TMI Blog2022 (9) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... ll for or examine any other documents/detail as may be necessary for complete adjudication of this issue. As a result, grounds no. 1 3 raised in assessee s appeal are allowed for statistical purpose. Income computed for the assessment years before the Income Tax Settlement Commission after taking into account the additional income offered by the assessee - Disallowance as cost of improvement of shop owned by the assessee - HELD THAT:- Since, it is not clear whether the property in Mayur Tower, Mumbai, which is referred in Income Tax Department s report under section 245D(3) of the Act, is the same property, which is sold during the year under consideration, therefore, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after necessary examination/verification of details. We further direct the assessee to furnish before the AO all the material/evidence in support of its aforesaid claim. The AO shall also have the liberty to call for or examine any other documents/detail as may be necessary for complete adjudication of this issue. Further, since, the claim of the assessee is based on the proceedings before the Income Tax Settlement Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. As on 31 March 2014, in the Appellant's books, is advance towards supply of Material Reimbursement of statutory due paid on behalf. b) Learned CIT(A) has wrongly treated advance against business transaction as deemed dividend U/s 2(22)(e). 3. Without prejudice to above, The Learned CIT(A) has made the 100% addition of advance against business transaction made by Jaya Jewellery Pvt. Ltd to Alex Jewellery Pvt. Ltd in the hands of appellant as deemed dividend U/s 2(22)(e). however appellant is holding only 50% shareholding in Jaya Jewellery Pvt. Ltd. Moreover Alex Jewellery (P) Ltd is not the share holder of Jaya Jewellery P. Ltd. 4. The Learned CIT(A) has erred in disallowing Rs. 79,24,051/- as cost of improvement of Shop B1 at Mayur Tower. However same was offered by appellant as undisclosed income before income tax settlement commission for AY 2006-07 during A.Y. 2011-12. 5. The Learned CIT(A) has erred in making disallowance of interest of Rs.1,79,996/ U/s 14A of I.T. Act, 1961. The Learned CIT(A) fail to appreciate that appellant has own sufficient interest free fund to make investment in tax free securities. 6. The Learned CIT(A) has erred in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to tax for the year under consideration. The Assessing Officer ( AO‟) vide order dated 25/08/2016 passed under section 143(3) of the Act, after noting that no submission was filed by the assessee in response to the various queries till the date of passing of the order, held that since assessee is shareholder in M/s Jaya Jewellery Private Limited and M/s Alex Jewellery Private Limited, therefore, provisions of section 2(22)(e) are attracted in the present case and accordingly, the payments received by way of advance or loan, as stated above, are chargeable to tax as deemed dividend‟ under the aforesaid section. Further, since the accumulative profits in the form of Reserves and Surplus‟ in assessee s balance sheet was only to the tune of Rs. 1,02,25,291, the addition under section 2(22)(e) of the Act was restricted to the aforesaid amount. 6. In appeal, learned CIT(A) vide impugned order dated 31/10/2019 dismissed the appeal filed by the assessee on this issue, by observing as under: 5.3 The contentions of the assessee have been duly considered. It is noted that the assessee has not made any submissions with regard to the amount treated as deemed di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds reimbursement of statutory taxes paid on its behalf. The learned AR referred to the Ledger of Sri Jaya Jewellery and M/s Alex Jewellery Private Limited in the books of M/s Jaya Jewellery Private Limited in order to drive home the point that the advances given by M/s Jaya Jewellery Private Limited were adjusted against the supplies of imitation jewellery by Sri Jaya Jewellery and M/s Alex Jewellery Private Limited. The learned AR also submitted that M/s Jaya Jewellery Private Limited had also given advances to other suppliers apart from its sister concerns during the relevant assessment year as well as in subsequent assessment years. 8. On the other hand, learned Departmental Representative ( learned DR‟) vehemently relied upon the orders passed by the lower authorities. 9. We have considered the rival submissions and perused the material available on record. As noted above, assessee is having wholesale and retail trading business of imitation jewellery. Assessee is proprietor of Sri Jaya Jewellery, which has its shops/showrooms in various cities of India. Further, M/s Jaya Jewellery Private Limited is a private limited company registered in Mumbai doing trading busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance given. Since this issue is remanded for adjudication afresh, the assessee shall be at liberty to adduce any other evidence to support its case. Further, the AO shall also have the liberty to call for or examine any other documents/detail as may be necessary for complete adjudication of this issue. As a result, grounds no. 1 3 raised in assessee s appeal are allowed for statistical purpose. 10. The issue arising in ground no. 4, raised in assessee s appeal, is pertaining to disallowance of Rs. 79,24,051, as cost of improvement of shop owned by the assessee. 11. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the year under consideration, the assessee has shown long term capital loss of Rs. 33,84,000, on sale of Shop B1, Mayur Tower. While working out the aforesaid capital loss, the assessee has, inter-alia, claimed deduction on account of income declared before the Income Tax Settlement Commission amounting to Rs. 60,00,000. Accordingly, in order to verify the allowability of deduction, the assessee was asked to provide the details of additional income declared during the course of proceedings before Income Tax Settleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he action of the AO of computing the LTCG after not allowing deduction of indexed cost of improvement of Rs. 79,24,051/- related to the undisclosed income offered of Rs.60,00,000/- before the ITSC. Accordingly, Ground no.4 of the appeal is dismissed. 13. Being aggrieved, the assessee is in appeal before us. 14. We have considered the submissions of both the sides and perused the material available on record. As per the assessee, an amount of Rs. 60,00,000 was offered for the year relevant to assessment year 2006 07 before the Income Tax Settlement Commission on account of unaccounted investment made in shop No. B1 at Mayur Tower, which was sold during the year under consideration for amount of Rs. 2,05,56,000. Therefore, while computing the capital gain, deduction on account of indexed cost of improvement of Rs. 79,24,051, was claimed, in respect of the said offered amount of Rs. 60,00,000, made to the Income Tax Settlement Commission. In absence of any details to demonstrate that the said disclosure of Rs. 60,00,000, before Income Tax Settlement Commission relates to the capital asset sold during the year, the lower authorities denied the relief to the assessee. Even dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) of the Act held that the value of the investment which give rise to exempt income is Rs. 26,41,752 (i.e investment in shares Rs. 25,66,752, and capital in partnership firm Rs. 75,000). Accordingly, the AO held that certain expenditure must have been incurred towards making and managing the aforesaid investment and therefore, the same is not allowable under section 14A of the Act. Consequently, the AO made disallowance of Rs. 1,73,996, under section 14A of the Act read with Rule 8D of the Income Tax Rules. 17. In appeal before the learned CIT(A) assessee submitted that it has sufficient own interest free funds available at its disposal to make the said exempt investments. The learned CIT(A) vide impugned order held that in absence of balance sheet of the assessee in its individual capacity, contention that he has sufficient own interest free funds cannot be verified. Accordingly, learned CIT(A) dismissed the appeal filed by the assessee on this issue. Being aggrieved, the assessee is in appeal before us. 18. We have considered the submissions of both the sides and perused the material available on record. It was submitted by learned AR that the AO considered Rs. 25,66,75 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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