Poona Health Services Private Ltd., V. Assistant Commissioner Income-tax,

ITA 1798/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9381 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 30-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHEKHAR SHAH
• Keywords: Earning of tax free income; Revised return
• Section: 14A

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1798/PUN/2014 / ASSESSMENT YEAR : 2009-10 POONA HEALTH SERVICES PRIVATE LIMITED, 16, SHIVAJINAGAR, PUNE 411005. PAN : AABCP1294M. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 4, PUNE. . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK & SHRI SHEKHAR SHAH / RESPONDENT BY : SHRI YOGESH KAMAT / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A) - II, PUNE, DT.28.0 5.2014 FOR THE ASSESSMENT YEAR 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A COMPANY STATED TO BE RUNNING A DIAGNO STIC CENTRE. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FO R A.Y. / DATE OF HEARING : 30.05.2017 / DATE OF PRONOUNCEMENT: 02.06.2017 2 2009-10 ON 29.10.2009 DECLARING TOTAL INCOME AT RS.15,12,5 96/-. SUBSEQUENTLY, ASSESSEE FILED REVISED RETURN OF INCOME ON 27.09.2010 DECLARING NIL TAXABLE INCOME. THE CASE WAS SELEC TED FOR SCRUTINY AND TOTAL LOSS WAS DETERMINED AT RS.1,70,18,3 10/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATT ER BEFORE LD.CIT(A), WHO VIDE ORDER DT.28.05.2014 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) ERRED IN CONFIRMING THE DISALLOWA NCE U/S 14A OF RS.1,46,964/-. 2. THE LD.CIT(A) FAILED TO APPRECIATE THAT THE ASSE SSEE HAD NOT INCURRED ANY EXPENDITURE TO EARN THE EXEMPT INCOME AND IN THE ABSENCE OF ANY PROPER SATISFACTION RECORDED BY THE LEARNED AO NO DISALLOWANCE U/S 14A R.W.R 8D COULD BE MADE IN THE HANDS OF THE ASSESSEE. ASSESSEE ALSO FILED ADDITIONAL GROUND, WHICH READS AS UNDER : THE ASSESSEE SUBMITS THAT WITHOUT PREJUDICE TO ITS CONTENTION THAT NO DISALLOWANCE U/S 14A R.W.R. 8D IS WARRANTED, IN THE EVENT, ANY DISALLOWANCE IS TO BE MADE, THE INVESTMENTS MADE IN NATIONAL HOUSING BANK OF RS.20,00,000/- AND IN RURAL ELECTRI FICATION CO. LTD. OF RS.30,00,000/- SHOULD BE EXCLUDED FROM THE COMPUTATION OF TAX FREE INVESTMENT WHILE WORKING OUT THE DISALLOWA NCE U/S 14A R.W.R. 8D SINCE THE INTEREST INCOME THEREON IS TAXA BLE AND NOT EXEMPT FROM TAX. 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLE CONTR OVERSY IS WITH RESPECT TO DISALLOWANCE OF EXPENSES U/S 14A R.W.R. 8D. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAD DERIVED EXEMPT INCOME. THE ASSESSEE WAS ASKED TO GIVE THE WORKING OF DISALLOWANCE U/S 14A OF THE ACT AND THE ASSESSEE WORKED OUT THE DISALLOWANCE AT RS.1,46,964/-. A O THUS 3 MADE A DISALLOWANCE OF RS.1,46,964/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPH ELD THE ORDER OF AO BY HOLDING AS UNDER : 3.