IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.760/MUM/2025 (Assessment Year 2018-19)

Sanjay Kothari (HUF), 1404, 14^th Floor, A Wing, Naman MidTown, Senapati Bapat Marg, Elphistone West, ............... Appellant Mumbai – 400013 PAN: AAJHS9132A v/s National Faceless Assessment Centre, Delhi ……………… Respondent Assessee by : Ms. Shivani Shah Revenue by : Shri Leyaqat Ali Aafaqui, Sr. AR Date of Hearing – 04/11/2025 Date of Order - 17/11/2025

O R D E R

PER SANDEEP SINGH KARHAIL, J.M.

The assessee has filed the present appeal against the impugned order dated 16.12.2024, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year

2018-19.

2. In this appeal, the assessee has raised the following grounds: –

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the income of the appellant at Rs. 3,32,05,810/- as against the income declared in the return of income at Rs 1,98,98,240/-.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the addition of Rs. 6,74,600/- made by the Ld. AO by wrongly invoking the provisions of s.14A of the Act.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly confirmed the addition of Rs. 1,26,32,970/- made by the Ld. AO even when the said amount was not in the nature of income.”

3. Ground No.1 is general in nature and therefore, needs no separate adjudication.

4. The issue arising in Ground No.2, raised in assessee’s appeal, pertains to the disallowance made under section 14A read with Rule 8D of the Income Tax Rules, 1962 (“the Rules”).

5. The brief facts of the case pertaining to this issue are that the assessee is an HUF and for the year under consideration filed its return of income on 10.10.2018, declaring a total income of Rs.1,98,98,240/-. During the year under consideration, the assessee declared income from solar power and profit from F&O trading. The return filed by the assessee was selected for scrutiny under CASS, and statutory notices under section 143(2) and section 142(1) were issued and served on the assessee. During the assessment proceedings, it was observed that the assessee has earned an exempt income of Rs. 2,34,87,124/-. However, it did not make any disallowance of expenditure under section 14A of the Act read with Rule 8D of the Rules. Accordingly, the assessee was asked to furnish the reason for not disallowing the expenditure under section 14A of the Act. In response, the assessee submitted that he had neither incurred nor claimed any expenditure for earning the exempt income, and therefore, the question of disallowing expenses under Section 14A of the Act does not arise. The Assessing Officer (“AO”) vide order dated 10.06.2021 passed under section 143(3) read with section 144B of the Act disagreed with the submissions of the assessee and, by applying the provisions of section 14A read with Rule 8D of the Rules, made a disallowance of Rs.6,74,600/- as follows: -

Opening value of investments as on 01.04.2017 Rs.5,31,96,146 Closing value of investments as on 31.03.2018 Rs.8,19,24,626 Average value of investments Rs.6,74,60,054/-

1% of average value of investments Rs.6,74,600/-

6. The learned CIT(A), vide impugned order, dismissed the grounds raised by the assessee on this issue and upheld the disallowance made under section 14A read with Rule 8D of the Rules. Being aggrieved, the assessee is in appeal before us.

7. During the hearing, the learned Authorised Representative (“learned AR”) reiterated the submissions made by the assessee before lower authorities and submitted that the disallowance of Rs.6,74,600/- made by the AO (being 1% of average value of average investments) under section 14A read with Rule 8D of the Rules