TMI Blog2018 (12) TMI 1684X X X X Extracts X X X X X X X X Extracts X X X X ..... ition made by AO in respect of unproved creditors i,e Butterfly Properties Pvt. Ltd., Indigo Edutainment Pvt. Ltd., K.K. Fintrade, P. Sharma (Infra Infotech) and Database Software Technology Pvt. Ltd. - HELD THAT:- identity, credit-worthiness, genuineness has been proved by assessee by furnishing confirmations, PAN numbers etc. and other documents accordingly discussed by the CIT(A) in his order. The claim of the assessee has allowed. The facts are not distinguishable at this stage also. No new evidence has been produced. Taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the issue judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition on account of unproved share application - HELD THAT:- Addition in sum of ₹ 20,00,000/- has been raised in the A.Y. 2007-08, therefore, there is no need to raise the addition in current year being the same would be tantamount the double taxation. Accordingly the facts are not distinguishable at this stage also. Nothing new evidence has been produced so taking into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and discussed but CIT(A) has mentioned the principle which he had already applied while deciding the issue no. 1. The relevant record and remand report etc has been considered. Nothing new evidence came into notice to which it can be assumed that the finding of the CIT(A) is perverse. Finding no distinguishable material to interfere with the finding of CIT(A) we affirm the finding of the CIT(A) on this issue at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition being loss on share trading on sale of shares - HELD THAT:- AO admits that debit note containing the details of the certificate number, distinctive numbers of the shares as also acknowledgement of shares having been received by the concerned buyer are on record. These shares were part of the stock in trade of the appellant company. The loss arriving to the appellant on account of the transaction has rightly accrued to it and the AO has brought no finding on record to dispute that. After the examining the record when the AO found genuineness of the transaction and accordingly submitted the report before the CIT(A), therefore, undoubtedly, the CIT(A) has righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of the claim - HELD THAT:- In the instant case also matter relates to the dividend income on stock of shares held by the assessee. Therefore, in the said circumstances, we are of the view that the matter of controversy is required to be adjudicated on the basis of finding of the Hon ble Supreme Court in the case of Maxopp Investment Ltd Vs. CIT [ 2018 (3) TMI 805 - SUPREME COURT] . Hence, we set aside the finding of the CIT(A) on this issue and restored the matter before the AO to decide the matter of controversy afresh by giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the revenue against the assessee. - I.T.A. Nos.1498 to 1501/Mum/2017 (Assessment Years: 2006-07, 2007-08, 2009-10 & 2011-12) - - - Dated:- 21-12-2018 - Shri Rajesh Kumar, AM And Shri Amarjit Singh, JM Revenue by: Shri Rajeev Gubgotra S. Padmaja (DR) Assessee by: Shri Vinod Kumar Bindal Gaurav Bansal ORDER Amarjit Singh (JM): The Revenue has filed the above mentioned appeals against the different order passed by the Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the letter, the assessment was reopened u/s 147 of the Act. The notice u/s 148 of the Act was given. The credit balance of loan and advances from M/s.Basant Marketing P. Ltd. was carried forwarded in sum of ₹ 1,52,37,750/- and during the current assessment year, the loan and advances was to the tune of ₹ 36,34,000/-. The notice was given on the basis of letter of investigation agencies. The carry forwarded loans and advances in sum of ₹ 1,52,37,750/- was declined and added to the income of the assessee u/s 68 of the Act. The assessee has also shown the credit in Schedule D in sum of ₹ 2,67,77,000/-. The assessee was asked to prove the transaction but the assessee failed to prove the same, therefore, credit in sum of ₹ 2,57,77,000/- was added to the income of the assessee and brought to tax. The assessee also showed the liability of ₹ 20,00,000/- on account of share application money which was also declined and added to the income of the assessee. The assessee also showed the investment in shares of the companies amounting to ₹ 5,00,000/-. The AO applied the provisions u/s 14A r.w. Rule 8D of the Act and disallowed in sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- 5.3.2 In the first instance, the status of BMPL has to be ascertained. I had examined this in detail in my appellate order m the case of another group concern, M/s Watermark Systems (India) Pvt. Ltd, for AY 2003-09 in Appeal No.ClT(A)-8/IT-407/14-15. Relevant extract of that order is reproduced below: 7.3.7 It is noted that Commissioner of Income Tax(A)-20, Kolkata. in his order for assessment year 2010-11 in the case of M/s Basant Marketing Private Ltd has held BMPL as not fake or bogus This fact is also not disputed by the Assessing Officer in his remand report. 