TMI Blog2021 (11) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... must eventually fail. In the second case, where the parties have jointed issue and have led evidence and the conflicting evidence can be weighed to determine which way to issue can be decided, the question of burden of proof becomes an abstract question and is therefore academic. The section 101 to 114 of Indian Evidence Act, 1872 deals with burden of proof. The section 102 of the Evidence Act provides that the burden of proof lies on that party who would fail if no evidence at all were given on either side. We note that in assessee`s case under consideration, the assessee has failed to discharge his initial burden of proof, as the assessee has failed to submit Bank Statements, Confirmation of creditors, PAN number of creditors, Address of creditors, and the proof that payment has been made by account payee cheques or non-account payee cheques to M.S. Fabrics. Even before the Bench, the ld Counsel fails to submit the basic document, bank statement, therefore it is not possible for the Bench to find the fact that whether payment has been made by account payee cheques or non-account payee cheques. The ld Counsel also argues that in assessment year 2011-12, the assessing officer ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether it is business income or income under other sources. Thus, summarized and concise Ground No.3 raised by the assessee is allowed for statistical purposes. Disallowances u/s 14A r.w.r. 8D - HELD THAT:- As if the assessee had enough own funds which was more than the investments which yielded tax free income there can be no disallowance of interest expenses in terms of Rule 8D(2)(ii) of the Rule. The Hon ble Supreme Court in the case of Maxopp Investment,[ 2018 (3) TMI 805 - SUPREME COURT] , wherein it was held that when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of section 10(34), this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of section 14A which is based on the theory of apportionment of expenditure between taxable and non-taxable income. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. AO has not worked out the disallowance as per the above judicial pronouncements. In the light of the judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-(unabated assessment) (ii)Assessment year 2011-12, ₹ 1,35,11,370/- (abated assessment) (2) The Ld. CIT(A) has erred in law and on facts in confirming addition under section 41(1) of the Act. (i) For A.Y. 2011-12: Addition of ₹ 41,25,000/- u/s 41(1) made by AO in absence of any incriminating material. Learned Counsel prays that Assessment Year 2011-12 is unabated assessment, therefore addition should not be made without incriminating material.(abated assessment) (ii)For A.Y. 2012-13: Addition of ₹ 1,64,59,592/- u/s 41(1) made by AO. This is abated assessment year wherein the assessing officer can do regular scrutiny to verify the items in the return of income filed by the assessee.(abated assessment) (3) CIT(A) has not decided Ground No.5 raised by the assessee during appellate proceedings: Income disclosed during the course of search to the tune of ₹ 5,35,75,000/- should be treated as business income and not income from other sources. AO treated it as income from other sources whereas assessee claims that it is business income. (4) The Ld Commissioner of Income Tax (Appeals) has erred in law and on facts in confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the previous year in which the search was conducted under section 132 or requisition was made under section 132A of the Act. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. We note that section 153A starts with a non-obstante clause relating to normal assessment procedure covered by sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31st May, 2003. The sections, so excluded, relate to returns, assessment and reassessment provisions. However, the provisions that are saved are those under section 153B and 153C, so that these three sections 153A, 153B and 153C are intended to be a complete code for post-search assessments. 11. We note that in assessee`s case the search was conducted on 27.12.2012. Shri Hiren M.Diwan, ld Counsel, stated that time limit for issuance of notice u/s 143(2) of the Act for the Assessment Year 2009-10 in respect of the origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es chargeable to STT (-) 1,56,13,207 Any other income ₹ 55,385 Gross Loss (-)6,30,660 P L Account Gross Loss (-)6,30,660 Interest Expenses Claimed ₹ 63,43,408 Dividend Receipt from Shares : claimed exempt u/s 10(34) ₹ 24,73,689 Net Loss Shown by you Rs(-) 69,74,068 In addition to this, perusal of the balance sheet shows assessee showing a separate head in the balance sheet i.e. Investment shown following entries under it; Investments ICICI Bonds 935 Investment in shares 6,03,002 UTI US-64 10,21,950 