TMI Blog2022 (6) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... had discussed the provisions of section 14A(1) of the Act, but had not justified how the expenditure which the assessee had incurred during the relevant year related to the income not forming part of its total income and, had straightaway applied rule 8D, then, in the absence of proximate relationship between the expenditure and the exempt income the disallowance made by him was rightly vacated by the Tribunal. Accordingly we are of the considered view, that as there is a clear lapse on the part of the lower authorities in validly assuming jurisdiction for dislodging the assessee s claim that no disallowance u/s.14A of the Act was called for in its hands, therefore, the disallowance worked out by the Assessing Officer u/s 14A r.w Rule 8D(2)(iii), which thereafter, had been sustained by the CIT(Appeals) is liable to be vacated. We, thus, set-aside the order of the CIT(A) and vacate the disallowance made by the A.O u/s 14A r.w Rule 8D(2)(iii). - ITA Nos. 378 And 379/PAN/2017 - - - Dated:- 31-3-2022 - Shri Ravish Sood, Judicial Member And Shri Jamlappa D Battull, Accountant Member For the Assessee : Shri D.E. Robinson, AR For the Revenue : Shri Sourabh Nayak, Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee would be attributable to purchase of exempt income yielding investments and, receipt of dividend income arising therefrom, the Assessing Officer worked out the disallowance u/s. 14A of the Act by triggering the mechanism contemplated under rule 8D(2)(iii) of the Income Tax Rules, 1963 at Rs.11,59,010/-. 3. Aggrieved, the assessee assailed the assessment order before the CIT(Appeals). During the course of the appellate proceedings, the assessee, inter alia, assailed the validity of the disallowance that was worked out by the Assessing Officer u/s.14A r.w Rule 8D(2)(iii) on the ground that the Assessing Officer had failed to record his satisfaction as to why the assessee s claim that no part of the administrative expenditure was attributable to earning of the exempt income was not to be accepted. Also, it was the claim of the assessee that the Assessing Officer had failed to establish that there was any nexus between its exempt dividend income and the expenditure incurred. However, the CIT(Appeals) was not persuaded to subscribe to the aforesaid contentions of the assessee. Observing that the Assessing Officer had only after recording his satisfaction determined the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s claim that no part of the expenditure was attributable to earning of the exempt dividend income, had, therein, dispensing with the said statutory obligation wrongly assumed jurisdiction and in a mechanical manner determined the disallowance u/s.14A of the Act by triggering the mechanism contemplated in Rule 8D(2)(iii). On a perusal of the assessment order, we find, that the Assessing Officer had without dislodging the assessee s claim that no part of the expenditure was incurred either towards purchase of exempt income yielding investment, or, earning of dividend income, had in a most mechanical manner worked out the disallowance u/s. 14A r.w Rule 8D (2)(iii) at Rs.11,59,010/-. Admittedly, as stated by the Ld. Authorized Representative (for short AR ) for the assessee, and rightly so, there is no whisper in the body of the assessment order qua the satisfaction on the part of the Assessing Officer that as to why the assessee s claim that no part of the expenditure was attributable to earning of exempt dividend income was not to be accepted. On appeal, the CIT(Appeals) being of the view that the Assessing Officer had after duly recording his satisfaction worked out the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the 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. Also a similar view had been taken by the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. Vs CIT (2018) 402 ITR 640 (SC). In the case before us, it is a matter of fact borne from the record that there is a failure on the part of the A.O, to record his dissatisfaction, that having regard to the accounts of the assessee, as were placed before him, it was not possible on his part to generate the requisite satisfaction with regard to the correctness of the assessee s claim that no part of expenditure pertaining to its business could be attributed to earning of exempt dividend income. As observed by us hereinabove, the state of affairs qua the dissatisfaction as regards the claim of the assessee that no part of the expenses incurred by it with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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