TMI Blog2021 (10) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITAT MUMBAI] the proceedings u/s 154 are stated to have been concluded after the assessee had submitted its reply. Backed by the aforesaid facts, not being able to persuade ourselves to subscribe to the contention of the ld. A.R that the A.O having issued a notice u/s 154 of the Act could not have on the same basis validly reopened its case u/s 147 of the Act, we, thus, dismiss the same. The Grounds of appeal Nos. 2 3 are dismissed. Disallowance u/s 14A r.w.r. 8D - non recording his satisfaction that as to why the claim of the assessee that no part of the expenses could be attributed to earning of the exempt income - HELD THAT:- A.O in the case before us had dislodged the aforesaid claim of the assessee that no part of the expenditure was attributable to earning of its exempt income without recording his satisfaction as to why the same was not to be accepted having regard to the accounts of the assessee which were placed before him - we are of a strong conviction that the A.O had wrongly assumed jurisdiction and worked out the disallowance in the hands of the assessee u/s 14A - We, thus, in terms of our aforesaid observations respectfully follow the judgments of Godrej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 143(3) r.w.s 147, dated 31.10.2014, wherein after making a disallowance u/s 14A r.w Rule 8D of ₹ 1,26,048/- the income of the assessee was determined at ₹ 10,89,950/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Before the CIT(A) the assessee assailed both the validity of the jurisdiction that was assumed by the A.O for reopening his case u/s 147 of the Act, as well as challenged the addition therein made on merits. However, the CIT(A) not finding favor with the contentions advanced by the assessee dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. It was submitted by the ld. A.R that the A.O had wrongly assumed jurisdiction and reopened the case of the assessee u/s 147 of the Act. Elaborating on his aforesaid contention, it was submitted by the ld. A.R that the A.O after framing the assessment u/s 143(3), dated 26.02.2011 had issued notice u/s 154, dated 15.04.2013 wherein he had sought to disallow u/s 14A r.w. Rule 8D an amount of ₹ 1,24,683/- attributable to exempt income of ₹ 42,81,534/- earned by the assessee during the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. We shall first take up the claim of the ld. A.R that the A.O had wrongly assumed jurisdiction u/s 147 of the Act, for the reason, that he had reopened his concluded assessment on the very same reason on which notice u/s 154 of the Act was issued to him. 8. After giving a thoughtful consideration to the aforesaid contention of the ld. A.R, we are unable to persuade ourselves to subscribe to the same. In our considered view, the powers vested with an A.O u/s 147 and u/s 154 of the Act operate in their respective fields. On the one hand, the A.O u/s 154 of the Act is vested with the jurisdiction to rectify a mistake apparent from the record, while for on the other hand the jurisdiction u/s 147 is to be exercised by him in a case where he holds a belief that any income of the assessee chargeable to tax had escaped assessment. Admittedly, in a case where the A.O had on a specific ground sought to rectify a mistake apparent from the record in an order passed by him and issued a notice u/s 154 to the assessee, then, if such rectificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 154 are stated to have been concluded after the assessee had submitted its reply. Backed by the aforesaid facts, not being able to persuade ourselves to subscribe to the contention of the ld. A.R that the A.O having issued a notice u/s 154 of the Act could not have on the same basis validly reopened its case u/s 147 of the Act, we, thus, dismiss the same. The Grounds of appeal Nos. 2 3 are dismissed. 9. We shall now deal with the alternative claim of the ld. A.R that the A.O without recording his satisfaction that as to why the claim of the assessee that no part of the expenses could be attributed to earning of the exempt income, had however, wrongly assumed jurisdiction and in a mechanical manner worked out the disallowance u/s 14A r.w Rule 8D. As is discernible from the assessment order, it was observed by the A.O that the assessee despite having earned an exempt income of ₹ 42,81,534/- had however not offered any disallowance u/s 14A of the Act. Being of the view, that the assessee was obligated to work out the mandatory disallowance u/s 14A as per the mechanism provided in Rule 8D, the A.O had called upon the assessee to file a working of the said disallowance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the CIT(A) that once the assessee makes a disallowance suo motto, that establishes the correctness of applicability of Sec. 14A. At this stage, we may herein observe that as the assessee on a suo motto basis had not offered any disallowance u/s 14A, therefore, the aforesaid observation of the CIT(A) is absolutely misconceived and irrelevant in context of the case of the assessee before us. Further, the CIT(A) was of the view that as the A.O had in the assessment order observed that disallowance computed by the assessee was not in accordance with Rule 8D, therefore, the same sufficed the requirement of recording of satisfaction on the part of the A.O. 11. We have given a thoughtful consideration to the issue before us and are unable to persuade ourselves to subscribe to the view taken by the lower authorities. Admittedly, the A.O having regard to the accounts of the assessee had failed to record his dissatisfaction as regards the correctness of its claim that no part of the expenses were incurred for earning of the exempt income. In our considered view, the issue as to whether or not it is obligatory on the part of the A.O to record his satisfaction as to why the claim of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. 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 sub-section (2) and (3) of Sec. 14A of the Act. 12. As observed by us hereinabove, the A.O in the case before us had dislodged the aforesaid claim of the assessee that no part of the expenditure was attributable to earning of its exempt income without recording his satisfaction as to why the same was not to be accepted having regard to the accounts of the assessee which were placed before him. Accordingly, we are of a strong conviction that the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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