TMI Blog2013 (11) TMI 1639X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation filed by the assessee. Mere mentioning that he was not satisfied with the correctness of the claim made by the assessee, is not sufficient. He has to mention the reason for rejecting the claim of the assessee in no uncertain terms. Therefore, we are not able to endorse the views of the AO that were confirmed by the FAA. In our opinion, considering the facts of the case under consideration, further verification is required. Therefore in the interest of justice we are remitting back the matter to the file of the AO. He is directed to pass a reasoned and speaking order after affording reasonable opportunity of hearing to the assessee. Effective ground of appeal filed by the assessee is allowed in its favour, in part. - ITA No.59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company, engaged in the business of production and distribution of feature films, T.V. serials, trading in shares and securities, financing and manufacturing of PVC,filed its return of income on 29.09.2008 declaring total income of ₹ 5.62Crores.Assessing officer (AO)finalised the assessment order u/s.143(3) of the Income-tax Act,1961(Act), on 30.12. 2010, determining the total income at ₹ 6,09,27,790/-. 2.Effective Ground of appeal pertains to disallowance of ₹ 3,53,153/-towards indirect expenses u/s.14A of the Act.During the assessment proceedings AO found that the assessee had earned dividend income of ₹ 31,25,425/-,that it had made investment of ₹ 10, 81,96,452/- in shares and mutual funds.He held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive expenses. He also referred to the decision of Special Bench of Tribunal delivered in the case of Gujarat Gas Financial Services Ltd. (14DTR481).He finally held that the AO had made disallowance on the basis of Rule 8D which was very much applicable for AY under consideration. He relied upon the judgment of Godrej Boyce Manufacturing Co. Limited.(328ITR81). 2.2.Before us, Authorised Representative(AR) submitted that the assessee had not borrowed fund for earning any exempt income, that investments in mutual funds was made out of surplus funds and investment in shares was made many years long back, that no borrowing were made for the purpose of earning exempt income, that the assessee had not incurred any expenditure directly in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 14(3)of the Act,provided he is not satisfied with the correctness of the claim made by the assessee.We find that while deciding the matter of Maxopp Investment Ltd. Ors.(247 CTR 162) Hon ble Delhi High Court has analysed the provisions of section 14A r.w.r.8D as under : Sub-s.(2) of s. 14A of the said Act provides the manner in which the AO is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision carefully, we would find that the AO is required to determine the amount of such expenditure only if the AO, having regard to the accounts of the assessee,is not satisfied with the correctness of the claim of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y prescribed method, as mentioned in sub-s. (2) of s. 14A of the said Act. It is only if the AO is not satisfied with the correctness of the claim of the assessee, in both cases,that the AO gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the said Act in accordance with the prescribed method. The prescribed method being the method stipulated in r. 8D of the said Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the AO would have to indicate cogent reasons for the same. While deciding the matter, Hon ble Delhi High Court has considered the history ..... X X X X Extracts X X X X X X X X Extracts X X X X
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