TMI Blog2017 (5) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... urchases, whereas the disallowance made on account of GP is sustained to cover possible leakage of revenue. Disallowance of Interest under rule 8D(2)(ii) of the Rules - expenditure at the rate of 0.5% of the average investment u/s 14A of the Act read with rule 8D(2)(iii) of the Rules - disallowance - Held that: - the assessee‟s own funds were ₹ 3,89,28,953/- whereas the investments made by the assessee in shares and securities were ₹ 1,25,15,918/- as per the balance sheet as on 31.3.2010 - in view of the ratio laid down in the case of HDFC Ltd [2014 (8) TMI 119 - BOMBAY HIGH COURT], wherein the Hon'ble Jurisdictional High Court has clearly held that the when the assessee own funds are more than the investments made in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O called upon the assessee to prove the genuineness of the transactions, produce bills/challans of transporters, which were not produced. Moreover, these purchases were made on credit basis. Accordingly, a show cause notice was issued as to why these purchases should not be treated as accommodation entries and brought to tax u/s 68 of the Act. The AO rejected the books of account u/s 145(3) of the Act and also applied GP rate at the rate of 2% on ₹ 9,36,000/- and worked out the disallowance to ₹ 18,720/-. Aggrieved assessee filed appeal before the ld.CIT(A), who after considering the submissions of the assessee sustained both the additions by observing and holding as under : 3.2 Findings and decision On careful co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no evidence that payment was made within 45 days and if it was made subsequent thereof, any interest was paid as per this stipulation laid down in the bill. If the payment is made subsequently to say after a reasonable period, it implies that assessee had fiduciary relationship because no prudent person would like to sell to an unknown person on credit for a long period. In given circumstances, the assessee should produce such person or produce latest confirmation from such seller. The assessee had failed on all counts. The bills itself reveals certain suspicious features. As per tax invoice issued by the seller, column as to 'buyer's order no.' states 'ON TELE', whereas assessee relies on its purchase order which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand the ld.AR submitted that the total purchases of the assessee during the year were ₹ 8,23,42,226/- and the sales were to the extent of ₹ 1,32,99,36,208/-. The ld. AR submitted that the payments were made through banking channels and by account payee cheques, the materials were duly received and entered in the books of account including the stock register of the assessee. The ld. AR argued that the AO has not doubted the sales of the assessee as the materials received has been duly sold. We find that when the AO not doubting the sales cannot disallow the entire purchases without giving detailed findings. At the most GP on the said purchases could be brought to tax which has already been done by applying 2% of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,84,741/- without going into the facts on records. The ld. AR argued that the assessee deployed its own funds which were far more than the investments made in shares and securities on which the assessee earned dividend during the year of ₹ 3,87,611/-. The ld. AR further argued that since the assessee‟s own funds were far more than the investments made in shares therefore no disallowance of ₹ 1,36,539/- is called for u/s 14A of the Act r.w.r 8D(2)(ii) of the Rules and should be deleted. In support of this submissions the ld.AR strongly placed reliance on the decisions of Jurisdictional High Court in the case of CIT V/s RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (Bom) and CIT V/s HDFC BANK LTD. [2014] 366 ITR 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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