2022 (8) TMI 1578

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.... CIT(A)] for assessment year 2012-13 and the sole issue for consideration before us is the confirmation of disallowance of Rs. 4,02,747/- in terms of section 14A of the Income Tax Act,1961 (hereinafter called 'the Act') read with Rule 8D(2)(iii) of the Income Tax Rules,1962 (hereinafter called 'the Rules'). 2.0 The brief facts of the case are that the assessee is engaged in the business of derivatives. The return of income was filed declaring income of Rs. 2,98,83,170/-. After processing of the return, the case was selected for scrutiny under CASS guidelines. During the course of assessment proceedings, the Assessing Officer (AO) noted that the assessee company has made investments in shares and mutual funds amounting to Rs. 7,48,72,437/....

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....ng the following Grounds of appeal: 1. That the order passed by the Ld. CIT (A) is contrary to law and facts of the case. 2. That the Ld. CIT (A) erred in law and as on facts in upholding the disallowance of Rs.4,02,747/- made by assessing officer under Rule 8D(2)(iii). 3. That the Ld. CIT (A) erred in law and on facts in enhancing the disallowance made by assessing officer under Rule 8D(2)(iii) by Rs.4,092,747/- by applying amended Rule 8D and thus by making total disallowance under Rule 8D(2) of Rs.8,05,494/- (Rs.4,02,747/- + Rs.4,02,747/-). 4. That the appellant craves leave to add/alter/amend any ground of appeal on or before the due date of hearing of appeal 3.0 The Ld. Authorized Representative (....

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....ke effect from 02.06.2016 only and that the same could not have been applied for assessment year 2013-14. The Ld. AR submitted, therefore, the direction of the Ld. CIT (A) that the AO should apply the provisions of Amended Rule 8D was not legally sustainable. The Ld. AR also placed reliance on another order of the ITAT Chandigarh Bench in the case of Vardhman Holdings Limited in ITA No.550/Chd/2015 wherein, vide order dated 04.09.2015, the ITAT Chandigarh Bench had held that where the AO had created a situation where no expenditure was allowed as deduction to the assessee against taxable income in the garb of computing disallowance under section 14A, such disallowance was totally bad in law and the Ld. CIT (A) had rightly deleted the disall....

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....e i.e. assessment year 2012-13 is concerned, it is seen that the assessee has already made suo moto disallowance in terms of the provisions of section 14A which is undisputedly in proportion to the dividend income earned. It is also a case in point that the assessee has not made any fresh investments during the year under consideration and still further the AO has also not given any cogent reason for not accepting the suo moto disallowance made by the assessee and has simply mentioned in the assessment order the onus was on the assessee to prove that it had not incurred any expenditure to earn exempt income. The AO has observed that as per the provisions of Rule 8D, if the AO is not satisfied with the correctness of claim of expenditure mad....