TMI Blog2015 (3) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... ination of the accounts and rejection if any of the assessee s claim or explanation. Second aspect is there appears to have been no scrutiny of the accounts by the AO - an aspect which is completely unnoticed by the CIT (A) and the ITAT. Third, and in the opinion of this court, important anomaly which we cannot be unmindful is that whereas the entire tax exempt income is ₹ 48,90,000/-, the disallowance ultimately directed works out to nearly 110% of that sum, i.e., ₹ 52,56,197/-. By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A, and is only to the extent of disallowing expend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO on the basis of his own understanding of Rule 8D of the Income Tax Rules disallowed the sum of ₹ 52,56,197/- under Section 14A read with Rule 8D. The assessee s grievance was that the entire tax exempt income (Rs.48,90,000/-) was lower than the disallowance. It, therefore, appealed to the CIT (A) but met with no success. Its further appeal to the ITAT likewise met the same fate. 4. The ITAT upheld the orders of the authorities below and held inter alia that: - 11. Now, we come to various other arguments by the learned counsel wherein he has disputed the quantum of the disallowance worked out by the Assessing Officer. The assessee's counsel has contended that the various expenses, viz., filing fees, house tax, conveyanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,197/-. Therefore, whether the working of the disallowance of interest as per Rule 8D(2)(ii) is correct or not is of academic interest and, therefore, we do not wish to go into the details of the assessee's arguments with regard to the correctness of the disallowance of interest. At the cost of repetition, we reiterate that the disallowance worked out by the Assessing Officer which was the aggregate of three components as prescribed under Rule 8D(2) was ₹ 99,45,325/-. But, finally, the Assessing Officer restricted the disallowance to ₹ 52,56,197/-. Therefore, In our opinion, no relief is due to the assessee from the disallowance made by the Assessing Officer at ₹ 52,56,197/-. The same is sustained and the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and Rule 8D(1) in unison and affirmatively record that the computation or disallowance made by the assessee or claim that no expenditure was incurred to earn exempt income must be examined with reference to the accounts, and only and when the explanation/claim of the assessee is not satisfactory, computation under sub Rule (2) to Rule 8D of the Rules is to be made. 13. We need not, therefore, go on to sub Rule (2) to Rule 8D of the Rules until and unless the Assessing Officer has first recorded the satisfaction, which is mandated by sub Section (2) to Section 14A of the Act and sub Rule (1) to Rule 8D of the Rules. 9. In the present case, the AO has not firstly disclosed why the appellant/assessee s claim for attributing ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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