TaxTMI 
TaxTMI 
2022 (9) TMI 598
X X X X Extracts X X X X
X X X X Extracts X X X X
....prayed that the above addition /disallowance made by assessing officer and confirmed by learned Commissioner of Income-tax((Appeals) may please be deleted." 2. Brief facts of the case are that assessee is a Doctor by profession, filed his return of income for the assessment year 2017-18 declaring income of Rs.2.751 crores. The case was selected for scrutiny. During the scrutiny assessment, the Assessing Officer on perusal of record found that assessee has shown exempt income of Rs.39,26,433/- comprising dividend and interest from tax free bonds and long term capital gain. The Assessing Officer also noted that opening and closing investment, which yielded exempt income, was of Rs.4.922 crores and Rs.6.506 crores respectively. The assessee was asked to furnish the working of suo motu disallowances as per Section 14A r.w.s Rule 8D. In response thereto, the assessee filed his reply darted 06.11.2019. The reply of assessee extracted in para-4.1 of the assessment order. The assessee in his reply in sum and substances submitted that Section 14A deals with the expenditure incurred in relation to income not includable in total income under section 14A was amended by the Finance Act, 2007 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for earning exempt income. Therefore, the submission of assessee is not acceptable. The Assessing Officer recorded that the assessee has made average value of investment during the year of Rs.5.714 crores. The Assessing Officer thereby invoking the provision of Rule 8D 2(ii) and computed the disallowance @ 1% of average value of investment, thereby worked out the disallowance of Rs.5,71,485/- and added the same to the income of assessee while passing the assessment order on 30.11.2019. 3. Aggrieved by the addition / disallowance under section 14A, the assessee filed appeal Ld. CIT(A). the appeal of the assessee was migrated to NFAC. Before Ld. NFAC/Ld. CIT(A) the assessee filed his statement of fact as well as submission. The submission of assessee is recorded in para-4 of the order of NFAC/Ld. CIT(A). The assessee in his submission, reiterated the same contention as contended before the Assessing Officer. The assessee also stated that assessee has earned total exempt income of Rs.39,26,433/- (being dividend of Rs.2,91,765/-, interest from tax free bonds of Rs.27,23,700/- and long-term capital gains of Rs.9,10,968/-). The investment were made by assessee from his own fund and no l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce as per section 14A r.w.s. Rule 8D. The said decisions also discussed the applicability of Section 14A(2) when the Assessing Officer is not satisfied with the correctness of the satisfaction incurred in relation to exempt income. Both the judgments emphasise power to the Assessing Officer to compute the disallowance as per Rule 8D. The ld. NFAC/Ld. CIT(A) held that Assessing Officer has not made any disallowance under Rule 8D(2)(i) and 8D(2)(ii) whereas the disallowance has been made only under Rule 8D(2)(iii) which is rightly disallowed / worked out at Rs.5,71,485/-under section 14A read with Rule 8D. Further aggrieved the assessee has filed present appeal before the Tribunal. 5. We have heard the submission of Ld. Authorized Representative (AR) for the assessee and the Ld. Senior Departmental Representative (Ld. Sr.DR) for the Revenue and have gone through the orders of lower authorities carefully. The ld. AR for the assessee submits that assessee is a gynaecologist by profession and derived professional income. The assessee while filing his return of income declared income of Rs.2.751 crores. During the assessment, the Assessing Officer noted that assessee has derived exempt ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Circle-10(1), New Delhi vs. DBH International (P.) Ltd. (2015) 55 taxmann.com 424 (Delhi-Trib.). The Ld. AR for the assessee submits that assessee's own funds were in far excess of the investments made for yielding exempt income then no interest of disallowance was warranted. In without prejudice submission, the ld. AR for the assessee submits that assessee has received dividend of Rs.2,91,765/- from few scripts and also the dividend is received through ECS where no human effort is involved and no expenditure is possibly incurred. In fact, such service was rendered free-of-cost by the respective banks / agents as they got a commission as a AMFI registered agent by respective mutual fund companies in lieu of their services. Further majority of exempt income derives from interest from tax free bonds which is Rs.27,23,700/-. No new investment was made during the year for consideration on the tax-free bonds. Interest from tax free bonds is also received through ECS only. The Ld. AR for the assessee further submits that expenditure for earning exempt income has to have a reasonable proportion to the income so earned, going by the common financial prudence. If the Assessing Officer has t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lating to earning of exempt income and @ 1% of annual average of monthly average of opening and closing balance of the value of investment, income from which does not or shall not form part of the total income is to be disallowed. The Assessing Officer has not made any disallowance under Rule 8D(2)(i) and only made disallowance under Rule 8D(2)(ii). The assessee nowhere disputed the figure of average value of investment either before the Assessing Officer or before Ld. NFAC/Ld. CIT(A). So far as satisfaction on the correctness of claim of assessee on disallowance under section 14A is concerned, the Ld. Sr. DR for the Revenue submits that Assessing Officer had duly recorded his dissatisfaction about the correctness of claim of assessee. The Ld. Sr. DR for the Revenue submits that no specific language is prescribed for recording dissatisfaction about the correctness of claim of expenditure claimed by assessee is prescribed under the Act or under Rules 8D or in section 14A. The Assessing Officer before applying the formula of Rule 8D recorded his dissatisfaction that claim of assessee is not correct and that income cannot be generated without incurring any expenditure. The Ld. Sr. DR ....