2019 (5) TMI 1383

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....ction of the DCIT (15)(3)(1), Mumbai in invoking the provisions of section 14A read with rule 8D in making addition of Rs. 45,86,331/- and prayed before the Bench that the DCIT, Mumbai be directed to restrict the disallowance at Rs. 6,91,341/- as calculated by the assessee. 3. The facts in brief are that the AO during the course of assessment proceedings observed that assessee has shown exempt income by way of dividend of Rs. 3,59,21,689/- and has made suo motto disallowance under section 14A read with rule 8D at Rs. 6,91,341/-. The AO vide order sheet dated 14.09.2016 issued a show cause notice to the assessee as to why the disallowance should not be worked out by applying provisions of section 14A read with rule 8D which was replied by t....

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....at it is mandatory on the part of AO to record objective satisfaction before applying section 14A read with rule 8D by referring to the books of accounts of the assessee as to how the disallowance worked out by the assessee is not wrong and is not acceptable. The Ld. A.R. relied on the decision of co-ordinate bench of the Tribunal in assessee's own case in earlier years in ITA No.696/M/2017 & ors. order dated 24.04.2019 and ITA No.1279/M/2016 A.Y. 2010-11 order dated 08.11.2018. Therefore, the Ld. A.R. submitted that the order of Ld. CIT(A) should be set aside on the ground that it has failed to consider that no satisfaction has been recorded by the AO in the assessment order in view of the decision of the co-ordinate bench of the Tribunal....

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....record, we observe that in this case the issue is whether the AO has recorded objective satisfaction before invoking the provisions of section 14A read with rule 8D for calculating the disallowance of expenses attributable to earning of exempt income. We note that the assessee has made disallowance of Rs. 6,91,341/- which has been tabulated by the tax auditor in the tax audit report. After perusing the assessment order carefully we observe that the AO has not recorded any satisfaction as to how the disallowance worked out by the assessee of Rs. 6,91,341/- is wrong having regards to the books of accounts of the assessee. The issue is squarely covered in favour of the assessee by the decision of Hon'ble Bombay High Court in the case of "God....