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R Wadiwala co(BSE) 4,247 R Wadiwala co(NSE) Nil Assessee has failed to submit any confirmation of accounts details from any of the sundry creditors debtors shown by her above. Perusal of the details filed, with Mehul Shah brings forth following facts : i) The earlier records filed for showing the evidence of carry forward losses shows that assessee is in share trading business for more than 5 years in past was treating the share trading, derivative trading commodity trading as a business activity merged together from at least as early as 2003-04 may be much early. ii) The pledging evidence of Business stock shows indirect evidence that; assessee is having multiple DMat a/c in different banks linked with various bank accounts. iii) In addition to self-trading, assessee is also doing trading by taking professional portfolio management services like R. Wadilal Co, Concept Securities, Kotak Mahindra Bank others. iv) As per the Mehul Shah, assessee keeps changing DMat account by int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wipro Ltd 22-01-08 10,000 39,88,764 Very Old 1,00,000 @10 38,88,764 Nil 22-01-08 20,000 79,92,470 Very. Old 2,00,000 @10 77,92,470 Nil 28-03-08 32 14,087 Very Old 320 @10 13,767 Nil 1,16,95,001 The assessee is not able to give details of openings stock of WIPRO Ltd has no evidence of transfer of Gifted Wipro shares through. (ii) It is peculiar to note that assessee' has shown opening balance of Investment in share of ₹ 6,03,002/- without giving any details or bifurcations of the holding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogether from at least as early as 2003-04 may be much early. b) Assessee is having multiple Demat a/c in different banks linked with various bank accounts. c) In addition to self-trading, assessee is also doing trading by taking professional selftrading, assessee management services like R. Wadilal Co, Concept Securities, Kotak Mahindra others. d) As per the Mehul Shah, assessee keeps changing Demat account by inter-transferring the share from one DMat a/c to others. e) The assessee has no records of maintaining distinction in shares which are as capital investment shares kept as business stock. No separate DMat a/c is maintained for distinction in shares which are as capital investment shares kept as business stock. The only distinction shown by the assessee between Capital investment business stock is an affidavit given by Bindiben, which states that she has made following gift i x of shares of Wipro Ltd. Date of Gift No of WIPRO shares Gifted By Demat a/c The Person to whom Gifted Demat a/c in which Shares Deposited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stated to have received as Gift is also not reflected in the DMat statement submitted, in spite of the fact that demat account pertains to period from 1997 2000. vi) The shares of WIPRO Ltd is seen to have pledged in the Dmat a/c for Loan but on cancellation of pledged Wipro Ltd, the share do not comes in the DMat statement. vii) There is existence of Joint a/c account in existence, which shows there is no demarcation of assets among individual differentiation of stocks between individuals. viii) As per the Client Id 10061659 in Axis Bank held jointly in the name of Damini Amit Shah Amit Vasant Shah, 2,500 share of WIPRO looks to be pledged with Axis Bank for Loan in period A.Y 2007-08 , which even on removing of pledge , the shares do not gets credited in Axis Bank. ix) Wipro shares with business stocks are used for the business purpose to get Secured loans of ₹ 2,21,78,317/- and unsecured loan of ₹ 1,84,24,550/-. The interest expenses are claimed as business expenses; - interest to Kotak of ₹ 38,37,172 /- - interest to J M Finance of ₹ 18,51,642/- - Bank Interest of ₹ 6,54,594/- Since the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or; (ii) assessment years where assessments are already completed u/s 143(3) of the Act ; unless they are reopened u/s 147 of the Act for some other purpose in both the scenarios stated above. 6.4.2 The scheme of assessment proceedings contemplated u/s 153A of the Act are totally different and distinct from the proceedings contemplated u/s 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled altogether. 