TaxTMI 
TaxTMI 
2017 (5) TMI 778
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....l income of the assessee at Rs. 89,37,960/- after making certain additions. A survey operation u/s.133A of the Act had been conducted at the premises of the assessee on 11/12.12.2004 by the DDIT (lnv.), Unit III(2), Mumbai. In his statement recorded u/s.133A of the Act, the assessee had accepted that an amount of Rs. 2,17,50,000/- deposited in account NO.0060460000320 in the name of M/s. Essjay Incorporation with the HDFC Bank, Worli Branch, Mumbai represented his unexplained money. During the survey it was offered by him as his undisclosed income in the A.Y. under consideration. The assessee had not declared this amount as income in his return of income and the AO however, while completing the assessment vide order dated 24.12.2007, had not made any addition on this account. Therefore, proceedings u/s.263 of the Act was initiated by the CIT, Central-Ill, Mumbai. In the course of revision proceedings, the assessee challenged the jurisdiction u/s.127 of the Act and contradicted the statement recorded during the course of survey, contending that it was merely tentative and had no evidentiary value whatsoever. The CIT vide his order u/s.263 dated 29.03.2010 concluded that the assessme....
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....bove findings of CIT(A). Accordingly, ground taken by assessee is dismissed. 6. With regard to the assessment order being barred by limitation, we found that the CIT vide his order dated 29.03.2010 has set aside the order of original assessment dated 24.12.2007 and directed the AO to pass a fresh assessment order after examining the issues involved and providing the assessee reasonable opportunity of being heard. It is also observed that the AO completed the consequential assessment proceedings vide his order dated 29.12.2010. The CIT(A) rejected assessee's contention after observing as under:- 5.3.1 I have considered the submissions of the appellant and perused the materials on record. As per Section 153(2A) read with the second proviso, the period of limitation for passing the fresh assessment order was available up to 31.12.2010, whereas the impugned order is seen to have been passed on 29.12.2010. It is observed that in view of the serious allegations levelled by the appellant against the AO., my predecessor had vide letter dated 06.11.2012 sought a remand report from the AO in this regard. The relevant extract of the remand report furnished by the AO. vide letter dated 06.0....
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.... and such a repeated baseless act can only be regarded to be causing delay in judicial proceedings. Since the assessment order was served to the assessee well within the period of limitation, the appeal filed by the assessee is beyond the period allowed u/s. 249 of the Income Tax Act, 1961, the Hon'ble CIT(A) is requested not to consider the appeal under consideration and reject the same". 5.3.2 The said Remand Report dated 06.06.2013 forwarded by the Addl. CIT, Central Range-8, Mumbai vide letter dated 11.06.2013 was received on 17.06.2013. A copy of the same was provided to the appellant for rebuttal, if any. The appellant has furnished his rejoinder vide Affidavit dated 04.12.2013 wherein he has reiterated his submissions as well as allegations against the AO such as forgery, interpolations and tampering of the original despatch registers, backdating of proceedings etc. It is alleged that the AO has "falsely created records to show that he had passed and sent the assessment order within the period of limitation". It is stated that the appellant has already filed complaints with the DGIT (Vigilance), New Delhi with a request to carry out an investigation in the matter. It ....
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....n of said amount of Rs. 2,17,50,000/- is concerned, it is observed from the record that the said amount represents unexplained or undisclosed income of the appellant admitted by him in the course of his sworn statement recorded on 12.12.2004 based on incriminating materials impounded in the course of survey at his premises, as brought out above. It would be pertinent to refer to the following extracts of his statement recorded during the course of survey:- "Question No. 6: Perusal of bank statement reveals that maximum amount of cash deposited on a single occasion was on 6/12/2004 and the amount was Rs. 2,17,50,000/-. As per your statement this entire amount appears to be your unaccounted cash balance. What do you have to say? Ans.: Yes, I accept this amount of Rs. 2,17,50,000/- as my unexplained money and offer it for taxation as concealed income in the current year. Question No.7: In the light of your statement, do you accept the cash seized of Rs. 1,23,46,500/- as your unexplained money? Ans.: As Mr. Mangilal Devashi has already stated, this money was given by me out of the same rotating cash balances which I have just now offered as my concealed income ". 6.3.2 A pe....
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....ssession of Shri Mangilal Devashi represented the assessee's income from unexplained sources. While explaining the contents of pages 26 and 27 impounded during the course of survey proceedings, the assessee stated that "all the loans recorded on these two pages have been received back by me and the cash of Rs. 1,23,46,500/- was generated out of the liquidation of the loans". In light of the notings on page 27, the assessee offered for taxation undisclosed income of Rs. 2,17,50,000/- being peak credit in HDFC Account in the name of Essjay Incorporation. M/s. Essjay Incorporation is proprietary concern of Mrs. Sangeeta Jain, wife of Shri Mukesh Jain who happens to be cousin brother of the assessee. The assessee had undertaken to bifurcate his offer of undisclosed income of Rs. 2,17,50,000/- in two years, but it is seen from the record that the assessee never disclosed the said amount in his return for the A.Y. under consideration. The facts narrated above have been culled out from the order of CIT(A), Central VIII, Mumbai dated 12.11.2007 in case of the assessee for A.Y.2004-05. It deserves to be noted that upon being asked to furnish copy of his statement recorded during the cou....
