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2016 (7) TMI 374 - ITAT KOLKATARevision u/s. 263 - disallowance u/s. 14A - whether CIT had erroneously held that invoking the provisions of Rule 8D of the Rules is mandatory and automatic for making disallowance u/s. 14A? - Held that:- We are in complete agreement with the arguments of Ld. AR that adoption of Rule 8D of the Rules for disallowance u/s. 14A of the Act is not automatic and cannot be mechanically applied by the AO. The AO in the instant case was satisfied with the manner of assessee making disallowance u/s. 14A of the Act which specifically refers to each and every item of expenditure debited in the P&L Account and accordingly, thought it fit not to resort to Rule 8D of the Rules. He had in fact made disallowance u/s. 14A(2) of the Act. We find from the bare reading of section 14A of the Act that Rule 8D of the Rules should be applied only as a last resort in the event of AO not able to work out the disallowance of expenses incurred for earning income which does not form part of the total income especially in the case of a composite business having both taxable as well as non-taxable income. We find in the instant case that the Ld. CIT in 263 proceedings had only tried to substitute his own opinion in lieu of decision already taken by the Ld. AO. We find that the Ld. DR had only tried to argue on flimsy ground that the Ld. AR had not furnished the covering letter before the AO while replying to section 142(1) questionnaire dated 18.01.2010. It is not in dispute that the Ld. AO disallowed a sum of ₹ 22,584/- being the disallowance offered by the assessee based on workings given above. Under these circumstances, the claim of the assessee requires to be accepted and that of revenue deserves to be rejected. In view of the aforesaid findings and judicial precedents relied on hereinabove, we quash the revisionary proceedings u/s. 263 of the Act by the Ld. CIT - Decided in favour of assessee.
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