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TMI Blog2016 (7) TMI 387X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the Act. But this mandatory requirement, if not fulfilled by the AO, cannot be done, to fill – omission of the AO before the CIT(A). It is also pertinent to note that in the present case the assessee suo moto disallowed ₹ 31553/- and the AO has not recorded any finding to show that he is not satisfied with the correctness of the claim as well as suo moto disallowance, made by the assessee and thus the authorities below cannot validly make any disallowance and consequent addition u/s 14A Respectfully following the decision of Hon’ble Jurisdictional High Court of Delhi in the case of Cheminvest Ltd. ( 2015 (9) TMI 238 - DELHI HIGH COURT ), we hold that no disallowance u/s 14A of the Act can be made where there is no exempt in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as given rise to the income and which does not form part of the total income, is to be considered. 3. We have heard arguments of both the sides and carefully perused the relevant materials placed on record before the Tribunal. The Ld. Counsel for the assessee placing reliance on the decision of Hon ble Jurisdictional High Court of Delhi in the case of Maxopp Investment Ltd. vs. CIT dated 18.11.2011 passed in ITA No. 687/2009 submitted that primary satisfaction has not been recorded by the AO as per provision of Section 14A of the Income Tax Act, 1961 ( for short the Act) challenging the suo moto disallowance made by the assesee and there is no satisfaction to dismiss the correctness of the expenditure claimed by the assessee. The co-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to income which does not form part of total income. As per ratio laid down by Hon ble High Court of Delhi in the case of Maxopp (supra) and as per mandate of subsection (2) section 14A of the Act, we would find that the AO is required to determine the amount of such expenditure only if the AO, having regard to the accounts of the assessee, is satisfied with the correctness of the claim of expenditure as well as about the correctness of the suo moto disallowance made by the assessee. This requirement is mandatory to be complied by the AO and the CIT(A) by using coterminous powers during first appellate proceeding can not fill the gap by recording required satisfaction which was not recorded by the AO in the assessment order. 7. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (3) The provisions of sub-section (2) shall also apply in relation to a case where an 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: Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imed any exempt income and thus in view of ratio laid down by Hon ble Jurisdictional High Court of Delhi in the case of Cheminvest Limited vs CIT VI vide ITA No. 749/2014 order dated 2.9.2015 no disallowance can be made. The relevant operative para 23 of this judgment reads as under :- 23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression does not form part of the total income in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words, Section 14A will not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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