TMI Blog2023 (6) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... hed that the particular expenditure claimed by the assessee was incurred in relation to such income which was exempt. As per the mandate u/s 14A AO is bound to determine the amount of expenditure incurred in relation to such income which does not form part of the total income. In the present case, however, there is absolutely no finding recorded by the authorities below that which and how much expenditure has been incurred in relation to an exempted income the fact otherwise shows that the total income also included taxable income from house property, which is not contemplated. Claim of interest payment on borrowed funds u/s 36(1)(iii) has not been shown as resulting into some exempted income or was incurred in relation to an exempted income. CIT(A) erred in not considering the challenge raised by the assessee before him. CIT(A) failed to appreciate that the provisions of S. 14A of the Act was wrongly applied. We are, therefore, satisfied that the assessee could have raised the issue of applicability of S. 14A in the peculiar facts of the case. Further coming to grounds of appeal no. 2.2 3 wherein the very applicability of S.14A is challenged, we have already held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case in confirming the applicability of Sec. 14A even with regard to the taxable income, which is contrary to the provisions of law and facts. Hence, it may kindly held that the provisions of Sec. 14A could not have been applied at least with respect to the taxable interest income of Rs.11,27,000/-. 4. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234B, 234C 234D of the Act and as also in withdrawing interest u/s 244A of the Act. The appellant totally denies its liability of charging and withdrawal of any such interest. The interest so charged/withdrawn, being contrary to the provisions of law and facts, kindly be deleted in full. 2.1 During the course of hearing, the Bench noted that the Ground of Appeal No. 1 is a general ground which does not require any adjudication. 3.1 Apropos Ground No. 2.1 to 3, the facts as emerges from the order of the ld. CIT(A) are as under:- 6.1. I have considered the facts of the case, order u/s. 143(3)/250 of the Act and appellant's submissions and I find that in the original assessment order passed u/s. 143(3) dated 13-12-2011, the appellant's income was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appellant's argument that income from house property is a separate income and has nothing to do with the income from the firm, the assessing authority has misinterpreted the provision of sec. 14A and therefore entire addition of Rs 5,65,880/- deserved to be struck down. The appellant had also questioned the manner of disallowance worked out by the AO before the CIT(A). After due consideration of these arguments, the CIT(A) directed the AO to re-work out the amount to be disallowed. The CIT(A)'s direction cannot be taken in isolation where the amount of disallowance is enhanced. In my view, the AO ought to have accorded opportunity of being heard before arriving at any figures and working of disallowable amount u/s. 14A r.w.r 8D. However, the AO simply arrived figure at 7,91,675/- by doing calculation in following manner. 678344X1126578/9658600-791675) 791675-565880-225795/- 6.1.2. From the above working, it is not clear whether the AO considered or excluded house property income of Rs. 3,06,701/- from the gross income Working of disallowance also does not specify under which clause of Rule 8D the calculation is made. There is ambiguity in the AO's action as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Grounds of Appeal No. 2.1 to 3 is against the rejection of the Grounds of appeal taken by the assessee before the ld. CIT(A) to the effect that the provisions of S. 14A of the Act are not applicable in as much as the predecessor ld. CIT(A) vide its order dated 19.08.2013 in appeal No. 357/11-12 for the subjected year had already upheld the applicability of S. 14A with regard to the interest claimed u/s 36(1)(iii) of the Act as it remained unchallenged before a higher forum by the assessee and hence, the subject matter was restricted to the computation of amount disallowable u/s 14A in the light of Rule 8D.After a very careful consideration of the rival contentions, the orders of the authorities below and the material available on record, we find that the predecessor ld. CIT(A) had no doubt had upheld the applicability of S. 14A but at the same time, he has very categorically held that the disallowance of Rs. 5,65,880/- was not correctly worked out by the AO by overlooking Rule 8D of the Income Tax Rules, 1962. Therefore, the predecessor ld. CIT(A) had directed the AO to work out the disallowance as per rule 8D.The AO, pursuant to the above directions, reworked out the disallow ..... 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