The AO held that the assessee received dividend income and sought explanation. \u00a0The assessee explained that it had already disallowed an amount under S.\u00a014A. \u00a0He was not satisfied with the explanation holding that the disallowance under S. \u2002\u00a014A\u00a0had to be mandatorily made under rule\u00a08D. \u00a0Accordingly, he disallowed the amount and made an addition. \u00a0The CIT(A) deleted the addition. \u00a0On appeal the Tribunal held\u00a0 that a duty was cast upon the AO to examine the claim of the assessee having regard to the accounts and only where the Assessing Officer was not satisfied, which should be on cogent grounds, with the claim of the assessee, could the AO follow the prescribed procedure under rule\u00a08D. \u00a0Since the AO did not record any satisfaction regarding the claim of the assessee having regard to its accounts, he was not empowered to invoke rule\u00a08D\u00a0in the first place. \u00a0Accordingly, the action of the AO of making disallowance thereunder was not justified. \u00a0On the facts, the assessee had given details of interest expenses, none of which had any nexus with the dividend income. \u00a0Accordingly, no disallowance under rule\u00a08D(2)(ii)\u00a0was called for. \u00a0Evidently, the assessee had already made disallowance under sub-clauses (i) and (iii) of rule\u00a08D(2). \u00a0Therefore, no further disallowance was called for under S. \u00a014A. \u00a0\u00a0(AY. \u00a02006-07 2009-10, 2010-11, 2011-12).<\/p>\n","protected":false},"excerpt":{"rendered":"
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