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TMI Blog2024 (12) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... stently following a particular method for making suo motu disallowance u/s. 14A. Assessee s contention that in the past assessment years, the methodology adopted has been accepted, either at the stage of assessment or in appellate proceeding, remains uncontroverted. Therefore, if the A.O., having been satisfied with the explanation of the assessee, has accepted the suo motu disallowance, which is otherwise consistent with the methodology adopted by the assessee in past assessment years, in our view, the assessment order cannot be considered to be erroneous. Thus, assumption of jurisdiction u/s. 263 of the Act, is invalid. Decided in favour of assessee. - Shri Saktijit Dey, VP And Shri Girish Agrawal, AM For the Appellant : Shri Yogesh Thar And Shri Karan Jain For the Respondent : Shri Kailash C. Kanojiya ORDER PER SAKTIJIT DEY, VP: The present appeal, at the instance of the assessee, calls into question the validity of the order dated 11.03.2024, passed u/s.263 of the Income Tax Act, 1961 ( the Act for short) by learned Principal Commissioner of Income Tax, Mumbai ( ld.PCIT for short), pertaining to the assessment year (A.Y.) 2018-19. 2. Briefly stated, the assessee is a resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and prejudicial to the interest of Revenue . In support of such contention, the assessee relied upon a catena of judicial precedents. The ld. PCIT, however, remained unconvinced with the submissions of the assessee. He was of the view that while accepting assessee s claim, the A.O. has not made full and proper enquiry, as was required to be made. Further, referring to clause (c) under Explanation 2 to section 263 of the Act, he observed that the A.O. has not passed the order in accordance with CBDT Circular No. 05/2014, which mandates computation of disallowance u/s. 14A of the Act read with Rule 8D. Thus, he ultimately concluded that non computation of disallowance in terms of Rule 8D has made the assessment order erroneous and prejudicial to the interest of Revenue. Having held, he set aside the assessment order, directing the A.O. to make enquiry on the issue of disallowance u/s. 14A of the Act and reassess the income after providing opportunity of being heard to the assessee. 5. Before us, the ld. Counsel appearing for the assessee submitted that, the assessee is carrying out its investment activities from past several years and from 2012 onwards, the investments have remaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 263 of the Act, empowers the Revisionary Authority to declare an assessment order erroneous and prejudicial to the interest of the Revenue, if in his opinion, the conditions enumerated under the said explanation are fulfilled. 7. We have considered rival submissions, in light of the decisions relied upon and perused the materials on record. Undisputedly, the only issue on which ld. PCIT has invoked his powers u/s. 263 of the Act to revise the assessment order, is the disallowance u/s. 14A of the Act read with Rule 8D. As discussed earlier in the order, in the year under consideration, the assessee has earned exempt income amounting to Rs. 2.47 crores, whereas, suo motu , it has disallowed Rs. 58,456/-. At this stage, what is required to be examined is, whether in course of assessment proceeding the A.O. had enquired into and examined, the issue of disallowance to be made u/s. 14A of the Act. As we find, on 17.02.2020, the A.O. issued a notice u/s. 142(1) of the Act, wherein, an Annexure was attached specifying various aspects in relation to claims made in the return of income and computation of income, on which the assessee was required not only to furnish the necessary detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee s claim having regard to the accounts. In case, the A.O. is satisfied with the correctness of assessee s claim having regard to its accounts, there is no requirement in law that the A.O. must record such satisfaction in the body of the assessment order itself. 11. In the facts of the present appeal, having perused the materials on record, we are of the view that after examining the explanation of the assessee, the A.O. prima facie was satisfied with the correctness of the suo motu disallowance made by the assessee, having regard to its accounts. Hence, he did not discuss the issue in the body of the assessment order itself. A careful reading of the provision contained u/s. 14A(2) of the Act, read with Rule 8D(1), clearly indicates that the satisfaction postulated in the aforesaid provisions is that of the A.O. and no other authority. Therefore, by merely stating that the A.O. has not properly recorded his satisfaction, the revisionary authority cannot substitute the satisfaction of the A.O. with his own, that too, without making any enquiry himself. 12. Now coming to the enquiry part, ld. PCIT himself admits that assessee s case does not fall under no enquiry. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O., having been satisfied with the explanation of the assessee, has accepted the suo motu disallowance, which is otherwise consistent with the methodology adopted by the assessee in past assessment years, in our view, the assessment order cannot be considered to be erroneous. Interestingly, though, the revisionary authority accepts that to substantiate allegation of incomplete enquiry the authority concerned must himself conduct enquiry to demonstrate that the action of the A.O. is erroneous and prejudicial to the interest of the Revenue, however in reality, he has not undertaken any such exercise in the instant case to falsify assessee s computation of disallowance, having regard to the accounts. Merely because a particular methodology has been provided under Rule 8D(2)(iii), that cannot be adopted as a straight jacket formula giving a complete go bye to the provision of section 14A(2) read with Rule 8D(2)(i). Therefore, in our considered view, the view taken by the A.O., in the present case is a possible view. That being the case, in our view, the assumption of jurisdiction u/s. 263 of the Act, is invalid. Accordingly, we reverse the impugned order passed u/s. 263 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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