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2020 (11) TMI 50 - AT - Income TaxDisallowance u/s 36 (1)(iii) - interest paid on the loan - HELD THAT:- Loans taken were utilised for advancing the loans in furtherance of their business and, therefore, the assessee is entitled to claim that the difference between the interest paid and interest received alone has to be considered towards the claim of interest expenditure and any disallowance of the interest expense has to be made only with reference to the difference amount and not with reference to the entire interest amount paid. With this view of the matter, we direct the AO to limit the disallowance of 15% and to delete the balance amount. Ground of assessee’s appeal is accordingly allowed in part. Disallowance u/s 14A read with Rule 8D - Non recording of satisfaction - HELD THAT:- AO did not record any satisfaction towards the expenditure incurred by the assessee for earning the exempt income, not any such satisfaction is it is discernible from the assessment order. Ld. CIT(A) rightly followed the binding precedent of the Hon’ble jurisdictional High Court, and therefore, we find it difficult to hold that the impugned findings of the Ld. CIT(A) suffer any legal infirmity. We, therefore, uphold the findings of the Ld. CIT(A) and dismiss ground No. 1 of the Revenue’s appeal. Disallowance of 10% of the purchases made by the assessee from the sister concern - HELD THAT:- We are in agreement with the Ld. CIT(A) that one cannot disallow the purchases on suspicion alone, while ignoring that the corresponding sales would have to be treated as bogus also, in which event it would result in zero-sum outcome. Without rejecting the sales, it would be unreasonable to suspect the purchases alone. AO did not make out any discrepancy in the statutorily mandated audited accounts of the assessee. AO merely proceeded on suspicion in view of the declaration of ₹ 25 crores under section 132 (4) of the Act by one Sh. HS Bedi on behalf of the assessee group of companies for an earlier year, which is quite impermissible in view of the decisions referred to by the Ld. CIT(A). CIT(A) is right in observing that however grave the suspicion is, it is not equivalent to evidence or proof. No addition can be made basing on suspicion, when the books are available before the assessing officer to bring out material sufficient to support his suspicion. In the absence of any such evidence, no ad hoc disallowance could be sustained and, accordingly, we decline to interfere with the findings of the Ld. CIT(A). - Decided against revenue.
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