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2023 (12) TMI 759 - AT - Income TaxAddition u/s 69B - unexplained investment - HELD THAT - We find that in the share purchase agreement there is no reference of Escrow agreement and assessee has not made any compliance of the said Escrow agreement , which is under litigation before the Hon ble Bombay High Court. In such circumstances, it cannot be held that assessee has paid additional consideration for purchase of the shares. In absence of any proof of payment of additional sale consideration, particularly when owner(s) of the flat i.e M/s Starlight Systems LLP has declined request of the three shareholders for allotment of flats to them. Further documents relating to allotment of those flats to three shareholders have been observed to be defective by the Ld. CIT(A) and this fact has not been controverted by the Ld. DR. Be that as it may be, it is evident that those three flats belonging to the M/s Starlight security LLP mentioned in the Escrow agreement has ultimately not been given to those three shareholders by the assessee on anyone on behalf of the assessee and matter being under litigation before the Hon ble Bombay High Court, no addition for unexplained investment could survive in the hands of the assessee company. In our opinion order of the Ld. CIT(A) on the issue in dispute is well reasoned and accordingly, we uphold the same. In the result, the ground Nos. 1 and 2 of the appeal of the Revenue are dismissed. Disallowance u/s 14A r.w.r. 8D - HELD THAT - We have noted that Hon ble Delhi High Court in the case of M/s Joint investment 2015 (3) TMI 155 - DELHI HIGH COURT has already held that disallowance u/s 14A of the Act cannot exceed dividend income. Also no disallowance u/s 14A of the Act can be made if the assessee had not earned any exempt income during the year under consideration. Since in the case assessee has already made disallowance to the extent of exempted income, therefore, respectfully following the finding of the Hon ble Delhi High Court Era Infrastructure (India) Ltd. 2022 (7) TMI 1093 - DELHI HIGH COURT , we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition made by the Assessing Officer. The arguments of the ld counsel for the assessee for restricting the disallowance under rule 8D to the extent of interest corresponding to the investment in mutual funds, are rendered academic only. Revised computation of the income of the assessee in compliance of the amalgamation order - CIT(A) upholding the stand of the AO of not considering the revised computation of the income filed in compliance to the amalgamation of the order of the Hon ble High Court passed on 12.12.2012 - HELD THAT - We find that that the Ld. CIT(A) upheld the decision of the Assessing Officer in view of the decision of Goetze (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT but the Ld. CIT(A) however has mentioned that direction given and the date specified in the original order dated 17.08.2012 as well as revised order dated 10.12.2012 of Hon ble High Court will have to be complied with by the AO. Accordingly, following the finding of the Hon ble supreme court in the case of Dalmiya Power Ltd. 2019 (12) TMI 991 - SUPREME COURT .we uphold the direction of ld CIT(A) to the Assessing Officer to take into consideration revised computation of the income of the assessee in compliance of the amalgamation order approved by the Hon ble Bombay High Court vide order dated 12.12.2012. The ground No. 5 of the appeal of the assessee is accordingly allowed.
Issues Involved:
1. Deletion of addition of Rs. 50,00,45,000/- under Section 69B of the Income Tax Act, 1961. 2. Disallowance of expenses of Rs. 4,58,23,162/- under Section 14A of the Income Tax Act, 1961. 3. Rejection of revised computation and amalgamated accounts during the assessment proceedings. Summary: Issue 1: Deletion of Addition under Section 69B The Revenue challenged the deletion of Rs. 50,00,45,000/- as unexplained investment under Section 69B. The Assessing Officer (AO) had added this amount based on an escrow agreement indicating additional consideration in the form of flats. The Ld. CIT(A) deleted the addition, noting that the escrow agreement was not acted upon, the flats were not transferred, and the matter was under litigation. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing that the conditions for invoking Section 69B were not met as the assessee neither made the investment nor owned the flats. The Tribunal found no evidence of additional consideration paid by the assessee and dismissed the Revenue's appeal. Issue 2: Disallowance of Expenses under Section 14A The assessee contested the disallowance of Rs. 4,58,23,162/- under Section 14A, arguing that the disallowance should not exceed the exempt income and that the shares of Somani and Company Pvt. Ltd. had extinguished due to amalgamation. The Ld. CIT(A) upheld the AO's disallowance, applying Rule 8D. However, the Tribunal referred to the Delhi High Court's decision in M/s Joint Investment Company, which held that disallowance under Section 14A cannot exceed the exempt income. Consequently, the Tribunal set aside the Ld. CIT(A)'s decision and deleted the addition made by the AO. Issue 3: Rejection of Revised Computation and Amalgamated Accounts The assessee argued that the revised computation and amalgamated accounts should be considered due to the amalgamation order by the Bombay High Court. The Ld. CIT(A) upheld the AO's rejection based on the Supreme Court's decision in Goetze (India) Ltd., but directed the AO to comply with the High Court's order. The Tribunal, following the Supreme Court's decision in Dalmia Power Ltd., directed the AO to consider the revised computation in compliance with the amalgamation order, thus allowing the assessee's appeal on this ground. Conclusion The Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal, directing the AO to consider the revised computation and amalgamated accounts and deleting the disallowance under Section 14A in excess of the exempt income.
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