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND PERUSED MATERIAL ON RECORD. THE APPELLANT HAS CONT ESTED THE DISALLOWANCE MADE U/S 14A OF RS.1,46,964/-. IT IS UNDISPUTED THAT THE APPELLANT HAS EARNED EXEMPT INCOME TO THE TUNE OF RS.7,37,340/- ON ACCOUNT OF INVESTMENT IN MUTUAL FU ND. THE APPELLANT HAD NOT MADE ANY SUO MOTO DISALLOWANCE U/ S 14A IN RESPECT OF THE EXPENSES INCURRED DESPITE THE FACT O F HAVING INVESTED AN AVERAGE OF RS.93,92,848/- IN INVESTMENTS YIELDIN G TAX FREE INCOME. THE ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS AFTER HAVING EXAMINED THE ACCOUNTS OF THE APPELLANT AND BEING NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE A SSESSEE AND FINDING NO EXPENDITURE HAVING BEEN INCURRED IN RELA TION TO EXEMPT INCOME SOUGHT THE EXPLANATION OF THE ASSESSEE WHO F URNISHED THE WORKING OF THE DISALLOWANCE U/S 14A R.W. RULE 8D(2) (III) OF AN AMOUNT OF RS. 1 , 46,964/-. THE AFORESAID WORKING HAS BEEN ARRIVED AT BY TAKING THE AVERAGE OF SUCH INVESTMENT YIELDIN G EXEMPT INCOME BEING 0.5% OF THE AVERAGE OF RS (3,15,24,178 + 2,72 ,61 , 518) BEING RS. 2,93,92,848/-. THE ASSESSING OFFICER CONCURRED WITH THE SAID WORKING SUBMITTED BY THE ASSESSEE AND FINDING NO CL AIM OF INTEREST MADE BY THE APPELLANT IN THE PROFIT & LOSS ACCOUNT EITHER DIRECT OR INDIRECT RESTRICTED THE SAID DISALLOWANCE U/S 14A R . W . RULE 8D(2)(III) AS WORKED OUT AND SUBMITTED BY THE APPELLANT . THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE, 328 ITR 8 1 (BOM) AUTHORIZES THE ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE U/S 14A AS PER PRESCRIBED METHOD U/R 8D IN CASE HE IS N OT SATISFIED WITH THE CLAIM OF THE ASSESSEE HAVING REGARD TO ITS ACCOUNTS . THE SAID PRINCIPLE HAS ALSO BEEN UPHELD BY ITAT MADRAS IN THE CASE OF SIVA INDUSTRIES HOLDING LTD VS ACIT IN ITS ORDER DA TED 20-05-2011, ITA NO 2148/MDS/2010 AND ALSO BY THE DELHI TRIBUNAL IN DCIT VS JINDAL PHOTO LTD LTA NO 814/DE1/2011 DATED 23-09-20 11 . THE FACT ON RECORD CLEARLY INDICATE THE APPELLANT TO BE IN R ECEIPT OF EXEMPT INCOME IN THE FORM OF DIVIDEND FROM THE INVESTMENTS MADE OF RS . 2 . 72 CRORES DURING THE YEAR UNDER CONSIDERATION. THUS , PRIMA FACIE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS BEEN RIGHTLY DONE U/S 14A R . W . RULE 8D(2)(III) . THERE CANNOT BE ANY INCOME WITHOUT ANY KIND OF EXPENSES OR LABOUR HOWEVER SMAL L IT CAN BE AND , THEREFORE , THE ASSESSING OFFICER WAS JUSTIFIED IN CALCULATING THE DISALLOWANCES ON THE EXEMPTED INCOME . THE DIVIDEND INCOME MAY NOT INVOLVE SEPARA T E/DIRECT EXPENSES BUT INDIRECT EXPENSES ARE THERE IN PURCHASING THOSE MUTUAL FUNDS AND OTHER AD MINISTRATIVE EXPENSES IN THE EARNING OF INCOME. THE APPELLANT HA S UNDISPUTEDLY EARNED EXEMPT INCOME HENCE THE SEC 14A IS APPLICABL E WHERE I T PROVIDES THAT NO DEDUCTION BY THE ASSESSEE IN RESPE CT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO EXEMPTED INCOME WILL BE ALLOWED. THERE ARE EXPENSES INCURRED FOR EARNING THE EXEMPT INCOME AS WELL AS EARNING OF OTHER INCO M E S . 