7.3.8 Thus, it is seen that the identity of BMPL is established beyond doubt It is a/so not disputed that BMPL had sufficient funds in its own books of accounts arid reflected in bank statements, which establishes its creditworthiness. The appellant is not required to establish source of source as held in Jaikishan Dadlani vs ITO 4 SOT 138 (MUM). The appellant had offered explanation to the Assessing Officer but had not been to submit all documentary evidences because the same were in custody of CBI As already quoted above, in the appeal in the case of BMPL for AY 2010-11, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut it cannot be regarded as undisclosed income of the assessee-company. v CIT v First Point Finance Ltd. (2006) 286 ITR 477 (Raj) CIT v. Bhawani Oil Mills (P.) Ltd. 49 DTR 212. Where it is found that the investors are genuinely existing persons, they have filed confirmations in respect of investments made by them and their statements are also recorded, amount of share application money cannot be treated as unexplained cash credit and no addition can be made under section 68. vi. Shree Barkha Synthetics Ltd. v. Asstt CIT [2006] 263 ITR 377 / 155 Taxman 289 (Raj.), Uma Polymers (P.) Ltd v. Dy OT(2006] 101 TTJ l24 {Jodh.)(TM); Where the share application money is received by the assessee-company through banking channel, the assesses has only to prove The existence of person in whose name share application money is. received Once the existence of investor is proved, it is no further burden of assessee to prove whether me person itself has invested the said money or some other person has made investment in name of that person The burden then shifts on the Revenue to establish that such an investment has come from assesses-company i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were filed in respect of some of the depositors xi. CIT vs. Orissa Corpn. (P.) In this case assessee gave the names and addresses of the creditors. It was in the knowledge of the Revenue that the creditors were incometax assessee. The revenue apart from issuing notices under section 131 did not pursue the matter further. It did not examine the source of income of the alleged creditors to find out whether they were creditworthy Therefore, it was held that in these circumstances, assessee could not do any further and it had discharged the burden laid on it. Xii In Orient Trading Co. Ltd. v. Commissioner of Income-tax (1963) 49 ITR 723 (Born.), one of the questions referred to the Bombay High Court was whether there was arty material before the Tribunal to hold that a sum standing in the books of the assessee to the credit of a third party belonged to the assessee. The Bombay High Court discussed the nature and significance of cash credits in such cases and observed as follows; When cash credits appear in the accounts of an assesses, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order which has been mentioned above. The company has also been held as genuine company by the CIT(A)-20 Kolkata in his order of the A.Y. 2010-11 in case of M/s. Basant marketing Pvt. Ltd. The identity is not in dispute and in its books of account sufficient fund has been reflected. The bank statement also established its credit worthiness. The CIT(A) has relied upon number of cases mentioned in his order and arrived at this conclusion that the assessee has proved the identity, genuineness and credit worthiness of transaction, therefore, no addition can be raised hence allowed the claim of the assessee. The facts are not distinguishable at this stage also. There is no finding of any authority on record in which it has been held that M/s. Basant Marketing Pvt. Ltd. is not genuine company. The Department nowhere preferred the appeal against the judgment mentioned in the finding nor perverse finding is on record. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y me. 5.4.3 Based on the submissions made in the said appeal for A Y. 2007-08, a Remand report was called for vide this, office letter dated 06-02-2015. Remand report was submitted by the assessing officer vide his letter dated 31.8 2016. In the said Remand report the assessing officer has acknowledged that in respect of the amount of credit outstanding in the name of M/s. HFCL, the transaction did not materialize during the year and the amount of advance has been returned by the appellant company to the said creditor in the F.Y. 2012-13 and the creditor has confirmed the receipt of the said amount. In the circumstance there is no basis for holding the amount outstanding as non-genuine. 5.4.4 As far as the remaining credits appearing in the names of M/s Indigo Edutainment Pvt. Ltd (₹ 9,00,000/-), and M/s Database Software Technology Pvt. Ltd (₹ 69,21,000/-), the appellant submits that these are companies of the group and there has been inter-company transactions depending upon the requirement of funds. The creditors acknowledge the credits being outstanding. 