AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 1766
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....A) had raised before us the following grounds of appeal:- "Ground No. 1: Jurisdiction to apply and determine disallowance u/s. 14A: 1. On the facts and in the circumstances of the case and in law, the CIT(A) er red conf irming the act ion of the Deputy Commissioner of Income Tax - 4(3) (1) , Mumbai ( " the AO") of assuming jurisdict ion to apply section 14A r.w.r. 8D of the Income-tax Rules, 1962 ("the Rules") as also to determine the amount of expenditure incurred by the Appellant in relation to income which does not form part of total income. 2. The Appellant prays that it be held that: i. the lower author ities failed to establish burden that they are not satisfied with the claim of the Appellant; ii. their act ion to invoke se....
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....grounds of appeal." 2. We find that the appeal filed by the assessee involves a delay of 24 days. The assessee has filed an application explaining the reason leading to delay in filing of the appeal. It is claimed by the assessee that the delay in filing of the appeal had occasioned for the reason that Ms. Bhakti Ajmera, assistant of Sh. Samir R. Sanghvi, Chartered accountant who is a Partner of Manish Modi & Associates, Chartered accountants, out of inadvertence, while going on leave on 17th October, 2016 for her final examination of Chartered accountancy had failed to hand over the appeal papers of the assessee company, viz. Taurian Engineering (P) Ltd, as a result whereof the appeal could not be filed within the limitation period. The a....
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....e disallowance under Sec. 14A r.w. Rule 8D, as under:- (i) The amount of expenditure directly relating to income which does not form part of total income. (% of Dividend Income/Total Income) x Total expenditure 552 (ii) Proportionate of interest expenditure computed in accordance with the formula given in Rule 8D (2)(ii) (A X B/C) 40,72,065 x 14,07,34,820/33,12,84,758 17,29,875 (iii) Amount equal to one-half percent of the average of the value of investment, income from which does not or shall not from part of the total income as appearing in the Balance Sheet of the assessee, on the first day and the last day of the previous year. 0.5% x (14,07,34,820) 7,03,674 Total Expenditure disallowed u/s. 14A 24,34,101 ....
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.... A.O and dismissed the contentions of the assessee assailing the disallowance made under Sec. 14A of the Act. 6. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Authorized Representative (for short 'A.R') for the assessee at the very outset of the hearing of the appeal submitted that as the A.O had failed to record his satisfaction as to why he was not satisfied as regards the correctness of the claim of the assessee, in respect of the amount disallowed under Sec. 14A, had thus wrongly assumed jurisdiction and worked out the disallowance under Sec. 14A r.w Rule 8D at Rs. 24,34,101/-. The ld. A.R further tried to impress upon us that as no disallowance under Sec. 14A r.w. Rule 8D....
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....not adopted a mechanism for computing the disallowance or debited the same to the respective expenditure account, therefore, there was no obligation on the part of the A.O to have recorded his dissatisfaction as regards the claim of disallowance made by the assessee in its return of income. We also do not find ourselves to be in agreement with the observation of the CIT(A) that as the A.O had made a further disallowance under Sec.14A, therefore, the same in itself proved that he was not satisfied with the correctness of the claim of the assessee in respect of the expenditure incurred in relation to the dividend income. We find that the view taken by the CIT(A) is not in conformity with the judgment of the Hon'ble Supreme Court in the case o....
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.... 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 (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. We are of the considered view that in the case before us, the A.O had failed to satisfy the statutory requirement of arriving at a satisfaction, that having regard to the accounts of the....