TMI Blog2022 (3) TMI 1195X X X X Extracts X X X X X X X X Extracts X X X X ..... e difference and addition u/s 14A - HELD THAT:- CIT noted that the assessee had debited foreign exchange rate difference in its profit and loss account but it had not shown any export income and nor had incurred any expense towards import of goods or services. The Assessing Officer had further allowed the aforesaid expenditure of foreign exchange rate difference. Second point noted by the ld. Pr. CIT was that the assessee had debited interest expense in the profit and loss account but as per balance sheet assessee had made an investment in equity shares of Kutch Salt Allied Industries Ltd. which was an investment yielding exempt income. The assessee had however not disallowed any part of the expenditure u/s.14A in the statement of total income. AO has also not made any disallowance u/s. 14A - Pr. CIT accordingly in view of the above two issues issued show cause notice u/s. 263 and proceeded to pass orders u/s. 263 holding that the order passed by the Ld. A.O. u/s. 143(3) r.w.s. 153A(1)(b) is erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee. - ITA Nos. 153 And 154/Rjt/2016 - - - Dated:- 25-3-2022 - Shri Waseem Ahmed, Accountant Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods or services. The Assessing Officer had however allowed the aforesaid expenditure on foreign exchange rate difference. Second point noticed by ld. Pr. CIT was that assessee had debited interest expense of ₹ 55,22,432/- in its profit and loss account but as per balance sheet assessee had made an investment of ₹ 23,12,78,015/- in equity shares of Kutch Salt Allied Industries Ltd. which was an investment yielding exempt income. The assessee had however not disallowed any part of the expenditure u/s. 14A of the Act in the statement of total income. The Assessing Officer has also not made any disallowance u/s. 14A of the Act. The Pr. CIT accordingly in view of the above two issues issued show cause notice u/s. 263 of the Act on 23-11-2014. 4.2 In response to the notice, the assessee filed a written submission dated 27-01-2016. Before ld. Pr. CIT, the assessee submitted that original assessment in this case was finalized u/s. 143(3) of the Act on 10-12-2009 at a total income of ₹ 5,08,546/-. Thus, original assessment was not pending when the search took place. Subsequently, search took place at the premises of the assessee on 15-06-2011 wherein no incriminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) (Delhi) which has held that the additions need not be restricted or limited to incriminating material found during the course of search. Further, the Pr. CIT noted that regarding foreign exchange rate, it is noticed that during the assessment proceedings, no verification was made with regard to the claim of foreign exchange rate difference of ₹ 2,97,796/- and no investigation was made whether the borrowed funds were utilized for the purpose of business. The Assessing Officer was therefore directed to ascertain whether the loan taken was for the purpose of business and accordingly decide admissibility of foreign exchange rate difference expense of ₹ 2,97,796/-. With regard to the claim u/s. 14A of the Act, the Pr. CIT held that as per CBDT Circular No. 5/2014 dated 11-02-2014 , it has been clarified that Rule 8D r.w.s. 14A of the Act provides for disallowance of expenditure even where assessee in a particular year has not earned any exempt income. The Assessing Officer was accordingly directed to verify the details of investment, interest expense and total assets and work out the disallowance u/s. 14A of the Act accordingly. For the above reasons, the Pr. CIT held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Kolkata Tribunal held in case of unabated assessments of an assessee, no addition is permissible in order under section 153A, unless it is based on any tangible, cogent and relevant incriminating material found during course of search qua assessee and qua assessment year. The Mumbai Tribunal in the case of Wind World India Infrastructure (P.) Ltd.v. PCIT [2017] 86 taxmann.com 279 (Mumbai) held that in case of an unabated assessment, no addition in absence of any incriminating material emerging during course of search and seizure proceedings conducted under section 132(1) can be made in hands of assessee. In our view, the cases cited above squarely applied to assessee s set of facts wherein, the original assessment was completed on 10-12-2009 at a total income of ₹ 5,08,546/-. A search operation was carried by the Department on 15-06-2011 wherein no incriminating material was discovered. The assessment u/s 143(3) r.w.s. 153(1)(b) of the Act was completed on 28-03-2014 by determining the total income at ₹ 5,08,546/- as declared by the assessee. We note that at the time when the search operations were carried out on 15-06-2011, the original assessment proceedings ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng total income at ₹ 2,52,681/- which is the same income as declared by the assessee in the return of income. 8.1 On examining the record, the Pr. CIT noted that the assessee had debited foreign exchange rate difference of ₹ 3,64,118/- in its profit and loss account but it had not shown any export income and nor had incurred any expense towards import of goods or services. The Assessing Officer had further allowed the aforesaid expenditure of foreign exchange rate difference. Second point noted by the ld. Pr. CIT was that the assessee had debited interest expense of ₹ 44,13,595/- in the profit and loss account but as per balance sheet assessee had made an investment of ₹ 23,12,78,015/- in equity shares of Kutch Salt Allied Industries Ltd. which was an investment yielding exempt income. The assessee had however not disallowed any part of the expenditure u/s. 14A of the Act in the statement of total income. The Assessing Officer has also not made any disallowance u/s. 14A of the Act. The Pr. CIT accordingly in view of the above two issues issued show cause notice u/s. 263 of the Act on 23-11-2015 and proceeded to pass orders u/s. 263 of the Act dated 29-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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