TaxTMI 
TaxTMI 
2016 (12) TMI 753
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....d under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 31.12.2012, wherein the income of the assessee was determined at 73,31,610/- in view of the following disallowances:- (i) From business promotion expenses Rs. 53,931/- (ii) Out of motor car expenses Rs. 29,999/- (iii) Out of Depreciation on motor car Rs. 1,08,296/- (iv) Out of Telephone expenses Rs. 56,800/- (v) Under section 14A r.w. Rule 8D Rs. 5,67,458 2.2 Aggrieved by the order of assessment dated 31.12.2013 for A.Y. 2010-11, the assessee preferred an appeal before the CIT(A)-3, Mumbai who dismissed the assessee's ....
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....ing the same. On being queried by the Assessing Officer (AO) in this regard, the assessee submitted that a detailed explanation to the AO vide letter dated 05.11.2012 (copy placed at pg. 1 to 5 of the paper book) stating, inter alia, that all investments were routed through her banker ABN Amro Bank who do not charge their clients any fees for such services rendered. It is contended that even though in the above letter, all the factual and legal circumstances were explained as to why no administrative expenditure was incurred by the assessee for earning the said exempt income and why no borrowed funds were used for such investments, the AO has not at all addressed the assessee's contentions therein and in para 7 of the order of assessmen....
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....rmed the disallowance under section 14A r.w. Rule 8D made by the AO without addressing the assessee's contentions of the judicial pronouncements cited. 4.1.4 In written submission placed before us in the course of hearing it was contended that the disallowance under section 14A r.w. Rule 8D is not automatic. In order to invoke Rule 8D, the AO firstly in accordance with the procedure laid down in section 14A of the Act, it is a prerequisite that he has to record his satisfaction having regard to the accounts of the assessee that he is not satisfied with the correctness of the assessee's claim that no expenditure was incurred to earn the said exempt income. The onus was on the AO to prove that expenditure was incurred in relation to ....
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....ted that, inter alia, all investments were routed through ABN Amro Bank, her banker, who do not charge their clients any fees for such services rendered and therefore no disallowance was called for. We observe that there is no mention or addressal of the assessee's explanation in the order of assessment. Rather it is seen that the AO states that the assessee agreed for the disallowance of 5,67,458/-; which averment is strongly contested by the assessee as being factually incorrect and this assertion by the assessee has not been controverted by Revenue before us. As contended by the assessee, we find that the AO's lack of clarity and application of mind further extends to the working of the break-up of the disallowance under section ....
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....ction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, 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 the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expend....
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....nd appreciation of facts as it appears to be made on interest paid on car loan from ICICI Bank, which has no nexus with the investments made by the assessee; and under Rule 8D(2)(iii) of administrative expenses, which the assessee challenged before the learned CIT(A) on the ground that whether such disallowance was called for when separate disallowances were made by the AO from out of expenditure claimed as telephone charges, motor car expenses and depreciation thereof, business promotion, etc. It appears to us that the AO proceeded to invoke Rule 8D and make the disallowance thereunder on the premise that disallowance thereunder is automatic, irrespective of the genuineness of the assessee's claim in respect of expenses incurred in rel....