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2017 (5) TMI 165 - AT - Income TaxAddition on account of bogus purchases - Held that: - when the AO not doubting the sales cannot disallow the entire purchases without giving detailed findings. At the most GP on the said purchases could be brought to tax which has already been done by applying 2% of the amount of total alleged bogus purchases - the order of the ld.CIT(A) upholding the entire purchases which according to the facts on records were duly entered in the stock register and subsequently sold cannot be sustained - the order of ld.CIT(A) on this issue is set aside and AO directed to delete the addition on account of bogus purchases, whereas the disallowance made on account of GP is sustained to cover possible leakage of revenue. Disallowance of Interest under rule 8D(2)(ii) of the Rules - expenditure at the rate of 0.5% of the average investment u/s 14A of the Act read with rule 8D(2)(iii) of the Rules - disallowance - Held that: - the assessee‟s own funds were ₹ 3,89,28,953/- whereas the investments made by the assessee in shares and securities were ₹ 1,25,15,918/- as per the balance sheet as on 31.3.2010 - in view of the ratio laid down in the case of HDFC Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT], wherein the Hon'ble Jurisdictional High Court has clearly held that the when the assessee own funds are more than the investments made in the shares and securities made out of own funds, there is no need to disallow the expenditure u/s 14A of the Act r.w.r.8D of the Rules - the disallowance of ₹ 48,202/-made under section 14A of the Act read with rule 8D(2)(iii) of the Rules, is sustained. Appeal allowed - decided partly in favor of assessee.
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