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2023 (8) TMI 1440 - AT - Income TaxAddition u/s 68 - unexplained cash credit - Onus to prove - HELD THAT:- The assessee has filed the necessary evidences comprising names, addresses, PANs, bank statements, ITRs, balance sheet, profit and loss accounts, share allotment letter, share application with bank statement besides filing the bank statements of the assessee thereby evidencing the receipt of amounts of from these investors. We note that the assessee is a trading in shares and textiles and all the subscribers were also trader in textiles. We also note that it’s customary in the business of textiles to business dealings in cash and so deposit into the banks accounts out of sales proceeds is in the normal course of business. Therefore mere fact that the cash has been deposited in the bank accounts of the subscribers immediately one or two days before issuance of cheques in favour of the assessee will not perse prove that these transactions were non-genuine. As examined the evidences filed before us in respect of share subscriber companies. We note that these companies are in fact having business in textiles and their turnover justified the cash deposits. Therefore the reasoning given by authorities below without looking into the nature of business of the assessee and the subscribers qua the cash deposit in the account of the subscribers before the date of the payment to the assessee is not sustainable. Besides the mere fact that the assessee has failed to produce the principals / directors of the subscribing company due to which investment could not be verified cannot be a ground for making addition in the hands of the assessee. As both the authorities have failed to point out any defects in the documents/evidences furnished by the assessee and simply relied on the theory principal officers/ directors of the assessee company were not produced. In our opinion, the addition is based upon conjecture and surmises and not on the records which were available before the authorities below. Decided in favour of assessee. Addition u/s 14A r.w.r. 8D(2)(iii) - assessee has received exempt income and has suo motto disallowed a sum under Rule 8D(2)(i) - HELD THAT:- We find that the issue is squarely covered in favour of the assessee by a series of decisions wherein it was held that the disallowance of expenses has to be restricted to the amount of exempt income received by the assessee. We note that the assessee has earned tax free income of Rs. 1,53,600/- and therefore the disallowance cannot exceed the said amount of exempt income. Accordingly we set aside the order of Ld. CIT(A) and direct the AO to restrict the addition - Appeal of the assessee is allowed.
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