3.4.1. THE SECTION 14A DOES NOT TAKE CARE OF ONLY DIRECT EXPENSES BUT INDIRECT EXPENSES ARE ALSO TO BE ALLOCATED TO T HE EXEMPTED INCOME. IN THE CASE OF ACIT VS CHAMPION COMMERCIAL CO . LTD (2012) 139 ITO 108 (KOL) IT WAS HELD THAT A DISALLOWANCE U/S 14A 4 CAN ALSO BE MADE IN A CASE IN WHICH THE ASSESSE CLA IMS NO EXPENDITURE HAS BEEN INCURRED FOR EARNING TAX EXEMP T INCOME THEREFORE, WHEN THE ASSESSEE DOES NOT OFFER ANY DIS ALLOWANCE U/S 14A ON HIS OWN, THE PROVISIONS OF SEC 14A R . W . RULE 8D CAN BE INVOKED WITHOUT THERE BEING ANY NEED TO EXPRESS SAT ISFACTION AND INCORRECTNESS OF CLAIM. THE EARNING OF DIVIDEND INC OME HAS EMANATED FROM THE INVESTMENTS MADE BY THE APPELLANT . THE SATISFACTION IN ANY CASE AS TO THE NON-DISALLOWANCE OF EXPENSES AGAINST EXEMPT INCOME IS IN ANY CASE DISCERNING FRO M THE OBSERVATION OF THE ASSESSING OFFICER . THUS THE ISSUE IN APPEAL LIES I N A VERY NARROW COMPASS OF UNDISPUTED MATER I AL FACTS AND IN PRINCIPLE THE DISALLOWANCE U/S 14A R.W . RULE 8D GETS ATTRACTED AND THE SAME HAS BEEN RIGHTLY WORKED OUT BY THE ASSESSE E AND ALSO CONCURRED B Y TH E ASSESSING OFFICER WHILE WORKING OUT THE DISALLOWANCE . SO FAR AS THE CONTENTION OF THE APPELLANT IN THE PRESENT CASE REGARDING THE ASSESSING OFFICER HAVING NOT RECORDED THE SATISFACTION BEFORE RESORTING TO DISAL LOWANCE IS CONCERNED , IT IS THE INITIAL ONUS ON THE ASSESSEE TO EXHIBIT W ITH REFERENCE TO ITS ACCOUNTS , THAT IT HAS NOT INCURRED ANY EXPENDITURA . AS BEING CLA I MED BY IT WITH THE ASSESSEE R ATHE R HAVING MADE SUO MOTO DISALLOWANCE U/S 14A INSPITE OF HAVING INVEST ED AN AVERAGE OF RS . 2 , 93,92,848/- IN INVESTMENTS YIELDING TAX-FREE INCOME , IT IS ONLY WHEN THE ASSESSEE DOES SO THAT IT BECOME S I NCUMBENT ON THE ASSESSING OFFICE R TO , ON AN EXAMINATION OF THE ASSESSEE ' S CLAIM TO EITHER ACCEPT THE SAME OR STATE HIS REAS ONS FOR HIS DISSATISFACTION THEREWITH AGAINST WITH REFERENC E TO THE ACCOUNTS . APART FROM BEING THE REQUIREMENT OF LAW IT IS ONLY IN SUCH CASE THAT THE VALIDITY OF THE DISSATISFACTION OF THE ASSESSIN G OFFICER , ON AN APPEAL BY THE ASSESSEE COULD BE EXAMINED AND REVIEW ED BY AN APPELLATE AUTHO R ITY . T H E ASSESSING OFFICER IN ANY CASE HAS CONSIDERED THE DISALLOWANCE AS IS APPARENT FROM THE AMOUNT DISALLOWED UNDER RULE 8D(2)(III) ONLY AND NO DISALL OWANCE HAS BEEN CONSIDERED UNDER THE OTHER CLAUSES OF RULE 8D . FURTHER IT IS RELEVANT TO POINT OUT THAT THE APPELLANT HAD HIMSEL F WORKED OUT THE DISALLOWANCE U/S 14A U/R 8D DURING THE COURSE OF AS SESSMENT PROCEEDINGS WHICH THE ASSESISNG OFFICER FOUND TO BE IN ORDER AND ACCORDINGLY CONSIDERED THIS AMOUNT FOR DISALLOWANCE . IN THIS REGARD THE DECISION OF THE CHENNAI ITAT IN THE CASE OF DCI T VS. VINTROS AND CO (2013) 141 ITD 626 BECOMES RELEVANT WHEREIN THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME. WHEN THE ASSESSING OFFICER FOUND TO BE IN ORDER AND ACCORDINGLY CONSIDERED THIS AMOU NT OF DISALLOWANCE. IN THIS REGARD THE DECISION