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2019 (10) TMI 383

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..... barked upon by the assessee and the judicial pronouncements, it is hereby held that the re-computation done by the Assessing Officer in the absence of recording of the satisfaction is liable to be set aside. - Decided in favour of assessee. Disallowance of 1/5th of the expenses of Telephone, Mobile and Car expenses - HELD THAT:- CIT (A) after careful consideration of the facts of the case and the case laws cited by the Ld. AR before him during the hearings held that the personal use of Car and Telephone cannot be ruled out in the case of the assessee in the absence of day to day details with regard to use of telephone and car and held that the disallowance made by the Assessing Officer are very reasonable and cannot be said to be excessive under any circumstances. AR has taken the arguments that have been taken before the Ld. CIT(A) which the Ld. CIT(A) has duly considered and distinguished the case laws. Having gone through the issue in detail, in the peculiar facts and circumstances of the instant case, we hereby decline to interfere with the order of the Ld. CIT(A) on this issue. - Decided against assessee - ITA No. 562/Chd/2017, ITA No. 288/Chd/2018, ITA No. 1085/Chd/2017, ITA .....

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..... assessee as stipulated and mandated in section 14A; and invoking Rule 8D is not automatic. 5. That Ld. Commissioner of Income Tax (Appeals) has passed the order in utter haste and without considering the records of the case. That Ld. Commissioner of Income Tax (Appeals) has held that no decision of any Hon'ble High Court has been delivered after considering circular No. 5 of 2014 issued by CBDT. Whereas number of recent judgments were produced in favour of Assessee's case at the time of hearing of appeal and the same were totally ignored by the Ld. Commissioner of Income Tax (Appeals). Further the reference of Judgements have been clearly mentioned in the Ld. Commissioner of Income Tax (Appeals)'s order. 6. That addition has been made wholly on adhoc basis which could not be sustained in law. That without pointing out any deficiency and without verifying records, Ld. Assessing officer straightway came to the conclusion that personal use of expenses by the assessee can not be ruled out and l/5th of these expenses are disallowed. 7. That the order of the Ld. Commissioner of income Tax (Appeals) is contrary to Law and facts of the case. 8. That the Appellant craves leave t .....

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..... rovisions of section 14A of the Income Tax Act 1961 in Appellant's case. That Ld. Commissioner of Income Tax has never verified facts of the assessment order and totally ignored the assessment order, wherein details of expenditure incurred for earning dividend income was duely furnished and such amount was duely taken while computing the disallowance. Further Ld. Commissioner of Income tax has clearly held in his order that there is no set language which can be used for recording dissatisfaction for the claim made by the assessee, whereas in landmark judgment of Hon'ble Jurisdictional High Court in the case of C.l.T. vs. Abhishek industries Limited dated 27-01-2015 clearly hold that Section 14A of the Act cannot be applied unless and until satisfaction is recorded. The onus, therefore, to prove the applicability of section 14A, lies squarely on the shoulders of the revenue. 3. That the Ld. Commissioner of Income Tax (Appeals) is grossly erred by holding that once the assessee has earned exempt income, the provisions of section 14A are attracted and disallowance has to be worked out by applying rule 8D. Whereas. It is settled bv various judicial pronouncements that invoking .....

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..... e Tax (Appeals) is contrary to Law and facts of the case. 9. That the Appellant craves leave to add, amend or alter any grounds of Appeal before the Appeal is heard and disposed off. ITA No. 563/CHD/2017 1. That Ld. Commissioner of Income Tax is not justified in law and facts of the case by confirming disallowance of expenses to the tune of ₹ 86163/- on account of disallowance made u/s 14A read with rule 8-D in Appellant's case. 2. That Ld. Commissioner of Income Tax has misconstrued and misapplied the provisions of section 14A of the Income Tax Act 1961 in Appellant's case. That Ld. Commissioner of Income tax has clearly held in his order that there is no set language which can be used for recording dissatisfaction for the claim made by the assessee, whereas in landmark judgment of Hon'ble Jurisdictional High Court in the case of C.l.T. vs. Abhishek industries Limited dated 27-01-2015 clearly hold that Section 14A of the Act cannot be applicable unless and until satisfaction is recorded. The onus, therefore, to prove the applicability of section 14A, lies squarely on the shoulders of the revenue. 3. That the Ld. Commissioner of Income Tax (Appeals) is grossly err .....

