TMI Blog2021 (8) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... balance amountthe details of which are given in page 29 of the paper book, we note that these are receipts from FYs 2005-06 to 2010-11. This amount if the assessee has offered to tax in the subsequent assessment years then it should not be taxed and this also the AO need to consider afresh after verification and pass order in accordance to law. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- We note that the assessee has prepared separate income and expenditure account (personal) where dividend income which assessee claimed as exempt. According to Ld. AR, even though the portfolio management expenses of ₹ 39,18,761/- has been debited as expenses relating to portfolio management expenses, this expenses has not been claimed as deduction in the computation of total income which fact has not been verified by the AO or the Ld. CIT(A). According to Ld. AR, the assessee has incurred expenses of only ₹ 39,18,761/- for earning exempt income and the assessee has not claimed any deduction of the same in its revised computation of total income which is placed from pages 2 to 7 of the paper book. Therefore this issue need to be examined by AO afresh, for that we set aside the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in it as discussed above and which is accepted by the assessee also. Assesses in any case is fallowing cash system of accounting. No further details are available on record regarding this hence this amount is also treated as a component of assessee's taxable income for the year end added to total income of the assessee. Balance sheets submitted alongwith audit report have an element of finality in them and provides snapshot of assessee's performance at a specific point in time. On the other hand provisional balance sheets provide an interim snapshot that may be modified. Provisional means that something is conditional or interim or subject to change or alteration. Provisional also means that something serves a purpose for the time being. A balance sheet may he provisional due to pending adjustments to the net income statement that will impact earnings. However a balance sheet prepared and signed by the auditor and which is submitted along with the audit report and in compliance to statutory provisions is not expected to be provisional. Hence this discussion along with the additions made in the previous years on the issue of advances tends credence to the belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payers are not identifiable in the relevant year of deposits; and those un-identifiable payers whose receipts are shown in the suspense account maintained by the assessee, which practice assessee has been following for a long time; and whenever the assessee is able to identify the payer of the receipt, then the identified receipt is taken out of suspense account and duly offered to tax in that assessment year. And the assessee had shown in this assessment year in his suspense account an amount of ₹ 19,04,784.47 out of which a sum of ₹ 5,24,498.24 is the opening balance (refer page 26 of paper book). According to the assessee, an amount of ₹ 16,50,203.71 out of the amount of ₹ 19,04,784.47 was identified as on 29.11.2017 and offered to tax in the subsequent assessment years (refer to pages 27 and 28 of the paper book) which fact according to the Ld. AR can be verified by the AO. According to the Ld. AR, the details of the remaining amount of ₹ 2,54,581/- are given at page 29 of the paper book and since the identity of the payers has still not been identified it is still shown in suspense account. According to the Ld. AR, as and when the identity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as the Act ) read with Rule 8D of the Income Tax Rules, 1968 (hereinafter referred to as the Rules ). 7. The AO noted that the assessee has shown dividend from shares and mutual fund of ₹ 2,13,68,176/- which was claimed by him as exempt. According to the AO, in the computation of total income the assessee has not computed and disallowed any expenditure u/s. 14A of the Act. According to the AO from the details of assessee's account he discerned that the assessee has business as well as investment activity carried out during the year. According to the AO, the assessee has claimed all the expenses under the head business expenses; and against income from other sources all the expenses has been treated as business expenditure only. According to AO, the matter was discussed with the counsel for the assessee and then AO was of the opinion that the expenses incurred and claimed in respect of exempt income should be disallowed as per the provision of section 14A of the Act read with Rule 8D of the Rules. According to the AO, since the assessee has invested in instruments which have given rise to exempt income in the form of dividend and long term capital gain, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not record his reasons, Now coming to the merits of the issue, The undisputed fact is that the appellant maintains two separate books of account. One for his business and the other for his investment activity. In fact the AO has observed this when he says that expenses have been debited to the business side of the accounts. The appellant earns about 22.36 crores from his professional and business activities and about 2.14 crores from his investment related activities. Thus the income from the investment activity amounts to about 10% of the income from business and profession. The income from the investment activity has arisen on account of investments in shares and mutual funds cumulatively amounting to over ₹ 50 crores. At the same time the turnover for business and profession come to about ₹ 54.38 crores. Thus, the two amounts, viz. the business receipts from which the business income is derived and the amount of investments, from which the investment income is derived, are comparable to each other. The appellant has produced the balance sheet, P L account etc. for these two activities. It is clear from these that the direct expenses attributable to business an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as exempt. According to Ld. AR, even though the portfolio management expenses of ₹ 39,18,761/- has been debited as expenses relating to portfolio management expenses, this expenses has not been claimed as deduction in the computation of total income which fact has not been verified by the AO or the Ld. CIT(A). According to Ld. AR, the assessee has incurred expenses of only ₹ 39,18,761/- for earning exempt income and the assessee has not claimed any deduction of the same in its revised computation of total income which is placed from pages 2 to 7 of the paper book. Therefore this issue need to be examined by AO afresh, for that we set aside the impugned order of Ld. CIT(A) and remand this issue back to AO with a direction to verify this fact and the AO to examine the claim of the assessee that expenditure to the tune of ₹ 39,18,761/- which was incurred for earning the exempt income has been suo-moto disallowed by the assessee while computing the computation of total income. So assessee claims is that no more disallowance u/s. 14 of the Act is warranted. So in this background the AO has to examine the account of the assessee and if he is not satisfied with the corre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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