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6. The ld AR submitted that impugned order it passed u/s 153A of the Income Tax Act and disallowance u/s 14A has been made without being any incriminating material. He further relied on the decision of the Hon'ble Delhi High Court of Shri Kabul Chawla Vs. CIT 380 ITR 573.

7. The ld DR vehemently supported the orders of the lower authorities.

8. We have carefully considered the rival contentions and also perused the orders of the lower authorities. The impugned assessment order is admittedly passed u/s 153A of the Act. as held by the Hon'ble Delhi High Court vide para no. 37 of the order CIT Vs. Kabul Chawla 380 ITR 573 the completed assessment can be interfered only on the basis of incriminating material unearth during the course of search or requisition of the documents or undisclosed income, or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. It is not the case of the Revenue that assessee has not disclosed the exempt income and disallowance u/s 14A of the Act. Further, no incriminating material was shown to us and the ld AO which could have resulted into disallowance u/s 14A of the Act pointed none out. in view of this respectfully following the decision of the Hon'ble Delhi High Court we reverse the finding of ld CIT(A) and direct AO to delete the disallowance u/s 14A of the Act of Rs. 24340709/-. In view of this appeal NO. 621/Del/2013 for AY 2008-09 filed by the assessee is allowed.

"14. The view and the legal ratio expressed above is not being elucidated for the first time. The Delhi High Court in Maxopp Investment Ltd. v. CIT [2012] 347 ITR 272 (Delhi), has observed (page 290) :
"Scope of sub-sections (2) and (3) of section 14A Sub-section (2) of section 14A of the said Act provides the manner in which the Assessing Officer is to determine the amount of expenditure incurred in relation to income which does not form part of the total income. However, if we examine the provision relation to income which does not form part of the total income under the said carefully, we would find that the Assessing Officer is required to determine the amount of such expenditure only if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in Act. In other words, the requirement of the Assessing Officer embarking upon a determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the Assessing Officer returns a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore, the condition precedent for the Assessing Officer entering upon a determination of the amount of the expenditure incurred in relation to exempt income is that the Assessing Officer must record that he is not satisfied with the correctness of the claim of the asses see in respect of such expenditure. Sub-section (3) is nothing but an offshoot of sub-section (2) of section 14A. Sub-section (3) applies to cases where the assessee claims that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act. In other words, sub-section (2) deals with cases where the assessee specifies a positive amount of expenditure in relation to income which does not form part of the total income under the said Act and sub-section (3) applies to cases where the assessee asserts that no expenditure had been incurred in relation to exempt income. In both cases, the Assessing Officer, if satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure, as the case may be, cannot embark upon a determination of the amount of expenditure in accordance with any prescribed method, as mentioned in sub-section (2) of section 14A of the said Act. It is only if the Assessing Officer is not satisfied with the correctness of the claim of the assessee, in both cases, that the Assessing Officer gets jurisdiction to determine the amount of expenditure incurred in relation to such income which does not form part of the total income under the said Act in accordance with the prescribed method. The prescribed method being the method stipulated in rule 8D of the said Rules. While rejecting the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, in relation to exempt income, the Assessing Officer would have to indicate cogent reasons for the same.
As we have already noticed, sub-section (2) of section 14A of the said Act refers to the method of determination of the amount of expenditure incurred in relation to exempt income. The expression used is-'such method as may be prescribed'. We have already mentioned above that by virtue of Notification No. 45 of 2008, dated March 24, 2008, the Central Board of Direct Taxes introduced rule 8D in the said Rules. The said rule 8D also makes it clear that where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the assessee ; or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the said Act for such previous year, the Assessing Officer shall determine the amount of the expenditure in relation to such income in accordance with the provisions of sub-rule (2) of rule 8D. We may observe that rule 8D(1) places the provisions of section 14A(2) and (3) in the correct perspective. As we have already seen, while discussing the provisions of sub-sections (2) and (3) of section 14A, the condition precedent for the Assessing Officer to himself determine the amount of expenditure is that he must record his dissatisfaction with the correctness of the claim of expenditure made by the assessee or that no expenditure has been incurred. It is only when this condition precedent is satisfied that the Assessing Officer is required to determine the amount of expenditure in relation to income not includable in the total income in the manner indicated in sub-rule (2) of rule 8D of the said Rules.

17. More important and relevant for us are the observations in Godrej and Boyce Mfg. Co. Ltd. (supra) on requirement and stipulation of satisfaction being recorded by the Assessing Officer with reference to the accounts under section 14(2) of the Act and rule 8D(1) of the Rules. It was observed (page 120 of 328 ITR) :

"Parliament has provided an adequate safeguard to the invocation of the power to determine the expenditure incurred in relation to the earning of non-taxable income by adoption of the prescribed method. The invocation of the power is made conditional on the objective satisfaction of the Assessing Officer in regard to the correctness of the claim of the assessee, having regard to the accounts of the assessee. When a statute postulates the satisfaction of the Assessing Officer 'Courts will not readily defer to the conclusiveness of an executive authority's opinion as to the existence of a matter of law or fact upon which the validity of the exercise of the power is predicated'. (M. A. Rasheed v. State of Kerala [1974] AIR 1974 SC 2249). A decision by the Assessing Officer has to be arrived at in good faith on relevant considerations. The Assessing Officer must furnish to the assessee a reasonable opportunity to show cause on the correctness of the claim made by him. In the event that the Assessing Officer is not satisfied with the correctness of the claim made by the assessee, he must record reasons for his conclusion. These safeguards which are implicit in the requirements of fairness and fair procedure under article 14 must be observed by the Assessing Officer when he arrives at his satisfaction under sub-section (2) of section 14A. As we shall note shortly hereafter, sub-rule (1) of rule 8D has also incorporated the essential requirements of sub-section (2) of section 14A before the Assessing Officer proceeds to apply the method prescribed under sub-rule (2)."