TaxTMI 
TaxTMI 
2024 (12) TMI 1047
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....3/2015, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act']. 3.1. The Appellant has raised following grounds in appeal: "1. 1.1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in passing the order on non-existing entity/merger entity's PAN, even though the event of merger was already being intimated during the appeal proceedings. 1.2. The Appellant prays that the order passed by the Ld.CIT(A) be quashed. 2. 2.1. On facts and in circumstances of case and in law Ld CIT(A) erred in upholding disallowance u/s 14A of the Act read with Rule 8D of the Income Tax Rules 1962. 2.2. The Ld CIT(A) failed to appreciate that Ld AO cannot invoke Rule 8D without recording any objective satisfaction qua Appellant's claim that no expenditure is relatable to earning exempt income apart from suo-moto disallowance of 14A offered by the Appellant having regard to its books of account. 2.3. Without prejudice to above, Ld. CIT(A) erred in rejecting the suo-moto disallowance offered by Appellant, since disallowance u/s. 14A cannot exceed actual expenditure debited to Statement of Profit and Loss and claime....
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....ad, without recording dissatisfaction, invoked the provisions contained in Rule 8D of the IT Rules to make additional disallowance of INR 1,43,83,306/- under Section 14A of the Act. The CIT(A) rejected the aforesaid contention of the appellant and dismissed the ground raised by the Appellant in this regard. 7. Being aggrieved, the Appellant carried the issue in appeal before the Tribunal. 8. The primary contention advanced on behalf of the Appellant was that the Assessing Officer had failed to record dissatisfaction regarding the voluntary disallowance made by the Appellant under Section 14A of the Act. In this regard, the Learned Authorized Representative for the Appellant placed reliance of on paragraphs 3.4 to 3.7 of the Assessment Order and submitted that the order passed by the Assessing Officer was in violation of the provisions contained in Section 14A of the Act and the binding judgments of the Hon'ble Supreme Court and Bombay High Court. 9. Per contra, the Learned Departmental Representative relied upon Paragraph 3.3 of the Assessment Order and submitted that Assessing Officer had clearly recorded that provisions contained in Section 14A of the Act were not discriminato....
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....o make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. In that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO." (Emphasis Supplied) 13. Thus, before proceeding to invoke provisions of Rule 8D of the IT Rules for computing disallowance under Section 14A of the Act the Assessing Officer was required to express his dissatisfaction regarding the computation of disallowance made by the Assessee. 14. In the present case the Appellant had not claimed that no expenses were incurred for earning exempt income. To the contrary, the Appellant had made suo-moto disallowance under Section 14A of the Act and had furnished the computation and the basis of making such computation during the assessment proceedings. The Appella....
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....ance offered by the assessee has to be arrived at on the basis of the accounts submitted by the assessee. In this case, the Assessing Officer had not carried out the aforesaid exercise but rejected the disallowance claimed by the assessee only on the ground that it was not in accordance with Rule 8D of the Rules. The application of Rule 8D of the Rules would only arise once the Assessing Officer is not satisfied on an objective criteria in the context of its accounts, that suo motu disallowance claimed by the assessee is not proper. 12. In fact, the Supreme Court in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154/254 Taxman 325/402 ITR 640 while upholding the view of the Delhi High Court has held that the Assessing Officer needs to record his nonsatisfaction having regard to the sou motu disallowances claimed by the assessee in the context of its accounts. It is only thereafter, the occasion to apply rule 8D of the Rules for apportionment of expenses can arise 13. In the present facts, the Tribunal has correctly come to the conclusion that non-satisfaction as recorded by the Assessing Officer for rejecting the sou motu disallowances claimed by the assessee....