TaxTMI 
TaxTMI 
2025 (1) TMI 1670
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....are dismissed as infructuous. 3. The interconnected issue raised by the assessee in ground Nos. 2 to 5 is that the Ld. CIT(A) erred in confirming the addition under section 14A of the Act, read with Rule 8D of the Income Tax Rules, to the extent of Rs. 19,77,142 only. 4. In the present case, the assessee, a private limited company engaged, is in the business of providing technological solutions and services, including consulting, architecture, package implementation, application engineering, testing, infrastructure management, and IT process optimization. The assessee company offers these technological services to the customers across various domains such as banking, manufacturing, and financial services. 4.1 During the year under consideration, the assessee company earned an exempt income in the form of dividends amounting to Rs. 1,15,60,948.00. The assessee company adheres to the provision of section 14A of the Act made suo-motu disallowance amounting to Rs. 8,04,994.00 only. 4.2 During the assessment proceedings, the AO observed a significant increase in the investments made by the assessee. For instance, the investment in mutual funds increased from Rs. 4.75 crores ....
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....rt of the total income shall be the aggregate of following amounts, namely:- (i) the amount of expenditure directly relating to income which does not form part of total income; and (ii) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income: Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee." 5.2.4 In this backdrop, the computation of relatable interest expense at Rs. 92,34,517/- made by the AO by invoking the pre amended clause (ii) of sub rule == (2) of rule 8D is not justified. Hence, the said addition of Rs. 92,34,517/- is deleted. 5.2.5 Now coming to the application of clause (iii) of pre amended sub rule (2) of rule 8D. The AO has disallowed 0.5% of average value of investments of Rs. 89,23,485/-. The said clause has been amended to state that the disallowance shall be @ 1 percent of average of average monthly investments. The appellant vide its reply dated 04.02.2021 has furnished the calculat....
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....ording dissatisfaction. 8.2 The learned CIT(A), while considering the appeal, upheld the AO's invocation of Rule 8D without addressing the fundamental issue of whether the AO had complied with the statutory requirement of recording dissatisfaction. Further, the CIT(A) directed the computation as per the amended Rule 8D without first verifying whether the AO's invocation of Rule 8D was legally justified in the first place. This approach disregards the settled legal principle that Rule 8D cannot be applied in a mechanical manner. 8.3 Based on above the learned AR pleaded that the action of the AO in invoking Rule 8D without recording dissatisfaction is legally untenable and should be set aside. The confirmation of the disallowance by the learned CIT(A) is also unjustified. 9. On the other hand, the Ld. DR before us vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on records. From the preceding discussion, we note that during the year under consideration, the assessee declared exempt income in the form of dividends amounting to Rs. 1,15,60,948, against which the assessee....
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....ct of the expenditure in relation to the income which does not form part of the total income under the Act. However, he felt obliged and going by the presence of Rule 8D that once Section 14A is attracted, the disallowance is to be made as per Rule 8D only which has been prescribed by the Legislature. The Assessing Officer has not adverted to the plain language of sub-section (2) of Section 14A. 10.3 In view of the above, we hold that, in the absence of any dissatisfaction recorded by the AO regarding the suo motu disallowance made by the assessee, the provisions of Rule 8D cannot be invoked. In the present case, there is no dissatisfaction recorded by the AO with respect to the suo motu disallowance made by the assessee. Therefore, we are of the view that the ratio laid down by the Hon'ble Bombay High Court in the case cited above is squarely applicable to the given set of facts. 10.4 Accordingly, we are inclined to delete the addition made by the AO, which was subsequently confirmed by the Ld. CIT(A). Hence, we set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made by him. Consequently, the ground of appeal raised by the assessee is hereby al....
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.... the AO contending that the additional documents filed by the assessee before the Tribunal should not be admitted. Furthermore, the learned DR vehemently supported the order of the authorities below. 17. We have heard rival contention of both the parties and perused the material available on record. We note that the assessee during the appellate proceedings before the learned CIT(A) has made detailed submission against the disallowances made under section 40(a)(i). However, the Ld. CIT(A) without considering the argument forwarded by the assessee proceeded to dismiss the appeal of the assessee without assigning any reasoning. The relevant findings of the ld. CIT-A is reproduced as under: "5.3.3 The facts of the case, assessment order and submissions of the appellant have been considered. The appellant is an Indian Company and it is engaging the service of a non-resident for acquiring skilled manpower for executing its various contracts. It is observed that the appellant has complete control over all stages of work relating to the contract awarded to it by the client right from initial stages of negotiation with the client till the conclusion of software development and ....
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.... points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Section 251(1)(a) and (b) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-section (2) of Section 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under Section 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact with effect from 1st June, 2001 the power of the CIT(A) to set aside the order of the Assessing Officer and restore it to the Assessing Officer for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) is co-terminus with that of the Assessing Officer i.e. he can do all that Assessing Officer....
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....ance with law." 17.3 This ruling reinforces the principle that appellate authorities cannot dismiss or decide appeals arbitrarily but must provide a reasoned decision. Even in cases where the assessee is not present, the CIT(A) must analyze the material on record and decide the matter based on its merits. Given the legal framework under Section 250(6) of the Act and the ratio of the Bombay High Court, it is evident that the order of the CIT(A), in the present case, does not satisfy the requirements of a reasoned and speaking order. The failure to record proper reasoning amounts to a violation of the principles of natural justice, rendering the order unsustainable in law. Accordingly, the order passed by the CIT(A) may require reconsideration in light of the statutory provisions and judicial pronouncements to ensure compliance with due process. At the time of hearing, both the ld. AR and the DR also raised no objection if the matter is set aside to the ld. CIT-A for fresh adjudication as per the provisions of law. In view of the above, we set aside the issue to the file of the ld. CIT-A for fresh adjudication as per the provisions of law. Hence, the ground of appeal of the assess....