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2021 (9) TMI 217 - AT - Income TaxDisallowance u/s 14A r.w.r. 8D2(ii) and Rule 8D2(iii) - CIT(A) deleted disallowances after appreciating the fact that reserve and surplus available with the assessee are in far excess than the investment made by assessee - HELD THAT - The Hon ble Bombay High Court in Reliance Utilities powers Ltd 2009 (1) TMI 4 - BOMBAY HIGH COURT held if there are funds available both, interest free and interest bearing, then a presumption would arise that investment would be out of interest free funds generated or available with the company. We find that the interest free funds available with the assessee are in far excess than the investment made by the assessee for earning the exempt income. Considering the aforesaid factual matrix, we do not find any legality or infirmity in the order passed by the Ld.CIT(A), which we affirm. In the result this ground of appeal is dismissed. Addition solely on the basis of statement of official of assessee as recorded during the survey action - HELD THAT - We find that the stand of assessee right from the beginning is that the additional income was not accrued as the agreement with MDHPL was not materialised. AO has not issued any notice under section 133(6) or summon under section 131 to MDHPL to verify the veracity of the facts to prove it contrary. The AO has not investigated the issue and only insisted on the disclosure made by assessee. As seen that the ld.CIT(A) after considering the submission of assessee, accounts of MDHPL and the fact that no amount on account of marketing fees from the contract of assessee with MDHPL was realised. In our view, there is no infirmity in the order of the ld.CIT(A), which we affirm. In the result, Ground No.2 of the raised by Revenue is dismissed. Addition on protective basis on the stock difference found during the survey - Addition on the basis of additional evidences - HELD THAT - The assessee explained that the difference was recorded in the books of accounts of Vivid Margi Investment sister concern of assessee . The AO made the addition by taking view that the sister concern of assessee is not assessed in his range and it is not ascertainable. We find that the AO has not investigated the fact from sister concern, no notice of summon was issued. We find that the Ld.CIT(A) after considering the accounts and invoices of Vivid M. Investment that these stocks were duly accounted in the said concern deleted the protective addition. CIT(A) took a reasonable view after verifying the facts. We further find that the assessee made a mere protective addition and not clarified on whom the substantive addition is made. Hence, we affirm the order of ld CIT(A). In the result this ground of appeal is also dismissed. Unexplained cash difference at the time of survey - CIT(A) deleted the addition without calling the remand report and in violation of Rule 46A - HELD THAT - AO has not pointed out whether the difference in cash was short or in excess. We find that before making addition, the AO has not issued any show cause notice. The ld.CIT(A) on furnishing copy of petty cash book found that the cash available on 05.08.2008 was of ₹ 1,15,026/-. - AO made addition without specifying the difference whether it was short or in excess made addition of ₹ 34,962/-. The ld. CIT(A) on verifying the petty cash book deleted the addition. In our view, the ld.CIT(A) has taken a reasonable and plausible view as the ld.AO has not clarified whether cash was excess or short. Thus, we do not find any reason to interfere with the findings of the ld.CIT(A). - Decided against revenue.
Issues Involved:
1. Deletion of addition made under Section 14A of the Income Tax Act. 2. Deletion of addition of ?1.75 crore related to an agreement with MDHPL. 3. Deletion of addition of ?1,96,132/- on the basis of additional evidence without calling for a Remand Report. 4. Deletion of addition of ?34,692/- on the basis of additional evidence without calling for a Remand Report. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 14A: The Revenue challenged the deletion of ?43,42,965/- made under Section 14A of the Income Tax Act. The Assessing Officer (AO) noted that the assessee had not substantiated that no expenditure was incurred for earning dividend income and that investments were not made from borrowed funds. The AO invoked Rule 8D, making an interest disallowance of ?39,42,764/- and indirect expenses disallowance of ?4,00,201/-. The CIT(A) deleted the disallowance, noting that the assessee had sufficient interest-free funds far exceeding the investments. The Tribunal upheld the CIT(A)'s decision, relying on the Bombay High Court ruling in CIT vs. Reliance Utilities and Power Limited, which presumes that investments are made from interest-free funds if both interest-free and interest-bearing funds are available. 2. Deletion of Addition of ?1.75 crore: The Revenue appealed against the deletion of ?1.75 crore, which was disclosed during a survey but not included in the assessee's return. The assessee argued that the amount pertained to an agreement with MDHPL, which did not materialize due to quality issues. The AO added the amount, citing the survey statement, but the CIT(A) deleted the addition, noting that no income accrued from the unmaterialized agreement. The Tribunal upheld the CIT(A)'s decision, finding no infirmity as the AO did not verify the facts with MDHPL and relied solely on the survey statement. 3. Deletion of Addition of ?1,96,132/-: The AO made a protective addition of ?1,96,132/- for stock differences found during a survey, which the assessee claimed pertained to its sister concern, Vivid Margi Investment Pvt. Ltd. The CIT(A) deleted the addition after verifying that the stock was accounted for in the sister concern's books. The Revenue argued that this was done without a Remand Report, violating Rule 46A. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not investigate the sister concern and made a protective addition without clarity on substantive addition. 4. Deletion of Addition of ?34,692/-: The AO added ?34,692/- for cash differences found during the survey without specifying whether the difference was in excess or short. The CIT(A) deleted the addition, finding that the cash book showed a balance of ?1,15,026/- on the survey date. The Revenue argued that this was done without a Remand Report, violating Rule 46A. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not issue a show-cause notice or clarify the nature of the difference. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletions on all grounds. The Tribunal found no legal or factual infirmities in the CIT(A)'s order, which was based on a thorough examination of the evidence and applicable legal principles. The decision was announced on 23rd August 2021.
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