TMI Blog2022 (8) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 14A of the Act. In the present case, from the perusal of the assessment order as well as the order of the ld. CIT(A), it would clearly reveal that the appellant had asserted that no expenditure was incurred. The Assessing Officer had not recorded any finding on the submissions made by the appellant company - Therefore, we remit the issue to the file of the ld. CIT(A) to adjudicate the contention of the appellant company that in the absence of recording of satisfaction, no disallowance u/s 14A can be made in accordance with law. Accordingly, these grounds of appeal no.2 and 4 stands partly allowed. Addition on account of notional rental value of unsold flats lying in stock-in-trade - HELD THAT:- This issue is decided in favour of the appellant company by this Tribunal in the case of Kumar Properties and Real Estate Pvt. Ltd [ 2021 (4) TMI 1163 - ITAT PUNE] , KUMAR CONSTRUCTION AND PROPERTIES PRIVATE LIMITED [ 2021 (10) TMI 441 - ITAT PUNE] . Addition on account of provision for expenses which has been made in respect of properties which are completed and the expenses had to be incurred - HELD THAT:- It is settled position of law that if liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - During the course of assessment proceedings, the Assessing Officer observed that the appellant company made investments in partnership firm, namely, M/s Marigold Properties and income from which is exempt from tax in the hands of the appellant company. The appellant also made investments with partnership firm and in equity shares, income from which is also exempt. On noticing that the appellant had not offered any suo moto disallowance u/s 14A, the appellant was called upon to explain as to why disallowance u/s 14A cannot be made. In response to the same, the appellant filed letter dated 28.11.2016 stating that it had not incurred any expenditure for earning the exempt income. Therefore, the question of disallowance u/s 14A does not arise. Rejecting the above contention, the Assessing Officer had proceeded with making of disallowance under the provisions of Rule 8D(2)(iii) of the Income Tax Rules, 1962 ( the Rules ) at Rs.18,69,491/-. 3. As regards, the addition on account of notional rent of unsold flats, the Assessing Officer, during the course of assessment proceedings, noticed that the appellant company completed two projects, namely, Kumar Infinia and Kumar Picasso as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is in appeal before us in the present appeal. 7. Ground of appeal no.1 is general in nature does not require any adjudication. 8. Ground of appeal no.2 to 4 challenges the order of the ld. CIT(A) in confirming the disallowance of Rs.18,69,491/- u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules. It is contended before us that before embarking upon the disallowance under the provisions of section 14A, it is incumbent upon the Assessing Officer to record a satisfaction as to the correctness of the claim of the assessee that no expenditure was incurred to earn exempt income. Taking us through the submission made before the ld. CIT(A), he submits that the appellant took stand that no expenditure was incurred for the purpose of earning the exempt income and the question of disallowance does not arise. The Assessing Officer as well as the ld. CIT(A) had proceeded with making a disallowance u/s 14A of the Act. He further submits that no disallowance can be made u/s 14A without recording a satisfaction as to the correctness of the claim made by the assessee company. Without prejudice to the above, it is submitted that the amount of disallowance u/s 14A r.w. Rule 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee for purchasing the shares/ making the investment in shares is to be examined by the Assessing Officer 11. The Hon ble Supreme in the case of Godrej Boyce Manufacturing Company Ltd. vs. DCIT, 394 ITR 449 (SC) held as follows :- 37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Subsections (2) and (3) of Section 14A of the Act read with Rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ats but only to sell in the market. The AO rejected the contention raised by the assessee and calculated the deemed rental income regarding the above said unsold flats by deputing the Inspector for field enquiry ascertaining the monthly fair market rent. The CIT(A) in the impugned order agreed with the view taken by the AO. A similar issue came up before this Tribunal in assessee‟s sister concern in the case of Kumar Properties and Real Estate Private Limited in ITA No. 2977/PUN/2017 for A.Y. 2013-14. The Co-ordinate Bench of Tribunal vide order dated 28-04- 2021 discussed the issue in detail from Para Nos. 3 to 13 of the said order and held that an exception has been carried out in section 22 of the Act that any such property or its part, which is occupied by the assessee for the purposes of any business or profession carried, the profits of which are chargeable to income-tax, shall be excluded on satisfying the conditions therein. The Co-ordinate Bench, further discussed the said 4 conditions in Para Nos. 6, 7, 8 and 9. The first condition being that the property or its part should be occupied by the assessee as an owner. There is no material evidence to show before us that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been offered to tax, disallowance of corresponding expenditure results in the distortion of true picture of the taxable income. 16. On the other hand, ld. CIT-DR submitted that the expenses were incurred in respect of area of sold flats and balance was formed part of the closing work-in-progress requires verification and this contention was not raised before the Assessing Officer. 17. We heard the rival submissions and perused the material on record. The issue in the present ground of appeal relates to the allowability of the provisions for expenses of Rs.2,03,08,768/-. It is settled position of law that if liability for expenditure had crystallized during the previous year relevant to the assessment year under consideration, then the deduction should be allowed, although the liability is discharged at future date. Reliance in this regard can be placed on the decision of the Hon ble Apex Court in the case of Bharat Earth Movers vs. CIT, 245 ITR 428 (SC). On going through the orders of the ld. CIT(A) as well as the Assessing Officer, we find that without examining the crystallization of liability for the expenditure, the Assessing Officer had made disallowance. This approach ..... X X X X Extracts X X X X X X X X Extracts X X X X
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