TaxTMI 
TaxTMI 
2014 (1) TMI 755
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....me Tax (Appeals), New Delhi has erred in facts and law in holding that the interest of Rs.10,79,674/- is liable to be disallowed u/s 14A read with Rule 8D. 4. The order passed by the Ld. Commissioner of Income Tax (Appeals), New Delhi has erred in facts and law in holding that borrowed funds re used for making investments and sustained the disallowance of interest of Rs.10,79,674/- out of total interest of 10,95,391/- on loan u/s 14A read with Rule 8D. 5. The order passed by the Ld. Commissioner of Income Tax (Appeals), New Delhi has erred in facts and law in holding tht interest on borrowed fund is covered under Rule 8D (ii) read with Section 14A. 6. The order passed by the Ld. Commissioner of Income Tax (Appeals), New Delhi has erred in facts and law in stating that it is unlikely tht no expenses have been incurred when huge investment is made and sustained the disallowance under Rule 8D without giving any reasons thereof. 7. The order passed by the Ld. Commissioner of Income Tax (Appeals), New Delhi has erred in facts and law in holding the disallowance o Rs.1,97,465/- being 5% of average investment under Rule 8D (iii) read with Section 14A. 8. The order passed by the Ld. C....
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....d the surplus funds generated out of Business Income in Mutual Funds and dividend income is earned on such investment. No expenses have been incurred for earning dividend which is exempt and as result no disallowance is made u/s 14A read with Rule 8D. b. Ld. AO has disallowed interest of Rs.10,79,674/- and alleged that borrowed funds were used for making investments. The detailed information was furnished during the course of Assessment Proceedings whereby it was clearly demonstrated that none of the borrowed funds were used for making investment in Mutual Funds/shares. c. The details of utilization of overdraft for tyre business and corresponding bank statements are enclosed in the paper book. It was clearly demonstrated through these documents that not even a single investment was made from the bank till the time there was overdraft in the current account. The assessee started investing in the mutual funds only after the period when the overdraft loan was fully paid off to the bank. d. It is settled law that in case the borrowed funds have not been used for earning exempted income then no disallowance can be made on account of interest on borrowed funds. e. In view of the above....
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.... to 7 are restored to the AO with the above direction. The AO shall decide the issue in accordance with law by way of speaking order after giving a reasonable opportunity to the assessee of being heard. 5. Qua the next issue agitated by the assessee which is corresponding to Ground No-1 in the department's appeal the facts found discussed in the assessment order are found reproduced in the impugned order at page 6 para 9. The same are reproduced for ready-reference:- "9. Vide these grounds the assessee challenged the action of the AO in making an addition of Rs.59,18,524/- towards undeclared commission income. The reasons given by the AO are as under :- "From the return of income and computation of income submitted by the assessee, it appears that the assessee is employed as director of Tip Top General Services (P) ltd. and getting salary from them for his employment. As per computation of income, salary income of Rs.1,13,20,571/- is offered by the assessee received from M/s Tip Top General Agencies (P.) ltd. the form 16 was not submitted by the assessee, though it is stated in the computation of income that form 16 is also attached therewith. I observed from the bank statements....
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....ncluded in the returned income under the head salaries. f. As a result, sum of Rs.59,18,524/- has been taxed twice by Ld. AO. We, therefore, humbly prayed that addition of Rs.59,18,524/- may kindly be deleted." 6.1. A perusal of the impugned order at para 12 shows that the issue has been restored to the AO to verify the reconciliation statement and other documents which were filed for the first time before the CIT(A). For ready-reference we reproduce the same:- "12. The appellant is a Director in M/s Tip Top General Agencies Pvt. Ltd and received salary including commission. The AO noticed that appellant's Bank Account was credited with a sum of Rs.57,96,602 which represents commission receipts from Tip Top General Agencies Pvt. Ltd. The AO added the gross commission amount on the ground that the same is not offered for taxation. The AR has stated that the commission income was included in salary income and no queries were raised in the course of assessment proceedings and the AO has not made his intention known to add the income in terms of any show cause notice. In the course of these proceedings the AR has filed reconciliation statement and other details like Form No-16. It is....