9911796707
TMI Blog2024 (12) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... notices, the assessee appeared from time to time and furnished the requisite reply/details. After examining the reply /details furnished by the assessee, the A.O., vide order dated 07.05.2021, completed the assessment u/s. 143(3) r.w.s. 144B of the Act, determining the total income at Rs. 15,26,53,134/-. 3. Against the assessment order so passed, the assessee preferred an appeal before learned first appellate authority. Be that as it may, after completion of the assessment, ld. PCIT, in exercise of powers conferred u/s. 263 of the Act, called for and examined the assessment records. While doing so, he noticed that in the year under consideration, the assessee had earned exempt income by way of dividend amounting to Rs. 2,47,18,033/-. Whereas, suo motu, the assessee has disallowed an amount of Rs. 58,456/-, being expenditure attributable to earning of exempt income. On further examination, he found that during the year under consideration, assessee's investments in equity shares and mutual fund stood at Rs. 34,737.60 lacs. According to him, in terms with section 14A read with Rule 8D(2)(iii), the disallowance, has to be made at 1% of the average value of investment, which would wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of certain employees assigned to investment activity, proportionate electricity, telephone, society cost, etc. He submitted, the methodology adopted by the assessee was accepted by learned first appellate authority in assessee's case in A.Y. 2012-13 and 2013-14, though the A.O. had made disallowance adopting the method provided under Rule 8D(2). He submitted, in subsequent assessment years, until the current assessment year, no disallowance was ever made in addition to the suo motu disallowance. He submitted, in course of the assessment proceeding, the A.O., in the notice dated 17.02.2020 issued u/s. 142(1) of the Act, has specifically enquired into the suo motu disallowance made by the assessee qua applicability of Rule 8D. In this context, he drew our attention to a copy of the said notice, along with its Annexure placed at pg. no. 141 of the paper book. He submitted, in response to the query raised by the A.O., the assessee furnished a detailed reply on 09.03.2020, justifying the computation of suo motu disallowance. He submitted, after making necessary enquiry and applying his mind to the facts and materials brought on record, the A.O., being satisfied that the suo motu d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o motu disallowance of expenses relating to earning of exempt income. In the said reply, the assessee further brought to the notice of the A.O., the past assessment history relating to the very same issue and stated that the disallowances made in various assessment years, have been deleted by the appellate authorities, being ld. CIT(A) or the Tribunal. In the said reply, it was explained by the assessee that it has computed the suo motu disallowance by considering the salary cost of the employees assigned to the investment activity, electricity and certain other costs on proportionate basis. 9. A reading of the assessment order clearly reveals that the A.O. has passed the assessment order after examining in detail the various issues raised in the notices issued either u/s. 142(1) of the Act or u/s. 143(2) of the Act. The assessment order certainly cannot be considered to be a cryptic or non-speaking order accepting assessee's claim. In fact, as against the nil income declared by the assessee, the A.O. has determined the total income at Rs. 15,26,53,132/-, after making couple of disallowances. These facts clearly reveal that the A.O. has passed the assessment order after conducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t read with Rule 8D(1) becomes otiose. This is so because, in case Rule 8D(2) has to be applied mandatorily, then there is no need to record satisfaction. In our view, the sanctity of recording satisfaction u/s.14A(2) of the Act has been judicially settled, hence, the issue should not detain us any further. At this stage, it needs to be observed that while justifying his action u/s. 263 of the Act, ld. PCIT has taken shelter under clause (c) to Explanation 2 which reads as under: Section 263 in The Income Tax Act, 1961 263. Revision of orders prejudicial to revenue. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner,- (a) ........... (b) ............ (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or 13. In our view, Explanation 2 cannot militate against the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X
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