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TMI Blog2023 (6) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 143(2) was issued and assessment proceedings were pending on the date of search which came to be abated. In response to notice u/s 153A dated 24.10.2011 appellant filed return of income on 29.1.2011 declaring Total income of Rs. 317,47,69,697/- and Book Profit u/s 115JB Rs. 666,76,27,404/- In the assessment order dated 28.3.2013 passed u/s 153A r.w.s. 143(3), the Assessing Officer has made certain additions/disallowance which are subject matter of this appeal . Assessment order dated 28th March 2013 is the order that was impugned before the CIT(A). Therefore it clearly indicates that the AO s finding in paragraph 5.2 of the assessment order is based relying upon a non-existent assessment order and that indicates clear non-application of mind. - K.R. SHRIRAM FIRDOSH P. POONIWALLA, JJ. For the Appellant : Mr. Suresh Kumar. For the Respondent : Mr. Priyanka Jain a/w Mr. Pankaj Soni Mr. Devansh Jain i/b Vaish Associates. (ORAL JUDGMENT PER K.R. SHRIRAM J.) : 1. The assessee filed the original return of income for A.Y.-2009-2010 on 30th September 2009 declaring income of Rs. 317,47,69,697/- after claiming deduction under Section 80-IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 11th February 2014, issued by the Central Board of Direct Taxes which clearly provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income ? c) Whether on the facts and circumstances of the case and in law. the ITAT was justified in directing the AO to delete the addition worked out u/s. 14A r.w. Rule 8D of the Act while computing the book profits under section 115JB of the Act relying on its own decision in the assessee's own case for A.Y. 2006-07 without considering that as per Explanation 1(f) to Section 115JB, the book profits have to be increased by the expenditure incurred for earning the exempt income? 4. As regards question (b) proposed, Mr. Suresh Kumar in fairness stated that no submissions were made regarding Circular No. 5 of 2014 before the Income Tax Appellate Tribunal (ITAT). Therefore, we will not go into that question, but deal only with the other two questions proposed. 5. Section 14A of the Act reads as under: Expenditure incurred in relation to income not includible in total income. 14A. (1) Notwithstanding anything to the contrary contained in this Act, for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come: Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.] 6. In sub-Section (2) of Section 14A and Rule 8D it is provided that if the Assessing Officer is not satisfied with the correctness of the claim in respect of expenditure made by assessee in relation to income which does not form part of the total income under this Act, he shall determine the amount of expenditure in relation to such income in accordance with the provisions prescribed. 7. Therefore, the most fundamental requirement is the Assessing Officer should record his dis-satisfaction with the correctness of the claim of the assessee in respect of the expenditure and to arrive at such dis-satisfaction he should give cogent reasons. 8. Ms Jain relied upon three judgments of this court, viz., Principal Commissioner of Income Tax Vs. Bajaj Finance Ltd.(2019) 110 taxmann.com 303 (Bombay), Principal Commissioner of Income Tax-2 Vs. Bombay Stock Exchange Ltd. (2020) 113 taxmann.com 303 (Bombay) and Principal Commissioner of Income Tax Vs. Godrej Boyce Mfg. Co. Ltd. (2023) 149 taxmann.com 222 (Bombay) to submit that the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the disallowance offered by the Respondent in terms of section 14A(2) of the Act. It only on being dissatisfied with the above, does Rule 8D of the Rules can be invoked to compute the disallowance. Paragraph 11 of Godrej Boyce Mfg. Co. Ltd. (Supra) reads as under: 11. In the present case, the assessee had earned an exempt income of Rs. 84,30,37,423/- from shares and mutual funds and submitted a computation of inadmissible expenditure u/s 14A amounting to Rs. 13,66,635/- The assessee claimed that the disallowance made u/s 14A was as per the books of account attributable to earning of exempt income. On a perusal of the assessment order we find that there is no discussion by the AO with regard income. Further, the AO has not recorded any satisfaction that the working of inadmissible expenditure u/s. 14A is incorrect with regard to the books of account of the assessee. The proviston u/s 14(2) does not empower the AO to apply Rule 8D straightaway without considering the correctness of the assessee's claim in respect of expenditure incurred in relation to the exempt income. We agree with the view of the ITAT that in the present case the AO has neither examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) in his order dated 9th December 2014 records Though not mentioned in assessment order, admittedly a notice u/s 143(2) was issued and assessment proceedings were pending on the date of search which came to be abated. In response to notice u/s 153A dated 24.10.2011 appellant filed return of income on 29.1.2011 declarting Total income of Rs. 317,47,69,697/- and Book Profit u/s 115JB Rs. 666,76,27,404/- In the assessment order dated 28.3.2013 passed u/s 153A r.w.s. 143(3), the Assessing Officer has made certain additions/disallowance which are subject matter of this appeal . The assessment order dated 28th March 2013 is the order that was impugned before the CIT(A). Therefore it clearly indicates that the Assessing Officer s finding in paragraph 5.2 of the assessment order is based relying upon a non-existent assessment order and that indicates clear non-application of mind. 12. As regards proposed question (c), we do not even find any discussion in the impugned order relating to Section 115JB of the Act. Mr. Suresh Kumar states that question was raised in the appeal filed by the revenue but it has not been discussed. Well, that cannot be still a ground for a substantial questi ..... 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