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2019 (10) TMI 383
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....e. 2. That Ld. Commissioner of Income Tax (Appeals) is also not justified in law and facts of the case by confirming disallowance of expenditure to the tune of Rs. 77401/- on account of l/5th expenses of telephone, mobile and car expenses without any basis. Specially in a case when there was no incriminating material, or adverse evidence was found during the course of assessment proceedings to establish that these expenditure have been incurred on account of personal use. 3. That Ld. Commissioner of Income Tax has misconstrued and misapplied the provisions of section 14A of the Income Tax Act 1961 in Appellant's case. That Ld. Commissioner of Income tax has clearly held in his order that there is no set language which can be used for recording dissatisfaction for the claim made by the assessee, whereas in landmark judgment of Hon'ble Jurisdictional High Court in the case of C.l.T. vs. Abhishek industries Limited dated 27-01-2015 clearly hold that Section 14A of the Act cannot be applicable unless and until satisfaction is recorded. The onus, therefore, to prove the applicability of section 14A, lies squarely on the shoulders of the revenue. 4. Tha....
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....ee has also earned dividend income from trading business of shares, which was duly explained by the Appellant during the course of Assessment proceedings .Therefore addition confirmed by the Ld. Commissioner of Income Tax was without verifying the facts of the case. 3. It is well settled law that no disallowance of expenses can be made unless it is proved that the related expenses were incurred to earn exempt income. Whereas the Ld. Assessing Officer failed to discharge such nexus. In the absence of nexus of expenditure incurred and income earned, disallowance cannot be made. 4. That the Ld. Commissioner of Income Tax (Appeals) is grossly erred by holding that once the assessee has earned exempt income, the provisions of section 14A are attracted and disallowance has to be worked out by applying rule 8D. Whereas. It is settled by various judicial pronoun-cements that invoking Rule 8D is not mandatory, it will be resorted only if Ld. Assessing Officer is not satisfied as to the correctness of the claim of expenses made by the assessee as stipulated and mandated in section 14A: and invoking Rule 8D is not automatic. 5. That the order of the Ld. Commis....
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.... of pr. C.l.T. vs Ganeshay Overseas dated 20-02-2017 was duely produced in favour of Assessee's case at the time of hearing of appeal and the same was totally ignored by the Ld. Commissioner of Income Tax (Appeals). 5. That Ld. Commissioner of Income Tax (Appeals) is also not justified in law and facts of the case by confirming disallowance of expenditure to the tune of Rs. 70885/- on account of l/5th expenses of telephone, mobile and car expenses without any basis or evidence. Specially in a case when there was no incriminating material, or adverse evidence was found during the course of assessment proceedings to establish that these expenditure have been incurred on account of personal use. 6. That addition has been confirmed by the Ld. Commissioner of Income Tax (Appeals) wholly on adhoc basis which could not be sustained in law. That without pointing out any deficiency and without verifying records, Ld. Assessing officer straightway came to the conclusion that personal use of expenses by the assessee cannot be ruled out and l/5th of these expenses are disallowed. 7. That the Ld. Commissioner of Income Tax (Appeals) is also not justified in law and....
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....s) has passed the order in utter haste and without considering the records of the case. That Ld. Commissioner of Income Tax (Appeals) has held that no decision of any Hon'ble High Court has been delivered after considering circular No. 5 of 2014 issued by CBDT. Whereas number of recent judgments were produced in favour of Assessee's case at the time of hearing of appeal and the same were totally ignored by the Ld. Commissioner of Income Tax (Appeals). Further the reference of Judgements have been clearly mentioned in the Ld. Commissioner of Income Tax (Appeals)'s order. 5. That the order of the Ld. Commissioner of income Tax (Appeals) is contrary to Law and facts of the case. 6. That the Appellant craves leave to add, amend or alter any grounds of Appeal before the Appeal is heard and disposed off. ITA No. 565/CHD/17 1. That Ld. Commissioner of Income Tax (Appeals) is not justified in law and facts of the case by confirming disallowance of expenses to the tune of Rs. 1161750/- on account of disallowance made u/s 14A read with rule 8-D in Appellant's case. 2. That Ld. Commissioner of Income Tax (Appeals) has misconstrued a....
