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2017 (4) TMI 1189 - AT - Income TaxDisallowance 14A r.w.r. 8D - Held that:- The law in regard to the disallowance u/s 14A has evolved quite recently and subsequent to passing of impugned assessment order. Ld. DR was unable to prima facie rebut the issues raised by the Ld. Counsel before us. Under these circumstances, we find it appropriate to send this issue back to the file of the AO where the assessee shall be free to raise all legal and factual issues with regard to the disallowance u/s 14A and shall file requisite evidences to establish its claim, as may be required by the AO from time to time. The AO shall decide this issue afresh after considering the material and the arguments as may be brought on record by the assessee on objective basis and shall be free to decide this issue independent of the voluntary disallowance made by the assessee in the return of income. The AO would be well within his powers to assess the income below the amount offered by the assessee in the return of income, if the facts of this case and law applicable thereon so demands. Thus, with these directions, this issue is sent back to the file of the AO and may be treated as allowed, for statistical purposes. Disallowance of interest u/s 36(1)(iii) - whether there was no prudence in carrying out the activity in such a manner which culminated into incurring of net interest loss - Held that:- The doubt noted by the AO with respect to incurring of loss could have at the best be it a triggering point for further investigation but that itself cannot be a conclusive ground to make disallowance in the hands of the assessee. Unfortunately, the AO failed in carrying out any investigation to contradict the transaction. In fact, it also appears to us that AO did make some verification but nothing ingenuine or wrong was noted by him. Rather, the transactions were duly substantiated. Similarly, at the stage of Ld. CIT(A) also nothing wrong or ingenuine could be brought on record by him. Under these circumstances, we find that disallowance has been made merely on the basis of whims and fancies, surmises & conjectures and doubts & suspicion made by the lower authorities. It is well settled law that a revenue officer cannot sit in the armchair of a businessman and dictate how a business is to be carried out. Thus, taking into account the totality of facts and circumstances of the case, we find that the AO had no material in his possession so as to enable him to make the impugned disallowance. Thus, the disallowance made by him on mere suspicion is not sustainable in law and therefore, it is deleted.
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