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2016 (6) TMI 1086 - AT - Income TaxRevision u/s 263 - mandation for the AO to apply Rule 8D - According to CIT the AO ought to have made disallowance u/s 14A of the Act in terms of Rule 8D of the Rules - Held that:- Invoking of Rule 8D of Rules is not automatic and that the AO u/s 14A of the Act has the discretion to substitute the computation of disallowance u/s 14A as made by the assessee is under estimation. The satisfaction contemplated u/.s 14A (2) of the Act is not merely restricted to rejecting the claim made by the assessee and the disallowance to be made u/s 14A of the Act but also includes substituting the claim made by the assessee on any other reasonable basis as the AO deem it fit. In such circumstances the correctness of the AO’s judgment can be reviewed but it cannot be said that the AO had no jurisdiction to do so and AO ought to resort only to the provision of Rule 8D of the Rules. In other words Rule 8D is not automatic and can be resorted to by the AO only as a measure of last resort. For the reasons given above, We quash the order u/s 263 and allow the appeal of the assessee.
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