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TMI Blog2012 (8) TMI 985X X X X Extracts X X X X X X X X Extracts X X X X ..... he case are that the assessee is an individual and is a member of 'Atithi Group'. A search and seizure action under Section 132(1) was conducted in the premises of the assessee on 4-10-2006. Accordingly, a notice under Section 153A, dated 16-3-2007 was served requiring the assessee to furnish the return of income in the prescribed form. In response to the notice for all the assessment years in question, the assessee submitted that his original return filed may kindly be treated as return in response to notice under Section 153A. In the assessment year 2004-2005, the assessee has raised the following additional grounds :- Additional Ground No.1: "On the facts and in the circumstances of the case, and in law, the assessment order passed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(2) has not been expired, therefore, the assessment was still open and in view of the provisions of section 153A, such assessment gets abated. Under Section 153A, the Assessing Officer is empowered to assess or reassess the "total income" for six assessment years, preceding to the year of assessment in which search has taken place. There can be only one assessment order in respect of six assessment years. If the assessment proceedings are pending completion,on the date of search is initiated, they will get abated and the Assessing Officer has to complete the assessment on the total income including disclosed and undisclosed income. If the assessment proceedings have already completed or attained finality, then there is no questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search." 5. From the above proposition of law laid down by the Hon'ble Special Bench, so far as the assessee's case for assessment year 2004-2005 is concerned, we find that the assessment for the assessment year 2004-2005 had attained finality and the same will not get abated. The addition in such a case can only be made on the basis of incriminating material found in the course of search and in the instant case, from the perusal of the assessment order as well as the order of CIT(A), it is seen that the disallowance on interest, which has been made, is not based on any seized material or documents found during the course of searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it is not necessary to earn income as a result of any expenditure in the year in which expenditure is incurred, it is sufficient that there is potentiality to earn the income. This contention was taken in view of the principle laid down by the Hon'ble Supreme Court in Rajendra Prasad Moody's case in 115 ITR 519. 8. The Assessing Officer rejected the said contention on the ground that the assessee has not earned any income from the use of the borrowed funds by lending the same to the company where he is a director. Further, it is not for the sustaining the earning capacity by advancing the funds to the company. Such an investment will mainly for the dividend income, which is exempt and, therefore, as per the provision of Section 14A, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for such investment would not have been allowed u/s. 14A of the Act. In any case, the aforesaid interest expenditure has not been wholly and exclusively incurred for the purposes of appellant's business and therefore, the same is not allowable u/s. 37(1) of the Act. Reliance is placed on the following decisions :- 1. Phalton Sugar Works Ltd. Vs. CIT (1994) 208 ITR (Bom) 2. Phalton Sugar Works Ltd. Vs. CIT (1995) 216 ITR 479 (Bom) 3. Phalton Sugar Works Ltd. Vs. CIT (1997) 138 Taxation 650 (Bom) 4. Shankar Theatres Vs. CIT (1984) 146 ITR 547 (Bom) 5. CIT Vs. Doctor & Co. 180 ITR 627 (Bom) 2.3.2 Having regard to the facts and circumstances of the case and in light of the aforesaid Jurisdictional High Court's decisions, the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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