6.4.3 The expression 'assess or reassess' stated in section 153A(1)(b) has to be understood as below:- 'assess' means assessments to be framed in respect of abated assessment years irrespective of the fact whether there are any incriminating materials found during the course of search with respect to relevant assessment years ; 'reassess' means assessments to be framed in respect of concluded assessment years where incriminating materials were found during the course of search in respect of the relevant assessment year. 16. We also find that Hon ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 17. It is abundantly clear from the bare provisions of the Act and legal precedents cited above that assessing officer can make addition in case of unabated assessments provided there is an incriminating material unearthed by search team. We observe that assessing officer did not refer any incriminating material for the Assessment Years 2008-09 and 2009-10, and we note that these assessment years fall under concluded proceeding, that is, unabated assessments, as on the date of search on 27.12.2012, therefore the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed in these assessment years. We also note that before ld CIT(A), during the appellate proceedings, neither assessee nor Department has produced any incriminating material. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned orders. We note that assessee submitted before us copy of the affidavit by Smt. Bindiben V. Shah, sister-in-law of the assessee substantiating the facts that shares of Wipro Limited were received by the assessee by way of gift in the year 1999 ( Vide Paper book page 21 to 23). Assessee submitted before us copy of the Demat Account of Smt. Bindiben V.Shah substantiating the facts that shares of Wipro Limited were transferred by her by way of gift in the year 1999 to the assessee( Vide Paper book page 24). Assessee submitted before us copy of the Demat Account of assessee(Vide Paper book page 25). Assessee submitted before us copy of the Demat Account of assessee substantiating the fact of transfer of shares of 1,49,000 of Wipro Limited, out of the gifted shares to Edelweiss Finance Ltd. (Vide Paper book page 31 to 34). Assessee submitted before us copy of transaction of the assessee with Edelweiss Finance Ltd, substantiating the fact of receipt of 1,49,000 shares of Wipro Ltd, therein and sale of 52,000 shares of Wipro Ltd, therefrom (Vide Paper book page 43 to 44). Assessee submitted before us copy of ledger account of Edelweiss Finance Ltd, from the books of accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence the additions so made are hereby deleted. Therefore, we reverse the action of the assessing officer in assessment year 2012-13 at ₹ 2,76,89,895/- (abated assessment) and in assessment year 2013-14 at ₹ 6,20,56,548/-(abated assessment), in treating the capital gain as business income. 6.Since, the issue raised by the assessee in concise ground no. 1 is squarely covered by the case of his wife Smt. Daminiben Amitbhai Shah [In IT(SS)A No. 192 to 195/AHD/2017], order dated 31.08.2021, there is no change in facts and law. We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the judgment of the Coordinate Bench in assessee s wife case, we delete the addition made by assessing officer. We allow concise ground no. 1 raised by the assessee. 7.The summarized and concise Ground No.2 raised by the assessee, is reproduced below for ready reference: (2) The Ld. CIT(A) has erred in law and on facts in confirming addition under section 41(1) of the Act. (i) For A.Y. 2011-12: Addition of ₹ 41,25,000/- u/s 41(1) made by AO in absence of any incriminating material. Learned Counsel prays that Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry creditor is there in your balance sheet and since when. Not filing the evidence has led to taxation of this bogus entry in guise of Unexplained Creditor, under section 41(1) of I.T. Act, treating this as income in the hands of assessee by cessation of liability in A.Y 2007-08.This addition on account of cessation of liability in A.Y. 2007-08 has balanced the wrong full balancing assets entry made in the balance sheets of earlier years i.e. 2005-06 or earlier, against the bogus entry in guise of Unexplained Creditor. Present status: In current year, repayment of ₹ 41,50,000/- was seen. Assessee was asked the address, PAN details of M S Fabric for verification of repayment. Assessee is unable to provide any details w.r.t M S Fabric. Bank book also states that on a/c payment is made against M S Fabric, but no name or details are provided w.r.t to the party to whom these payments are done in the guise of Repayment to MS Fabric. Bank show withdrawals by name M.S. Fabric bank account states on account payment. No details was been filed by assessee, 'for the reasons of payment made as On a/c payments. The party to whom the payments are made are not reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d below for making the point clear: STATEMENT U/S. 131 QF THE I.T. ACT. 1961 Statement on oath/solemn affirmation recorded of Shri Amit Vasantlal Shah, son of Shri Vasantbhai Shah, (PAN-APXPS3632JJ, recorded on 21.12.2016 at 11:30 AM at Room NO.216-A, Aayakar Bhavan, Majura Gate, Ghod Dod Road, Surat, during the course of Appellate proceedings in the case of the assesses, himself Shri Amit V. Shah. Oath taken by Oath administered by (Sd/- Amit Shah) (Sd/- Rajeev Agarwal) Q.No.3: You had claimed that there were amounts outstanding payable to LR. Finance and