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..... ng that once the assessee has earned exempt income, the provisions of section 14A are attracted and disallowance has to be worked out by applying rule 8D. Whereas. It is settled by various judicial pronouncements that invoking Rule 8D is not mandatory, it will be resorted to only if Ld. Assessing Officer is not satisfied as to the correctness of the claim of expenses made by the assessee as stipulated and mandated in section 14A: and invoking Rule 8D is not automatic. 4. That Ld. Commissioner of Income Tax (Appeals) has passed the order in utter haste and without considering the records of the case. That Ld. Commissioner of Income Tax (Appeals) has held that no decision of any Hon'ble High Court has been delivered after considering circular No. 5 of 2014 issued by CBDT. Whereas number of recent judgments were produced in favour of Assessee's case at the time of hearing of appeal and the same were totally ignored by the Ld. Commissioner of Income Tax (Appeals). Further the reference of Judgements have been clearly mentioned in the Ld. Commissioner of Income Tax (Appeals)'s order. 5. That the order of the Ld. Commissioner of income Tax (Appeals) is contrary to Law and fac .....

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..... f the Ld. Commissioner of income Tax (Appeals)-4 is contrary to Law and facts of the case. 6. That the Appellant craves leave to add, amend or alter any grounds of Appeal before the Appeal is heard and disposed off. 3. Grounds relating to disallowance under section 14A r.w.r 8D is common for all the appeals hence being dealt together. 4. Facts taken from the orders of the Ld. CIT(A) are that the assessee is engaged in the business of trading in securities and derivative products and also has investment in shares and filed his return of income for the year under consideration on 30.09.2009 declaring therein income of (-)₹ 3,24,92,528/-. While completing the assessment, the Assessing Officer has made an addition of ₹ 3,84,162/- to the returned of the assessee company on account of disallowance of expenses by invoking provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 on the aground that the assessee has earned dividend income from investment in shares to the extent of ₹ 3,70,73,052/- which will not form part of taxable income and will be exempt from tax. 5. The Assessee has submitted that he has debited an amount of ₹ 60,000/- .....

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..... ness of the claim of the assessee, having regard to the accounts of the assessee. The same provision is contained in sub-rule (1) of the Rule 8D of the Income Tax Rules, 1962 which stipulates that the Assessing Officer, if he is not satisfied, having regard to the accounts of the assessee with the correctness of the claim of the expenditure made by the assessee or the claim of the assessee that no expenditure has been incurred, shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub rule (2) of rule 8D of the Income Tax Rules, 1962. The Ld. CIT(A) further held that in the present case, the submission of the assessee is that there is nothing in the order of the Assessing Officer to indicate that the Assessing Officer was not satisfied with the correctness of the claim of the assessee, and in both under sub-section (2) of section 14A of the Act and under sub-rule (1) of Rule 8D of the Income Tax Rules, 1962, the Assessing Officer is empowered to apply the method as prescribed in the Rules if, having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of that part .....

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..... Assessing Officer while determining the expenses under section 14(A). He relied on the judgment of the jurisdictional High Court in the case of CIT Vs. Abhishek Industries Ltd and other arguments as taken before the lower authorities. 7.1. On the other hand Ld. DR strongly relied on the order of the Ld. CIT(A) and argued that there is an implicit satisfaction recorded by the Assessing Officer and there cannot be fixed format for recording the satisfaction and the observations of the Assessing Officer must be constituted as satisfaction in terms of Section 14A(2). 8. That leaves us with a question to be adjudicated whether satisfaction as per the provisions of Section 14A has been recorded or not by the Assessing Officer. In order to examine this, the provisions of the Act, the recording of the Assessing Officer, the judicial pronouncements are carefully perused. The Section 14A (2) reads as under 14A(2): The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assess .....

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..... tation done by the Assessing Officer cannot be treated as valid. 9. In the instant case, we find that there is no tangible material on record, there is no record of examination of accounts as stipulated under section 14A(2), there is no satisfaction recorded by the Assessing Officer in terms of the expenditure claimed by the assessee, and hence keeping in view the provisions of the Act, the process embarked upon by the assessee and the judicial pronouncements, it is hereby held that the re-computation done by the Assessing Officer in the absence of recording of the satisfaction is liable to be set aside. 10. The other grounds taken in ITA No. 526 and 1085 pertain to disallowance of 1/5th of the expenses of Telephone, Mobile and Car expenses. In this regard the Ld. CIT (A) after careful consideration of the facts of the case and the case laws cited by the Ld. AR before him during the hearings held that the personal use of Car and Telephone cannot be ruled out in the case of the assessee in the absence of day to day details with regard to use of telephone and car and held that the disallowance made by the Assessing Officer are very reasonable and cannot be said to be excessive under .....

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