TaxTMI 
TaxTMI 
2019 (5) TMI 1315
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....sallowance u/s 14A. 2.1 Facts on record reveal that the assessee being resident corporate assessee stated to be engaged as property developer was assessed u/s 143(3) on 28/12/2016 wherein the assessee was saddled with disallowance u/s 14A for Rs. 6.80 Lacs. During assessment proceedings, it transpired that the assessee earned aggregate exempt income of Rs. 22.02 Lacs and offered suo-moto disallowance against the same u/s 14A in its computation of income for Rs. 1.93 Lacs, the working of which was furnished during assessment proceedings. However, finding mistake in the same, Ld. AO computed additional disallowance of Rs. 6.80 Lacs u/r 8D(2)(iii) which was nothing but 0.5% of average investments as per formula prescribed under the rule. ....
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....disallowance of Rs. 1.93 Lacs which comprised-off of direct expenditure for Rs. 1.03 Lacs and indirect expenditure for Rs. 0.90 Lacs. The Ld. AO, assuming the same to be direct expenditure and terming the assessee's computation as erroneous, proceeded to apply Rule 8D. The said very fact would reveal that the disallowance made by the assessee was not appreciated by the Ld. AO and the action of Ld. AO in proceeding to apply Rule 8D could not be said to be in accordance with law. The Ld. AO, disregarding the assessee's computations, proceeded to compute disallowance u/s 14A without recording requisite satisfaction as to how the aforesaid estimated disallowance made by the assessee was not correct having regard to the accounts of the ass....
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....er that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. 38. In the present case, we do not find any mention of the reasons which had prevailed upon the Assessing Officer, while dealing with the Assessment Year 2002-2003, to hold that the claims of the Assessee that no expenditure was incurred to earn the dividend income cannot be accepted and why the orders of the Tribunal for the earlier Assessment Years were not ac....
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.... 39. In the above circumstances, we are of the view that the second question formulated must go in favour of the assessee and it must be held that for the Assessment Year in question i.e. 2002-2003, the assessee is entitled to the full benefit of the claim of dividend income without any deductions Similar are the observations in Maxopp Investment Ltd. Vs CIT [supra] wherein it has been held as under: - 41) Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance under Section 14A was not correct. It will be in ....