Without recording requisite satisfaction under section 145(3) addition made on estimate basis was not justified

IT : Where Tribunal found that only administrative expenditure was incurred and that was estimated at 5 per cent of dividend earned, it was justified in restricting disallowance under section 14A at 5 per cent of dividend income
IT : Without recording requisite satisfaction under section 145(3) addition made on estimate basis was not justified
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[2015] 53 taxmann.com 20 (Bombay)
HIGH COURT OF BOMBAY
Commissioner of Income-tax-9, Mumbai
v.
Teletronics Dealing Systems (P.) Ltd.*
S.C. DHARMADHIKARI AND A.K. MENON, JJ.
IT APPEAL NO. 1296 OF 2012†
SEPTEMBER  25, 2014
Section 14A of the Income-tax Act, 1961, read with rule 8 of the Income-Tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (In case of certain incomes/Dividend) - Assessee earned dividend income and claimed exemption under section 10(34) - Assessing Officer worked out disallowance under section 14A by applying rule 8D - On appeal, Tribunal found that only administrative expenditure was incurred and that was estimated at 5 per cent of dividend earned - Whether Tribunal was justified in restricting disallowance under section 14A to 5 per cent of dividend income - Held, yes [Para 4] [In favour of assessee]
Section 145 of the Income-tax Act, 1961 - Method of Accounting - Rejection of books of account (Recording of reasons) - Whether without recording requisite satisfaction in terms of section 145(3) to reject books of account, Assessing Officer was not justified in making addition on estimate basis - Held, yes [Para 5] [In favour of assessee]