Case Law Details
HCL Comnet Ltd. Vs DCIT (ITAT Delhi)
It is settled principle of law that generic dissatisfaction as to the correctness of the claim of the assessee without assigning any reason is not a valid satisfaction which is mandatory under section 14A(2) of the Act, as has been held by Hon’ble Supreme Court in case of Maxopp Investments Ltd. vs. CIT (2018) 402 ITR 640 (SC) and Hon’ble Delhi High Court in case of HT Media Ltd. vs. Pr.CIT 199 ITR 576 (Del.). So, when audited financials of the assessee company have otherwise been accepted by the AO, mechanical application of Rule 8D to reject the suo motu disallowance u/s 14A of the Act by the assessee is not sustainable in the eyes of law.
AO was not empowered to invoke the provisions contained under section 14A read with Rule 8D in a mechanical manner without recording his satisfaction that working given by assessee company is not correct.
AO has merely recorded that, “I am not satisfied with the correctness of the claim of the assessee”. No reasons as to how and why he has not got satisfied with the correctness of the claim of the assessee. So, we are of the considered view that AO as well as ld. CIT (A) have erred in making/confirming further disallowance under section 14A read with Rule 8D over and above the disallowance made by the assesse.
So, we are of the considered view that the disallowance made by the AO and confirmed by the ld. CIT (A) on the basis of invalid satisfaction as to the correctness of the claim of the assessee is not sustainable, hence ordered to be deleted.
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