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2022 (1) TMI 790 - HC - Income TaxDisallowance u/s 14A r.w.r. 8D in rectification proceedings under Section 154 - Mandation of recording satisfaction - expenditure incurred for earning income exempt - HELD THAT:- Assessee has to make a claim with regard to expenditure incurred for earning income which is not chargeable to tax, which requires to be examined by the AO and satisfaction has to be recorded, more particularly, when the Assessing Officer has not agreed with the disallowance claim under Section 14A of the Act. For disagreeing with such disallowance, deduction of the expenditure is not to be allowed which has been incurred by the assessee in relation to the income which does not form part of the total income under the Act as per Section 14A(1) of the Act. Such expenditure which has been incurred in respect of other income which has to be treated as part of the total income has to be considered under Section 14A(2) of the Act read with Rule 8D of the Rules, but suo moto disallowance under Section 14A of the Act made by the Assessing Officer is unwarranted. Recording of satisfaction by the Assessing Officer under Rule 8D(2) of the Rules is mandatory. In the light of these provisions, the Assessing Officer invoking Section 154(2) to rectify the assessment order is wholly untenable for the reason that there is no mistake apparent on the face of the record to invoke the proceedings under Section 154 of the Act. On the other hand, the matter requires adjudication upon the issue which is a debatable issue as pointed out by the Tribunal. In such circumstances, the order passed by the Assessing Officer under Section 154 of the Act and confirmed by the CIT(A) is unsustainable. On these material aspects, the Tribunal has rightly applied its mind and has reversed the finding of the authorities which cannot be faulted with. - Decided in favour of assessee.
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