OF THE C HENNAI ITAT IN THE CASE OF DCIT VS. VINTROS & CO (2013) 141 ITD 626 BE COMES RELEVANT WHEREIN THE ASSESSEE EARNED EXEMPT DIVIDEND INCOME. WHEN THE ASSESSING OFFICER INVOKED SEC.14A, ASSESSEE ITSELF WORKED OUT DISALLOWANCE U/R 8D WHICH WAS ADDED TO THE TOTAL IN COME. THE TRIBUNAL HELD THAT SINCE THE ASSESSEE INSTEAD OF CH ALLENGING APPLICATION OF PROVISION ITSELF COMPUTED DISALLOWAN CE, IT COULD NOT OBJECT TO ITS ADDITION TO INCOME. 3.5 IN VIEW OF THE ABOVE FACTS, THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER IS LIABLE TO BE UPHELD AND GROUND S OF APPEAL NO.1 AND 2 RAISED BY THE APPELLANT ARE DISMISSED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 5 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFOR E AO AND LD.CIT(A). HE FURTHER SUBMITTED THAT DURING THE YE AR ASSESSEE HAD EARNED TAX FREE DIVIDEND OF RS.7,37,340/- FROM INVESTMENTS IN MUTUAL FUNDS. HE SUBMITTED THAT THE DIVIDEN D WERE RECEIVED UNDER RE-INVESTMENTS SCHEME OF MUTUAL FUNDS AND WERE THEREFORE AUTOMATICALLY RE-INVESTED IN THE SAME FUNDS AND ACCORDINGLY ASSESSEE HAD NOT INCURRED ANY EXPENDITURE FOR EARNING THE DIVIDEND. LD.A.R. FURTHER POINTED OUT THE COPY OF THE AUDITED BALANCE-SHEET AND STATED THAT ASSESSEE WAS HAVING SUFFIC IENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESER VE AND SURPLUS AGGREGATING TO RS.10.54 CRORES AS AGAINST THE INV ESTMENT OF RS.2.72 CRORES WHICH SHOWS THAT INTEREST FREE FUNDS AVA ILABLE WITH THE ASSESSEE WERE FAR IN EXCESS OF INVESTMENTS A ND THEREFORE IT CAN BE PRESUMED THAT NO INTEREST FREE FUNDS HAVE BE EN UTILIZED FOR THE PURPOSE OF INVESTMENT. HIS ANOTHER ARGUMENT WAS THAT EVEN WORKING OF DISALLOWANCE U/S 14A R.W.R. 8D IS WRONG BECAUSE WHILE CALCULATING THE AVERAGE INVESTMENTS, THE BONDS OF NAT IONAL HOUSING BANK (RS.20 LACS) AND RURAL ELECTRIFICATION COMPANY LIMITED (RS.30 LACS) AGGREGATING TO RS.50 LACS SHOULD HAVE B EEN EXCLUDED BECAUSE THE INTEREST EARNED FROM THESE BONDS ARE NOT TAX FREE BUT ARE TAXABLE. HIS THIRD ARGUMENT WAS THAT WHILE MAKING A DISALLOWANCE U/S 14A R.W.R. 8D, AO HAS NOT RECORDED ANY SATISFACTION AS REQUIRED U/S 14A(2) OF THE ACT AND IN SUCH A SITUATION, THE DISALLOWANCE U/S 14A OF THE ACT CANNOT BE P ROCEEDED WITH AND FOR THE AFORESAID PROPOSITION, HE RELIED ON THE DEC ISION OF PUNE TRIBUNAL IN THE CASE OF ACIT VS. MAGARPATTA TOWNSH IP DEVELOPMENT & CONSTRUCTION COMPANY LIMITED IN [2014] 46 6 TAXMANN.COM 284 (PUNE). HE PLACED ON RECORD THE COPY O F THE AFORESAID DECISION. HE THEREFORE SUBMITTED THAT THE DISALLOWA NCE MADE U/S 14A AND CONFIRMED BY LD.CIT(A) BE DELETED. