Case Law Details
Section 14A of the Act postulates and states that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act. Under sub-section (2) of Section 14A of the Act, the Assessing Officer is required to examine the accounts of the assessee and only when he is not satisfied with the correctness of the claim of the assessee in respect of expenditure in relation to exempt income, the Assessing Officer can determine the amount of expenditure, which should be disallowed in accordance with such method as prescribed i.e. Rule-8D of the Rules, therefore, the Assessing Officer at the first instance must examine the disallowance made by the assessee or the claim of the assessee that no expenditure was incurred to earn the exempt income. If and only if the Assessing Officer is not satisfied on the count after making reference to the accounts only then he is entitled to adopt the method as prescribed under Rule-8D of the Rules, thus, Rule-8D is not attracted and applicable in a situation, where, the assessee has voluntarily computed the disallowance as per Rule-8D of the Rules.
RELEVANT EXTRACT OF THE ITAT ORDER
2. Ground no.1, raised by the assessee, pertains to not providing sufficient opportunity of being heard to the assessee and consequent enhancement of disallowance u/s 14A of the Income Tax Act, 1961 (hereinafter the Act) r.w.r-8D of the Income Tax Rules, 1962 (hereinafter the Rules). The crux of the argument on behalf of the assessee, Ld. counsel, Shri Chetan Kariya, is identical to the ground raised. On the other hand, Ms. Vidisha Kalra, ld. CIT-DR, explained that sufficient opportunity was provided to the assessee, therefore, there is no substance in the ground raised by the assessee.
2.1. We have considered the rival submissions and perused the material available on record. We find that the assessment order was framed u/s 143(3) of the Act, whereas, as is evident from page-1 itself, the ld. counsel for the assessee, Shri Vijay C. Kothari along with Shri Vijay Agarwal, appeared and were heard. The arguments advanced by the ld. counsel was duly considered, therefore, we are not satisfied with the argument of the ld. counsel for the assessee that proper opportunity was not provided to the assessee, consequently, this ground of the assessee is dismissed.
3. So far as, ground no. 2 & 3 with respect to computing the disallowance u/s 14A of the Act read with Rule 8D(2)(ii) at Rs.60,04,84,033/- as against the disallowance computed by the assessee at Rs. 1,09,16417/- accepted by the ld. Assessing Officer and consequent disallowance u/s 14A of the Act r.w.r 8D(2)(iii) at Rs.4,63,71,2 13/- as against the disallowance computed by the assessee at Rs. 1 lakh is concerned, the crux of argument, on behalf of the assessee, before us, is that own funds substantially covers the investment made by the assessee as per settled position of law and further the method of calculation followed by the assessee has to be accepted for making disallowance u/s 14A of the Act as has been accepted by the Revenue in the past several years, thus, rule of consistency requires that similar view should be taken in the present year also. It was also explained that the assessee has already made suo-moto disallowance of Rs. 1.10 crores and Rs. 1 lakh.
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