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2022 (9) TMI 249 - AT - Income TaxAssessment u/s 153A - Disallowance u/s 14A - HELD THAT:- The assessee has responded to the show cause notice. The Assessing Officer has made elaborate discussion on the issue and has resorted to the disallowance u/s 14A of the Act. Noticeably, the assessment was framed u/s 153A where requisite information/accounts of the assessee were called for. Needless to say, the satisfaction of the AO is the assent of his mind. AO has inquired on the issue having regard to the details/information filed by the Assessee. The text and tenor of the assessment order shows that the Assessing Officer has objectively looked into the issue having regard to the details/accounts of the assessee and thus the contention of arriving at contemplated satisfaction is fulfilled. More so, opportunity was duly granted and availed by the Assessee. The facts and circumstances imply presence of satisfaction contemplated under Section 14A(2) of the Act. Noticeably, it is not a case where the assessee has offered any disallowance under Section 14A which is sought to be displaced by the Assessing Officer. Hence, Ground No. 1 of the Cross Objection of the assessee in this regard is not tenable. Disallowance under Section 14A cannot exceed the exempt income by way of dividend - The issue has been discussed by the Co-ordinate Bench in ACIT vs. Hindustan EPC Company Ltd., [2022 (8) TMI 904 - ITAT DELHI] and thus no longer res integra. The CIT(A) shall accordingly restrict the disallowance to the extent of exempt income while making denovo adjudication. Hence, Ground No.2 of the Cross Objection is allowed. Disallowance under Rule 8D(2)(iii) - Since the issue has been restored to the file of the CIT(A), the assessee shall be at liberty to place such arguments and adduce such evidence as may be considered expedient in the course of fresh adjudication by the CIT(A). Hence, Ground No.3 of the Cross Objection is thus allowed for statistical purposes. Adjustment made in the book profit under Section 115JB of the Act towards disallowance under Section 14A - We find merit in the contention of the assessee that estimated disallowances computed under Rule 8D cannot be adopted for the purposes of Section 115JB of the Act. This aspect is also restored to the file of the CIT(A) for determining the book profit/loss having regard to decision of the Special Bench in ACIT vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and in accordance with law. Hence, Ground No.4 of the Cross Objection is allowed for statistical purposes.
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