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TMI Blog2018 (12) TMI 1684X X X X Extracts X X X X X X X X Extracts X X X X ..... d correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition made by AO in respect of unproved creditors i,e Butterfly Properties Pvt. Ltd., Indigo Edutainment Pvt. Ltd., K.K. Fintrade, P. Sharma (Infra Infotech) and Database Software Technology Pvt. Ltd. - HELD THAT:- identity, credit-worthiness, genuineness has been proved by assessee by furnishing confirmations, PAN numbers etc. and other documents accordingly discussed by the CIT(A) in his order. The claim of the assessee has allowed. The facts are not distinguishable at this stage also. No new evidence has been produced. Taking into account, all the facts and circumstances, we are of the view that the CIT(A) has decided the issue judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition on account of unproved share application - HELD THAT:- Addition in sum of 20,00,000/- has been raised in the A.Y. 2007-08, therefore, there is no need to raise the addition in current year being the same would be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) while deciding the issue no. 1, the claim of the assessee has been allowed. No doubt this issue has not been described and discussed but CIT(A) has mentioned the principle which he had already applied while deciding the issue no. 1. The relevant record and remand report etc has been considered. Nothing new evidence came into notice to which it can be assumed that the finding of the CIT(A) is perverse. Finding no distinguishable material to interfere with the finding of CIT(A) we affirm the finding of the CIT(A) on this issue at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition being loss on share trading on sale of shares - HELD THAT:- AO admits that debit note containing the details of the certificate number, distinctive numbers of the shares as also acknowledgement of shares having been received by the concerned buyer are on record. These shares were part of the stock in trade of the appellant company. The loss arriving to the appellant on account of the transaction has rightly accrued to it and the AO has brought no finding on record to dispute that. After the examining the record when the AO found genuineness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee against the revenue Addition on account of non-examination of the claim - HELD THAT:- In the instant case also matter relates to the dividend income on stock of shares held by the assessee. Therefore, in the said circumstances, we are of the view that the matter of controversy is required to be adjudicated on the basis of finding of the Hon ble Supreme Court in the case of Maxopp Investment Ltd Vs. CIT [ 2018 (3) TMI 805 - SUPREME COURT] . Hence, we set aside the finding of the CIT(A) on this issue and restored the matter before the AO to decide the matter of controversy afresh by giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the revenue against the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... d during the current assessment year, the loan and advances was to the tune of ₹ 36,34,000/-. The notice was given on the basis of letter of investigation agencies. The carry forwarded loans and advances in sum of ₹ 1,52,37,750/- was declined and added to the income of the assessee u/s 68 of the Act. The assessee has also shown the credit in Schedule 'D' in sum of ₹ 2,67,77,000/-. The assessee was asked to prove the transaction but the assessee failed to prove the same, therefore, credit in sum of ₹ 2,57,77,000/- was added to the income of the assessee and brought to tax. The assessee also showed the liability of ₹ 20,00,000/- on account of share application money which was also declined and added to the income of the assessee. The assessee also showed the investment in shares of the companies amounting to ₹ 5,00,000/-. The AO applied the provisions u/s 14A r.w. Rule 8D of the Act and disallowed in sum of ₹ 10,00,000/- and added to the income of the assessee. The total income of the assessee was assessed to the tune of ₹ 4,50,16,817/-. The assessee filed an appeal before the CIT(A) who allowed the claim of the assessee, therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of that order is reproduced below: 7.3.7 It is noted that Commissioner of Income Tax(A)-20, Kolkata. in his order for assessment year 2010-11 in the case of M/s Basant Marketing Private Ltd has held BMPL as not fake or bogus This fact is also not disputed by the Assessing Officer in his remand report. 