5.4.5 Thus, as staled above, there is no merit in treating the balances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e no. 3 is in connection with the deletion of the addition of ₹ 20,00,000/- on account of unproved share application. No doubt the revenue has challenged the deletion of the said decision but on appraisal of the order of the CIT(A), we noticed that the addition has been raised by revenue in the A.Y. 2007-08 which has been dealt by CIT(A) in his order. The finding of the CIT(A) on this issue is hereby reproduced as under for ready reference: - 5.5.1This ground relates to addition of ₹ 20,00,000/- on account of share application money reflected in the balance sheet of the appellant. The assessing officer has discussed this at page 6 of his order. He has made the addition, Taking to consideration above history of assesses company corroborated by adverse report of investigating agency of CBI's stature...... There is no other investigation, finding or observation by the assessing officer for making this addition. 5.5.2 It is noted that the same addition has also been made in the subsequent assessment for AY 2007-08. The issue has been dealt in detail in the appellate order for that year. That being the case, addition made in the instant ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6D is not automatic to invoke Rule 8D, The assessing officer should, after considering the accounts of the appellant give a finding that he is not satisfied with the correctness of the claim of the appellant in respect of such expenditure in relation: to income- which does not form part of the total income under this Act and such 'satisfaction' must be a objective satisfaction. This is evident from the following' observations of the Hon'ble High Court. Subsection (2) of Section 14A does not enable the Assessing Officer to apply the method prescribed by Rule BO without determining in the first instance the correctness of the claim of the assessee. having regard to the accounts of the assessee Subsection (2) of Section 14A mandates that it is only when having regard to the accounts of the assessee. the Assessing Officer is not satisfied with the correctness of the claim of the in respect of expenditure incurred in relation to income which not form part of the total income under the Act, that he can proceed to make a determination under the Rules; 5.6.4 In Union Bank of India v. ACIT, ITA. No. 5347/M/2007, Hon ble ITAT following the decision in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of ₹ 20,00,000/- on account of unproved share application money. 3. whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of ₹ 26,00,000/- being loss on share trading on sale of shares. 4. whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of ₹ 10,000/- u/s 14A of the Act, 1961 observing that disallowance u/s 14A cannot be made if exempt income has not been earned. 5. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 15. The facts of the present case are quite similar to the facts of the case narrated above while deciding the case in ITA. No. 1498/M/2017, therefore, there is no need to repeat the same. However the figure is different. ISSUE NO.1 16. Under this issue the revenue has challenged the deletion of the addition of ₹ 29,55,500/-. The said amount is the part of the credit balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. This fact has also been recorded by the assessing officer in his reasons for reopening the assessment. 7.3.4 As regards the remaining 3 parties, the appellant submitted Ledger balance for financial year 2006-07 and confirmations from the parties. Two of those balances appeared in books prior to 2003 whereas amount of ₹ 25,15,500/- appears from financial year 2005-06. The appellant filed confirmations of all the four parties Being additional evidence, the details filed were forwarded to the assessing officer for a report u/s 250(4) of the Act by my predecessor vide letter dated 06/02/2015. The assessing officer submitted the remand report vide letter dated 31/08/2015. it is noted that the assessing officer has not objected to admission of additional evidence. There is no dispute that the appellant had not been able to submit the documents as records were seized by CBI/ACB during the period of assessment proceedings. The appellant was prevented by sufficient cause from filing those evidences and the same is under exceptions provided under Rule 46A. Therefore, in my opinion, the additional evidences submitted by The appellant pertaining to this ground of appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roper, reasonable and acceptable explanation as regards the sum found credited in the books maintained by the assessee. It further held that the opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material other attending circumstances available on record. The opinion of the AO is required to be formed objectively with reference to the material available on record. Application of mind is the sine qua non for forming the opinion. ii. CIT vs Daula RamRawat Mull (87' ITR 349}(SC) It was held that assessee was not required To prove the source of the source, iii 190 ITR 396 (Bom): It was held that the assessee having discharged the initial burden, by giving complete name and address of the bankers and confirmation letters, it was for the Income-tax Officer to show that the explanation rendered by the assessee was not true, iv. CIT v. Lovely Exports (P.) Ltd. [Appeal No 11993 of 2007, dated 