IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRINARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No.1384/Mum/2024 (Assessment year: 2016-17)

Supreme Nonwovens Private vs ACIT-14(3)(2), Mumbai, Limited, RoomNo.455,4^thFloor,Aayakar Plot No.110, Supreme House, Bhavan, M.K. Road, Mumbai

16^th Road, Maharastra, 400 071 PAN : AAACS5921R APPELLANT RESPONDENT Assessee by : Shri K.Gopal a/w Miss Neha Paranjpe Respondent by : Shri Bhangepatil Pushkaraj Ramesh–

Sr. AR Date of hearing : 01/04/2025 Date of pronouncement : 07/04/2025

O R D E R

Per Anikesh Banerjee (JM):

The instant appeal by the assessee was filed against the order of the National Faceless Appeal Centre, Delhi *in short,’Ld.CIT(A)’], passed under section 250 of the Income-tax Act, 1961(in short, ‘the Act’), date of order 13-01-2023 for A.Y. 2016-17.The impugned order emanated from the order of the Learned Assistant Commissioner of Income-tax, Circle 14(3)(2), Mumbai passed under section 143(3), date of order 30/11/2018.

2. The Ld.AR argued that the only issue before the Bench is related to disallowance under section 14A read with rule 8D of the Income tax Rule, 1962. The Ld.AR contended that the assessee suo motu disallowed the expenses related disallowance under section 14A read with rule 8D of I.T. Rules, 1962 amount to Rs.4,06,523/-.The Ld.AO had rejected the calculation of the assessee for disallowance U/s 14A of the Act and calculated the said disallowance to the extent of Rs.23,88,891/-. The balance amount of Rs. 19,82368/- {Rs.23,88,891/- (-) Rs. 4,06,523/-) was added back with total income. The aggrieved assessee filed appeal before the Ld. CIT(A). The Ld.CIT(A) upheld the view of the Ld. AO and the appeal of the assessee was rejected. Being aggrieved, the assessee filed appeal before us.

3. The Ld.AR argued that during the rejection of assessee’s calculation related to disallowance under section 14A, the Ld.AO had not recorded any satisfaction, while passing the order. Accordingly, the entire addition under section 14A is arbitrary and bad in law.

4. The Ld.DR vehemently argued and invited our attention to page 2, first para and he contended that discussion in the said paragraph is considered as the satisfaction of the AO. The relevant paragraphs is reproduced below: - “On perusal of the submission made by the assessee, it was noticed that the assesses has received dividend income to the tune of Rs. 13,75,74,357/- and also made investments in unquoted equity Instruments to the tune of Rs. 66,19,42,4261, However, assessee had made disallowance of only Rs 4,16,291 pertaining to only the interest component is under Rule 8D(2)(ii). The suo motu disallowance made by the assessee does not include the various direct and indirect costs associated with the earning of exempt Income. Assessee was asked vide show cause notice dated 22.11.2018 as to why the various indirect costs be not disallowed as per rule 8D(2). Assessee stated in it's response that there were no expenses other than proportionately attributable interest expenditure. The submission of the assesese is considered but not found acceptable. The contention that there are no direct or indirect expenditure incurred for earning exempt income is not correct. The disallowance of expenditure has to be made considering the direct and indirect costs associated with earning exempt income as per rule 8D(2) The assessee ought to have made disallowances of expenditure in relation to the income which does not or shall not form part of total u/s 14A in accordance with the provision of Rule 8D of the Income Tax Rules, 1962, Thus, the accounting treatment of the assesses company is not acceptable as the same is not in tune with the provisions of section 14A r.w.r 8D of the IT Act. It is very clearly that any dividend / exempt income cannot be received without making and expenses. The above submission made by the assessee is considered but not acceptable.”

5. We have heard