The Tax Publishers2021 TaxPub(DT) 0625 (Karn-HC) : (2021) 431 ITR 0356

INCOME TAX ACT, 1961

Section 14A

Where AO had not determined the amounts of expenditure and had not recorded any reasons with regard to correctness of the claim made by the assessee in respect of such expenditure, in relation to income which did not form part of the total income of assessee and AO had to record a finding that he was not satisfied with correctness of claim of assessee in respect of such expenditure, therefore, disallowance was liable to be deleted.

Disallowance under section 14A - Expenditure incurred against earning of exempted income - No satisfaction recorded by AO -

Assessee was engaged in banking business. The case of the assessee was selected for scrutiny and AO completed the assessment and made addition of a sum which included a sum disallowed under section 14A. Assessee argued that AO had not arrived at the mandatory satisfaction as required under section 14A and hence no disallowance was possible. CIT(A) affirmed the order passed by AO. Held: AO had not determined the amounts of the expenditure and had not recorded any reasons with regard to correctness of the claim made by the assessee in respect of such expenditure, in relation to the income which does not form part of total income of the assessee. AO before embarking upon determination of amount of expenditure incurred in the light of the exempted income, had to record a finding that he was not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, disallowance was liable to be deleted.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10



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