11-1-2008]: If the share application money is received by the assesseecompany from alleged bogus shareholders, whose names are given to the AO, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge of the Revenue that the creditors were income-tax assessees. The revenue apart from issuing notices under section 131 did not pursue the matter further. It did not examine the source of income of the alleged creditors to find out whether they were creditworthy. Therefore, it was held that in these circumstances, assessee could not do any further and it had discharged the burden laid on it. ix Dy. CIT v. Rohini Builders [2002] 256 ITR 360 /[20Q3] 127 Taxman 523 (Guj.) If the identity of the creditors is proved and the amounts are received by account-payee cheques, the initiate burden of proving credit is discharged and the source of credits need not be proved. x. CIT v. Samtel Color Ltd. 64 DTR 46: In this decision given by the Delhi High Court, it was held that by bringing on record every possible information regarding the depositors included in the application form which included particulars of applicant/depositor, telephone No., particulars of demand draft/cheque through which the deposit was made, lax status of applicant and other deposit with the assessee, if any, assessee had discharged the initial laid on it under section 68 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... den, by giving complete name and address of the bankers and confirmation letters, it was for the Income-tax Officer to show that the explanation rendered by the assessee was not true 190 ITR 396 (Bom). 7 3.8 As regards applicability of s. 41(1) is concerned, the caption heading of section 41(1) is 'Profits Chargeable to tax'. In business there are circumstances where a person might have incurred a liability but later on he need not have to pay j| for one or other reason The Income Tax Act brings to tax such liabilities which are no more payable The section brings in to its ambit benefit in cash or in kind obtained by a person by remission or cessation of liability. The only condition is that the person must have obtained a deduction or allowance in his computation of income for the said liability in any previous years. To tabulate the same one needs to consider the following mandatory points, There has to be a remission or cessation of a liability or There has to be recovery of any loss or There has to be recovery of any expenditure The liability must be a trading liability and not on capital acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een the and the creditor discharges the debtor of the debt either fully or partly then to the extent the debt is discharged by the creditor without payment by the assessee, liability would cease to exist. Thus, there has to be an event for cessation of liability to lake place. However, nothing like that has happened in the case of appellant company during the relevant assessment year and as such liability in respect of such creditors cannot be considered as ceased to exist. 7.3.12 Credit amount outstanding for several years cannot be held as cessation of trading liability on the ground That assessee could not prove genuineness of the transactions, where assessee had acknowledged its (lability successively over several years. For this conclusion, reliance is placed on [he judgment of Delhi High Court in the case of GtT, Delhi-H vs Gen Exports Pvt Ltd. [2013] 35 Taxmann.com 540 and CfT- Iff vs Shn Vardhaman Overseas Limited J2011] 16 Taxmann.com 350/343 ITR 40d. 7.3.13 The Delhi High Court in the case of CIT - III vs Shri Vardhaman Overseas Limited [2011] 16 Taxmann.com 350/ 343 ITR 408 has further held that the question whether the liabilities were genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... editors which were brought forward from earlier years were outstanding and none of these creditors have been written off in the books of accounts are not in dispute. Further the appellant has the intention to make the payment to such creditors is evident from the fact that they are still reflected in the books of accounts. However, the AO had neither disproved the appellant's claim relating to the impugned liability nor discharged his onus to prove that the appellant has obtained the benefit in respect of such trading liability by way of remission or cessation thereof. Merely because the appellant obtained benefit of reduction in earlier years and balance is carried forward in the subsequent year, it would not prove that the trading liabilities of the appellant have become nonexistent Further, when the appellant continues to reflect or record the liabilities as still payable and appellant decided to not to write them off unilaterally, the AO has higher levels of responsibility and hence he has to establish with evidence that the said book entries are wrong or not bonafide. This view is supported by the decisions of the tribunal in the cases of Shri Vardhman Overseas Ltd. vs. AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of transaction has been proved and creditworthiness is also on record. Applying the same ratio of finding which has applied by the CIT(A) while deciding the issue no. 1, the claim