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2022 (4) TMI 1225 - AT - Income TaxDisallowance u/s 36(1)(iii) - Whether assessee has advanced these interest free funds or lower interest bearing funds? - HELD THAT:- We do not find that any interest bearing funds have been used for advancing loan is to these parties when enough in non-interest-bearing funds are available with the assessee for advancing non-interest-bearing or lower interest-bearing funds to these parties. The presumption is always available in favour of the assessee that non-interest-bearing funds have been used for advancing to the parties, unless otherwise proved. In view of this the addition confirmed by the learned CIT-A u/s 36 (1) (iii) of the act deserves to be deleted. Hence deleted. Accordingly, ground number 1 of the appeal along with sub grounds is allowed. Disallowance u/s 14A read with rule 8D - HELD THAT:- We find that during the year, the assessee has not earned any exempt income and further assessee denied that it has incurred any expenditure. Now therefore it is mandatory on part of the learned assessing officer to record a satisfaction that the claim of the assessee is not correct. Such is the mandate of the provisions of Section 14A(2) of the act. We find that the learned assessing officer has merely on the basis of the investment shown in the annual accounts of the assessee has invoked the provisions of Section 14A read with rule 8D and issued notice to the assessee. When assessee has categorically replied that it has not incurred any expenditure during the year the learned assessing officer is duty-bound to record a satisfaction that why the explanation furnished by the assessee is incorrect. Such satisfaction also has to be based on accounts of the assessee. If assessing officer merely says that as the investment decision are very complex the assessee should have incurred certain expenditure cannot satisfy the requirement of Section 14A (2) of the act. This shows that there is no reference to the accounts of the assessee. Accordingly, we find that assessing officer has failed to record any satisfaction prior to invoking of the provisions of rule 8D of income tax rules 1962 - Decided in favour of assessee.
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