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2019 (1) TMI 674 - AT - Income TaxDisallowance u/s 14A r.w.r 8D - Held that:- In the present case assessee himself when confronted has stated that it has incurred expenditure for earning exempt income but could only give a pro rate allocation. Based on the changing stand of assessee ld AO was satisfied that claim of the assessee originally that it has not incurred any expenditure for earning exempt income is correct. Accordingly, the ground No. 2 of the appeal of the assessee is dismissed holding that the ld Assessing Officer has correctly recorded the satisfaction with respect to the correctness of the claim of the assessee and invoking the provisions of Rule 8D of the Income Tax Rules, 1962 for working out disallowance u/s 14A of the Act. On careful perusal of the certificate of the Chartered Accountant, there is certain reference to the records of the company; however no such records were mentioned as to what was examined and how it was examined by the Chartered Accountant for working out the disallowance. It is also true that Hon'ble Delhi High Court in ACB INDIA LIMITED (FORMERLY M/S ARYAN COAL BENEFICATIONS (P) LTD. [2015 (4) TMI 224 - DELHI HIGH COURT] has held that while working disallowance u/s 14A read with Rule 8D, only those investment which has resulted into exempt income during the year are required to be considered. Addition u/s 14A computation - Held that:- AO is directed to decide the issue of disallowance u/s 14A read with Rule 8D afresh in accordance with law. In view of above facts and decision of Honourable Delhi High court in ACB Investments P Ltd [2015 (4) TMI 224 - DELHI HIGH COURT] it is further held that the ld Assessing Officer is directed to examine the certificate issued by a Chartered Accountant working out disallowance u/s 14A. If the ld Assessing Officer finds the disallowance worked out by the assessee as per that certificate as correct then disallowance u/s 14A may be restricted to that extent. If the same is found to be incorrect the ld Assessing Officer may decide the issue of the disallowance afresh in accordance with the law. Penalty u/s 271(1)(c) - Disallowance u/s 14A - Held that:- The fact shows that in assessee’s own case for assessment year 2011 – 12, the learned CIT(A) has held that no disallowance under section 14 A can be made. Further, the issue before us is squarely covered by the decision of the Hon’ble Delhi High Court in CIT vs. Liquid Investments dated 5/10/2010, where the Hon’ble High Court has held that issue of disallowance under section 14A of the Income Tax Act was a debatable issue. Even otherwise in the case of the assessee itself for the same assessment year we have held that the disallowance offered by the assessee is on estimated basis and the learned AO has merely applied the provisions of rule 8D of the Income Tax Rules 1962. In assessee’s own case in AY 2011-12, CIT (A) has deleted the disallowance u/s 14A of the act. Thus, it shows that the assessee has not furnished any particulars of income, which are incorrect. The issue remains is merely computation of the disallowance. Therefore, we do not find any infirmity in the order of the learned CIT(A) in deleting the above penalty.
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