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TMI Blog2016 (3) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring total income of Rs. 99,74,64,581/-. In the course of assessment proceedings u/s.143(3) of the Act, the AO noticed that the Assessee had on his own disallowed a sum of Rs. 26,07,177/- u/s.14A of the Act, being expenditure incurred by the Assessee in earning income which does not form part of the total income under the Act. The AO called upon the Assessee to explain the basis on which the aforesaid sum was quantified by the Assessee. The Assessee gave details of the basis of its quantification as below: Position Nature of Expenses Amount Estimate percentage of time devoted Estimated cost that can be apportioned Officer Salary 4,82,278 100% thereof Rs. 492,778 492,778 Telephone 6,000 Medical 4,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Rules, 1962 (Rules) and he could not substitute the estimation of the Assessee by his own estimation. 4.1. To the show cause notice issued by the CIT u/s.263 of the Act, the Assessee gave reply pointing out that the view taken by the AO was a possible view and the same was not erroneous or prejudicial to the interest of the revenue. The Assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Vs. CIT 243 ITR 83(SC). The Assessee also submitted that even in a case where the AO rejects the basis of disallowance by an Assessee it is not necessary that the AO should mandatorily resort to Rule 8D of the Rules for making disallowance u/s.14A of the Act. Reference was made to the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in the case of Godrej & Boyce Mfg. Co. Ltd. 328 ITR 81(Bom.) have taken a view that Rule 8D of the I.T. Rules will apply only for A.Ys. 2008-09 and subsequent assessment years. It has also been laid down that the assessee has to make a claim (including a claim that no expenditure was incurred) with regard to expenditure incurred for earning income which is not chargeable to tax. Such a claim has to be examined by the AO and only if on an objective satisfaction arrived at by the AO that the claim made by the assessee is not correct, can the AO proceed to apply the computation mode as specified in Rule 8D(2) of the Rules. If the AO comes to the conclusion that claim made by the assessee is not correct, it is only thereafter that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, we are also of the view that the AO has adopted one of the possible course open to him in law. The CIT cannot invoke jurisdiction u/s.263 of the Act just because he does not agree with the view of the AO. In other words u/s.263 of the Act, the CIT cannot substitute his view with that of the AO. The decision relied upon by the learned counsel for the Assessee clearly supports the stand taken by the Assessee in this regard. 9. We therefore hold that the order of the AO was neither erroneous nor prejudicial to the interest of the revenue and therefore jurisdiction u/s.263 of the Act ought not to have been invoked by the CIT. We therefore quash the order u/s.263 of the Act and allow the appeal by the Assessee. 10. In the result appeal by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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