AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 931
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....mstances of the case and in law the ld CIT(A) has erred in deleting the addition of Rs. 6,65,592/- made by R/w Rule 8D of the Act. 2. That on the facts and circumstances of the case and in law the ld CIT(A) erred in deleting the addition of Rs. 40628975/- made by on account of suppression of stock. 3. The brief facts of the case shows that the assessee is a company engaged in the business of sale and purchase of shares and mutual funds. It filed its return of income on 25/8/2011 at Rs. Nil and carried forward loss of Rs. 141636242/-. Ld AO noted that the assessee has made investment of Rs. 18.60 crores and received the dividend of Rs. 59.62 lacs and therefore, asked the assessee to explain why not the disallowance u/s 14A read with Rul....
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.... Rs. 141636242/-. Over and above two disallowance/additions discussed above, some minor disallowances were also made but same are not in dispute now. 5. The assessee carried the matter before the ld CIT(A), who deleted the disallowance u/s 14A of the Act. He held that as the assessee has voluntarily made the disallowance of Rs. 305815/- in its computation of total income, the disallowance to the extent of that sum should have been reduced. He further held that value of unquoted shares should not be considered while working out disallowance u/r 8D as those shares have not yielded any tax-free income during the year. He therefore, deleted the disallowance u/s 14A of Rs. 665592/-. 6. The ld CIT (A) with respect to the addition on account of ....
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....cost‟ only. He submitted that merely because the valuation of the share has gone down for this year it could not be said that change in the method of the valuation of the closing stock is bonafide. He further submitted that the ld AO has given the detailed reasons for disallowing the loss of Rs. 40628975/-. He relied heavily on the order of the ld AO. 9. The ld AR submitted that the assessee has itself disallowed a sum of Rs. 305815/- and therefore, to that extent the disallowance cannot be upheld. With respect to the other aspect, she stated that from the unquoted shares, the assessee has not received any income and therefore, the disallowance has been correctly deleted by the ld CIT (A). She heavily relied upon the order of the ld ....
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....gain of Rs. 16.72 crores was also claimed as exempt income. Therefore, it is apparent that the assessee has claimed exempt income and issue of disallowance u/s 14A of the act arises. Therefore, the ld AO asked the assessee to explain that why disallowance u/s 14A of the Act should not be made. In response to this question, assessee has suo motto offered the disallowance under Rule 8D of Rs. 305815/- in the submission. However, such disallowance was not originally made in the return of income, the computation submitted by the assessee was verified by the ld AO, and he noted that the assessee has excluded the investment in unquoted shares for calculation of disallowance u/s 14A of the Act. Therefore, he rejected the working, computed the disa....
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....is already taxed, the learned assessing officer is required to reduce the disallowance of Rs. 665592/- by the sum of Rs. 305815/-. Accordingly, ground No. 1 of the appeal of the revenue is partly allowed. 13. Coming to ground number 2 of the appeal it is apparent that for this year the assessee has changed the method of valuation of the closing stock of shares from"at cost to "at cost or market value, whichever is less." Though As-2 Issued by ICAI does not apply to shares held as stock in trade, however the basic principle of accounting of „Prudence‟ explains that no income, which has accrued to the assessee, should not be recognized and valuation at cost or market value whichever is less is part of that principle. . It is also....