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2021 (8) TMI 683 - AT - Income TaxAddition u/s 14A r.w.r.8D - non-satisfaction with the correctness of the claim suo-moto disallowed by the Appellant u/s. 14A - as argued AO without recording his dissatisfaction as regards the correctness of the assessee’s claim for disallowance u/s 14A of the Act, had wrongly assumed jurisdiction and substituted the same by the amount of disallowance that was computed by him as per the methodology prescribed in Rule 8D - HELD THAT:- We find, that the A.O had most arbitrarily bypassed the “Note on disallowance u/s 14A” at Sr.No. 1.2 that was submitted by the assessee in order to support his claim that as sufficient own funds and interest free funds of ₹ 10.93 crore were available with it, therefore, no disallowance of any part of the interest expenditure was called for in its hands. In the totality of the aforesaid facts, the A.O in our considered view without recording his dissatisfaction as regards the correctness of the suo motto disallowance under Sec. 14A that was offered by the assessee in its return of income could not have dislodged and substituted the same by an amount that was computed by him by triggering the mechanism provided in Rule 8. The material aspect, viz. validity of the disallowance made by the A.O as per the mechanism provided in Rule 8D without recording of an objective satisfaction with regard to the incorrectness of the suo-motto claim of disallowance that was offered by the assessee u/s 14A of the Act, we find, despite having been specifically raised by the assessee before him was however not addressed and therein answered by the CIT(A) in the right perspective We are of the considered view, that as the A.O having regard to the accounts of the assessee, as were placed before him, had failed to record his dissatisfaction as regards the correctness of the suo motto disallowance that was offered by it under Sec. 14A in its return of income, therefore, he could not have validly resorted to sub-section (2) and (3) of Sec. 14A and computed the said disallowance as per the mechanism contemplated in Rule 8D. Accordingly, not being persuaded to accept the view taken by the CIT(A), we herein set-aside his order and vacate the additional disallowance made by the A.O. Appeal filed by the assessee is allowed.
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