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TMI Blog2020 (5) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... dispose of all these appeals by this consolidated order for the sake of convenience by taking the IT(SS) A No. 104/Kol/2018 as the lead case for AY 2013-14 and AY 2014-15 and the result of which will be applied for these two appeals. 2. The sole ground of appeal of the assessee is against the action of Ld. CIT(A) in upholding the disallowance made by the AO u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as the "Act") for all the assessment years before us. However, it was brought to our notice by the Ld. AR that AY 2013-14 and AY 2014-15 was not pending before the AO on the date of search i.e. on 01.12.2015 and, therefore, these two assessment years are unabated assessment years and further he contended that it is trite law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons for non disallowance as per Rule 8D. But according to AO the assessee had not furnished any explanation in this regard. Since no explanation has been filed by the assessee, the disallowance u/s. 14A was resorted by AO which comes to Rs. 3,19,768/-. Aggrieved, assessee preferred an appeal before the Ld. CIT(A), who confirmed the action of AO by observing as under: "Be that the case, I find that the appellant has earned exempt income in form of dividend for Rs. 8,10,813/- but no disallowance u/s 14A of the I.T. Act'61 was made suo-mottu by the assessee in computation of income as per parameters laid down in Rule 8D. As has been recorded by the Ld. AO, the assessee was asked to explain the reasons for non-disallowance, which howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original return filed for the relevant assessment year which did not abate and further, there is no recitals in the assessment order that this disallowance was fall out of any incriminating materials unearthed during search u/s. 132 of the Act. So according to Ld AR, since the assessment was not pending before the AO on the date of search, no addition could have been saddled on the assessee without the aid of incriminating materials while assessment is framed under the provisions of section 153A of the Act. According to Ld. AR, it is settled law that unabated assessments can be interfered by AO while making assessment u/s. 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar. We note that in this assessment year assessee received exempt income of Rs. 2,10,000/- and the AO has made disallowance of Rs. 1,06,773/- by applying Rule 8D(2)(i) i.e. direct expenditure of Rs. 2,132/- and rule 8D(2)(iii) - ½% of average investment - Rs. 1,03,641/-. We note that no disallowance was made by AO under Rule 8D(2)(ii). The limited prayer of the Ld. AR of the assessee is that the disallowance made u/s. 14A read with Rule 8D(2)(iii) may be restricted to .5% of the investment made in the dividend yielding scrips. We find force in the contention of the Ld. AR and this Tribunal have been consistently taking such a view after the decision in REI Agro Ltd. vs. DCIT (144 ITD 141). So, we direct the AO to restrict the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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