TMI Blog2016 (6) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... of Chemnivest Ltd Vs. CIT(A) (2015 (9) TMI 238 - DELHI HIGH COURT) wherein their lordships speaking for the jurisdictional High Court held that when no exempted income was earned by the assessee in the relevant assessment year, and since the genuineness of the expenditure incurred by the assessee in not in doubt then no disallowance could be made u/s 14A of the Act. - Decided in favour of assessee - I.T.A. No. 4137 /Del/2013 - - - Dated:- 30-5-2016 - Shri S. V. Mehrotra, Accountant Member And Shri Chandra Mohan Garg, Judicial Member For the Appellant : Sh. Sajeve Deora, FCA For the Respondent : Ms. Rakhi Bimal, Sr. DR ORDER Per Chandra Mohan Garg, JM This appeal has been filed by the assessee against the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount was ₹ 2,50,674/- , the disallowance was restricted to this extent only. The Ld. AR submitted that as per Section 14A (2) of the Act before making any disallowance under this provision the Assessing Officer is duty bound to record that having regard to the accounts of the assessee he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of total income under this Act. The Ld. AR further drawn our attention towards entire assessment order para 1 to 3.1 and submitted that no satisfaction as required by the said mandate of Sub Section 2 of Section 14A of the Act has been recorded by the A.O. Therefore, no disallowance can be made. The Ld. AR al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivest Ltd. Vs. CIT reported as 378 ITR 33 (Delhi) and contended that the order of the ITAT Delhi in the case of Chemnivest Ltd Vs. ITO reported as 124 TTJ 577, which has been relied by the authorities below, has been reversed by the jurisdictional High Court wherein it was held that no exempt income was earned by the assessee in the relevant assessment year and since the genuineness of the expenditure incurred by the assessee was not in doubt, then no disallowance can be made u/s 14A of the Act. 4. On careful consideration and submission of both the side, in the present case on vigilant perusal of the relevant operative part of the assessment order, it is amply clear that the Assessing Officer has not accorded any satisfaction alleging t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Sub-section (3) is nothing but an offshoot of sub-section (2) of section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred ITA 283/2014 Page 5 of 6 in relation to income which does not form part of the total income unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A read with Rule 8D (2) of the Rules without recording his satisfaction and noted that the recording of satisfaction as to why the voluntary disallowance made by the assessee was unreasonable and unsatisfactory is a mandatory requirement of the law. 5. In view of above, the disallowance made by the Assessing Officer without recording any satisfaction as required by the mandate of Sub Section (2) of Sub Section 14 A of the Act cannot be held as sustainable. 6. The next question for adjudication before us is that whether any disallowance can be made by the Assessing Officer in a situation when the assessee claimed that no exempt dividend income was received during the period under consideration, therefore, no disallowance u/s 14A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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