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Judgment
ORDER
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
This captioned appeal has been filed by the assessee against the order of the learned Commissioner of Income Tax (Exemption)-NFAC, Delhi [‘CIT(A)’ in short] dated 08.12.2025 arising from the assessment order under section 143(3) read with section 144B of the Act passed by the National E- Assessment Centre, Delhi for Assessment Year 2018-19 on 03.05.2021.
Brief facts of the case are that the assessee is a non banking finance company and filed its return of income on 30.10.2018 declaring income of Rs.54,05,180/-. The case was selected for Complete Scrutiny under the E-assessment Scheme, 2019 on the issues of claim of deductions in Schedule BP, and expenses incurred for earning exempt income. Notice u/s 143(2) dated 22/09/2019 and notice u/s 142(1) dated 18/12/2020 along with a detailed questionnaire were issued and duly served. During assessment proceedings, the assessee submitted details of investments and stated that it had voluntarily disallowed Rs.46,17,899/- u/s 14A of the Act. After examining the investment pattern, the Assessing Officer held that earning exempt income involved managerial decisions and indirect expenditure, and therefore provisions of section 14A r.w. Rule BD were applicable. Based on Rule 8D, the AO computed the disallowance at Rs.1,17,95,841/- and, after reducing the voluntary disallowance, made an addition of Rs.71,77,952/-. The assessment was completed u/s 143(3) at a total income of Rs.1,25,83,132/- Aggrieved with the order of AO, assessee filed appeal before the CIT(A), which was dismissed. Now the assessee before the ITAT with the following grounds of appeal:
1.“That the learned Commissioner of Income Tax (Exemption) has erred on facts and in law in confirming the disallowance of Rs.71,77,952/- under section 14A of the Act.
2.That the learned Commissioner of Income Tax (Exemption) has erred in confirming the action of the AO who had computed the above disallowance in a routine manner, without recording any finding/satisfaction as to why the su-moto disallowance of Rs.46,17,889/- was incorrect.
3.that the ld. CIT(A) has erred in holding that the AO has made analysis before proceedings to compute disallowance under section 14A and has followed the procedure prescribed under Rule 8D.”
We are called upon to adjudicate on the issue of disallowance u/s 14A in the instant year. At the outset, learned Counsel of the assessee stated that the AO has not recorded satisfaction while disallowing the sum of Rs.71,77,952/-. It is further submitted that the learned AO has not pointed out any item of expense to show that the suo moto disallowance of Rs.46,17,889/- was not justified. Further learned Counsel pointed out that the ITAT in assessee’s own case for A.Y. 2016-17 has decided the issue of disallowance under section 14A in assessee’s favour.
Per contra, learned DR relied on the order of the AO.
We have heard the rival submissions and perused the material available on record. We find that the AO has not recorded any satisfaction as to how the suo moto disallowance made by the assessee u/s 14A is unjustified. Further, we find that the Co-ordinate Bench of ITAT, Delhi has decided the issue in assessee’s own case for A.Y. 2016-17 in favour of the assessee. Following the same, we delete the addition made by the AO and hold that the suo moto disallowance of Rs.46,17,889/- would suffice the provision of law. Appeal of the assessee is allowed.
In the result, appeal of the assessee is allowed.