9911796707
TMI Blog2011 (11) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... s return of income declaring total income of ₹ 11,03,650/-on 31/12/1999, which was processed u/s 143(1) accepting the returned income. A survey action u/s 133A was conducted on 15/02/1999 wherein it was noticed that there was excess stock of ₹ 19,98,796/-. The working of the excess stock computed by the survey party reproduced by the AO at pages 1 & 2 in assessment order. The AO noted that in accordance with the stock position of the assessee as on 31/03/99 as per the books the value should have been of ₹ 70,07,180/- instead of total stock found valued at ₹ 99,00,564/-. Accordingly, excess stock found calculated at ₹ 99,00,564 - 70,07,180/- ₹ 19,98,796/-. The AO after taking into consideration the answer to question No. 10 & 11 of the statement made by the Assessee on the date of survey, which was reproduced by the AO in assessment order at page 2 in assessment order, and taking into consideration the disclosure made by the assessee of ₹ 20 lakhas towards additional sales, made an addition of ₹ 20 lakhs as additional income by holding that the assessee never produced any evidence in support of his claim nor did he produced books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w after providing reasonable opportunity of hearing to the assessee. Thus, this ground is treated as allowed for statistical purposes. 8. Ground No. 2 reads as under:- "1. The CIT(A) erred in confirming the addition of ₹ 8,92,950/- to the income of the assessee for the following reasons: a) The CIT(A) failed to appreciate that there was in fact no diversion of funds. b) The CIT(A) erred in not appreciating on the facts of the case the provisions of section 14 A did not apply." 9. The assessee had made investment of Rs, 1,99,05,100/-. It had been pointed out by the assessee that besides the capital, the assessee was having loans and borrowings of ₹ 1,09,49,479/- and deposit on lease rent of ₹ 1,15,00,000/-. The deposit on lease rent was received from a sister concern M/s Ashraj Foods & Beverages Pvt. Ltd. The Assessee held that the assessee had invested in shares out of his borrowings and therefore he asked the assessee to explain the source of investment of these shares. After considering the reply filed by the assesssee dated 20/03/2002 and following the ratio of the decision of the Madras High Court in the case of Sujani Textiles Pvt. Ltd., the AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Godrej & Boyce Co. Ltd. On the other hand, the learned DR submitted that neither the AO nor the CIT(A) applied Rule 8-D, however, in principle he has accepted that the matter may be remitted back to the AO to decide the issue as per the judgment of the jurisdictional High Court in the case of Godrej and Boyce Ltd [2010] 328 ITR 81 (Bom.). 11. After hearing the learned representatives of the parties, perusing the record and going through the orders of the authorities below, we find that the issue in dispute is covered by the decision Hon'ble jurisdictional High Court in the case of Godrej & Boyce Mfg. Co. Ltd., [2010] 328 ITR 81 (Bom.) wherein the Hon'ble Court held as under:- "That the provisions of rule 8D of the Rules which have been notified with effect from March 24, 2008, would apply with effect from assessment year 2008-09. Even prior to assessment year 2008-09, when rule 8D was not applicable, the AO had to enforce the provisions of sub-section (1) of section 14A. For that purpose, the AO is duty bound to determine the expenditure which has been incurred in relation to income which does not form part of the total income under the Act. The AO must adopt a reasonab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e co-ordinate bench held as under:- "13. We have heard the parties. While deciding the assessee's appeal for the AY 1996-07, we have decided the issue of 'deemed dividend' u/s 2(22)(e) of the Act. In the year, though the assessee has taken the stand that the amount received from M/s Ashraj Foods was towards deposit for leasing out the galas to the said company to the extent of ₹ 1.15 crore but the same was rejected by the AO as well by the Ld. CIT(A) and we have also confirmed the finding given by the authorities below in respect of the nature of the advance and held that it was not towards the deposit for leasing out galas/units but simple advance. Once it is held that the amount received by the assessee is not in the nature of the deposit for leasing out any property then the same cannot, at the first instance, be considered for the purpose of computing the annual value ALV u/s 23(1)(a) of the Act. Admittedly, in the present case, it is claimed that the assessee has not received any rent from M/s Ashraj Foods and hence, section 23(1)9b) is not applicable. So far as section 23(1)(a) is concerned, that contemplates the factum of the property given on lease/leave and licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 11,03,650/- on 31/12/1999 for the year under consideration. Subsequently, the assessment order u/s 143(3) was passed on 28/03/202 determining the total income of assessee at ₹ 55,34,880/-. Thereafter, a survey was carried out u/s 133A in the business premises of the assessee. One of the issue for the addition was ₹ 19,98,796/- on account of excess stock found during the course of search action. Based on the excess stock found, assessee declared additional income of ₹ 20 lakhs. In addition to the said addition, disallowance of interest of ₹ 12,93,750/- being the notional interest calculated by the AO and ₹ 8,92,950/- being interest disallowed by invoking the provisions of section 14A of the Act. The CIT(A) confirmed the said additions. Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) of the Act on the ground that the assessee had concealed his particulars of income. The explanation and the reasons given by the assessee in the penalty proceedings were rejected by the AO and levied penalty of ₹ 12,45,010/- against the total additions of ₹ 41,86,700/-. Aggrieved the assesee carried the matter in appeal before the CIT(A). After c ..... 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