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TMI Blog2024 (12) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... eeta Punit Kaushik ORDER Per Bench: 1. These are three appeals preferred by the Assessee pertaining to Assessment Years 2012-13, 2013-14, and 2014-15. Since identical issues were raised in the appeals, the same were heard together and are, therefore, being disposed by way of a common order. 2. We would first take appeal for Assessment Year 2012-13. ITA No.2066/Mum/2024 (Assessment Year 2012-13) 3. This appeal has been preferred by the Assessee against the order, dated 29/02/2024, passed by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the CIT(A) ] for the Assessment Year 2012-13, whereby the Ld. CIT(A) had partly allowed the appeal of the Assessee against the Assessment Order, dated 02/03/2015, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the Act ]. 3.1. The Appellant has raised following grounds in appeal: 1. 1.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in passing the order on non-existing entity/merger entity's PAN, even though the event of merger was already being intimated during the appeal proceedings. 1.2. The Appellant prays that the order passed by the Ld.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of INR 11,62,13,520/- after making disallowance of INR 1,43,83,306/- (in addition to voluntary disallowance of INR. 5,42,906/- made by the Appellant in the return of income) under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 [for short IT Rules ). 6. Being aggrieved, the Appellant carried the issue in appeal before the CIT(A) contending, inter-alia, that the Appellant had made voluntary disallowance of INR.5,42,906/- [consisting of direct expenses, being Securities Transaction Tax of INR.1,26,808/- and indirect expenses, being common expenses of INR.4,16,898/- computed in proportion of exempt income over total revenue]; and that the Assessing Officer had, without recording dissatisfaction, invoked the provisions contained in Rule 8D of the IT Rules to make additional disallowance of INR 1,43,83,306/- under Section 14A of the Act. The CIT(A) rejected the aforesaid contention of the appellant and dismissed the ground raised by the Appellant in this regard. 7. Being aggrieved, the Appellant carried the issue in appeal before the Tribunal. 8. The primary contention advanced on behalf of the Appellant was that the Assessing Officer had failed to record dissa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. (Emphasis Supplied) 12. Similar view was expressed by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT : 347 ITR 272: 41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot consistent with Rule 8D of the said Rules. It is only in view of the disallowances not being worked out as per Rule 8D of the Rules, that the Assessing Officer is not satisfied with the disallowance offered by the Respondent. This, to our mind, is putting the cart before the horse. The Assessing Officer must first record a conclusion that having regard to the accounts of the assessee, he is not satisfied 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. xx xx 11. Non-satisfaction with the disallowance offered by the assessee has to be arrived at on the basis of the accounts submitted by the assessee. In this case, the Assessing Officer had not carried out the aforesaid exercise but rejected the disallowance claimed by the assessee only on the ground that it was not in accordance with Rule 8D of the Rules. The application of Rule 8D of the Rules would only arise once the Assessing Officer is not satisfied on an objective criteria in the context of its accounts, that suo motu disallowance claimed by the assessee is not proper. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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