TaxTMI 
TaxTMI 
2016 (3) TMI 363
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....le and purchase of units of mutual fund in violation of sec. 73. 2. On the facts and in the circumstances of the case the Ld. CIT(A) was erred deleing the disallowance of Rs. 4,08,937 made u/s. 14A read with rule 8D without considering the merit. 3. On the facts and in the circumstances of the case the Ld. CIT(A) was erred deleing the addition made u/s 68 without considering the merit." 2. The first issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO on account of short term capital gain of Rs. 14,34,741.00 and treating the speculation loss as per explanation to section 73 of the Act as loss from capital gain. 2.1 The facts of the case are that the assessee is a limited company and is engaged in business of trading of iron & steel. During the year the assessee has shown the following income. 1) Income from business a) Iron & steel business Rs. 66,551.00 b) Derivative trading business Rs. 18,24,635.00 2) Income from speculative business Rs. 8,864.00 3) Income from capital gain a) Short term capital loss from shares Rs. (-) 33,90,390.00 b) Long Ter....
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....Gains." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. Shri Jai Narayan Gupta, Ld. Authorized Representative appearing on behalf of assessee and Shri Sanjit Das, Ld. Departmental Representative appearing on behalf of Revenue. 4. We have heard rival submissions of both the parties and perused the materials available on record. Ld. DR vehemently relied on the order of AO whereas Ld. AR relied on the order of Ld. CIT(A). Ld. AR submitted paper book which is running pages 1 to 230. Before us the ld. AR submitted that the AO has first treated the capital gain/ loss from shares as speculative transactions and thereafter computed the test of applicability of explanation to section 73 of the Act wrongly. The AO first should have determined the income under various heads of income without deciding the nature of share transactions and then should have applied the test of applicability of explanation to section 73 of the Act. On the other hand the ld. DR vehemently supported the order of the AO. From the aforesaid discussion we find that the AO has treated the losses declared by the assessee are in the nature of speculative loss in term of explanation to sec....
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....on to exempt income and issued notice to the assessee for the clarification. The assessee submitted that the expenses incurred in relation to the exempted income for Rs. 58,612.00 only. The assessee further demonstrated to the AO to bring something on record for his dissatisfaction of the expenses. However the AO disregarded the claim of the assessee and applied the rule 8D of the Income Tax Rules 1962. As per the provisions of rule 8D the disallowance was worked out for Rs. 4,08,937/- @ ½ % of the average value of investment ( ½% of 106584628 + 56990209)/2. 6. Aggrieved, assessee preferred an appeal before ld. CIT(A) who deleted the addition made by the AO by observing as under : "I have carefully gone through the assessment order and the submissions of the Appellant. It is true that the App had, himself computed the amount disallowable u/s. 14A. The AO has not disputed the computation of the Appellant. Merely stating that he is not satisfied with the correctness of the claim without recording the reasons of his disallowance-satisfaction, goes beyond the four corners of the provisions of section 14A. Had it been so, there would not have been any requireme....
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..... AO to resort to application of Rule 8D only if he is not satisfied with the correctness of the quantum of disallowance admitted by the assessee. From the aforesaid discussion we find that the AO has disallowed the expenses as per the provisions of Rule 8D of Income Tax Rules 1962. The AO has not recorded the dissatisfaction about specific expenses in relation to the exempted income. The ITAT Delhi Bench in the case of DCIT Vs. Jindal Photo Ltd. in ITA No. 814/Del/2011 for AY 2008-09 dated 23.09.2011, where the Tribunal has held that Rule 8D r.w.s. 14A(2) can be invoked 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 expenditure incurred" in relation to tax-free income. The burden Ion the Assessing Officer to establish nexus of expenses incurred with the earning of exempt income, before making any disallowance under section 14A. There cannot be any presumption that the assessee must have incurred expenditure to earn tax free income. The AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is ....
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....nt by the single person. Therefore the AO has disregarded the claim of the assessee and added a sum Rs. 1.83 crores u/s 68 of the Act to the total income of the assessee. 9. Aggrieved assessee preferred an appeal to ld. CIT(A) who deleted the addition made by the AO by observing as under:- "16. I have carefully gone through the assessment order and the submissions of the Appellant. I am in agreement with the submissions, which is based on documentary evidences. The addition made by AO in respect of shares application money subscribed by 9 out of 25 applicants is unwarranted. Just on flimsy ground of notice u/s. 133(6), having been served at any particular address, which happened to be the old address of those Company share applicants, he cannot make the addition when a host of other evidences are supporting the identity of the applicants, genuineness of the transaction and creditworthiness of the applicants. In fact, the AO has, all along, resorted to guesswork and surmises. He has used the words, 'it appears' several times in the assessment order. Therefore, I direct the AO to delete the addition." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal bef....
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....rnished before him. The AO has not asked the respective Company applicants also to explain the alleged discrepancy in the address. The AO has not brought any material on account of record to disbelief the evidences furnished with him and treat the transaction as not genuine. The assessee submitted the following material at the time of assessment. a) Copy of share applications from the share applicants (copies enclosed) b) Copy of Form 2 filed with Registrar of Companies, West Bengal (copy enclosed) c) Copy of Form 18 about the Registered Office of the applicants for change of address subsequent to the date of allotment, i.e. 31.03.2009 (copies enclosed) d) Members register e) Share application & Allotment Register f) Copy of board resolution. g) Replies from Share applicants to the notice u/s. 133(6) issued to them by the AO seeking information and documents about the sources and to examine their identity, genuineness of the transaction and their creditworthiness. (copy enclosed). h) Copy of audited accounts. i) Copy of bank statements. j) Copy of Income tax acknowledgment of return filed for ....