2024 (5) TMI 157

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....n law, the Hon'ble CIT(A) has erred in upholding an additional disallowance of INR 1,84,372 under section 14A of the Act over and above the suo moto disallowance of INR 8,60,000 made by the Appellant. 2. That on the facts and circumstances of the case and in law, the satisfaction recorded under section 14A(2) of the Act by the CIT(A) / AO was improper and otherwise bad in law and as such, no disallowance under section 14A was called for. 3. That on the facts and circumstances of the case and in law, CIT(A) has erred in disallowing .the expenditure to the extent of the exempt dividend income earned without appreciating the fact that expenditure incurred in towards earning exempt income was suo-moto disallowed by the Appellant and no furt....

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....the assessee and, therefore, there cannot be any disallowance under Rule 8D r.w.s. 14A of the Act observing as under: - "9. We have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. Ld.CIT(A) after considering the various submissions made by the assessee, decided the issue partly in favour of the assessee. The relevant contents of the findings of Ld.CIT(A) are reproduced as under:- 5.1.5. "It is undisputed fact that the appellant has received dividend income amounting to Rs. 2761157/- being claimed exempt in computation of total income for the previous year relevant to the AY 2014-15. The contention of the appellant that only dividend yi....

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....ed the sum of Rs. 52,56,197/- Held that:- In the present case, the AO has not firstly disclosed why the appellant/assessee's claim for attributing Rs. 2,97,440/- as a disallowance under Section 14A had to be rejected. In Taikisha [2014 (12) TMI 482- DELHI HIGH COURT) says that the jurisdiction to proceed further and determine amounts is derived after examination of the accounts and rejection if any of the assessee's claim or explanation. The second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. The third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is Rs.....

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....d to the objections of the assessee and did not accept the suo- motto disallowance made by the assessee. Looking to the facts of the present case, the AO failed to take into account that the assessee was having interest free fund. Certain investment did not earn exempt income and some investments in foreign entities were amendable to tax in India. Further, AO did not give any cogent reason for rejecting the suo-motto disallowance. We therefore, are considered view in the absence of such finding under the facts of the present case, disallowance made by AO and restricted by Ld.CIT(A) to the extent of exempt income, is not justified. We therefore, direct the AO to delete the impugned addition. The ground raised by the assessee is accordingly, ....