TaxTMI 
TaxTMI 
2017 (11) TMI 1929
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....posed of by this common order. The assessee in all the appeals has raised solitary issue of disallowance u/s. 14A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") r.w. Rule 8D. 2. Shri J.G. Pendse appearing on behalf of the assessee stated at the Bar that he is not pressing ground No. 1 in all the appeals. Thus, the grounds relevant for adjudication before the Tribunal for assessment year 2008-09 are as under : "2. The learned CIT(A) fail to appreciate that sub section 2 and 3 of Section 14A and rule 8D is not applicable as the said provisions imposing a specific disallowance leading to tax liability are substantive and not procedural in nature. 3. The Learned CIT(A) erred in holding that provision of ....
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....bstantial disallowance u/s. 14A r.w. Rule 8D in the assessment years under appeal. The Assessing Officer has not given specific finding as to why suo-moto disallowance made by assessee is insufficient. The assessee raised specific ground before the First Appellate Authority against the manner of disallowance made by Assessing Officer without recording satisfaction. The Commissioner of Income Tax (Appeals) rejected the contentions of the assessee by holding that it is not eminating from the submissions of assessee before Assessing Officer that the assessee has made any disallowance u/s. 14A of the Act. The ld. AR submitted that as per the provisions of section 14A(2), the Assessing Officer before making any disallowance, is required to recor....
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.... of Rule 8D. The details of exempt income received, suo-moto disallowance made by assessee and disallowance u/s. 14A r.w. Rule 8D made by Assessing Officer are as under : Assessment Year Total Dividend income received, claimed as exempt (in Rs.) Suo-moto disallowance by assessee (in Rs.) Disallowance u/s. 14A applying Rule 8D by AO (in Rs.) 2008-09 13,72,45,640/- 2,55,400/- 1,17,74,029/- 2009-10 12,51,22,953/- 3,02,550/- 1,61,02,610/- 2010-11 4,24,98,032/- 4,43,316/- 1,01,86,592/- 2011-12 13,56,23,646/- 5,28,048/- 1,18,34,013/- 6. The Assessing Officer made disallowance u/s. 14A by invoking the provisions of Rule 8D(2)(ii) and 8D(2)(iii). In first appeal the Commissioner of Inco....
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....ub-section (2) to section 14A makes it clear that recording of satisfaction by Assessing Officer to the effect that the claim made by assessee in respect of expenditure in relation to income which does not form part of the total income under the Act is correct or otherwise is one of the pre-conditions. Thus, the road to Rule 8D passes through sub-section (2) to section 14A of the Act. The satisfaction of Assessing Officer as to incorrect claim made by assessee is sine-qua-non for invoking the provisions of Rule 8D. Such satisfaction can be reached and recorded only when the claim of assessee is verified. 8. In the present case we observe that during the course of assessment, the Assessing Officer after considering the submissions of asse....
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....of Rule 8D in great detail in his order. Thus the satisfaction of the AO regarding applying Rule 8D is there." To support his reasoning, the Commissioner of Income Tax (Appeals) placed reliance on the decision of Pune Bench of Tribunal in the case of Lap Finance & Consultancy Pvt. Ltd. in ITA Nos. 1522 to 1525/PN/2013 decided on 06-11-2015. 10. We find that the Commissioner of Income Tax (Appeals) has erred in coming to conclusion that the Assessing Officer has recorded satisfaction regarding applying Rule 8D. We further observe that reliance placed by the Commissioner of Income Tax (Appeals) on the decision of Co-ordinate Bench of the Tribunal in the case of Lap Finance & Consultancy Pvt. Ltd. (supra) is misplaced, as the facts of af....
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....ndent-assessee has to be an objective satisfaction which entails recording of reasons as held by this Court in Godrej and Boyce (supra) in para 55 while recording summation of its conclusion as under: "(ix) The satisfaction envisaged by sub-s. (2) of s. 14A is an objective satisfaction that has to be arrived at by the AO having regard to the accounts of the assessee. The safeguard introduced by sub-so (2) of s. 14A for a fair and reasonable exercise of power by the AO, conditioned as it is by the requirement of an objective satisfaction, must, therefore, be scrupulously observed. An objective satisfaction contemplates a notice to the assessee, an opportunity to the assessee to place on record all the relevant facts including his ac....