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.... made under Rule 8D and for disallowance of 20% of motor car expenses. The AO also treated SPCG of Rs. 80,33,589/- as business income. By the impugned order CIT(A) confirmed the additions against which assessee is in further appeal before us. 12. We have considered rival contentions and from the record, we found that in the course of assessment for A.Y.2006-07. The Assessing Officer has noticed that in the assessment year passed u/s. 143(3) for A.Y. 2005-06, the Assessing Officer has made additions based on the documents found during the course of survey u/s.133A of the Income Tax Act. The Assessing Officer has also discussed the issue of accrued interest on the loans advanced and investments in the assessment order for AY 2005-06. The relevant part of this order is reproduced at page 5 and 6 of the assessment order. Since the facts of the case for the year under consideration are the same, therefore, again the Assessing Officer has given show cause notice to explain the interest accrued on KVP, FDs loans and advances. However, no explanation was filed. From the record, we found that in terms of documents found during course of survey u/s.133A, the AO found that assessee has not....
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....r authorities, the AO is directed to re-compute the disallowances made u/s. 14A as per this decision. Therefore, the ground of appeal is partly allowed. 14. We have considered rival contentions and found that both AO and CIT(A) has dealt with the issue in great detail and disallowed expenditure u/s.14A to the tune of Rs. 3,34,788/- by computing expenditure as per Section 14A in respect of dividend income of Rs. 4,35,458/- Since, assessment year involved is 2006-07 which is prior to insertion of Rule 8D, therefore, we direct the AO to restrict the disallowance u/s.14A to the extent of 5% of the dividend income. We direct accordingly. 15. With regard to treatment of short term capital gain as business income, the CIT(A) observed that from the computation of income and details filed before the Assessing Officer, it was noticed that the assessee has declared short term capital gain of Rs. 80,33,589/-. From the statement of Short Term Capital Gain, the Assessing Officer has noticed that the assessee has claimed Short Term Capital loss of Rs. 30,37,651/- against Rs. 1,10,71,240/- resulting in net Short Term Capital Gain of Rs. 80,33,589/-The Assessing Officer has also observed that....
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....r has given opportunity vide order sheet noting dated 11.12.2008 and in response to this show cause notice the appellant submitted its reply dated 2.12.2008 which is reproduced at page 3 of the Assessing Officer. Therefore, the argument of the appellant that the opportunity was not provided is baseless and over ruled. The claim of the appellant before the Assessing Officer that he is not a share dealer but only an investor is evident from the transactions carried out amounting to Rs. 11,36,54,971/- through 9 brokers and share of 313 companies which proves that he was wrongly claiming STCG in place of business income to avoid payment of taxes at higher rates. The appellant has also raised loans of Rs. 2,74,08,904/- for share transactions and paid interest of Rs. 17,84,709/- on these loans. The other argument of the appellant that the share transactions shown as investments in the balance sheet is also not tenable because share transactions made by the appellant are so frequent thus were never shown as investments or stock in trade in the balance sheet 90% of the transactions made during the year under consideration were holding of shares for period less than 10 days. It clearly show....
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....d found that CIT(A) has dealt in great detail with each and every script dealt with by the assessee, its magnitude turn over and the frequency of purchases and sales and thereafter arrived at a conclusion that assessee's claim of short term capital gain was not correct and held the same as business income. The detailed finding so recorded by CIT(A) has not been controverted by learned AR by bringing any positive material on record, accordingly we do not find any reason to interfere in his findings. ITA NO.8274/Mum/2011 (A.Y.2008-09):- 18. In this appeal, assessee is aggrieved for addition of Rs. 1,68,000/- on account of deemed rent. Addition made on account of deemed rent was confirmed by CIT(A) by following his order for A.Y.2007-08. However, nothing was brought on record by learned AR that any appeal having been filed for A.Y.2007-08. It implies that assessee has accepted the addition made on account of rent. No fresh arguments were advanced alleging the orders of the lower authorities. Accordingly we confirm the addition so made by AO on account of deemed rent. 19. Disallowance made u/s.14A of Rs. 14,75,018/- was confirmed by CIT(A) after observing as under:- In the ....
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....e relevant facts and circumstances after furnishing a reasonable opportunity to the assessee to place all germane material on the record; vii) The proceedings for Assessment Year 2002-03 shall stand remanded back to the Assessing Officer. The Assessing Officer shall determine as to whether the assessee has incurred any expenditure (direct or indirect) in relation to dividend income / income from mutual funds which does not form part of the total income as contemplated under Section 14A. The Assessing Officer can adopt a reasonable basis for effecting the apportionment. While making that "determination, the Assessing Officer shall provide a reasonable opportunity to the assessee of producing its accounts and relevant or germane material having a bearing on the facts and circumstances of the case. 9. It can be seen from the above that the Hon'ble Bombay High Court has clearly held that Rule 8D will apply from AY 2008-09. Hence, the stand of the AO is upheld and the ground of appeal of the appellant is dismissed. 20. We have considered rival contentions and found that both AO and CIT(A) has computed the disallowance u/s.14A and disallowed Rs. 14,75,018/- against the exemp....
