TMI Blog2020 (11) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... icult to hold that the impugned findings of the Ld. CIT(A) suffer any legal infirmity. We, therefore, uphold the findings of the Ld. CIT(A) and dismiss ground No. 1 of the Revenue s appeal. Disallowance of 10% of the purchases made by the assessee from the sister concern - HELD THAT:- We are in agreement with the Ld. CIT(A) that one cannot disallow the purchases on suspicion alone, while ignoring that the corresponding sales would have to be treated as bogus also, in which event it would result in zero-sum outcome. Without rejecting the sales, it would be unreasonable to suspect the purchases alone. AO did not make out any discrepancy in the statutorily mandated audited accounts of the assessee. AO merely proceeded on suspicion in view of the declaration of ₹ 25 crores under section 132 (4) of the Act by one Sh. HS Bedi on behalf of the assessee group of companies for an earlier year, which is quite impermissible in view of the decisions referred to by the Ld. CIT(A). CIT(A) is right in observing that however grave the suspicion is, it is not equivalent to evidence or proof. No addition can be made basing on suspicion, when the books are available before the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenging the deletion of the addition of ₹ 6,30,73,410/- under section 14A of the Act read with Rule 8D of the Rules and ₹ 3, 54,89,157/- added by disallowing 10% of the total purchases on ad hoc basis, in these 2 appeals. Since these two appeals emanate from the same set of facts and the same assessment order, we deem it just and convenient to dispose them of by way of this common order. 5. Coming to the assessee s appeal, it relates to the addition of ₹ 4, 70, 61, 259/- by disallowing, on ad hoc basis, 15% of the interest expense. During the course of assessment proceedings assessing officer noted that the assessee had debited interest expenses amounting to ₹ 31, 37, 41, 731/- in their Profit and Loss Account (P L Account), and since no evidence to prove the fact that the loan on which the interest and finance expenses were paid exclusively utilised for the purpose of the business of the assessee, learned Assessing Officer had taken a view that an amount equivalent to 15% of such interest expense, amounting to ₹ 4,70,61,259/- has to be disallowed under section 36 (1)(iii) of the Act. 6. Assessee produced the details of the interest paid on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im that the difference between the interest paid and interest received alone has to be considered towards the claim of interest expenditure and any disallowance of the interest expense has to be made only with reference to the difference amount and not with reference to the entire interest amount paid. With this view of the matter, we direct the learned Assessing Officer to limit the disallowance of 15% on ₹ 3, 83, 31, 304/- and to delete the balance amount. Ground of assessee s appeal is accordingly allowed in part. 9. First ground of Revenue s appeal relates to the addition of ₹ 6, 30, 73, 410/- on account of disallowance under section 14A of the Act read with Rule 8D of the Rules. It could be seen from the assessment order, that on observing that the assessee had received a dividend amount of ₹ 5,71,95,882/- by making an investment of ₹ 42,50,13,767/-, the assessing officer jumped to the calculation of disallowance under Rule 8D of the Rules without referring to the claim of expenditure, if any, preferred by the assessee in their books. Assessee claims that no expenses have been claimed by the assessee in their P L Account which is relatable to the ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that a substantial amount of ₹ 25 crores was declared under section 132 (4) of the Act at the time of search on the assessee group, on account of bogus purchases and, in such circumstances, the possibility to inflate the purchases cannot be ruled out. 13. On this aspect, while admitting the additional evidence under Rule 46A of the Rules, Ld. CIT(A) sought the report of the learned Assessing Officer and on verification of the record learned Assessing Officer reported that the letters dated 31/10/2013 and 27/11/2013 were to be found on record whereas the letter dated 9/12/2013 was not to be found. On verification of the letters to be found on the record more particularly the letter dated 27/11/2013, Ld. CIT(A) found that this letter contains the part where the details of purchases and sales and such details establish the fact that the assessee had purchased and sold goats in the same day the transactions being with a sister concerns, but the fact remains that both the purchases and sales with group concerns, the bogus purchases would naturally be offset with a bogus sale resulting in a zero-sum outcome. Ld. CIT(A) further observed the assessee had offered profit o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
