Sec. 14A No attribution of expense for exempted income earned without employee interference

1. The relevant facts are that the assessee had reported a tax exempt dividend income of Rs. 10,87,898/- and he had, however, not claimed any expenditure for earning that income. Purporting to apply the statutory disallowance under Section 14A read with Rule 8D of the Income Tax Rules, the AO ascribed a sum of Rs. 1,21,805/- and added it back to the taxable income. The assessee contends that the  methodology adopted and entire approach of the revenue is foul. In this connection it is urged that the bulk of the tax exempted income was earned interest which was credited to the bank account and ...