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M/s Sunrays Properties & Investment Co. Pvt. Ltd. Versus. Income-tax Officer, Ward 9 (3) , New Delhi.

2015 (5) TMI 845 - ITAT DELHI

Reopening of assessment - Held that:- We find that notice u/s 148 had been issued primarily on the basis of information received from Investigation Wing of department regarding accommodation entries received from M/s Garg Finvest (P) Ltd. amounting to ₹ 3,00,315/-. Therefore, it is not correct to say that no addition had been made in respect of the amounts on which notice u/s 148 had been issued. - Decided against assesse.

Commission paid for obtaining the said accommodation ent .....

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- Held that:- CIT(A) correctly did not apply Rule 8D by observing that the said Rule was applicable w.e.f. assessment year 2008-09, as laid down by the Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] and applying formula for computing disallowance u/s 14A in cases prior to AY 2008-09 where the provisions of Rule 8D of IT rules are not applicable - Decided in favour of assesse. - ITA nos. 2970 & 2971/Del2013, ITA nos. 3278 & 32 .....

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the case are that the assessee had filed its return of income declaring Nil income, after claiming brought forward loss to the extent of ₹ 2,70,76,818/-. Tax had been paid on book profit u/s 115JB on ₹ 2,67,27,280/-. Subsequently, on the basis of information received from Investigation Wing of the Department that the assessee company had received accommodation entry from M/s Garg Finvest (P) Ltd. amounting to ₹ 3,00,315/- each on 23-8-2003 total amounting to ₹ 6,00,630/-, .....

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which the alleged amount had been given to the assessee company. The bank sent the bank statement of M/s Garg Finvest (P) Ltd. for the relevant period and confirmed that two cheques were issued by M/s Garg Finvest (P) Ltd. for making the draft and one cheque dated 777676 dated 23-8-2003 for ₹ 3,00,315/- had been used to make the draft for ₹ 3 lacs in favour of the assessee company and another cheque no. 759399 dated 30- 5-2003 for ₹ 3,00,315/- had been used to make draft of &# .....

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e company submitted that it had disclosed sale through its profit & loss account and, therefore, there was no income which had escaped assessment. 2.2. The AO, however, did not accept the assessee s contention for the following reasons: (a) No details regarding sale of shares of M/s Garg Finvest (P) Ltd. were furnished; (b) Genuineness of the transaction and creditworthiness of the parties was not established. (c) The assessee was taking the plea almost throughout the assessment proceedings .....

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be examined. (f) M/s Garg Finvest (P) Ltd. had been subjected to certain inquiries and investigation by the Investigation Wind, wherein it was found that they were not carrying on any active business and only providing accommodation entries. 2.3. He, accordingly, made addition of ₹ 3 lacs. 2.4. The AO also made addition of ₹ 7500/- on account of commission being paid by assessee for obtaining the accommodation entries. 2.5. The AO further noted that assessee had earned dividend incom .....

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14A at ₹ 1,64,38,217/-. 2.7. Ld. CIT(A) partly allowed the assessee s appeal. 2.8. Being aggrieved with the order of ld. CIT(A), both the assessee and the revenue are in cross appeal before us. 3. First we take up the assessee s appeal, being ITA no. 2970/Del/2013. Following grounds are taken: 1. On the facts and in the circumstances of the case and in law, the Id. CIT ( A) erred in not appreciating that the order passed by the Assessing Officer u/s 143(3) of the Income tax Act,1961 is wi .....

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ions of Section the Income- tax Act, 1961, ignoring the fact that no addition was made on the basis of reasons recorded by the AO and therefore ,assessment was liable to be quashed on that ground alone. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in disbelieving the sale of shares by the assessee company and thereby further erred in making addition of RS.3 lacs & ₹ 7,500j-ujs 68 of the Income tax Act,1961 on account of sale of shares reflected .....

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end or delete any of the grounds of appeal during the course of hearing of the appeal. 4. Apropos ground no. 1, the assessee s plea before ld. CIT(A) was that reopening of assessment u/s 147 was bad in law, since the notice u/s 148 had been issued beyond the period of limitation laid down u/s 149(1) of the I.T. Act. The assessee had given detailed submissions, inter alia, pointing out that since the notice u/s 148 dated 28-3-2011 had been served on the assessee company on 30-3-2011 i.e. beyond t .....

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₹ 3 lacs and also of commission of ₹ 7500/-. 4.2. Before us the assessee has assailed the invocation of jurisdiction u/s 147, mainly on the ground that once the income alleged to have escaped assessment recorded in the reasons, was not found correct and no addition was made on this count in the assessment order, the assessment was liable to be quashed. 4.3. We find that notice u/s 148 had been issued primarily on the basis of information received from Investigation Wing of departmen .....

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n detail the findings of AO on this count, which have been confirmed by ld. CIT(A). Nothing has been brought on record to controvert the findings of ld. CIT(A) that assessee has not been able to establish the genuineness of the transactions and keeping in view the contrary stand taken by the assessee during assessment proceedings and after the details of the inquires were confronted to assessee, we find no reason to interfere with the order of lower revenue authorities on this count. Accordingly .....

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hur by observing as under: The Hon ble Kerala High Court in the case of CIT Trichur Vs. Catholic Syrian Bank Ltd., Trichur, vide its judgment has suggested a formula for computing disallowance u/s 14A in cases prior to AY 2008-09 where the provisions of Rule 8D of IT rules are not applicable. The formula suggested by the Hon ble High Court is as under: Total Interest Liability ___________________X 1,26,61,025= ₹ 33,16,436/- 7,62,03,737 Keeping in view of the above facts, I am of the view t .....

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Having heard both the parties, we find that since the disallowance has been computed by ld. CIT(A) by applying the methodology laid down by Hon ble Kerala High Court, therefore, no interference is called for in the same. We, accordingly, confirm l. CIT(A) s finding on the issue in question. 7. Ground no. 5 is premature and ground no. 6 is general in nature, requiring no adjudication. 8. In the result, assessee s appeal is dismissed. Revenue s appeal (ITA 3278/Del/2013 - AY 2004-05): 9. Sole effe .....

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