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2022 (6) TMI 1010 - AT - Income TaxAssessment u/s 153C - Whether no satisfaction note was drawn and no incriminating material was found and used in the assessment order? - Disallowance u/s 14A - HELD THAT:- We find that Ld. AO has not referred to any incriminating material while making the assessment rather the return has been assessed in regular scrutiny assessment proceedings. The assessee group was searched on 19.04.2012 which falls in AY 2013-14. The provisions of Sec.153C, as stood at that point, mandate Ld. AO to determine the total income of such other person for six assessment years immediately preceding the assessment year (2013-14 in the present case) relevant to the previous year in which search is conducted or requisition is made. In other words, the assessment was to be framed u/s 153C only for AYs 2007-08 to 2012-13 and not for AY 2013-14. Therefore, we do not find any substance in the legal grounds raised by the assessee. Addition u/s 14A - We find that neither assessee nor revenue has made an attempt to draw the nexus of borrowed funds vis-à-vis its usage by the assessee. Naturally, if the borrowed funds were used to make the investments in the firms from which interest was earned, the assessee was entitled to claim the interest on borrowed capital otherwise not. In case of mixed funds, a presumption could be drawn in assessee’s favor that the borrowed funds were utilized to make investments. Therefore, on the given facts and circumstances of the case, we set-aside the impugned order and remit the matter back to the file of Ld. AO to ascertain the extent to which borrowed funds were utilized by the assessee to make investment in firms and adjudicate accordingly. The assessee is directed to substantiate its case. Regarding disallowance u/s 14A, the assessee is directed to substantiate that the expenditure was allowable from the income earned from partnership firm and no disallowance u/s 14A would be attracted. Needless to add that adequate opportunity of hearing shall be granted to the assessee. Assessee appeal stand partly allowed for statistical purposes.
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