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....missioner of Income Tax (Appeals)-4 has misconstrued and misapplied the provisions of section 14A of the Income Tax Act 1961 in Appellant's case. That Ld. Commissioner of Income tax is grossly erred by confirming that operating expenses i.e. vehicle repair, legal expenses, travelling expenses etc. has helped in earning exempt income to the assessee company. However operative expenses have no link with the investment made by the assessee company. 3. It is well settled law that no disallowance of expenses can be made unless it is proved that the related expenses were incurred to earn exempt income. Whereas the Ld. Assessing Officer failed to discharge such nexus. In the absence of nexus of expenditure incurred and income enerated, disallowance cannot be made. Moreover the expenses incurred , detail of the same were submitted during the course of Assessment proceedings before the Ld. Assessing Officer and no defect or deficiency was pointed out about these expenses incurred for earning dividend on investment of securities and it was never held that by which deficiency Ld. Assessing Officer was not satisfied for the expenses incurred for earing exempt income . Whereas Ld .....
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....correlation with the investment made. At this juncture, it is worthwhile to have a look at the provisions of section 14 A". In the subsequent paras of the assessment order, the Assessing Officer has observed as under;- "As can be seen above, Rule 8D provides for disallowance u/s 14A, on investments, income from which does not or shall not form part of the total income. The assessee has invested in shares and mutual funds and income from these whether the dividend or long-term capital gain on sale is exempt income. "Though, the assessee has provided details of expenses (computer & salary only) incurred on making these investments but these expenses are certainly on lower side keeping in view the magnitude of the investment made by the assessee As per ** jjRule 8D, if the AO is not satisfied with the correctness of the claim of expenditure made by the assessee or the claim by the assessee that no expenditure has been incurred, he shall apply provisions of Rule 8D(2) to compute the disallowance. Since, the assessee has not been able to substantiate his claims, the undersigned is constrained to apply the provisions of rule 8D in making the said disallowance, which is comput....
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.... so long as the order of the Assessing Officer indicates that he is not satisfied with the correctness of the claim of the assessee or the claim of the assessee that no expenditure has been incurred, the Assessing Officer has to proceed in the manner indicated by Rule 8D(2) of the Income Tax Rules 1962. 6.1 The Ld. CIT(A) held that a clear fulfillment of the requirement in sub section (2) of Section 14A the of the Act as well as sub-rule (1) of Rule 8D of the Income Tax Rules, 1962 that the Assessing Officer was not satisfied with the correctness of the claim of the assessee, on the basis of the accounts of the assessee is sufficient to determine the disallowance. He relied on the judgment of Hon. High Court in the case of M/s Dhampur Sugar Mills Limited Vs. Commissioner of Income Tax (Allahabad) 370 ITR0187. 6.2 The Ld. CIT(A) has also held that the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 will also be applicable on those investments from which the asssessee has not received any exempt income in view of clarification issued by the CBDT, New Delhi vide Circular No. 5 of 2014 wherein the legislative intention of the parliament for br....
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....nd is found to be without any logic or correlation with the investment made. At this juncture it is worthwhile to have a look at the provisions of the Section 14A ....... Though, the assessee has provided details of expenses (computer & salary only) incurred on making these investments but these expenses are certainly on lower side keeping in view the magnitude of the investment made by assesse. As per Rule 8D, if the AO is not satisfied with the correctness of the claim of expenditure made by the assessee or the claim by the assessee that no expenditure has been incurred, he shall apply the provisions of Rule 8D (2) to compute the disallowance. The judicial pronouncements envisage that the Assessing Officer has to examine whether the disallowance offered by the assessee itself was sufficient on the facts and circumstances of the case notwithstanding that applicability of Rule 8D. The Assessing Officer has to pin point any other in the computation of the disallowance made by the Assessing Officer. If the Assessing Officer is unable to pin point any other no ground can be made for altering the computation made by the assessee {Consolidated photo & Finvest limited 211 Taxman 184 (....