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2017 (9) TMI 1573 - HC - Income TaxAddition u/s 14A - Rule 8D applicability - recording of satisfaction in the shape of reasons as to why voluntary disallowance made by the assessee was unreasonable and unsatisfactory - Held that:- If the order of the Assessing Officer indicate that he is not satisfied with the correctness of the claim of the assessee or the claim of the assessee that no expenditure has been incurred, he has to proceed in the manner indicated in rule 8D(2) of the Rules, 1962. The court then examined the order of the Assessing Officer passed in that case which contained various reasons and details of disclosure made by the assessee and found that there was compliance of requirement of section 14A(2) of the Act, 1961 and order shows application of mind on the part of the Assessing Officer to the accounts of the assessee from the assessment order itself. Revenue when confronted with the aforesaid expositions of law could not place anything otherwise before this court so as to persuade us to take a different view. He, however, submitted that whatever has been omitted by the Assessing Officer, the same has been rectified by the Commissioner of Income-tax (Appeals) in the appellate order, when it has discussed everything in detail justifying as to why exemption of expenditure claimed by the assessee was rightly disallowed by the Assessing Officer. In our view, jurisdiction to apply section 14A of the Act, 1961 contemplates satisfaction of condition precedent therein, on the part of the Assessing Officer. If he has illegally exercised jurisdiction, the same cannot be said to have been rectified by order passed by the appellate authority inasmuch as the order of the assessing authority itself being illegal as statutory mandatory condition was not satisfied, such illegality could not have been cured by order passed by the appellate authority.- Decided in favour of assessee.
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