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2017 (1) TMI 251 - ITAT CHENNAIDisallowance of the loss on sale of shares - conversion of the investment into stock-in-trade disclosed under the head ‘business’ - revised return of income rejected - Held that:- AO was not ready to accept his personal statement which was given by Chartered Accountant before the AO. The AO for the purpose of clarification, he summoned Mr.C.L.Ravindra, Chartered Accountant. When he confirmed his report which related to his statement in the notes on account filed along with revised return of income, the AO was not ready to accept the same, when it is in favour of assessee. This kind of action of AO is not appreciable. Thirdly, the AO called for original copy of minute book of Board meeting. However, the assessee produced the copy of typed copy of minute book. He doubted the typed copy of minute book and he rejected the same. If the surrounding circumstances suggest that the assessee converted investment into stock in trade and also supported by the minutes produced by the assessee, still if he had the doubt, he should have clarified it from Board of Directors who attended the meeting. Instead of this, he rejected revised return of income itself, which is not appropriate. More so, in our opinion, the assessee could make claim even at appellate stage as held by the Supreme Court in the case of National Thermal Power Co. Ltd. in [1996 (12) TMI 7 - SUPREME Court]. We find that the procedural irregularities committed by the assessee either under the Companies Act or Income Tax Act, cannot be considered as a fatal so as to disallow the claim of assessee. Accordingly, we direct the AO to consider the revised return as a valid return filed by the assessee in terms of Sec.139(5) of the Act and complete the assessment as per the revised return filed before him. This ground of assessee is allowed. Addition u/sec.40(a)(ia) - payments to two sub-contractors - Held that:- This issue is squarely covered by the order of the Special Bench of the Tribunal in the case of Merilyn Shipping and Transports v. Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] wherein held that when the “expenses” is not outstanding at the end of the close of the financial year, provisions of the section 40(a)(ia) of the Act cannot be applied. Being so, if the amount is already paid, the provisions of the section 40(a)(ia) cannot be applied. With this observation, we remit the issue to the file of ld. Assessing Officer for fresh consideration. Disallowance being the expenses quantified as per Rule 8D of IT Rules on the application of Sec.14A in the computation of taxable income - Held that:- For assessment year 2009-10, the same issue came for consideration before this Tribunal in the case of M/s Consolidated Construction Consortium Ltd [2016 (2) TMI 230 - ITAT CHENNAI] disallowance u/s.14A r.w. Rule 8D should not exceed the exempt income. The Mumbai Bench in its order in M/s Daga Global Chemicals Pvt. Ltd vs ACIT [2015 (1) TMI 1204 - ITAT MUMBAI] sustained the disallowance on applicability of provisions of sec.14A r.w. Rule 8D. However, the alternative claim of the assessee was that disallowance if at all should be made, it should be restricted to exempt income earned and not beyond that. Accordingly, the AO is directed to look at this issue on this angle and decide it afresh in the light of the above decision of the Mumbai Bench of the Tribunal
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