Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 32 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - disallowance of expenditure incurred in relation to earning exempt income - mandation to record satisfaction so as to justify invoking Rule 8D of the Rules for computing disallowance - HELD THAT:- We are in complete agreement with the ld.counsel for the assessee that the AO had failed to comply with the conditions set out in law prior to invoking Rule 8D of IT Rules for computing disallowance of expenses u/s 14A - AO, we hold, has not recorded the requisite satisfaction about the incorrectness of the claim of the assessee. There is no dispute with regard to the interpretation of provision of section 14A(2) of the Act; that the AO can invoking rule 8D of the Rules for computing expenses disallowable u/s 14A only after rejecting assesses claim of expenses relating to exempt income. His dissatisfaction with the assesses claim being arrived at having regard to its accounts. The language of the section is also clear that the primary onus is on the AO to demonstrate that claim of the assessee was incorrect. In the present case, it is evident from the satisfaction recorded by the AO of the assesses claim of expenses relating to exempt income not being correct, that it is merely based on general observations with no reference to the accounts of the assessee. AO, we find, has expressed his dissatisfaction with the claim by giving general reasons stating that investment decisions were very complex in nature, they required substantial market research, day-to-day analysis of market trends and decisions etc. and also required huge investment in shares and consequential blocking of funds. He has not recorded any dissatisfaction having regard to the accounts of the assessee. The satisfaction of the AO, has to be an objective satisfaction, and it cannot be based on general statements made; statements which are not supported with any facts or figures. Therefore, we have no hesitation in holding, that the satisfaction recorded in the present case by the AO did not fulfill the requirements prescribed by the law u/s 14A(2) - Decided in favour of assessee.
|