TMI Blog2022 (10) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... owance under section 14A r.w.r 8D(2) on the ground that the funds invested in the exempt income earning assets could not be segregated from the funds invested in the business of the assessee - HELD THAT:- Upon perusal of the assessee s submission and the decisions cited by the Ld.AR, we are of the considered view that there is no fallacy in the decision of the Ld.CIT(A) in restricting the disallowance only to the extent of exempt income earned by the assessee. In this context, this ground of appeal filed by the Revenue is dismissed. Estimating 8% of alleged unsupported project expenses by treating the same as bogus expenditure - As we have already given a detailed order in the above mentioned appeals of the Revenue on this ground by confirming the said addition on the basis of 8% estimation relying on the decision of Rattan SinghRathod [ 2013 (1) TMI 133 - ITAT MUMBAI] wherein the assessee s nature of business was also contracts and sub contracts, we are inclined to follow the decision and thereby the estimation of net profit rate @8%, in our view, is justifiable. - ITA No.2852 to 2854/Mum/2018 And ITA No.3749 to 3752/Mum/2018 - - - Dated:- 30-9-2022 - Shri B.R. Baskaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer passed assessment order dated 30/12/2011 under section 143(3) r.w.s. 153A determining total income for impugned assessment years by making additions / disallowance under sections 68 14A which are tabulated below:- S.No A.Y. Assessed Income Amount of estimating 10% of total amt. Of depreciation and expenses on car towards personal use Amount of addition on account of bogus purchases Amount of Addition on account of unexplained share application money Amount of addition u/s 14A 1 2007-08 Rs.31,86,24,370 Rs.1,98,418 Rs.279,93,647 Rs.28,35,00,000 - 2 2008-09 Rs.16,02,18,590 Rs.1,13,365 Rs.484,44,830 Rs.10,18,50,000 Rs.16,92,168 3 2009-10 55,65,94,160 Rs.89,903 Rs.608,05,507 Rs.54,00,00,000 Rs.30,35,452 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of the Ld. Assessing Officer. 9. The Ld.AR for the assessee, on the other hand, contended that the assessee has subsequently furnished all details of the parties alongwith confirmation letters before the Ld.CIT(A), who remanded the same to the Assessing Officer for verification. The Ld.AR stated that the assessee has discharged its primary onus as to the identity, creditworthiness of parties and genuineness of the transactions. The Ld.AR further stated that the assessee had also furnished the labour job bills, bank account details and also other documentary evidence pertaining to the impugned transaction. The Ld.AR further stated that the assessee has also furnished the proof of repayment of the impugned loan amount which was also verified by the Assessing Officer. The Ld.AR relied on the decision of the Ld.CIT(A). 10. It is observed that the Assessing Officer, during the assessment proceedings had asked the assessee company to furnish details as to the expenses claimed by the assessee company in respect of invoices pertaining to various expenses, especially payments made to seven parties aggregating to Rs.17,60,39,565/-, the details of which are tabulated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and without support of any factual evidence. It was also observed that during the assessment proceedings, disclosure of additional income of Rs.38.80 crores on account of unproved purchases was also identified by the Assessing Officer. The assessee had contended that the said purchases were made on account of construction materials and electrical items with respect to the development of a property located at New Mumbai. It was also stated by the assessee that purchases in Bermaco Energy Systems Ltd were made on account of sub contract charges with respect to various project services rendered by the assessee company for its clients. The Assessing Officer alleged that there was no business activity carried out in the factory premises of the assessee company as per the findings of the Investigation Wing and held that the said expenses incurred by the assessee are in the nature of bogus expenses. The assessee replied for the said allegation of the Assessing Officer that the assessee was into the business of providing consultancy and other services in relation to setting up of power projects at various sites to various major players in the field of power industry. After getting the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Pvt Ltd, who was one of the parties in the Koyna Dam project for A.Y. 2009-10. The assessee has substantiated this contention that the payment made for A.Y. 2010-11 to the said party was only an advance payment and that no work was undertaken in respect of Koyna Dam project in A.Y. 2010-11 and the same is evidenced from the P L Account of the assessee company for the year ended 31/03/2010. It is further stated that no contract receipts from Koyna Dam project was obtained and that no expenses on account of the said project was claimed in A.Y. 2010- 11, the impugned amount of Rs.3,23,21,000/- was not shown in the P L Account for A.Y. 2010-11 and that on this ground, the disallowance made by the Assessing Officer for A.Y. 2010-11 for the impugned amount was deleted by the Ld.CIT(A). 12. The Ld.CIT(A) has also observed that the impugned bogus purchase was pertaining to the Koyna Dam project and that the assessee company has earned substantial revenue from the said project in the earlier years, the details of which are given below:- S.No. Assessment year Revenue from Koyna Dam Project offered for taxation 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We uphold the order of the Ld.CIT(A) in deleting the addition for A.Y. 2010-11. 