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TMI Blog2024 (4) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... t reasons. See JSW Energy Limited. [ 2023 (6) TMI 1223 - BOMBAY HIGH COURT] The order of the ITAT (Panaji Bench) in the case of Sesa Goa Limited [ 2013 (9) TMI 233 - ITAT PANAJI] has been upheld by the Goa Bench of this Court in CIT, Goa v. Sesa Goa Limited, Panaji, Goa [ 2021 (5) TMI 466 - BOMBAY HIGH COURT] where the Division Bench concurred with the view taken by the ITAT that the AO did not record his satisfaction why the disallowance made by Assessee was incorrect. Assessee appeal allowed. - K. R. SHRIRAM DR. NEELA GOKHALE, JJ. For the Appellant : Mr. Suresh Kumar. For the Respondent : Mr. J.D. Mistri, Senior Advocate, with Mr. Paras Savla Mr. Pratik Poddar,. ORAL JUDGMENT :- (PER K.R.SHRIRAM, J.) 1. This Appeal filed under Section 260A of the Income Tax Act, 1961 ( the Act ) impugns an order dated 9th May 2017 passed by the Income Tax Appellate Tribunal, Mumbai ( ITAT ). 2. The Assessee/Respondent has filed for Assessment Year ( AY ) 2008-09 its Return of Income ( ROI ) on 30th September 2008 declaring NIL income (Loss of Rs. 6,76,80,285/-). During the course of assessment proceedings when the case of Assessee was selected for scrutiny, the Assessing Officer ( AO ) observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he correctness of the claim of the assessee. As the application of Rule 8D is not automatic and the AO has not recorded valid reasons, in fact, any reason for his being not satisfied with the correctness of claim of the assessee in respect of expenditure relating to exempt income, the addition made by AO u/s. 14A is deleted. 4. Being unhappy with the CIT(A), Revenue preferred an appeal before the ITAT. The ITAT dismissed the appeal by the impugned order dated 9th May 2017. The ITAT concurred with the view expressed by the CIT(A) and also relied upon a decision of the ITAT Panaji Bench in the case of Sesa Goa Ltd. v. JCIT dated 8th March 2013-I.T.A. No. 72 and 85/PNJ/2012. 5. In the appeal before us, the following two substantial questions of law are proposed: 1. Whether on the facts and circumstances of the case in law, the Hon ble ITAT was right in deleting the disallowance made u/s.14A of the Income Tax Act, 1961 read with Rule 8D of Income Tax Rules, by relying on the decision of the Hon ble ITAT, Panji Bench in the case of Sesa Goa Ltd. v. JCIT in ITA No. 72 85/PNJ/2012, when the said decision is distinguishable on facts ? 2. Whether on the facts and circumstances of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of 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 154, for any assessment year beginning on or before the 1st day of April, 2001. Rule 8D of the said Rules that was inserted w.e.f. 24th March 2008 by the Income Tax (5th Amendment Rules) 2008, reads as under: 8D.-(1) Where the Assessing Officer, having regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oked to compute the disallowance. 9. Paragraph 9 of Bajaj Fiance Ltd. (Supra) reads as under: 9. Question No. (ii) pertains to disallowance made by the Assessing Officer under Section 14A of the Act read With Rule SD. The Tribunal, however, deleted the disallowance on the ground that the Assessing Officer had not recorded the necessary satisfaction for not accepting the disallowance offered by the assessee. As is well the amount of expenditure incurred in relation to income which is examined for tax if he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. The satisfaction of the Assessing Officer about the correctness of the expenditure offered for disallowance by the assessee therefore is a pre-condition. In the present case, we have perused the order of assessment in which the Assessing Officer had called assessee to justify the limited disallowances voluntarily offered. The assessee made detailed representation upon the inter alia pointed out that the assessee had not made any expenditure in the nature of administrative expenses. However, to avoid proceedings, a suo motu disallowance was made. The Assessing Officer did not in any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view too, the CIT (A) has rightly deleted the addition made on account of interest expenditure as the assessee had sufficient interest free surplus fund to make the investment and the ITAT has rightly deleted the disallowance made by the AO u/s 14A r.w Rule 8D. Consequently we hold that, the interest expenditure cannot be disallowed u/s 14A r.w. Rule 8D(2) (ii) under any circumstances. 10. Now let us examine the assessment order to see whether this mandatory conclusion that the Assessing Officer is not satisfied with the disallowance made by the assessee, has been arrived at. The only place where the Assessing Officer has come to his findings is at paragraph 5.2 of the assessment order, which reads as under: 5.2. The said submission has been considered. In the assessment order passed u/s 143(3) dated 20.10.2010, the AO has worked out the disallowance u/s 14A as per Rule 8D at Rs. 29,66,81,836/-. The assessee has also furnished working u/Rule 8D (though under protest) which amounts to Rs. 44,03,33,135/-. Rule 8D is to be applied in the present case based on the various discussions and findings of the AO in the original assessment order passed. However, since the amount worked ..... X X X X Extracts X X X X X X X X Extracts X X X X
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