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2019 (7) TMI 936 - AT - Income TaxDisallowance of expenditure on purchase of shares and Keyman Insurance - AO repeated the disallowance in original assessment u/s 143(3) in the assessment completed u/s 153A/143(3) - HELD THAT - Aspect of colourable device adopted by the assessee to claim the expenditure on purchase of shares was not looked into by the Tribunal in its order 2016 (9) TMI 592 - ITAT KOLKATA . We note from the assessment order passed by the AO u/s 153A/143(3) that both these additions were repeated by the AO just to maintain judicial consistency and there was no incriminating material found during the course of search to support and substantiate the same. We, therefore, find no infirmity in the impugned order of the CIT(Appeals) deleting both the additions made by the AO on account of disallowance of expenditure on purchase of shares and Keyman Insurance and upholding the same, we dismiss this appeal filed by the Revenue and allow the Cross Objection filed by the assessee.
Issues Involved:
1. Disallowance of ?15,02,247 on account of payment made for Keyman Insurance Policy. 2. Disallowance of ?1,05,36,000 incurred in relation to the purchase of shares. Issue-wise Detailed Analysis: 1. Disallowance of ?15,02,247 on account of payment made for Keyman Insurance Policy: The Assessing Officer (AO) disallowed the payment for Keyman Insurance Policy (KIP) on the grounds that the directors of the assessee-company were not actively engaged in the day-to-day affairs. However, the Tribunal referred to Explanation-1 to Section 10(10D) of the Income Tax Act, which defines a Keyman Insurance Policy as a life insurance policy taken by a person on the life of another person who is or was an employee or connected in any manner with the business of the first-mentioned person. The Tribunal found that the section only requires a connection between the assessee and the person insured, without necessitating active involvement in daily business affairs. Consequently, the Tribunal upheld the order of the CIT(Appeals) deleting the disallowance, finding no reason to interfere. 2. Disallowance of ?1,05,36,000 incurred in relation to the purchase of shares: The AO disallowed the loss claimed by the assessee on the valuation of closing stock of shares, treating it as an illegal loss created to avoid tax liability. The shares were purchased on 29.08.2008, but payment and transfer to the demat account occurred in March 2009. The Tribunal found that the shares were indeed available in the demat account of the seller at the time of purchase and that the transactions were duly reflected in the seller's books of account. The Tribunal also noted that similar transactions had been upheld as genuine in previous cases, including a scrutiny assessment of the seller, confirming the genuineness of the transactions. The Tribunal referred to the judgment of the Hon'ble Gujarat High Court in the case of Prudent Finance Pvt. Ltd., which held that off-market transactions, duly recorded in the books of both parties and without any evidence of artificial pricing, are genuine. The Tribunal found that the AO's allegations were based on presumptions without concrete evidence. Consequently, the Tribunal upheld the order of the CIT(Appeals) deleting the disallowance, maintaining judicial consistency. Conclusion: The Tribunal dismissed the appeal filed by the Revenue and allowed the Cross Objection filed by the assessee. The Tribunal found no incriminating material during the search to support the disallowances made by the AO. The Tribunal upheld the CIT(Appeals) orders, which were consistent with previous Tribunal decisions on similar issues. The appeal of the Revenue was dismissed, and the Cross Objection filed by the assessee was allowed.
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