In a recent decision, the Ahmedabad bench of Income Tax Appellate Tribunal ( ITAT ) has held that any revised disallowance claim under Section 14A of the Income Tax Act must be supported by a revised auditor’s certificate in Form 3CA, failing which the revised claim is liable to be rejected.
The assessee company had filed its return of income declaring ₹493.41 crores and suo moto disallowed ₹14.31 crores under Section 14A read with Rule 8D, in relation to dividend income of ₹78.65 crores claimed exempt under Section 10(34). During assessment proceedings, the Assessing Officer initially proposed a further disallowance of ₹296.35 crores but later accepted the assessee’s original disallowance and passed the assessment order accordingly.
However, during the assessment, the assessee submitted a revised computation, stating that the actual expenditure attributable to exempt income was only ₹98,872, and alternatively suggested a maximum disallowance of ₹1.09 lakhs based on proportionate allocation of administrative expenses.
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The assessee contended that the disallowance in the return was made out of abundant caution and did not reflect the correct computation. It also argued that the Assessing Officer failed to record dissatisfaction with the original disallowance before rejecting the revised claim.
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The Tribunal observed that the original disallowance was certified by the auditor in Form 3CA, and the assessee had not submitted any revised Form 3CA or revised tax audit report to support the lower revised claim. It held that any revised claim must be backed by proper rationale and documentary evidence, particularly when the original disallowance was auditor-certified.
The tribunal referred to the absence of a revised audit certificate and insufficient justification for the revised figures, the ITAT upheld the actions of the Assessing Officer and the CIT(A), and dismissed the assessee’s ground for reduction of disallowance under Section 14A.
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It was observed that “The assessee did not furnish any revised certificate from the Auditor in Form No.3CA in respect of the revised claim as made in the course of assessment. In the absence of any such revised certificate from the Auditor, the claim of the assessee was rightly rejected by the Assessing Officer.”
The bench of T R Senthilkumar (Judicial Member) and Narendra Prasad Sinha (Accountant Member) stated that a mere submission of alternate computations without amending the audit report or providing a revised Form 3CA does not entitle the assessee to seek a reduction in disallowance already admitted in the return of income.
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