TMI Blog2020 (4) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said statutory requirement by the A.O in the case before us. As is discernible from the assessment order, the A.O had after necessary deliberations observed that with reference to the accounts of the assessee, he was not satisfied with the correctness of its claim as regards the expenses which were attributed to earning of the income not forming part of the assesse s total income. Accordingly, we are of the considered view that the statutory requirement of arriving at a satisfaction by the A.O, as regards the correctness of the assesse s claim of disallowance under Sec. 14A can safely be held to have been satisfied on his part. As such, we are unable to persuade ourselves to subscribe to the claim of the ld. A.R that the A.O had without arriving at a satisfaction as regards the incorrectness of the claim of the disallowance under Sec. 14A of the assessee, disallowed the same by taking recourse to the provisions of Sec. 14A(2) and (3) r.w. Rule 8D. We find substantial force in the claim of the ld. A.R that for the purpose of computing the disallowance under Sec. 14A r.w. Rule 8D(2)(iii) only those investments are to be considered for the purpose of computing the average va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent : Shri R. Bhoopathi, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals)-8, Mumbai, dated 20.01.2019, which in turn arises from the assessment framed by the A.O under Sec. 143(3) of the Income Act, 1961 (for short Act ), dated 29.12.2015 for A.Y. 2013-14. The assessee had assailed the impugned order on the following grounds of appeal before us: The under mentioned Grounds of Appeal are independent and are without prejudice to one another: 1(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) ( the CIT(A) ) erred in confirming action of the Ld. Assessing officer of making disallowance to the extent of ₹ 10,67,730/- by invoking the provisions of section 14A read with Rule 8D of the Income Tax Rules, 1962 without appreciating that the Ld. Assessing Officer failed to recording, any reason for nonsatisfaction with the correctness of the claim of Rs. 50,143/- suo-moto disallowed by the Appellant u/s. 14A and doing so is wrong contrary to the facts of the case, provisions of the Act, and the Rules made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tilised for the purpose of making investments in the exempt income yielding shares. Also, it was submitted by it that a fair disallowance of the proportionate administrative expenses were already offered in the return of income. On a perusal of the details it was noticed by the A.O that the assessee had worked out the disallowance under Sec. 14A at an amount of ₹ 50,143/-, as under: Calculation of disallowance u/s.14A Salary Amount in Rs. 0.5% of the salary costs of management personnel 0.5% of Salary of VP Accounts 4,729 0.5% of Salary of Accounts Executive 1% of the salary costs of Executive Director 17,280 Total 22,009 Total salary debited to P/L 86,87,983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance under clause(i) Demat Charges 18,254 Disallowance under Clause (ii) Disallowance under Clause (iii) Average Value of Investments as on 01.04.2012 22,67,56,000 Average Value of investments as on 31.03.2013 20,38,55,000 Average value of Investments at the end of the year 21,53,05,500 0.5% of the Total average value of investments 10,76,528 Total Disallowance u/s. 14A (i)+(ii)+(iii) 10,94,782 Less: Already disallowed by the assessee 50,143 Balance amount to be disallowed u/s. 14A 10,44,639 Observing, that the assessee had already offered a suo-motto disallowance of ₹ 50,143/- u/s 14A, the A.O made a further disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Sec.14A(2) and (3) r.w. Rule 8D. On the basis of his aforesaid contention, it was vehemently submitted by the ld. A.R that the working of the disallowance under Sec. 14A r.w. Rule 8D by the AO, in the absence of arriving at a dissatisfaction as regards the correctness of the claim of the assessee could not be sustained and was liable to be vacated on the said ground itself. In support of his aforesaid contention the ld. A.R had relied on the order of the ITAT, D bench, Mumbai, in the case of Rajshree Production Pvt. ltd. Vs. ACIT-16(1), Mumbai [ITA No. 3477 3478/Mum/2017, dated 28.02.2019]. Alternatively, it was submitted by the ld. A.R that the A.O while working out the disallowance under Sec. 14A r.w. Rule 8D(2)(iii) had erroneously included the investments which had not yielded any exempt income during the year, for the purpose of computing the average value of investments. In order to drive home his aforesaid claim the ld. A.R took us through the details of the 11 exempt income yielding investments which had yielded the dividend income of ₹ 15,22,953/- during the year. [Page 7 of the assesses Paper book (APB)]. Relying on the order of the ITAT Speci ..... X 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 is not possible for him to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. As observed by the Hon ble Supreme Court, it is only after recording of such satisfaction that the A.O can take recourse to the provisions of Sec.14A(2) and (3) r.w Rule 8D of the Rules. In fact, the aforesaid view was once again reiterated by the Hon ble Supreme Court in the case of Maxopp Investment Ltd. VS. CIT (2018) 402 ITR 640 (SC). In the aforesaid case, it was once again observed by the Hon ble Supreme Court that if the A.O was not satisfied with the disallowance that was offered by the assessee, then, he remained under a statutory obligation to record his dissatisfaction to the said effect, as it was only thereafter that he could assume jurisdiction and take recourse to and work out the disallowance as per subsection (2) and (3) of Sec. 14A of the Act. Although, we are in agreement with the claim of the ld. A.R that in the absence of recording of the requisite satisfaction as regards the correctness of an assesse s claim of disallowance under Sec.14A, the A.O is divested of his jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would work at an amount of ₹ 4,27,46,110/-, as under : Sr. No. Name of the company Dividend Amount (in Rs.) Closing balance as on 31.03.2013 Closing balance as on 31.03.2012 1. BSE India Limited 2,81,892 1,87,92,800 1,87,92,800 2. HBL Power Systems Limited 1,380 - 3,14,084 3. ICICI Bank Limited 8,250 - 6,34,966 4. Indiabulls Financial Services Limited 7,000 - 5,34,183 5. Styrolution ABS (India) Limited 13,148 24,41,911 20,28,471 6. KJMC Financial Services Limited 10,20,000 1,75,52,500 1,75,52,500 7. Menon Bearing Limited 275 - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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