M.S. Fabrics since long. You did not give any details of the nature of the transactions claimed with them and their identities. Explain. Ans.: As far as M.S. Fabrics is concerned, I do not know the identity of the party and the nature of the business/ transactions with it. There was one cousin namely Rasik Maganlal Shah, who used to maintain our accounts and business was done by us. He was also keeping accounts of our partnership firm of the Cement House whose partners were Shri Nilesh Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not know why such huge amounts were outstanding and to whom? Ans.: I do not know. Q.No.13: According to you, you were just honouring the accounts maintained by your cousin. You are also saying that you are not medically well and are sick for last few years particularly the last 2 years. You said that you do not know how much amount is still outstanding. Please explain why did not you introduce the person claimed, to your family members? Ans.: I do not find it necessary. Q.No. 14: Why did not you make payments by account payee cheques to this party, when you are making payment to other parties by account payee cheques? Ans.: I do not remember. Q.No.15: I am showing you a copy of one of your cheques to M.S.Fabrics. Whose handwriting is there on the cheque and why is it not account payee? Ans.: The handwriting is of some staff and I do not know why it is not account payee. Q.No.16 : Who was the staff or accountant who generally use to write your cheques in 2017? Ans.: I do not remember. Q.No.17 : Who was the staff now who writes your cheques ? What is hisphone number/ address etc. Ans. Chaula Madam. Mobile No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction is claimed to have died in 2005. The assessee was having Wipro Shares worth crores of rupees. Is it believable that claimed creditor did not introduce himself and took payment after decades without interest and only after 5 years after death of Shri Rasik Maganlal Shah. d) The assessee did not try to take the identity or phone number or address of the party (reply to Q. No. 4). He did not have even inkling or idea as to why the payment was pending (reply to Q. No. 9) and also did not ask the person why the payment was due (reply to Q. No. 11). All this does not fit the probabilities of human behavior. e) When asked to describe the person who is claimed to have taken payments, he gave only very sketchy details and said that he is not remembering the details as he is diabetic and is having treatment of heart disease. Clearly, he was avoiding and evading enquiry (reply to Q. No. 6). f) On one hand, it is claimed that the payments were made to a personally unknown person on the word of the person maintaining the accounts, and on the other despite he (assessee) being-seriously sick and amount still outstanding, the assessee did not introduce such person ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the payments were already made. In the first scenario, if the amount was because of trading/business transaction and the expense was claimed; the credit on the date when the payment was shown had already ceased (definitely before the bogus/benami payment was claimed made) and therefore, the addition of the amounts made by the AO would be justified u/s. 41(1) of the Act. In case of amounts not being actually due, because of payment earlier (proved/found to be in the previous year in which bogus payments have been made) and in that case too, the addition of the amounts made by the AO are fully justified representing payments from undisclosed/unexplained sources made by the assessee. Therefore, the additions made by the AO are fully justified on the merits and facts of the case. The assessee has also pleaded that the additions could not be made in absence of incriminating evidences found during search. Firstly, as discussed in para 7.2 the return for A.Y. 2012-13 have not become final on the date of search and therefore there was no such limitation for this assessment year. Further, in case of genuine transaction the address/identity/phone number etc. of such a creditor sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO can perform the scrutiny assessment and ask the assessee to furnish the documents and evidences to examine the items mentioned in the return of income. We have gone through the order of ld CIT(A) and assessing officer and noticed that assessee has not submitted the essential documents and evidences before the lower authorities, that is, bank statements, confirmation of creditors, PAN number of creditors, Address of creditors, and the proof whether payment has been made by account payee cheques or non-account payee cheques etc. Therefore, assessee has not discharged its onus to prove identity, creditworthiness, and genuineness of creditors. During the appellate proceedings, summons u/s131 were issued to the assessee and assessee`s statement