2015 (3) TMI 1122 - AT - Income Tax

Tribunal overturns FAA's order due to lack of evidence for disallowance under Section 14A

The appeals for all three assessment years were allowed as the Tribunal found that there was no specific evidence of expenditure incurred by the assessee ... Addition 14A - Held that:- Without highlighting the facts of that case no addition should be made on the basis of general presumption. The FAA, in the present case, had held that the every assessee would keep watch over the market to maximise its profit but he had missed one important aspect that the assessee was holding the shares of group concerns for strategic purposes and for selling and buying and selling them frequently. In absence of the finding as to how much was the sum incurred by the assessee under the head administrative expenses, it is not possible for us to uphold the order of the FAA for the year under consideration. Hon’ble jurisdictional High Court in the case of Gopal Purohit (2010 (1) TMI 7 - BOMBAY HIGH COURT ) has held that that there should be uniformity in treatment and when facts and circumstances for different years were identical particularly in the case of the same assessee. Analysis of the above lay down that the principle of consistency can be ignored only in certain conditions and without pinpointing the difference of facts for a particular year with the facts of earlier year/s consistency should be maintained. Considering the peculiar facts and circumstances of the case, we are reversing the order of the FAA. Effective ground of appeal raised by the assessee for the year under consideration, is allowed in its favour. - Decided in favour of assessee. Issues Involved:1. Disallowance under Section 14A of the Income Tax Act, 1961 for multiple assessment years.Detailed Analysis:Issue 1: Disallowance under Section 14A of the Income Tax Act, 1961- The appellant challenged the order of the CIT (A) confirming the Assessing Officer's disallowance under Section 14A for various assessment years.- The AO applied Rule 8D and disallowed specific amounts under Section 14A due to the receipt of dividend income claimed exempt under Section 10(33) of the Act.- The FAA considered the claim that no new investments were made and no expenditure was required for earning dividend income. However, the FAA confirmed the disallowance of administrative expenses allocable to dividend income.- The FAA relied on the Godrej & Boyce Mfg. Co. Ltd. case and upheld Rule 8D, stating that a reasonable disallowance is necessary for earlier years.- The AR argued that no expenditure was incurred for earning exempt income, citing cases like Reliance Industries Ltd.- The Tribunal found that the AO did not pinpoint the specific expenditure incurred by the assessee for earning tax-free income, a prerequisite for disallowance under Section 14A.- The Tribunal emphasized the need for actual incurring of expenditure and rejected general presumptions for disallowance.- Relying on past judgments, the Tribunal reversed the FAA's order due to lack of specific findings on expenditure and consistency in treatment across assessment years.Issue 2: Disallowance under Section 14A for AY 2008-09- The AO made disallowance under Section 14A for the year, which was similar to the disallowance made in the earlier year.- The appellant received dividend income claimed exempt under Section 10(34) and offered a disallowance, which the AO increased using Rule 8D.- The FAA upheld the AO's order, considering the appellant's self-disallowance.- The Tribunal, finding similarities with earlier years, decided in favor of the appellant for the effective ground of appeal.Conclusion:- The appeals for all three assessment years were allowed based on the lack of specific evidence of expenditure for earning tax-free income and the need for consistency in treatment across assessment years.