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2023 (10) TMI 389 - AT - Income TaxRevision u/s 263 - Disallowance u/s 14A r.w.r 8D - as per CIT AO has made disallowance u/s 14A r.w.r. 8D only on one of the limbs provided in Rule 8D and failed to explore the other conditions enumerated in this Rule - HELD THAT:- A perusal of the financial statement would indicate that the assessee was having more interest-free funds than the investment. The interest-free funds are to the tune of Rs. 381 crores, whereas the investment which yielded tax-free income in the shape of dividend is only Rs. 133 crores. Therefore, there is no error in the order of the ld. Assessing Officer by not making any disallowance under Rule 8D(i). Also we are of the view that as per clause (c) of Section 263, if an item is under dispute before the ld. 1st Appellate Authority, then, proceeding under section 263 will not be taken up on that item. In the present case, AO has made the disallowance u/s 14A r.w.r. 8D that disallowance is subject matter of appeal before the ld. 1st Appellate Authority at the instance of assessee. In case, the ld. 1st Appellate Authority forms an opinion that ld. AO has committed an error by not making complete disallowance on all the limbs of Rule 8D, then, he could have issued a notice for enhancement of income by exercising his appellate power. Therefore, this issue ought to have not been taken up in 263 proceeding. The order of ld. Pr. CIT is not sustainable on the first-fold of reasoning given by him. As there is a domestic transaction between inter-related parties AO was required to make a reference to the ld. TPO mandatorily which he failed - We are of the view that Coordinate Benches have taken a view that since clause (i) of section 92BA stands omitted from the provision and omission of such is to be construed as if it never existed in the Statute Book and if it never existed in the Statute Book, then, no Arm’s Length Price is required to be determined for a transaction with specified persons in section 40A(2)(b) of a domestic transaction. If no Arm’s Length Price is required to be determined, then, no reference was required to be made. Therefore, on this fold of contention also, the order of the ld. Pr. Commissioner is not sustainable. Considering the above facts and circumstances in their setting as a whole, we allow this appeal and quash the order of ld. Pr. Commissioner passed Assessee appeal allowed.
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