Bhishma Realty Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai held that disallowance u/s 14A r.w. Rule 8D cannot be made mechanically merely because AO considers the assessee’s suo-moto disallowance to be “low”. Assessee had earned exempt income & had already made a suo-moto disallowance of ₹94,147/-. AO, without recording proper satisfaction as mandated u/s 14A(2), invoked Rule 8D & made an additional disallowance of ₹20.06 lakh.
Tribunal found that AO proceeded on incorrect facts, including treating taxable STCG as exempt income & double-counting direct expenses already disallowed by assessee. It was further noted that several expenses considered by AO were relatable to taxable investments & business activity, while assessee had reasonably disallowed salary cost as indirect expense. Since AO failed to demonstrate, with reference to accounts, why the assessee’s suo-moto disallowance was incorrect, invocation of Rule 8D was held to be bad in law. Relying on SC decision in Maxopp Investment Ltd. (402 ITR 640), Tribunal deleted the incremental disallowance & restricted disallowance to the suo-moto amount made by assessee. Appeal of assessee allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the assessee is against the order of CIT(A) 47, Mumbai vide Order No. ITBA/APL/S/250/2025-26/1078523862(1) dated 15.07.2025 passed against assessment order u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 03.02.2021 for AY 2018-19.
