TaxTMI 
TaxTMI 
2016 (6) TMI 1083
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed and produce the documentary evidence in respect of his claim. The assessee submitted the copies of 7/12 extracts of the land. It was submitted that the land is very fertile and assessee used to cultivate rich crops like Mango and Soyabean. Since the assessee could not produce any documentary evidence such as details of income, expenses, bills and vouchers etc. the AO treated an amount of Rs. 1 lakhs out of the agricultural income declared at Rs. 4,52,530/- as "income from other sources" and made addition of the same to the total income of the assessee. 4. Before CIT(A) the assessee submitted that he owns 27 Acres of irrigated land at Nilwandi. Since the assessee is not maintaining books of account to record the various expenses etc. those details could not be produced. However, the reasonableness of the income shown by the assessee should not have been doubted. However, the CIT(A) also was not satisfied with the explanation given by the assessee and upheld the action of the AO by observing as under : "5.2 I have carefully considered the facts of the case, the assessment order and oral as well as written submissions on behalf of the appellant. The AO has treated the part of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....partmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that since the assessee is not maintaining any books of account for the agricultural income and could not substantiate either before the AO or before the CIT(A) with documentary evidence, therefore, disallowance of Rs. 1 lakh under the facts and circumstances of the case is justified. 8. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We find the assessee has declared agricultural income of Rs. 4,52,530/- in the return of income out of which the AO disallowed an amount of Rs. 1 lakh treating the same as "income from other sources" on the ground that assessee could not substantiate with evidence regarding earning of such agricultural income. We find the Ld.CIT(A) sustained the addition made by the AO on the ground that the assessee could not substantiate such agricultural income and further similar addition made by the AO in the preceding assessment year has not been contested by the assessee in appeal. We find the assessee before the CIT(A) has explained that it is owning 27 Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nagement and administrative expenditure could be segregated. Further, the assessee had borrowed certain funds on which liability to pay interest is being incurred whereas certain amounts had been invested in earning tax free dividend income. Therefore, a part of the interest liability would be on account of investments made for earning tax free dividend income. Rejecting the various explanations given by the assessee the AO disallowed interest amount of Rs. 2,28,276/- and administration expenses of Rs. 30,475/- totaling to Rs. 2,58,751/-. 12. In appeal the Ld.CIT(A) upheld the action of the AO by observing as under : "8.2 I have carefully considered the facts of the case, the assessment order, relevant legal provisions, judicial pronouncements cited and oral as well as written submissions on behalf of the appellant. The AO has invoked the provisions of section 14A read with rule 8D and made the disallowance of Rs. 2,58,751/-. The contention of the AR that the AO should record his dissatisfaction as regards the correctness of the claim of the appellant that he has not incurred any expenditure in relation to the income which does not form part of total income under the provisions o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....allowance of interest can be made u/s.14A of the I.T. Act. 15. So far as administrative expenses are concerned, he submitted that no part of such administrative expenses is required to be incurred for earning the tax free income. 16. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). 17. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. There is no dispute to the fact that the investment in shares and mutual funds as on 31-03-2010 is Rs. 68,64,737/- whereas the capital of the assessee as shown in the balance sheet is Rs. 4,72,08,723/-. Thus, the capital of the assessee is much more than the investment in shares and mutual funds, the dividend income of which is claimed as exempt. 18. The Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (Supra) has held that if there were funds available both interest free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest free funds generated or avail....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld not substantiate anything for recovery of the said debt. In absence of any proof the AO held that the debt cannot be said as bad. He accordingly disallowed the claim of bad debt of Rs. 4,13,218/-. 22. In appeal the Ld.CIT(A) upheld the action of the AO by observing as under : "10.2 I have carefully considered the facts of the case, the assessment order and oral as well as written submissions on behalf of the appellant. The appellant's claim of bad debt is not in accordance to the provision of Sec.37(1)(vii) r.w.s.36(2) of the Act. Similarly, appellant's claim of deduction of bad debt u/s.28 or sec.37(1) is also not tenable as amounts claimed as bad debt were advances to the contractors and sub-contractors and not to the suppliers as evident from the Balance Sheet of the appellant. These amounts are not in the nature of expenditure and therefore cannot be allowed u/s.37(1) of the Act. In the facts and circumstances of the case appellant's claim is not acceptable. Therefore, the impugned disallowance made by the AO of Rs. 4,13,218/- on account of bad debts is hereby confirmed. This ground of appeal is dismissed." 23. Aggrieved with such order of the CIT(A) the assessee is in a....