TaxTMI 
TaxTMI 
2022 (3) TMI 1659
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.... u/s. 14A r.w.r.8D of the Income Tax Act, 1961 [ in short 'the Act']. In additional grounds of appeal the assessee has assailed the action of Assessing Officer in invoking the provisions of section 14A of the Act without recording his satisfaction as envisaged under section 14A of the Act . 2.1 The assessee in ground No.3 of appeal has assailed addition of Rs.2,40,000/- towards consultancy fees paid to Smt. Tanya Luthra. The ld. Authorized Representative for the assessee stated at the outset that he is not pressing ground No.3 of appeal. 3. Shri Vijay Mehta appearing on behalf of the assessee submitted that in additional grounds of appeal the assessee has raised a legal issue assailing invoking of section 14A of the Act without record....
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....earning of exempt income, the assessee has not made any suo-motu disallowance u/s. 14A. The ld. Authorized Representative of the assessee asserted that the statute requires that before proceeding to make disallowance u/s. 14A of the Act in terms of Rule 8D, the Assessing Officer having regard to the accounts of the assessee, if not satisfied with the correctness of the claim in respect of expenditure in relation to earning of the exempt income shall determine the amount of expenditure incurred for earning of exempt income. In the present case there is no such satisfaction by the Assessing Officer. The Assessing Officer has merely reproduced the submissions of the assessee and after rejecting the same without referring to the accounts of the....
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....in upholding disallowance u/s.14A of the Act. 2. The CIT(A) ought to have held that no disallowance can be made u/s. 14A of the Act since no satisfaction has been recorded by the Assessing Officer in response to the claim of the assessee that no expenditure has been incurred for the purpose of earning exempt income." The additional grounds raised by the assessee are purely legal, no fresh evidence is required to be examined for adjudicating the legal grounds. Hence, the legal issue raised by way of additional grounds is admitted for adjudication on merits. 6. The assessee has earned exempt income of Rs.1,05,27,666/- during the period relevant to the assessment year under appeal. No suo-motu disallowance has been made by the a....
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....ubmissions of the assessee and has thereafter held the same to be unacceptable. However, while giving reasons for not accepting the same there is no reference to the accounts of the assessee. Recording of satisfaction having regard to the accounts of assessee is sine-qua-non for making disallowance u/s. 14A r.w.s. 8D of the Act. 7. The Hon'ble Jurisdictional High Court in the case of CIT vs. Sociedade De Formento Industrial (P) Ltd. (supra) has held that application of section 14A of the Act and Rule 8D is not automatic to each and every case, where there is income not forming part of the total income. Before application of section 14A of the Act it needs to be justified as to how expenditure incurred by the assessee during the relevant ....
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....Court in the case of PCIT vs. Bombay Stock Exchange (supra) held that prior to working of disallowance u/s. 14A of the Act by applying Rule-8D, the Assessing Officer should record a conclusion that he is not satisfied with the suo-motu disallowance offered by the assessee. The relevant extract of the judgment is as under: "11. Non-satisfaction with the disallowance 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 t....
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....r has given detailed reasons for discarding the assessee's theory that to earn the assessable income the assessee incurred no expenditure whatsoever. The Tribunal confirmed such view. Decision of the Assessing Officer to apply the formula under Rule 8D was therefore correct. Tax appeal is accordingly dismissed." The Hon'ble High Court has laid emphasis on recording of satisfaction before invoking of section 14A r.w. Rule 8D. In the facts of the said case the Tribunal held that the Assessing Officer has recorded satisfaction. The view of Tribunal was upheld by the Hon'ble High Court in appeal by the assessee. In so far as legal requirement of recording satisfaction is not in dispute. It is also not in dispute that there is no particul....