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....able to be treated as deemed let out properties. It was observed that the assessee had not shown any rental income from the Deolali bungalov as well as the Ahmedabad shop. AO followed reasoning given in the Assessment Year 2007-08 and 2008-09 and added Rs. 1,68,000/- to total income of the assessee on account of rent from those properties. 24.The assessee had furnished copy of the Purchase Deed (in Gujarati language) in respect of the shop at Ahmedabad which seemed to have been executed on 25.09.2008. The annual value of the shop at Ahmedabad was determined by the AO. at Rs. 75,000/-. Since the assessee had acquired the said shop in September, 2008, the value was computed for 7 months at Rs. 43,750/- which was also treated as income of the assessee from house property. 25. By the impugned order CIT(A) confirmed the action of the AO after observing as under:- 6.3 I have considered the submissions of the appellant and perused the materials available on record. The issue for consideration is determination of annual letting value (AL V) of the house at Deolali and the shop at Ahmedabad. It is observed from the record that even in the earlier AY.s 2007-08 and 2008-09, the ALV o....
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....y provisions of Section 14A r.w. Rule 8D should not be applied to his case. In response, the assessee vide letter dated 15.12.2011 submitted that no disallowance under Section 14A could be made as no expenses had either been incurred or claimed in the relevant AY. It was claimed that investments in these securities had been made out of the assessee's capital account and no interest had been paid on borrowed amounts for the purpose of making the said investments. However, the AO did not find the explanation the assessee to be acceptable. According to the AO., Section 14A(2) automatically comes into play if the assessee contends that no expenditure has been incurred by him to earn the exempt income. Therefore, the AO. was satisfied that the provisions of Section 14A r.w. Rule 8D are very much applicable in the assessee's case and that it was not possible to earn any exempt income without incurring some administrative expenses. Therefore, as per Rule 8D, the AO calculated the expenses attributable to earning of dividend income at Rs. 29,96,l80/- which was added to the total income of the assessee. 28. By the impugned order CIT(A) confirmed the disallowance after observing a....
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....e earning of such income. Even if the assessee has utilised its own funds for making investments which have resulted in tax free income, the expenditure which is incurred in the earning of that income would have to be disallowed. b) After the introduction of Section 14A(l), no presumption can be drawn that investments are out of interest free funds available since Parliament expressly requires apportionment. The real enquiry is whether there are interest* free funds available on the asset side of the balance sheet and in the absence of sufficient proof of available interest free funds, no such presumption can be drawn. In view of the legal position enunciated above, the submissions made by the appellant to the extent these are not in line with the said position cannot be accepted. In CIT v. Walfort Share & Stock Brokers (P) Ltd. 326 ITR 1 (SC), the Hon'ble Supreme Court made it very clear that the permissible deductions enumerated in Section 15 to 59 are now to be allowed only with reference to the income which is brought under one of the heads of income and is chargeable to tax. The Hon'ble Apex Court also clarified that if an income like dividend is not part of the ....
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.....P. Bharucha (supra), it was found that the expenditure incurred and claimed by the assessee had direct nexus with his professional income rather than any tax exempt income. However, no such finding has been reached in the present case. The appellant has not placed on record copies of unreported decisions in the cases of Esquire Pvt. Ltd. and Tarun Chandmal lain cited supra and so it is not possible to ascertain their relevance in the context of the present case. The decision in case of Champion Commercial Co. (supra) is actually found to be in favour of the revenue wherein it has been clearly held that in a situation where the assessee does not offer any disallowance u/s.14A in respect of tax exempt income, the provisions of Section 14A(2) r.w. Rule BD can be invoked u/s.14A(3) of the Act. The ratio of said decision, in fact, goes against the appellant. Finally, reliance on the case of M/s. Auchtel Products Ltd. (supra) will also be of no help to the appellant who though earning exempt income has not offered any amount disallowable u/s.14A, because the A.O. has not automatically invoked Rule 8D but has duly followed the mandate of Rule 8D as he was not satisfied with the correctne....
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....of income attached with the return of income, the appellant has worked out the losses to be carried forward as under:- Nature of loss Amount (Rs.) Loss from speculative business 33,12,375 Business loss 58,60,962 Short term capital loss on sale of shares 38,96,356, Total 1,30,69,693 At the outset, it is imperative to first ascertain whether the appellant is an investor or a trader in shares in light of the settled judicial precedents and the guidelines laid down in this behalf in the CBDT Circulars issued from time to time. For this purpose, the entire pattern of the appellant's dealings in shares, whether delivery-based or otherwise, has to be closely scrutinized and analyzed. However, such an exercise cannot be carried out for want of complete (scrip-wise) details and evidences viz., contract notes, demat account, broker's account, bank statement etc. It is observed from the record that the appellant has not furnished any details in regard to the loss of Rs. 33,12,375/- claimed to have been incurred on "speculative business" of intraday trading in shares and trading in commodities. For want of the relevant details, the A.O. had no....