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2019 (7) TMI 1033 - ITAT PUNEDisallowance of expenses made u/s.14A r.w.s. Rule 8D - HELD THAT:- Earning of exempt income is not a criteria for making addition u/s.14A since it is a deeming provision. In our considered opinion, the Hon‟ble Apex Court in the case of CIT Vs. Walfort Share & Stock Brokers (P) Ltd. [2010 (7) TMI 15 - SUPREME COURT] has made it clear that there has to be proximate relationship between exempt income and disallowance u/s.14A. In this backdrop, we have examined the Schedule-11 of the Balance Sheet of the assessee and we find that there is no exempt income during the year in respect of the assessee. Thus, we set aside the order of the Ld. CIT(Appeals) and direct deletion of disallowance made u/s.14A of the Act. Thus, ground No.1 raised in appeal by the assessee is allowed. Bogus purchase of machinery and interest thereon on borrowed funds - HELD THAT:- Assessee could have furnished additional evidences which could have demonstrated in a way that the assessee‟s transactions were genuine and therefore, the acceptance of the addition made before the Assessing Officer was an ad-hoc one. However, no such evidences were brought on record by the assessee. The entire scenario clearly reflects that the assessee knew that the transactions were not genuine and therefore, in order to buy peace of mind it accepted the addition before the AO and therefore, it in no circumstances, can be termed as ad-doc acceptance of the addition. It is rather well planed action on the part of the assessee. That further, the assessee with regard to the bogus purchases of machinery is only harping upon case laws but those judicial pronouncements have been decided based on specific evidences on record. In the instant case, the assessee as clearly seen from the records, has not brought in any evidences as to the fact of showing the genuineness of the transactions in respect of purchase of machinery. In view of the matter, we find no infirmity with the findings of the Ld. CIT(Appeals) and the additions made on bogus purchases of machinery and interest thereon on borrowed funds are upheld. Thus, ground No.2 raised in appeal by the assessee is dismissed. Nature of expenditure - expenditures in respect of professional fees paid which was in connection with the installation of a machinery or set up of new assets - revenue or capital in nature - HELD THAT:- We have also given considerable thought to the findings arrived at by the Assessing Officer as well as by the Ld. CIT(Appeals). We observe in the findings of the AO on perusal of the detailed chart provided for installation of machinery, all expenses are in the nature of capital expenditure. Therefore, we reverse the findings of the Ld. CIT(Appeals) and uphold the order of the AO. The additions made by the Assessing Officer are therefore sustained. Thus, ground No.1 of the Revenue’s appeal is allowed. Addition u/s 40A(3) - HELD THAT:- As perused the exceptions as contained therein and we find that the criteria for which the CIT(Appeals) has allowed the amount though it is in contravention to Section 40A(3) of the Act, is not supported by any exceptions covered under Rule 6DD of the Income Tax Rules, 1962. The legislature in its own wisdom has created the provision of Section 40A(3) of the Act and even though the objective is to curb black money transactions, in additions to it, Rule 6DD is also provided by the legislature stating specific exceptions under which payments can be made in contravention to Section 40A(3) of the Act. The payment made in pursuance to Consumer Dispute Redressal Forum order is not an exception under Rule 6DD. We reverse the findings of the CIT(Appeals) on the issue and uphold the findings of the Assessing Officer. The additions made by the Assessing Officer u/s.40A(3) of the Act is therefore sustained. Thus, ground No.2 raised in appeal by the Revenue is allowed. Rejection of books of account - addition made by the Assessing Officer on account of extra profit on manufacturing sale and also deleting the addition made on account of unexplained investment towards extra production - HELD THAT:- As decided in assessee's own case for assessment year 2009-10 Tribunal has accepted the findings of the Ld. CIT(Appeals) and deleted all the additions from the hands of the assessee.
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