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF AO AND LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO DISALLOWANCE OF EXPENSES U/S 14A OF THE ACT. IT IS SEEN THAT THE DISALLOWANCE OF RS.1,46,964/- HAS BEEN WORKED OUT U/S 14A R.W.R. 8D(2), BEING 0.5% OF AVERAGE INVESTMENTS AND NO DISALLOWANCE OF ACCOUNT OF INTEREST HAS BEEN WORKED OUT. WE FIND THAT AO WHILE PROCEEDING WITH DISALLOWING THE EXPENSES HAS NOT RECORDED ANY SATISFACTION AS REQUIRED U/S 14A(2) OF THE ACT. AS PER SEC .14A(2), FOR INVOCATION OF RULE 8D, THE AO HAS TO RECORD SATISFACTIO N ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, IN RESPECT OF THE EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME. IN THE PRESENT CASE, WE FIND THAT N O SATISFACTION HAS BEEN RECORDED BY THE AO WHILE DISALLOWING T HE EXPENSE U/S 14A OF THE ACT. ON THE ISSUE OF NECESSITY OF RECORDING OF SATISFACTION WHILE DISALLOWING EXPENSES U/S 14A WE HAVE CO ME ACROSS A RECENT DECISION RENDERED BY HONBLE PUNJAB A ND HARYANA HIGH COURT IN THE CASE OF PUNJAB TRACTORS LTD., VS. CIT REPORTED IN (2017) 393 ITR 223 (P&H) WHEREIN HONBLE HIGH COURT HAS HE LD THAT AO MUST RECORD SATISFACTION THAT CLAIM REGARDING EXP ENDITURE IS NOT SATISFACTORY. THE RELEVANT OBSERVATIONS BY HONBLE HIGH COURT ARE REPRODUCED HEREUNDER : 7 11.SECTION 14A SPECIFIES THE CIRCUMSTANCES IN WHIC H THE ASSESSING OFFICER IS ENTITLED TO DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME I N ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCRIBED. THE METHOD P RESCRIBED IS IN RULE 8D OF THE INCOME-TAX RULES, 1962 WHICH WAS INTRODUCED WITH EFFECT FROM THE ASSESSMENT YEAR 2008-09. THE C ONDITIONS SPECIFIED IN SUB-SECTIONS (2) AND (3) OF SECTION 14 A MUST EXIST IN ORDER TO ENTITLE THE ASSESSING OFFICER TO INVOKE RU LE 8D. THIS IS CLEAR FROM THE LANGUAGE OF THESE SUB-SECTIONS. SUB-SECTIO N (2) PROVIDES THAT THE ASSESSING OFFICER SHALL DETERMINE THE AMOU NT OF EXPENDITURE INCURRED IN RESPECT OF EXEMPT INCOME IN ACCORDANCE WITH THE METHOD PRESCRIBED, I.E., RULE 8D 'IF' HAV ING REGARD TO THE ACCOUNTS OF THE ASSESSEE, HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE ASSESSEE'S CLAIM IN RESPECT OF SUCH EXPENDITU RE IN RELATION TO EXEMPT INCOME. THE WORD 'IF' INDICATES THAT TO INVO KE THE METHOD PRESCRIBED NAMELY RULE 8D, THE ASSESSING OFFICER MU ST NOT BE SATISFIED WITH THE CORRECTNESS OF THE ASSESSEE'S SA ID CLAIM. 12. SUB-SECTION (3) PROVIDES THAT THE PROVISIONS OF SUB-SECTION (2) SHALL APPLY IN RELATION TO A CASE WHERE THE ASSESSE E CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED BY HIM IN RELATION TO EXEMPT INCOME. THE OPENING WORDS OF SUB-SECTION (3) MAKE T HE PROVISIONS OF SUB-SECTION (2) APPLICABLE IN RELATION .TO CASES UNDER SUB-SECTION (3). THUS WHERE AN ASSESSEE CLAIMS THAT NO EXPENDIT URE HAS BEEN INCURRED BY HIM IN RELATION TO EXEMPT INCOME, THE A SSESSING OFFICER CAN RESORT TO RULE 8D ONLY IF HAVING REGARD TO THE ACCOUNTS OF THE ASSESSE IS NOT SATISFIED WITH THE CORRECTNESS OF TH E CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED BY H IM IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. THUS UNDER SUB-SECTION (2) AND (3) OF SECTION 14A, AN ASSESSING OFFICER CAN RESORT TO RULE 8D ONLY IF HE IS NOT SAT ISFIED WITH THE CORRECTNESS OF THE ASSESSEES