TaxTMI 
TaxTMI 
2022 (3) TMI 1329
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....adduced, thus addition so made deserves to be deleted. 3. On the facts and in the circumstances of the case, the ld. CIT(A) has grossly erred in confirming disallowance of Rs. 24,486/- made by ld. AO, out of expenses claimed in the Profit & Loss Account by assessee as vehicle and travelling expenses by alleging the same as incurred for non-business purpose, thus disallowance so made deserves to be deleted. 4. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. The brief facts of the case are that the assessee is a company registered under Companies Act,1956 and is engaged in the business of manufacturing of Steel, Disc, and Leather Band Knife from MS Strips etc. Return of income for the year under consideration was e-filed by the assessee on 19.09.2012 declaring loss of Rs. 3,99,936/-, which was processed u/s 143(1) of the Income Tax Act, 1961 (in short, the Act) and the case of the assesesee was selected for scrutiny by issuance of no....
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....ultural income itself is exempt from taxation, therefore there is no justification to allow deduction of expenditure on agricultural activities in the computation of total income. Thus, provisions of Section 14A are attracted if and only if: 1. The assessee has certain income which is not includible in his total income under any provisions of the Act. 2. The assessee has incurred expenditure in relation to earning of such income which is exempted under the Act. It is submitted that during the year under appeal there is no investment which had earned, or for that matter even would have earned, exempt income and thereby there is no occasion to invoke the provisions of section 14A and therefore, the disallowance made is totally unwarranted & in total disregard to the facts and evidence on record and thus deserves to be deleted. Further, so far as question of disallowance of Rs. 1,64,850/- under Rule 8D(iii) is concerned, it is submitted that clause (iii) of Rule 8D, was introduced for the reason that certain expenses on the nature of administrative expenses are bound to be incurred for making investment. However, in the instant case, Ld. AO....
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....us the basic approach of the Ld. AO to the issue in hand is patently wrong. Further investment in equity shares was carried over from preceding year and was not made in the year under appeal. Apart from this, ld. AO has failed to bring on record the nexus between the funds borrowed and invested in the equity shares having tax free income. Thus, ld. AO, without appreciating these facts concluded that investment in shares was made out of borrowed funds. Further, with respect to disallowance of interest of Rs. 3,60,135/- made by ld.AO under section 36(1)(iii), it is submitted that Mis Anil Special Steels Industries Ltd. is the main supplier of assessee, accordingly assessee has to make payment to it on regular basis in the ordinary course of business to get the material uninterruptedly. Thus advance of Rs. 33,20,370/- made by assessee to Anil Special Steels was in the ordinary course of business. It is further submitted that assessee is having Closing Balance of Unsecured Loan taken from M/s Anil Special Steels Industries Ltd. (ASSIL) of Rs. 3,34,31,537/- (APB 28) out of which a sum of Rs. 83.20 lacs was old term loans given for the acquisition of Plant & Machinery on which i....
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....bold) (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, 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 such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not, form part of the total income under this Act.' Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." From perusal of heading of section 14A, we observed that the "Expenditure incurred in relation to income not in....
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....atena of judicial decisions. In this regard, we relied on the decision of the Hon'ble Apex Court in the case of Maxopp Investment Ltd vs. CIT has held that "only that expenditure which is "in relation to" earning dividends can be disallowed u/s 14A & Rule 8D and further the AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo moto disallowance is not correct." The Hon'ble Delhi High Court in the case of Cheminvest Ltd. Vs. CIT 378 ITR 33 (Del) has held that, "no disallowance u/s 14A can be made in a year in which no exempt income has been earned or received by the appellant." Further, the Coordinate Bench of ITAT, Jaipur Bench in the case of Deepak Vegpro (P) Ltd., Alwar Vs. ACIT in ITA No 110/JP/14 order dated 24.04.2017 had deleted the disallowance made by the AO u/s 14A by relying on the Delhi High Court decision in case of Cheminvest Ltd. (supra) for the reason that no dividend income was received during the year. 9. We also observed from perusal of the record that out of disallowance of interest u/s 14A, Rs. 9,72,617/-was disallowed as per Rule 8D(2)(ii), being proportionate interest. In this regard, during assessment procee....
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....ion of making any disallowances is beyond the scope of section 14A and 36 (1)(iii) of the Act. Considering the totality of facts and circumstances of the case, we are of the considered view that the interest bearing funds taken by assessee were utilized wholly and exclusively for the purpose of business, in respect of which no disallowance could be made, therefore, we direct to delete the disallowance so made and confirmed qua this issue. 10. Ground No. 2 of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in confirming the addition of Rs. 21,80,000/- made by the A.O. U/s 68 of the Act. In this regard, the ld. AR has reiterated the same arguments as were raised before the ld. CIT(A) and also relied upon the written submissions filed before the Bench and the contents of the same are as under: "It is submitted that the assessee has obtained fresh unsecured loan from M/s Pooja Vintrade Pvt. Ltd. amounting to Rs. 2,16,44,037/- out of which Rs. 1,94,64.037/- was repaid and balance of Rs. 21,80,000/-. Ld. AO doubted the creditworthiness of the lender and made addition of Rs. 21,80,000/- in the hands of the assessee. It is pertinent to menti....
