TMI Blog2018 (4) TMI 1766X X X X Extracts X X X X X X X X Extracts X X X X ..... aving regard to the accounts of the assessee, as placed before him, it was not possible for him generate the requisite satisfaction with regard to the correctness of the claim of disallowance made by the assessee under Sec. 14A - A.O had failed to record the requisite satisfaction, therefore, the very assumption of jurisdiction by him for dislodging the claim of disallowance made by the assessee and substituting the same by the amount worked out as per Sec. 14A r.w Rule 8D cannot be sustained - Decided in favour of assessee. - ITA No. 7239/Mum/2016 - - - Dated:- 25-4-2018 - SHRI G.S. PANNU, AM AND SHRI RAVISH SOOD, JM For the Appellant : S/shri Krish Desai and Bhumila Rathod, A.Rs For the Respondent : Shri M.V. Rajguru, D.R ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal filed by the assessee is directed against the order passed by the CIT(A)-9, Mumbai, dated 23.08.2016, which in itself arises from the order passed by the A.O under Sec. 143(3) of the Income tax Act, 1961 (for short Act ), dated 30.03.2015 for assessment year 2012-13. The assessee assailing the order of the CIT(A) had raised before us the following grounds of appeal:- Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the appeal. It is claimed by the assessee that the delay in filing of the appeal had occasioned for the reason that Ms. Bhakti Ajmera, assistant of Sh. Samir R. Sanghvi, Chartered accountant who is a Partner of Manish Modi Associates, Chartered accountants, out of inadvertence, while going on leave on 17th October, 2016 for her final examination of Chartered accountancy had failed to hand over the appeal papers of the assessee company, viz. Taurian Engineering (P) Ltd, as a result whereof the appeal could not be filed within the limitation period. The affidavits of Sh. Samir R. Sanghvi, C.A and Ms. Bhakti Ajmera, affirming the aforesaid facts had also been enclosed along with the application seeking condonation of delay. We have perused the application filed by the assessee seeking condonation of delay and are of the considered view that the delay in filing o the appeal had crept in because of an inadvertent mistake on the part of the office of its chartered accountants. We thus, in all fairness condone the delay of 24 days involved in filing of the appeal. 3. Briefly stated, the facts of the case are that the assessee who is engaged in the business of manufacturing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd favour with the CIT(A) who being of the view that as the A.O had rightly worked out the disallowance under Sec. 14A r.w Rule 8D as per the mandate of law, after taking into consideration the objects with which the said statutory provision was made available on the statute, therefore, observed that no infirmity did emerge from his order. It was further observed by the CIT(A) that as the assessee had disallowed the expenditure incurred as certain percentage of the exempt dividend income, thus, the question of reaching of satisfaction as regards the correctness of the claim of the assessee did not arise at all. The CIT(A) further held a conviction that as the A.O had made a further disallowance under Sec.14A, therefore, the same in itself proved that he was not satisfied with the correctness of the claim of the assessee in respect of expenditure which was claimed to have been incurred in relation to the dividend income which did not form part of its total income. The CIT(A) on the basis of his aforesaid observations upheld the order of the A.O and dismissed the contentions of the assessee assailing the disallowance made under Sec. 14A of the Act. 6. The assessee being aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. We also do not find ourselves to be in agreement with the observation of the CIT(A) that as the A.O had made a further disallowance under Sec.14A, therefore, the same in itself proved that he was not satisfied with the correctness of the claim of the assessee in respect of the expenditure incurred in relation to the dividend income. We find that the view taken by the CIT(A) is not in conformity with the judgment of the Hon ble Supreme Court in the case of Godrej Boyce Manufacturing Co. Ltd. Vs. DCIT Anr. (Civil Appeal No.7020 of 2011; dated. 08.05.2017), wherein the Hon ble Apex Court had held that where an A.O makes a disallowance under Section 14A r.w. Rule 8D without arriving at a satisfaction as regards the correctness of the claim of the assessee, on the basis of its accounts as were placed before him, the same would not be sustainable in the eyes of law. 8. We have given a thoughtful consideration to the facts of the case, and are of the considered view that the very process of determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the A.O. returns a finding that he is not satisfied with the correctness of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the CIT(A) that as the A.O made a further disallowance under Sec. 14A, therefore, the same in itself proved that he was not satisfied with the correctness of the claim of the assessee. We are of a strong conviction that in case the A.O was not satisfied with the claim of disallowance of the assessee under Sec. 14A, then it was obligatory for him as per the mandate of law to have recorded cogent reasons which had led to such dissatisfaction on his part. We are of the view that as the A.O had failed to record the requisite satisfaction, therefore, the very assumption of jurisdiction by him for dislodging the claim of disallowance made by the assessee and substituting the same by the amount worked out as per Sec. 14A r.w Rule 8D cannot be sustained and is liable to be vacated. We thus set aside the disallowance of ₹ 24,34,101/- made under Sec. 14A by the A.O and sustained by the CIT(A). 9. That as we have vacated the disallowance made under Sec. 14A for lack of jurisdiction on the part of the A.O, therefore, we refrain from adverting to the contentions raised by the assessee on merits as regards the validity of the disallowance under Sec. 14A. 10. The appeal of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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