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2022 (8) TMI 584 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D - Mandation of recording satisfaction - HELD THAT:- Section 14A of the Act provides that no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does in form part of the total income under this Act., if the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does in form part of the total income, the Assessing Officer can determine the amount of such expenditure after having regard to the accounts of the assessee. The satisfaction as required to be recorded under the provisions of section 14A is not limited to merely disagreeing with the submission of the assessee and requires that the AO should also provide the basis for reaching such conclusion, after having regard to the accounts of the assessee. In the present case, assessee is an investor in shares as well as also does trading in shares under proprietary firm i.e. M/s Gaurav Trading Company. Assessee claimed to have maintained separate books of account for the aforesaid two activities. Dividend income was earned by the assessee in his personal account. The assessee has also claimed to have incurred expenditure in his personal account. The expenditure incurred on personal account by the assessee was not claimed as deduction and thus, no question arises of disallowing any part of such expenditure. As during assessment 2011-12, AO only took into account the exempt income forming part of the personal account, for the purpose of invoking the provisions of section 14A - Assessing Officer as well as learned CIT(A) though alleged that common pool of human and financial resources have been utilised to earn the income, however, failed to appreciate that the assessee has already recorded expenditure incurred in personal account, which has also not been claimed as deduction by the assessee. Therefore, no basis for upholding the disallowance made by the Assessing Officer under section 14A read with Rule 8D - Decided in favour of assessee.
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