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TMI Blog2015 (4) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... ch income which does not form part of the total income under this Act in accordance with such method as may be prescribed, "if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act". No satisfaction was recorded to satisfy the mandate of sub-sections (2) and (3) of Section 14A. The position continued to remain same before the learned CIT(A) as well, who also simply upheld the view taken by the Assessing Officer without making good the deficiency left by the Assessing Officer. The position which, therefore, emerges is that neither the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not making any voluntary disallowance under Section 14A in respect of the exempt dividend income of ₹ 18,09,961/-. The Assessing Officer, after reproducing the assessee's explanation dealt with the issue as under The assesee's reply has been considered and found to be unacceptable. The assessee cannot deny involvement of human acumen for which an appropriate disallowance has to be made as per Rule 8D of the I.T. Act, 1961. In this case the average of opening and closing balances as on 01.04.2008 and as on 31.03.2009 respectively are ₹ 72226700/- ₹ 77328164/-. The average comes to ₹ 74777432/-. Hence, a disallowance as per Rule 8D i.e. 0.5% of the average investments which is ₹ 378887/- is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to a case where the assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act. A conjoint reading of sub-sections (2) and (3) of Section 14A makes it manifest that the Assessing Officer is fully empowered to compute disallowance under Section 14A as per Rule 8D where he is not satisfied with the correctness of the assessee's claim of expenses incurred or not incurred in relation to exempt income. However, the pre-requisite for invoking the mandate of Section 14A is the recording of satisfaction by the Assessing Officer as to the incorrectness of the claim of the assessee in respect of the expenditure incurred or not incurred in relation to the exemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged under sub-sections (2) and (3) of Section 14A, then the disallowance under this section cannot follow. 6. We have reproduced the relevant discussion made by the Assessing Officer in an earlier part of the order from which it is palpable that no satisfaction was recorded to satisfy the mandate of sub-sections (2) and (3) of Section 14A. The position continued to remain same before the learned CIT(A) as well, who also simply upheld the view taken by the Assessing Officer without making good the deficiency left by the Assessing Officer. The position which, therefore, emerges is that neither the Assessing Officer nor the learned CIT(A) recorded the requisite satisfaction as required under Section 14A. In the absence of such satisfaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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