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2017 (1) TMI 860 - AT - Income TaxDisallowance u/s. 14 A read with Rule 8D 2 (iii) - Held that:- The departmental authorities were not justified in invoking the provisions of section 14 A r.w.r.8D of the Rules. The fundamental principle for making disallowance against the exempt income is that the assessee should have claimed some expenditure against the such income and thus should have availed double deductions. In the case under consideration, the assessee had not claimed any expenditure against the dividend income of ₹ 2,000/-. Therefore, there was no justification for making any disallowances under any of the heads under rule 8D(2)of the Rules. The Tribunal had,in the AY.2009-10, upheld the disallowance because the assessee itself had offered for it. - Decided in favour of the assessee Bogus purchases - Held that:- We find that the assessee had made payment of ₹ 2.76 lakhs to VE, that in the statement before the VAT authorities it had admitted to have issued bogus bills, that the assessee had produced the purchase bills and copies of the bank statement showing the payments made by it to VE,that cross examination of VE was not allowed to the assessee though it had made a specific request for it. The issue can be decided against the AO and in favour of the assessee only on this count,as the principles of natural justice were violated. The settled principles of taxation envisage that no adverse material should be used against an assessee without affording it an opportunity to rebut it. But, we would like to decide the issue on merits also. The AO or the FAA has relied upon the statement made by VE,but has not mentioned that it had specifically named the assessee in its statement. A general statement of issuing of bogus bills by an alleged hawala dealer cannot be used against a particular assessee to establish the fact that the purchase bills obtained by it were not genuine. It is to be noted that all the payments were made by cheques and there is no evidence of money coming back to the assessee. Secondly,the provisions of section 69C of the Act are not applicable to the facts of the case. The assessee had not made cash purchases - Decided in favour of the assessee
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