was recorded on oath on 21.12.2016 by the ld CIT(A), vide para no.14.2 of order of ld CIT(A). The question No.3 and its answer by assessee is reproduced below: Q.No.3: You had claimed that there were amounts outstanding payable to LR. Finance and M.S.Fabrics since long. You did not give any details of the nature of the transactions claimed with them and their identities. Explain. Ans.: As far as M.S.Fabrics is concerned, I do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawn for personal use. The assessee did not file bank statement before the assessing officer. During the appellate proceedings also the assessee has not submitted bank statement before ld CIT(A). However, ld CIT(A) has made efforts to inquiry whether payment was made by account payee cheque or by non-account payee cheques. Vide para 14.3 (g), which is reproduced below: 14.3(g) Further, when the cheques which were issued claiming to make payments to M S Fabrics were enquired into further, and the details called from the issuing bank and the bank in which these were finally credited; it was found that these cheques were not account payee, these could have been endorsed to anybody else. This clearly shows that payment has been made by non-account payee cheques. This also shows that payment does not reach to M.S. Fabrics, as claimed by the ld Counsel. During the course of hearings, the Bench asked ld Counsel to submit the bank statement to verify the fact that whether payment has been made by account payee cheques or by non-account payee cheques to M.S. Fabrics. However, ld Counsel failed to submit the bank statement before the Bench. The Tribunal is a fact finding author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dences. The expression burden of proof really means two different things. It means sometimes that a party is required to prove an allegation before judgment can be given in his favour. It also means that on a contested issue, one of the two contending parties has to introduce evidence. In the first sense, if the burden is not discharged, the party must eventually fail. In the second case, where the parties have jointed issue and have led evidence and the conflicting evidence can be weighed to determine which way to issue can be decided, the question of burden of proof becomes an abstract question and is therefore academic. The section 101 to 114 of Indian Evidence Act, 1872 deals with burden of proof. The section 102 of the Evidence Act provides that the burden of proof lies on that party who would fail if no evidence at all were given on either side. For example, where the assessee claims exemption, the burden is on the assessee to prove it to be exempt. Same is the position in case of allowances, deductions, or claims of loss, etc. Similarly, where there is a statutory rebuttable presumption against the assessee, as in case of cash credits under section 68 or unexplained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Concise ground No.2 is allowed for statistical purposes. 19. The summarized and concise Ground No.3 raised by the assessee is reproduced below for ready reference: (3) CIT(A) has not decided Ground No.5 raised by the assessee during appellate proceedings: Income disclosed during the course of search to the tune of ₹ 5,35,75,000/- should be treated as business income and not income from other sources. AO treated it as income from other sources whereas assessee claims that it is business income. 20. We have heard both the parties. We note that ld CIT(A), during the appellate proceedings, adjudicated the issue under consideration, as follows: 15. The ground no. 5 of appeal in A.Y. 2011-12 is against the AO treating the income of ₹ 5,35,75,000/- declared as income from business, to be actually taxable as income from other sources. I have found that this ground of appeal is only academic as it has got no bearing on the determination of total income and tax. The ground of appeal is therefore, not being decided. From the above, it is clear that ld CIT(A) has not adjudicated the issue raised by the assessee. 21. The crux of the controve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closure of ₹ 5,35,75,000/- as his undisclosed income. for the F.Y. 2010-11 (A.Y 2011-12) which is over and above his regular income filed an affidavit dated 08.04.2013, in which he has confirmed the disclosure of ₹ 5,35,75,000/- made by him. Perusal of return of Income filed shows, that you have treated these unexplained investment which has been declared only after search seizure proceedings u/s 132 of IT Act, as part of addition in business income u/s 28 to 44DA claimed following deduction adjustment against business losses for A.Y 2008-09 A.Y 2009-10.Assessee was asked by Q.4 of annexure to summons u/s 131 dated 23/06/2014 question w.r.t this transaction related to seized papers found seized during search seizure action u/s 132 on 27/12/2012 at Pages 