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TMI Blog2024 (11) TMI 682X X X X Extracts X X X X X X X X Extracts X X X X ..... already held that there was proper satisfaction recorded by the AO. Once the ITAT had held that there was satisfaction recorded by the AO the ld.CIT(A) do not have any jurisdiction to adjudicate that issue again. Therefore, in this case the Ld.CIT(A) has exceeded the jurisdiction. CIT(A) discussed availability of funds with the Assessee, however, as seen from the order of the ITAT, this was not the ground on which ITAT had set-aside. Therefore, in this aspect also, the ld.CIT(A) has exceeded his jurisdiction. We again reiterate that the ITAT had set-aside the issue for a Limited Purpose of Verification of suo-moto disallowance made by assessee. Therefore, ld.CIT(A) has no jurisdiction to venture into any other area. Therefore, CIT(A) has erred in deleting the disallowance. The assessee has submitted before us that assessee had made a suo-moto disallowance in the Return of Income. AO had calculated disallowance under section 14A read with rule 8D after considering the suo-moto disallowance - AO has already considered the suo-moto disallowance made by AO. Accordingly, disallowance made under section 14A read with rule 8D is upheld - Decided in favour of revenue. - Satbeer Singh Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Tribunal while remanding back the issue in its order dated 21.06.2021 has already held that the AO has recorded satisfaction while making the disallowance u/s 14A? 2. Whether in the facts and circumstances of the case and in law, Ld. CIT(A) is correct in deleting the addition u/s 14A r.w.r 8D without considering the fact that the impugned order is passed during set aside proceedings wherein Hon'ble Tribunal had remanded back the matter only for limited purpose of verification regarding suo-moto disallowance of the assessee and the question whether disallowance u/s 14A is applicable in this case was already decided by the tribunal in its order dated 21.06.2021? 3. Whether in the facts and circumstances of the case and in law, Ld.CIT(A) is correct in deleting the addition u/s 14A r.w.r 8D by holding that there is no clarity and satisfaction of the AO by which he has made disallowance, without considering the Facts that detailed findings have been given in the Assessment order by AO on Page no. 7-11 regarding non-acceptance of suo-moto disallowance of the assessee and AO has also recorded satisfaction for application of Section 14A? 1.2 For A.Y.2014-15 the Revenue has raised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 A.Y.2016-17 as lead appeal. 4.1 This is a second round of litigation before this Income Tax Appellate Tribunal. In this case the assessee had filed Return of Income for AY 2016-17 on 12/11/2016. The assessee s case was selected for scrutiny. The Assessing Officer (AO) after hearing the assessee s Counsel passed an order u/s 143(3) on 29/12/2018. The Assessee filed an appeal before the Ld.Commissioner of Income Tax (appeal). The Ld.CIT(A) decided the appeal vide order dated 13.03.2020. Aggrieved by the Order of the Ld.CIT(A), the Revenue filed an appeal before this Hon ble Tribunal. The Hon ble Income Tax Appellate Tribunal in ITA No.499/PUN/2020, 497/PUN/2020 and 498/PUN/2020 passed a common order dated 21/06/2021. In the first round of appeal before ITAT in ITA 499/PUN/2020 for A.Y.2016-17, the Revenue had raised three grounds, out of that Ground Number 1 2 was regarding disallowance made u/s14A read with rule 8D and the Ground Number 3 was regarding disallowance made u/s. 10AA(9) of the Act. The ITAT in 499/PUN/2020 has held as under for disallowance made u/s 14A read with Rule 8D : Quote, 12. First of all, we observe that nowhere in the assessment order it has been stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny documentary evidence in support of suo moto disallowance u/s. 14A, hence the AO was of the opinion that provisions of Section u/s. 14A is quite applicable in this case. With these given facts, the AO has applied the provisions of Section 14A and made disallowance of Rs. 99,27,035/- by applying the formula given in Rule 8D. Against invocation of provisions of Section 14A, the appellant has mainly raised objection stating that the investments in Growth Scheme cannot be considered while applying formula prescribed under Rule 8D(2)(iii) to calculate disallowance 14A of the Act r.w. rule 8D(2)(iii). It has further argued that the exempt income arises purely from investment of surplus funds representing post tax accumulated profits of the earlier years. It has further stated that the Company had not borrowed any funds for the purpose of investing in securities to earn income, which is exempt from tax. This is an admitted fact that during the year, the appellant earned income, which is exempt from tax and accordingly the assessee company has suo moto made disallowance u/s. 14A of the Act of Rs. 16,74,677/- (in the returns of income so filed), which relates to tax exempt income earned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from records that interest free funds were available with assessee which was substantially higher than the investments made by it. It is not necessary to draw a one to one nexus between investments and interest free funds. When the funds had gone out of a common pool and the assessee had interest free funds in excess of the investments, it could take a valid plea that such investments were made out of interest free funds. This being the case, question of disallowance of interest under section 14A, do not arise at all. 5.5 As the assessee has sufficient surplus fund to make major part of investment in interest- free securities in preceding year and there is negligible increase in investment during the relevant year, the impugned disallowance made under Rule 8D deserves to be deleted. I find that the Assessing Officer has also not pointed out any expenditure which could possibly have been incurred in earning the exempt income in this case. The objective of section 14A and Rule 8D stipulates that net income should actually be brought to tax. In my view, this objective should always be kept in mind while computing the disallowance. Rule 8D should not be pressed into service mechanical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ground on which ITAT had set-aside. Therefore, in this aspect also, the ld.CIT(A) has exceeded his jurisdiction. We again reiterate that the ITAT had set-aside the issue for a Limited Purpose of Verification of suo-moto disallowance made by assessee. Therefore, ld.CIT(A) has no jurisdiction to venture into any other area. Therefore, ld.CIT(A) has erred in deleting the disallowance. The assessee has submitted before us that assessee had made a suo-moto disallowance of Rs. 16,74,677/- in the Return of Income. The Assessing Officer(AO) had calculated disallowance under section 14A read with rule 8D of Rs. 99,27,035/-, after considering the suo-moto disallowance of Rs. 16,74,667/-. Therefore, the AO has already considered the suo-moto disallowance made by AO. Accordingly, disallowance made under section 14A read with rule 8D is upheld. Accordingly, Ground No.1, 2 and 3 raised by the Revenue are Allowed. 7. In the result, appeal of the Revenue in ITA No.590/PUN/2024 is allowed. ITA No.595/PUN/2024 ITA No.1478/PUN/2024 : 8. In both these cases, facts are identical to A.Y.2016-17 discussed above, except one fact that for both these years assessee had not made any suo-moto disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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