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TMI Blog2017 (11) TMI 1929X X X X Extracts X X X X X X X X Extracts X X X X ..... see in all the appeals has raised solitary issue of disallowance u/s. 14A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") r.w. Rule 8D. 2. Shri J.G. Pendse appearing on behalf of the assessee stated at the Bar that he is not pressing ground No. 1 in all the appeals. Thus, the grounds relevant for adjudication before the Tribunal for assessment year 2008-09 are as under : "2. The learned CIT(A) fail to appreciate that sub section 2 and 3 of Section 14A and rule 8D is not applicable as the said provisions imposing a specific disallowance leading to tax liability are substantive and not procedural in nature. 3. The Learned CIT(A) erred in holding that provision of Rule 8D are applicable when the appellant itself had con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt years under appeal. The Assessing Officer has not given specific finding as to why suo-moto disallowance made by assessee is insufficient. The assessee raised specific ground before the First Appellate Authority against the manner of disallowance made by Assessing Officer without recording satisfaction. The Commissioner of Income Tax (Appeals) rejected the contentions of the assessee by holding that it is not eminating from the submissions of assessee before Assessing Officer that the assessee has made any disallowance u/s. 14A of the Act. The ld. AR submitted that as per the provisions of section 14A(2), the Assessing Officer before making any disallowance, is required to record satisfaction that the disallowance, if any made by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and disallowance u/s. 14A r.w. Rule 8D made by Assessing Officer are as under : Assessment Year Total Dividend income received, claimed as exempt (in Rs.) Suo-moto disallowance by assessee (in Rs.) Disallowance u/s. 14A applying Rule 8D by AO (in Rs.) 2008-09 13,72,45,640/- 2,55,400/- 1,17,74,029/- 2009-10 12,51,22,953/- 3,02,550/- 1,61,02,610/- 2010-11 4,24,98,032/- 4,43,316/- 1,01,86,592/- 2011-12 13,56,23,646/- 5,28,048/- 1,18,34,013/- 6. The Assessing Officer made disallowance u/s. 14A by invoking the provisions of Rule 8D(2)(ii) and 8D(2)(iii). In first appeal the Commissioner of Income Tax (Appeals) deleted disallowance made under the provisions of Rule 8D(2)(ii) and confirmed disallowance under Rule 8D(2)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure in relation to income which does not form part of the total income under the Act is correct or otherwise is one of the pre-conditions. Thus, the road to Rule 8D passes through sub-section (2) to section 14A of the Act. The satisfaction of Assessing Officer as to incorrect claim made by assessee is sine-qua-non for invoking the provisions of Rule 8D. Such satisfaction can be reached and recorded only when the claim of assessee is verified. 8. In the present case we observe that during the course of assessment, the Assessing Officer after considering the submissions of assessee proceeded on to working of disallowance u/s. 14A r.w. Rule 8D without commenting or recording satisfaction qua suo-moto disallowance made by assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) placed reliance on the decision of Pune Bench of Tribunal in the case of Lap Finance & Consultancy Pvt. Ltd. in ITA Nos. 1522 to 1525/PN/2013 decided on 06-11-2015. 10. We find that the Commissioner of Income Tax (Appeals) has erred in coming to conclusion that the Assessing Officer has recorded satisfaction regarding applying Rule 8D. We further observe that reliance placed by the Commissioner of Income Tax (Appeals) on the decision of Co-ordinate Bench of the Tribunal in the case of Lap Finance & Consultancy Pvt. Ltd. (supra) is misplaced, as the facts of aforesaid case are distinguishable. In the said case, the assessee had not made any self disallowance of expenditure against exempt income earned. The assessee was given oppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion as under: "(ix) The satisfaction envisaged by sub-s. (2) of s. 14A is an objective satisfaction that has to be arrived at by the AO having regard to the accounts of the assessee. The safeguard introduced by sub-so (2) of s. 14A for a fair and reasonable exercise of power by the AO, conditioned as it is by the requirement of an objective satisfaction, must, therefore, be scrupulously observed. An objective satisfaction contemplates a notice to the assessee, an opportunity to the assessee to place on record all the relevant facts including his accounts and recording of reasons by the AO in the event that he comes to the conclusion that he is not satisfied with the claim of the assessee:" 6. Thus no fault can be found with the impug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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