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TMI Blog2012 (12) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... g the exempt income - Assessing Officer will provide opportunity of being heard to the assessee. Disallowance on ad hoc basis - AO during the course of assessment proceedings asked the details of packing material – Held that:- Complete details of expenditure were furnished before the AO and no defect has been pointed out by the Assessing Officer. No specific query regarding packing material expenses or other expenses has been raised by the AO. It is a settled law that ad hoc disallowance without pointing out any mistake is not justified – addition deleted - appeals filed by the assessee is partly allowed and by the Revenue is allowed for statistical purposes. - I.T. A. No.1443 & 1693/Del/2011 - - - Dated:- 31-1-2012 - SHRI R.P. TOL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not incur any expenditure direct or indirect for earning dividend income and also no man power was deployed for this purpose entailing any expenses. However, this contention of the assessee was rejected by the Assessing Officer. The AO relying on the decision of ITAT, Special Bench in the case of ITO vs. Daga Capital Management (P) Ltd., made disallowance by applying Rule 8D of the Income-tax Rules, 1962 of Rs.13,83,959/- which included interest expenses of Rs.7,25,050/- and the balance indirect expense was of Rs.6,58,909/-. 3. Before the CIT(A), similar arguments were advanced by the assessee. Reliance was also placed on the decision of Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd., wherein applicabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to page 129 of Paper Book in support of his contention that borrowed funds were not utilized for the purpose of investment in units of mutual fund. It was also submitted that no expenditure was incurred by the assessee for earning dividend income. On the other hand, the learned Sr. DR strongly supported the order of the Assessing Officer. 5. We have heard both the parties and gone through the material available on record. Hon ble Bombay High Court in the case of Godrej Boyce Manufacturing Co. Ltd. vs. DCIT (2010) 328 ITR 81 has held that provisions of Rule 8D are applicable prospectively i.e. from the Assessment Year 2008-09. It has also been held that under sec. 14A, the AO can disallow the amount which has direct nexus with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the learned CIT(A), it was submitted by the assessee that complete details of expenditure were furnished before the AO and there was no specific query regarding any specific item of expenditure, which remained unanswered/un-replied. It was submitted that no specific explanation or information regarding packing material expenses or other expenses was sought for. Therefore, it was argued that there was no justification for making ad hoc disallowance of Rs.5,00,000/-. The learned CIT(A) however, observed that the assessee has not been maintaining quantitative details of opening stock, purchases, consumptions and closing stock. The assessee was also not maintaining any records so that the items of packing material could be co-related ..... X X X X Extracts X X X X X X X X Extracts X X X X
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