Section 14A Not on Auto-Pilot: Rule 8D Disallowance Quashed for Want of AO’s Satisfaction

Bhishma Realty Limited Vs DCIT (ITAT Mumbai) ITAT Mumbai held that disallowance u/s 14A r.w. Rule 8D cannot be made mechanically merely because AO considers the assessee’s suo-moto disallowance to be “low”. Assessee had earned exempt income & had already made a suo-moto disallowance of ₹94,147/-. AO, without recording proper satisfaction as mandated u/s 14A(2), invoked Rule 8D & made an additional disallowance of ₹20.06 lakh. Tribunal found that AO proceeded on incorrect facts, including treating taxable STCG as exempt income & double-counting direct expenses already disa...