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....m. During the course of appellate proceedings, ld. CIT(A) directed to produce the party, however being located outside Jaipur (at Kolkatta), they could not be produced and due to the fact that the borrower is always in subdued capacity, assessee could not compel the lender to appear. However, assessee with best efforts was able to obtain affidavit from director of Pooja Vintra.de Private Ltd., (APB 49) duly confirming the fact that they have advanced loan to assessee in F.Y. 2011-12, which has closing balance of Rs. 21,80,000/- as on 31.03.2012, which was furnished before ld.CIT(A), however was brushed aside. Ld. CIT(A) while confirming the addition has wrongly stated that the assessee has not submitted complete Balance whereas the assessee vide letter dt. 6.3.2017 (APB 8-9) has submitted detailed Balance Sheet (APB 9, 44-48). The ld. AR has relied on the following decisions: i. Pr. CIT vs M/s Paradise Inland Shipping Pvt. Ltd., ITA NO. 66 of 2016 (Bom) ii. M/s Kota Dall Mill vs. DCIT in ITA No. 997 to 1002/JP/2018 & 1119/JP/2018, On the basis of above observations, Hon'ble bench has allowed the appeal of aforecited assessee on merits as well....
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.... nature and source thereof or the explanation offered by him is not, in the opinion of the -2[Assessing] Officer, satisfactory, the sum so credited may he charged to income-tax as the income of the assessee of that previous year" From perusal of the above Section, it is evident that the A.O. can make addition u/s 68 only under two circumstances, i.e.: (i) assessee does not offer any explanation about nature and source of such credit or (ii) explanation offered by assessee is not upto the satisfaction of the AO. It has also come out of rigors of Section 68 that an assessee has to furnish identity and creditworthiness of the creditor and genuineness of the transaction. In the instant case, assessee has established all the three conditions as under: - Identity of creditor is established as Pooja Vintrade Pvt. Ltd. was holding PAN - Creditworthiness: Assessee had furnished the confirmation and copies of audited Balance Sheet of M/s Pooja Vintrade Pvt. Ltd. which are at page Nos. 36-37 and 44-48 of the paper book. - Genuineness: Loan was taken through account payee cheque - Affidavit of the Director of the company which is at p....
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....ould not at all be justified. The Assessing officer, if he so desired, ought to have allowed the Assessee to cross examine such persons in case the statements were to be relied upon in such proceedings. Apart from that, the voluminous documents produced by the Respondents cannot he discarded merely on the basis of two individuals who have given their statements contrary to such public documents." The coordinate Bench of this Tribunal in the case of M/s Kota Dall Mill vs. DCIT in ITA No. 997 to1002/JP/2018 & 1119/JP/2018, wherein addition was made u/s 68 on account of unsecured loans, has allowed the appeal of assessee (para 11 pages 72-87) by observing that: - once the chain of transactions and flow of money from one entity to another and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. It is further observed that once the assessee has produced all the relevant record which includes bank statement, financial statements including balance sheet, copy of ROC Master data showing the status of loan creditor company as "active", confirmation of loan given to the assessee. - exce....
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....addition by pointing out certain lacunas in the bank account of the suppliers of the assessee, which cannot be permitted. Merely because 133(6) notices issued to the party returned un-served though it was the same address, which was supplied by supplier while filing its income tax return, no fault can be put on the shoulder of assessee. Further, the learned Commissioner (Appeals) confirmed the finding of the learned assessing officer without giving any reason but merely reiterating the findings of the assessing officer. In view of this the addition made by the learned assessing officer of Rs. 2657303 from Suresh HYP Enterprises cannot be sustained and hence, deleted. In the result ground No. 2 of the appeal of the assessee is allowed." We also draw strength from the decision in the case of Commissioner of Income Tax Vs. Bhawani Oil Mills (Raj.) 49 DTR 212 wherein it has been held as under: "INCOME - CASH CREDIT - GENUINENESS - Though only one of the eight creditors appeared in response to the notice given by the AO and confirmed the loan, non-appearance of others by itself cannot be a reason to discard their version - These persons have subsequently filed their confirma....
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.... further shown those amounts of money had been lent to the assessee. If before verifying such facts from the A.O. of the lenders of the assessee, the A.O. decides to examine the lenders and asks the assessee to further have the genuineness and creditworthiness of the transaction, the A.O. does not follow the principle laid down u/s. 68." Considering the totality of facts and circumstances of the case, we found merit in the contention of the ld. AR and the case laws relied upon before us are also found support the case of the assessee. No new facts and circumstances has been put forth by the ld. DR, therefore, we direct to delete the addition made and confirmed U/s 68 of the Act. 13. The 3rd ground of appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in confirming the disallowance of Rs. 24,486/- made out of expenses claimed in the P&L account as vehicle and travelling expenses. 14. Having considered the rival contentions and carefully perused the material placed on record. We observed from perusal of the record that the assessee being a private limited company, such disallowance for the personal use or for non-business purposes cannot be made....