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TMI Blog2019 (11) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, the Supreme Court in the case of Maxopp Investment Ltd. v. Commissioner of Income Tax [ 2018 (3) TMI 805 - SUPREME COURT] while upholding the view of the Delhi High Court has held that the Assessing Officer needs to record his non-satisfaction having regard to the sou motu disallowances claimed by the assessee in the context of its accounts. It is only thereafter, the occasion to apply rule 8D of the Rules for apportionment of expenses can arise. In the present facts, the Tribunal has correctly come to the conclusion that non-satisfaction as recorded by the AO for rejecting the sou motu disallowances claimed by the assessee is not done as required under section 14A(2) of the Act. On facts, the view taken by the Tribunal is a poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Rules, 1961 (Rules) in his assessment order dated 27 December 2010. 4. Being aggrieved with the order dated 27 December 2010, the Respondent filed an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 25 April 2012, the CIT(A) dismissed the Respondent s appeal. 5. On further appeal, the Tribunal by the impugned order dated 2 June 20016 allowed the Respondent s appeal by, inter alia, holding that the Assessing Officer did not record his non-satisfaction to reject disallowance under section 14A of the Act claimed by the Respondent. It also relied upon its decision on this issue for the assessment year 2006-07 and 2007-08. In the above view, it held there would be no occasion to invoke Rule 8D of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. For the purpose of this appeal, we accept that the reliance upon the order passed by the Tribunal for the assessment year 2006-07 is not correct. This, as in that year, Rule 8D of the Rules was not in force. However, we would examine whether in the absence of the above, does the question give rise to any substantial question of law. 9. We note that it is evident from the extracted part of the assessment order referred to hereinabove that the Assessing Officer has come to the conclusion that the disallowance claimed by the Respondent was not consistent with Rule 8D of the said Rules. It is only in view of the disallowances not being worked out as per Rule 8D of the Rules, that the Assessing Officer is not satisfied w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hasis that Sub-section (2) of Section 14A does not authorize or empower the Assessing Officer to apply the prescribed method irrespective of the nature of the claim made by the assessee. The Assessing Officer has to first consider the correctness of the claim of the assessee having regard to the accounts of the assessee. The satisfaction of the Assessing Officer has to be objectively arrived at on the basis of those accounts and after considering all the relevant facts and circumstances. The application of the prescribed method arises in a situation where the claim made by the assessee in respect of expenditure which is relatable to the earning of income which does not form part of the total income under the Act is found to be incorrect. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the accounts of the assessee. When a statute postulates the satisfaction of the Assessing Officer Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated .- M.A. Rasheed v. The State of Kerala AIR 1974 SC 2249 (at para 7 page 2252). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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