High Court in the case of India A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income under this Act: Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise, increasing the liability of the assessee under section .1 54, for any assessment year beginning on or before the 1st day of April, 2001. Sub.sec.(2) of sec. 14A is relevant for our consideration. The power to disregard the computation made by the assessee is given to the AO under sub. sec(2) of sec. 14A of the Act. It prescribes that the AO can determine the quantum of expenditure to be disallowed only 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. If he is not so satisfied, then the AO has to compute the disallowance in accordance with the method prescribed, i.e., as per Rule 8D of I.T Rules. Hence the mandatory condition prescribed in sec. 14(2) is that the AO, having regard to the accounts of the assessee, has to show that h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the total income under the Act. However, he felt obliged and going by the presence of Rule 8D that once Section 14A is attracted, the disallowance is to be made as per Rule 8D only which has been prescribed by the Legislature. The Assessing Officer has not adverted to the plain language of subsection (2) of Section 14A. It is that mistake committed by die Assessing Officer which was partially corrected by the First Appellate Authority. First Appellate Authority agreed with the assessee that the Assessing Officer has not commented upon the correctness or otherwise of the appellant's working of the claim. He has not specifically rejected that working and has not provided any reason for doing so. The Commissioner was of the view that before proceeding to compute the disallowance under Section 14A as per Rule 80, the Assessing Officer should consider the working of expenses made by the assessee and when he is not satisfied with the said working and terms it as incorrect, based on objective criteria and for cogent reasons, he can then proceed to work out the disallowance under Section 14A as per Rule 80 of the Rules. We cannot find any fault with this conclusion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly contrary to the provisions of the statue. The CIT, in the circumstances, allowed the appeal of the assessee and the Tribunal did not interfere . (f) Extract from the judgment of Hon'ble Supreme Court in the case of Maxopp Investment Ltd. 4021TR 640 (SC! Having regard to the language of Section 14A(2j of the Act, read with Rule SD of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct It will he in those cases where the assessee in his return has himself apportioned hut the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/ making the investment in shares is to be examined by the AO . 15. In the instant case, we notice that, the assessing officer did not record any dissatisfaction over the amount of disallowance determined by the assessee u/s 14A of the Act, having regard to the accounts of the assessee. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied with the amount of disallowance worked out by the assessee. Accordingly, we uphold the order passed by Ld C1T(A) on this issue. 6.2 The facts are identical for AY 2014-15 also. The AO has used the same language and therefore according to the ITAT decision, he has not recorded his dissatisfaction with the disallowance worked out by the assessee. In such a scenario, the Hon'ble ITAT held that the disallowance u/s. 14A read with Rule 8D cannot be made. 6.3 Further, the Hon ble ITAT at para 19 of the order stated that the assessee has disallowed a sum of ₹ 6.01 lakhs and ₹ 10,46 lakhs in Ays 2012-13 and 2013-14 respectively against a dividend income of ₹ 3.94 crores and ₹ 7.78 Crores respectively. The Hon ble ITAT considered the disallowance worked out by the assessee as mentioned above, as meeting the requirement of section 14A of the Act. In the instant case, the assessee has received dividend income of ₹ 12.75 Crores and made a suo moto disallowance of ₹ 41.49,119. Respectively following the decision of the Hon ble ITAT in the appellant own case for AYs 2012-13 2013-14 on identical facts, the disallowance of ₹ 41, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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