Assessment Officers must substantiate disallowances under Section 14A with specific reasons; generic dissatisfaction fails to meet legal requirements.

ORDER

PER VIKRAM SINGH YADAV, A.M :

This is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-47, Mumbai [„Ld. CIT(A)‟], dated 15-07-2025, pertaining to Assessment Year (AY) 2018-19, wherein the assessee has taken the following grounds of appeal:

“1) The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in upholding the action of the learned Assessing Officer in making a further disallowance of Rs.56,14,060/- under section 14A read with Rule 8D of the Income-tax Rules, 1962, as against the Suo-moto disallowance of Rs.95,584/- already made by the Appellants in the Return of Income filed. The Appellants submit that the said disallowance is unjustified, unwarranted, and contrary to the facts and circumstances of the case, and hence deserves to be deleted in entirety.

Without prejudice to the above, the Appellants submit that even otherwise, the disallowance sustained under section 14A is excessive, arbitrary, and without proper basis, and the same requires to be restricted to a reasonable figure.

2) Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”

2. Briefly the facts of the case are that the assessment in this case was completed u/s. 143(3) r.w.s. 144B of the Income Tax Act, 1961 („the Act‟) vide order dt. 21-05-2021, wherein the AO made a disallowance u/s. 14A of the Act amounting to Rs. 56,14,060/- which, on appeal by the assessee, has been sustained by the Ld.CIT(A) and against the said order and the findings of the Ld.CIT(A), the assessee is in appeal before us.

3. During the course of hearing, the Ld.AR submitted that the assessee has earned dividend income of Rs. 57,09,646/- which has been claimed as exempt from tax and it was further submitted that the assessee has suo- moto disallowed a sum of Rs. 95,584/- u/s. 14A of the Act in its return of income. It was submitted that the AO without recording satisfaction, has made further disallowance of Rs. 56,14,060/- u/s. 14A r.w. Rule 8D of the Income Tax Rules, 1962 („the Rules‟). It was submitted that it is a settled legal position that the AO has to record satisfaction as to why the suo moto disallowance made by the assessee is not acceptable to him and he has to record specific and cogent reasons which he has failed to do so and in light of same, the findings of the AO whereby he has invoked Rule 8D may be set-aside. It was submitted that the Coordinate Bench in assessee‟s own case for A.Y 2014-15 vide order dated 20/05/2019 in ITA No. 2954/Mum/2018 has deleted the disallowance so made by the AO u/s 14A r/w Rule 8D on account of lack of satisfaction. It was further submitted that following the said decision, the ld CIT(A) in assessee own case for A.Y 2015-16 has deleted the disallowance so made by the AO vide order dated 10/06/2019. It was accordingly submitted that the facts and circumstances of the case are exactly identical and the decisions so rendered by the Coordinate Bench and the ld CIT(A) supports the case of the assessee.

4. In this regard, further reliance was placed on the written submissions filed before the Ld.CIT(A) and the contents thereof were reiterated which read as under:

“At the outset it is submitted that the Assessing officer has nowhere in the Assessment order given any specific reason that why the disallowance made by the appellants is not acceptable and the disallowance u/s. 14A ought to be made by applying Rule 8D in the appellants case. The Assessing officer has simply copy pasted the reasons for making disallowance u/s. 14A as per Rule 8D without even noticing that the said reasons are not at all applicable in case of t