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TMI Blog2021 (2) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... 987 (7) TMI 3 - SUPREME COURT] has held that merely because the assessee agreed to certain addition, it will not follow that the assessee concealed income relating to such addition. At this stage, we must observe, irrespective of the fact whether or not the assessee has accepted the disallowance, in our considered view, the validity of the disallowance made under rule 8D(2)(i) is a highly debatable one on which more than one view is possible. In the present case, we hold that a case of furnishing of inaccurate particulars of income has not been made out against the assessee. As pointed out by the learned Counsel for the assessee and noted by us, though, similar disallowances were made by the Assessing Officer in preceding assessment years and accepted by the assessee, however, no penalty proceedings for imposition of penalty under section 271(1)(c) of the Act was initiated by the Assessing Officer. - Decided in favour of assessee. - I.T.A. No. 1443/Mum/2019 - - - Dated:- 2-2-2021 - Saktijit Dey, Member (J) And Manoj Kumar Aggarwal, Member (A) For the Appellant : Farrokh V. Irani, AR For the Respondents : Vinay Sinha, DR ORDER Saktijit Dey, Member (J) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure attributable to earning of exempt income. In course of assessment proceedings, the Assessing Officer called upon the assessee to justify the apportionment of expenditure for earning exempt income. Though, the assessee submitted that disallowance made under section 14A of the Act is the expenditure relatable to earning of exempt income; however, the Assessing Officer was not convinced. He observed, various expenditures, such as, fee paid to asset management company (AMC) have not been properly apportioned between the investment made for earning exempt income and other investments. He observed, due diligence of the AMC is attributable for identifying the investment opportunity for investment in equity shares. Therefore, out of the total expenses incurred by the assessee for engaging the services of AMC, he apportioned 45.60% towards investment in equity shares and the balance 54.31% towards investment in debentures. Accordingly, out of the total fee paid of ₹ 29,90,57,730/- to AMC, the Assessing Officer apportioned an amount of ₹ 13,66,39,477/-, being 45.69%, towards investment in exempt income building asset by treating such expenditure as directly related to earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablish any direct nexus between the expenditure incurred towards AMC and the exempt income earned and the apportionment has been done purely on estimate basis, it could not have been disallowed under rule 8D(2)(i). Further, he submitted, the Assessing Officer himself has accepted the disallowance made by the assessee under rule 8D(2)(ii). Therefore, on merits, the disallowance made by the Assessing Officer under rule 8D(2)(i) is unsustainable. He submitted, merely because assessee did not contest such disallowance, it cannot be held against the assessee and lead to automatic initiation of penalty proceeding. He submitted, the reason for not contesting the disallowance is only for the purpose of not entering into litigation which could have delayed the fund. He submitted, not only in the return of income, but in course of assessment proceedings, the assessee has furnished full particulars not only of income earned by the assessee but also the expenditure incurred. He submitted, the manner/mode of computation of suo motu disallowance under section 14A of the Act was also furnished before the Assessing Officer. Therefore, the assessee cannot be accused of furnishing inaccurate parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not concealed its income. Having said so, it is a fact on record that the disputed addition on the basis of which penalty under section 271(1)(c) has been imposed relates to disallowance made under section 14A of the Act r.w.r. 8D. On perusal of facts on record it is clearly revealed that in the computation of total income filed along with the return of income, the assessee has disallowed an amount of ₹ 2,05,92,611 under section 14A of the Act r.w.r. 8D(2)(iii) and in note 10 attached to the computation of total income, the assessee has provided the basis for such computation. In the assessment order, the Assessing Officer has noted the total expenditure claimed by the assessee during the year as under:- Particulars Amount (Rs.) Management Fee 28,94,28,749 Professional Fee 79,04,743 Trustee Fee 16,85,400 Printing and stationery 2,49,211 Auditors remuneration: - Audit Fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Though, at this stage, we are not called upon to decide the merits of the disallowance made by the Assessing Officer under section 14A r.w.r. 8D, however; we have to examine whether such disallowance made by the Assessing Officer can lead to the conclusion that assessee has furnished inaccurate particulars of income so as to visit it with penalty under section 271(1)(c) of the Act. In this context, we find substantial force in the submissions of the learned Counsel for the assessee. When the disallowance under rule 8D(2)(i) r.w.s. 14A of the Act has been made on a purely estimate basis, that too, without establishing any direct/proximate nexus with the exempt income earned, in our considered opinion, the assessee cannot be accused of furnishing inaccurate particulars of income. Merely because the assessee has not contested the disallowance in appeal, for that reason alone assessee cannot be automatically visited with penalty under section 271(1)(c) of the Act. In case of CIT vs. Reliance Petroproducts Pvt. Ltd. (supra), the Hon'ble Supreme Court, while dealing with the issue of imposition of penalty on the basis of disallowance made under section 14A of the Act has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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