Rohit Real Estates Pvt. Ltd. Vs ACIT (ITAT Lucknow)
The Lucknow Bench of the Income Tax Appellate Tribunal (ITAT) adjudicated an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre dated 16.08.2022 for Assessment Year 2017-18. The dispute related to disallowance under Section 14A of the Income Tax Act read with Rule 8D of the Income Tax Rules in relation to expenditure allegedly incurred for earning exempt dividend income.
The assessee challenged the disallowance of Rs.2,54,373 sustained by the CIT(A). The grounds of appeal included objections to the application of Section 14A read with Rule 8D, alleged misapplication of the Explanation inserted below Section 14A by the Finance Act, 2022, and the contention that the Explanation could not operate retrospectively. The assessee also alleged that the orders of the lower authorities were contrary to law and principles of natural justice.
The assessee company had filed its return of income declaring total income of Rs.8.22 crore on 29.10.2017. The case was selected for limited scrutiny under the Computer Assisted Scrutiny System (CASS) to examine expenditure incurred for earning exempt income. During assessment proceedings, the Assessing Officer noted that the assessee had earned exempt dividend income of Rs.31,070. The assessee contended that no expenditure had been incurred for earning such exempt income. The Assessing Officer did not accept this explanation and invoked Section 14A(2) read with Rule 8D(2)(ii), computing a disallowance of Rs.2,54,373 and assessing total income at Rs.8.25 crore. The CIT(A) upheld the addition, leading to the appeal before the Tribunal.