CLAIM IN RESPECT OF T HE EXPENDITURE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT OR IF HE IS NOT SATISFIED WITH THE CO RRECTNESS OF THE ASSESSEES CLAIM THAT NO EXPENDITURE HAS BEEN INCUR RED BY HIM IN RELATION TO SUCH INCOME. THE HONBLE HIGH COURT FURTHER OBSERVED AS UNDER 18. THE NEXT QUESTION IS AS TO WHETHER IT IS NECESS ARY FOR THE ASSESSING OFFICER TO RECORD HIS REASONS FOR NOT BEI NG SATISFIED WITH THE CORRECTNESS OF THE ASSESSEE'S CLAIM. 19. IT IS MANDATORY FOR THE ASSESSING OFFICER TO RE CORD THAT HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE HE IS NOT SA TISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME UNDER THE ACT OR THAT HE IS NOT SATISF IED WITH THE ASSESSEE'S CLAIM THAT NO EXPENDITURE HAD BEEN INCUR RED BY HIM IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. 8 20. THE MATTER STANDS CONCLUDED BY A JUDGMENT OF TH IS COURT DATED JANUARY 27, 2015 IN CIT VS. ABHISHEK INDUSTRIES LT D. I T A. NO. 320 OF 2013- REPORTED IN [2016] 380 I1R 652 (P&H), WHERE THE DIVISION BENCH HELD (PAGE 657) :- 'SECTION 14A OF THE ACT REQUIRES THE ASSESSING OFFI CER TO RECORD SATISFACTION THAT INTEREST BEARING FUNDS HAV E BEEN USED TO EARN TAX- FREE INCOME. THE SATISFACTION TO BE RECORDED MUST BE BASED UPON CREDIBLE AND RELEVANT EVIDENCE . .. ' 21. THE JUDGMENT IN MAXOPP INVESTMENT LTD. (SUPRA) ALSO SUPPORTS THIS VIEW NAMELY THAT THE ASSESSING OFFICER MUST RE CORD REASONS FOR NOT BEING SATISFIED WITH THE CORRECTNESS OF THE AS SESSEE' CONTENTIONS WITH REGARD TO THE ASPECTS MENTIONED IN SUB-SECTION S (2) AND (3) OF SECTION 14A. IT IS TRUE THAT THE DELHI HIGH COURT M ERELY STATES THAT SUCH REJECTION MUST BE FOR DIS-CLOSED COGENT REASON S. THE DISCLOSURE, HOWEVER, CAN ONLY BE IN WRITING. IT CAN HARDLY BE S UGGESTED THAT THE DISCLOSURE REMAINS IN THE ASSESSING OFFICER'S MIND. THE ASSESSEE IS ENTITLED TO TEST THE BASIS OF THE REJECTION OF HIS CONTENTIONS. THIS CAN BE DONE ONLY IF THE ASSESSING OFFICER RECORDS HIS R EASONS FOR HIS NOT BEING SATISFIED IN WRITING. WE FURTHER FIND THAT THE CO-ORDINATE BENCH OF THE TRIBUN AL, PUNE IN THE CASE OF ACIT VS. MAGARPATTA TOWNSHIP (SUPRA ) HELD THAT WHEN AO DID NOT RECORD ANY SATISFACTION AS REQUIRED BY SEC.14A(II), DISALLOWANCE U/S 14A R.W.R. 8D WAS UNJUSTIFIED. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS AND RELYING ON THE AFORESAID DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT, WE ARE OF THE VIEW THAT IN THE PRESENT CASE NO DISALLOWANCE U/S 14A IS CALLED FOR SINCE NO SATISFACTION FOR DISALLOWING THE EXPENSES U /S 14A HAS BEEN RECORDED BY AO. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED ON 2 ND DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 2 ND JUNE, 2017. YAMINI 9 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-II, PUNE. CIT-2, PUNE. #$% &&'(, '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // TRUE COPY // // . /012 / ASSISTANT REGISTRAR, '( , / ITAT, PUNE.