75 to 85, of Annexure BS-3. Since no reply was filed by the assesses, a show cause notice giving last final opportunity was served on assessee by letter dated 15-09-2014. In spite of this, till today, assessee has not filed any details or assessee's say on this matter. By the evidence found seized during proceedings u/s 132 of Income Tax. it is proved beyond doubt that, assessee have paid cash of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) executed by the assessee to purchase the land admeasuring 4600 sq.yard i.e. 41400 sq.feet for his business of dealing in real estate. Your Honours' would appreciate that a person would not acquire such big plot of land at the out skirt of the city i.e. at Bharthana for his personal purposes more so when the concerned person is carrying on the business of dealing real estates. (k) The English version of condition No. 3 in the agreement to purchase reads as under: ......... the party of the second part shall be given permission to commence the booking on the portion of land belonging to his part. The above condition also establishes that the concerned land was acquired by the assessee for the purpose of his real estate business. (I) From the questions and answers no. 9 and 10 of the statement of the assessee recorded u/s 131 of the Act on 02-04-2013 (copy whereof is available at pages no. 40 to 48 of the paper book). Your Honours' would find that the assessee admitted the undisclosed income of ₹ 5,35,75,000/- on account of on money paid by the assessee for acquisition of above land for real estate business for which the agreement t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or income under other sources. Thus, summarized and concise Ground No.3 raised by the assessee is allowed for statistical purposes. 29. Before parting, we would like to mentioned that ld Counsel has raised additional grounds of appeals in respect of undisclosed income of ₹ 5,35,75,000/- which is reproduced below: ADDITIONAL GROUNDS OF APPEALS BEFORE THE HON'BLE ITAT (1) The ld. A.O. has erred in law and on facts in treating the income disclosed during search of ₹ 5,35,75,000/- as income from other sources as against the business income treated by the assessee in absence of any incriminating material found during the course of search. (2) The ld. A.O. has erred in law and on facts in treating the income disclosed during search of ₹ 5,35,75,000/- as income from other sources as against business income treated by the assessee. 30.We note that in additional ground No.1, ld Counsel stated that without incriminating material the undisclosed income of ₹ 5,35,75,000/- cannot be treated under the head income from other sources. We note that on undisclosed income of ₹ 5,35,75,000/-, the assessee has paid the taxes. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse the assessee has filed details and working of the disallowance under section 14A of the Act, which is reproduced below: Working of Disallowance u/s 14A as per Rule 8D S.NO Particulars Amount(Rs) Amounts (Rs) i. Direct Expenditure relating to exempt Income Nil Nil 2. Amount computed as per Rule 8D(2)(ii)(A)(B)(C) Where A= Interest Expense B= Average Investments C=Average Total Assets 72,80,513 1,72,49,731 13,60,45,828 9,23,122 3 Amount computed as per Rule 8D(2)(iii) (0.5% of average value of investment) 1,72,49,731 86,249 Total disallowance as per Rule 8D (1+2+3) ₹ 10,09,371 35. The assessing officer has gone through the above working of disallowance as per Rule 8D of the Rules read with section 14A of the Act and accepted the same and accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when there is no exempt income then there can be no question of disallowance u/s 14A of the Act. The Hon ble Supreme Court in the case of Maxopp Investment,402 ITR 640 (SC), wherein it was held that when the shares are held as 'stock-in-trade', certain dividend is also earned, though incidentally, which is also an income. However, by virtue of section 10(34), this dividend income is not to be included in the total income and is exempt from tax. This triggers the applicability of section 14A which is based on the theory of apportionment of expenditure between taxable and non-taxable income. Therefore, to that extent, depending upon the facts of each case, the expenditure incurred in acquiring those shares will have to be apportioned. We note that assessing officer has not worked out the disallowance as per the above judicial pronouncements. In the light of the judicial pronouncements, as noted above, we are of the view that this issue should also be remitted back to the file of the ld assessing officer to adjudicate the same in the light of the judicial pronouncements. Therefore, we direct the assessing officer to rework the disallowance in the light of the above judic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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