of the assessee has been allowed. No doubt this issue has not been described and discussed but CIT(A) has mentioned the principle which he had already applied while deciding the issue no. 1. The relevant record and remand report etc has been considered. Nothing new evidence came into notice to which it can be assumed that the finding of the CIT(A) is perverse. Finding no distinguishable material to interfere with the finding of CIT(A) we affirm the finding of the CIT(A) on this issue at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.3 18. Under this issue the revenue has challenged the deletion of addition of ₹ 26,00,000/-being loss on share trading on sale of shares. The assessee showed the loss of ₹ 26,00,000/- on account of sale of shares of Tirupati Fibres and Industries Ltd. The Assessing Officer was of the view that the assessee has shown the artificial loss, in fact, the assessee did not suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance u/s. 14A in a routine and automatic manner 5.6.3 The Hon'ble Bombay High Court in the case of Godrej Boyce Mfg Co. Ltd. vs. DCIT (328 ITR 81) (Bom) has held that Rule 6D is not automatic to invoke Rule 8D, The assessing officer should, after considering the accounts of the appellant give a finding that he is not satisfied with the correctness of the claim of the appellant in respect of such expenditure in relation: to income- which does not form part of the total income under this Act and such 'satisfaction' must be a objective satisfaction. This is evident from the following' observations of the Hon'ble High Court. Subsection (2) of Section 14A does not enable the Assessing Officer to apply the method prescribed by Rule BO without determining in the first instance the correctness of the claim of the assessee. having regard to the accounts of the assessee Subsection (2) of Section 14A mandates that it is only when having regard to the accounts of the assessee. the Assessing Officer is not satisfied with the correctness of the claim of the in respect of expenditure incurred in relation to income which not form part of the total income und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 1,11,85,000/- made by the AO on account of unproved credits. 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was right in deleting the addition of ₹ 26,409/- u/s 14A of the Act, 1961 observing that disallowance u/s 14A cannot be made if exempt income has not been earned. 3. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the AO be restored. 23. The facts of the present case are quite similar to the facts of the case as narrated above while deciding the appeal above in ITA. No. 1498/M/2017, therefore, there is no need to repeat the same.However, the figure is different. ISSUE NO.1 24. Under this issue the revenue has challenged the deletion of addition of ₹ 1,11,85,000/- made by the AO on account of unproved credits. The Ld. Representative of the revenue has argued that the CIT(A) has wrongly deleted the addition of ₹ 1,11,85,000/-, therefore, the finding of the CIT(A) is not justifiable and is liable to be set aside. However, on the other hand, the Ld. Representative of the assessee has strongly relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y did the appellant discharge its onus of establishing identity and creditworthiness of creditors and genuineness of transactions, the assessing officer has admitted that ail the balances were very old. It is settled taw that such old balances cannot be added u/s 68 for the current year' 7.3.5 Following the reasoning for my earlier decisions on similar grounds, looking into the submissions of the appellant and the remand report of the assessing officer in the instant appeal, I am of the opinion that the above additions deserve to be deleted. These grounds of appeal are allowed. 25. On appraisal of the above said finding, we noticed the matter of controversy has been adjudicated by the CIT(A) on the basis of the finding for the A.Y. 2006-07 to 2008-09 in which it has been established that the identity, genuineness of transaction and creditworthiness of the creditors has been duly proved. Merely the transaction is very old, cannot be the base of the addition. Moreover, the remand report substantiated the claim of the assessee also. The facts are not distinguishable at this stage and finding no justifiable ground to be interfere with at this stage, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n relation to income which not form part of the total income under the Act, that he can proceed to make a determination under the Rules; 5.6.4 In Union Bank of India v. ACIT, ITA. No. 5347/M/2007, Hon ble ITAT following the decision in the case of Wimco Seedling Ltd. v. DCIT 107 ITD 267 Delhi TM, held that only expenditure which has been proved to have been incurred in relation to the earning of tax free income, can be disallowed, and the section cannot be extended to disallow even expenditure which is assumed to have been incurred for the purpose of earning the tax free income. In delite Enterprises (ITA. No. 2983/M/2005 (BOM) wherein it was held that if there is no income earned by the assessee which is claimed to be exempt, no disallowance u/s 14A can be made. 5.6.5 In facts and circumstances of the case, the disallowance u/s 14A cannot be upheld. This ground of appeal is allowed. 