16. Grounds 2 2b pertain to the deletion of addition made under section 68 of the I.T. Act and on account of unexplained cash credit (loan) by relying on the decision of Hon ble Bombay High Court in the case of CIT vs Continental Warehousing Corporation 374 ITR 645 (Bom) on the ground that the department has filed SLP before the Apex Court and also on the ground that the Assessing Officer has questioned the genuineness of the transaction in his remand report. 17. The addition made under section 68 of the I.T. Act for A.Ys. 2007-08 to 2010-11 is on the share warrant money, advance receipt, ICD, share application money, refundable interest free security deposit, etc. taken by the assessee company in all the impugned years. The details of the addition under section 68 of the Act for the impugned years are tabulated as below:- Assessment year Amount in INR Remarks 2007-08 218,35,00,000 Share warrant Money received from Sonata Investment Ltd 2008-09 10,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r loan amount received by the assessee company and also the fact that the statement of Shri Viren Ahuja was only on bogus purchases and was not on cash credits. It is observed that the assessee has also relied on the decision of Hon ble jurisdictional High Court in the case of CIT vs Continental Warehousing Corporation (supra) wherein it was held that without any incriminating material obtained during search operation and which are contrary to the facts in the assessment or re-assessment, no addition could be made under section 153A of the Act. Further to this, it is observed that the assessee has furnished the documents to establish the identity and creditworthiness of the parties and genuineness of the transaction by way of copies of ledger confirmation from all the companies which had funded the assessee company, from which the share application money was paid. Copy of bank passbook of lenders through which loan / ICD money was paid was also filed. Copies of the lender companies, copies of I.T. returns in some cases, Board Resolutions, agreements in relation to the money advanced, were also filed. Upon receiving the notices under section 133(6) of the Act, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. The Ld.DR contended that the Ld.CIT(A) has erred in deleting the addition made under section 14A r.w.r 8D(2) of the Act by relying on the decision of Hon ble ITAT in the case of M/s Future Corporate Resources Ltd vs DCIT (supra). The Ld.DR submitted that as the said decision has not attained finality and is a subject matter of appeal before the Hon ble jurisdictional High Court, the Ld.CIT(A) ought not to have relied on the said decision for the impugned addition made under section 14A r.w.r.8D. The Ld. DR relied on the decision of the co-ordinate bench in the case of ACIT vs Williamson Financial Services Ltd in ITA No. 154 156/Gau/2019 dated 06/07/2022. The Ld.DR further stated that the expenses are not attributable to the earning of dividend income and thereby relied on the decision of the Ld.Assessing Officer. 23. The Ld.AR, on the other hand, relied on the decision in the case of M/s Future Corporate Resources Ltd vs DCIT (supra) and stated that the disallowance under section 14A r.w.r. 8D cannot exceed the exempt income declared by the assessee company and relied on various judicial precedents to that extent. 24. Having heard both the rival submissions and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 14A is to be restricted to the extent of exempt income earned by the assessee. The Ld.CIT(A) has also relied on the decision of Nimbus Communications Ltd vs ACIT (supra) and also in the case of Joint Investments P Ltd vs CIT (2015) 372 itr 694 (Del). The Ld.CIT(A) has computed the disallowance under section 14A for the impugned assessment years tabulated below:- Assessment Year Disallowance u/s 14A A.Y. 2008-09 Rs.80,160 A.Y. 2009-10 Rs.11,55,121 A.Y. 2010-11 Rs.11,36,000 27. From the above observation, it is evident that the Assessing Officer has made disallowance under section 14A r.w.r 8D(2) on the ground that the funds invested in the exempt income earning assets could not be segregated from the funds invested in the business of the assessee. Further to this, the Assessing Officer has also observed that the assessee has incurred interest cost on investments to the tune of Rs.36,69,242/-. The Ld.Assessing Officer proceeded to disallow the same under section 14A read with rule 8D(2). The Ld.CIT(A), on appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases shown by the assessee cannot be said to be supported by proper evidence. As regards the sub-contract payment to related parties, AO has placed material on record to show that the said parties had been created only on 1.1.2007 but subcontract agreements were dated 1.9.2006. They had meager capital of Rs. 50.000/- each. The assessee had not made any payment to them during the year and entire payment made by cheque in the subsequent year immediately withdrawn in cash. It has not been explained as to how those parties had done work worth Rs. 30.00 lacs in each case with meager capital of Rs. 50,000/- when the work was labour intensive. Similar was the position of other sub-contract parties. Almost the entire amount remained outstanding at the end of the year and it was not explained as to how the parties did work worth Rs. 20- 30 lacs for the assessee during the year with almost no capital. The agreement with them was dated 1.4.2006 whereas the stamp paper was dated 30.6.2006. Obviously the sub-contract charges under these circumstances cannot be said to be properly substantiated. Only making payment by cheque is not enough as the amount paid by cheque can be taken back in cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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