27. On appraisal of the above mentioned finding, it is quite clear that the CIT(A) has deleted the addition on the basis of this fact that the assessee did not earn the exempt income in the relevant assessment year and also relied upon the decision of the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant craves have to amend or alter any ground or add a new ground which may be necessary. 30. The facts of the present case are quite similar to the facts of the case narrated above while deciding the appeal bearing ITA. No. 1498/M/2017, therefore, there is no need to repeat the same. However the figure is different. ISSUE NO.1 31. Under this issue the revenue has challenged the deletion of the addition of ₹ 10,00,00,000/- on account of unsecured loans u/s 68 of the I.T. Act, 1961. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record: - 5.2.1 This ground relates to addition of ₹ 10 crores on account of share purchase transaction and treating the same as unexplained credit. The AO has discussed this issue at page 3 of his order. He has observed that the appellant had taken the impugned amount as fresh secured loan from M/s. Satya Securities ltd., which is a group company. The appellant filed submission dated 10.03.2014 which has been summarily rejected by the AO on the basis of intimation received from DCIT Central Circle-XXVIII, Kolkata and report of CBI. 5.2.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Basant Marketing Private Limited (BMPL) and list of sundry creditors includes ₹ 14,90,700/- in Ihe name of M/s Consultshah Financial Services Private Limited (CFSPL). The Assessing Officer has dismissed explanation and evidences submitted by the appellant vide fetter dated 30/03/2014, Having regard to assessee s indulgence in scrupulous activities in the light of findings of investigating agencies . 5.3.2 It is noted that the appellant had filed confirmation of M/s BMPL and CFSPL, audit reports, audited balance sheets, JTR etc. had discharged initial onus to establish identity, creditworthiness and genuineness in the context of section 68 of the Act. All the facts and circumstances, nature of evidences filed and submissions made are similar to those at ground no. 1 above. Accordingly, addition of ₹ 15,20,700/- is deleted. This ground of appeal is allowed. 34. In fact the credit balance of ₹ 30,000/- in respect of M/s. Basant Marketing P. Ltd. and credit balance in sum of ₹ 14,90,700/- with the name of M/s. Consultshah Financial Services P. Ltd were discussed by the AO as non genuine. The appellant filed the confirmation of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.5.1 This relates to disallowance of ₹ 4,50,537/- u/s 14A Rule 8D. The AO has discussed this at para iv./pg.5-6 of his order. He observed that the appellant has made long term investments in shares and during the year it has earned dividend of ₹ 994,000/- claimed as exempt. He has rejected submissions of the appellant and applied Rule 8D(2)(iii) to disallow 0.5% of average investments and inventory. 5.5.2 It is noted that the appellant is in the business of share trading and holds shares as stock in trade. Further, during the year, the appellant has received the entire divined on shares of just one company. Hon ble Bombay High Court has settled the issue as regards dividend earned from shares kept as stock in trade in CIT V India Advantage Securities Ltd. (ITA. No.1131 of 2013 dated 13042015). This principle has been reiterated m HDFC Bank Ltd vs DC/7; Writ Petition No. 1753 of 2016 dt.25/02/2016- Moreover, the Assessing Officer has also not explained his dissatisfaction with the claim of the appellant that no disallowance u/s 14A is required but has applied R.8D(iii) in a routine and mechanical manner 5.5.3 In Pukhraj Chunilal Bafna v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee in respect of such expenditure or no expenditure having been incurred in relation to exempt income, that the mandate of rule 8D will operate in the instant case, the authorities below have directly gone to the second stage of computing disallowance under section 14A as per rule 8D without rendering any opinion on correctness or otherwise of the assessee's claim in this regard . 5.56 In the decision in the case of Yatish Trading Co. Pvt. Ltd. Vs. ACIT (456/M/2009), the Hon'ble Mumbai Tribunal held that there must be a live nexus between the expenditure incurred and the taxfree income The assessing officer has not established that. 5.5.7 In view of the above decisions and in the facts and circumstances of the case, addition of ₹ 4,50,537/- u/s 14A r.w.r. 8D is deleted. This ground of appeal is allowed. 38. On appraisal of the above mentioned finding, we noticed that the AO nowhere examined the claim of the assessee. Undoubtedly, the assessee earned the dividend income to the tune of ₹ 994,000/-. The assessee nowhere showed the expenditure to earn the exempt income. The CIT(A) has deleted the said addition on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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