7.3.8 Thus, it is seen that the identity of BMPL is established beyond doubt It is a/so not disputed that BMPL had sufficient funds in its own books of accounts arid reflected in bank statements, which establishes its creditworthiness. The appellant is not required to establish source of source as held in Jaikishan Dadlani vs ITO 4 SOT 138 (MUM). The appellant had offered explanation to the Assessing Officer but had not been to submit all documentary evidences because the same were in custody of CBI As already quoted above, in the appeal in the case of BMPL for AY 2010-11, the Id CIT(A) 20, Kolkata had categorically observed that there is no material on record to back the tinting that BMPL was involved in providing accommodation entry The finding of fact of CIT(A) in that case has been accepted by the Department by not going in appeal against if. Thus, (he genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare application money cannot be treated as unexplained cash credit and no addition can be made under section 68. vi. Shree Barkha Synthetics Ltd. v. Asstt CIT [2006] 263 ITR 377 / 155 Taxman 289 (Raj.), Uma Polymers (P.) Ltd v. Dy OT(2006] 101 TTJ l24 {Jodh.)(TM); Where the share application money is received by the assessee-company through banking channel, the assesses has only to prove The existence of person in whose name share application money is. received Once the existence of investor is proved, it is no further burden of assessee to prove whether me person itself has invested the said money or some other person has made investment in name of that person The burden then shifts on the Revenue to establish that such an investment has come from assesses-company itself. vii. CIT v. Gangour Investment Ltd [2009] 179 Taxman 1 (Delhi), CiT v. Victor Electries Ltd. [2010] 329 ITR 271 (Delhi), Dy- CITv. Dolphine Marbles (P.) Ltd. [2011] 129 ITD 163/10taxmann.com 75 (Jab)(TM), Bharti Syntex Ltd. v Dy. CIT 52 DTR 73 (Jp); Assessee-company filed letters of the share applicant companies to the AClT confirming that they had applied for shares in the assessee-company, giving d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee could not do any further and it had discharged the burden laid on it. Xii In Orient Trading Co. Ltd. v. Commissioner of Income-tax (1963) 49 ITR 723 (Born.), one of the questions referred to the Bombay High Court was whether there was arty material before the Tribunal to hold that a sum standing in the books of the assessee to the credit of a third party belonged to the assessee. The Bombay High Court discussed the nature and significance of cash credits in such cases and observed as follows; "When cash credits appear in the accounts of an assesses, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself as to the true nature and source of the amounts entered therein, and if after investigation OF inquiry he is satisfied that there is no satisfactory explanation as Jo the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee. When these credit entries stand in the name of the assessee himself, the burden is undoubtedly on him to prove satisfactorily the nature and source of these and to show that they do not constitute a part of his business income liable to tax W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o addition can be raised hence allowed the claim of the assessee. The facts are not distinguishable at this stage also. There is no finding of any authority on record in which it has been held that M/s. Basant Marketing Pvt. Ltd. is not genuine company. The Department nowhere preferred the appeal against the judgment mentioned in the finding nor perverse finding is on record. Taking into account all the facts and circumstances, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO.2 7. Under this issue the revenue has challenged the deletion of addition in sum of ₹ 1,07,77,000/- made by AO in respect of unproved creditors i,e Butterfly Properties Pvt. Ltd., Indigo Edutainment Pvt. Ltd., K.K. Fintrade, P. Sharma (Infra Infotech) and Database Software Technology Pvt. Ltd. The addition was raised by AO on the basis of intimation received from DCIT, Central Circle XXVIII, Kolkata and report of CBI and the AO added the outstanding balance against the said party of ₹ 2,57,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said amount. In the circumstance there is no basis for holding the amount outstanding as non-genuine. 5.4.4 As far as the remaining credits appearing in the names of M/s Indigo Edutainment Pvt. Ltd (₹ 9,00,000/-), and M/s Database Software Technology Pvt. Ltd (₹ 69,21,000/-), the appellant submits that these are companies of the group and there has been inter-company transactions depending upon the requirement of funds. The creditors acknowledge the credits being outstanding. 5.4.5 Thus, as staled above, there is no merit in treating the balances income u/s 28(iv). Moreover, the onus of establishing Identity, creditworthy^; and genuineness envisaged u/s 68 has also been discharged by the appellant z. furnishing confirmations, PAN numbers etc. The case laws cited under ground No. 2 apply equally in the instant issue The additions appear to have been made by the assessing officer purely on the basis of findings by the assessing officer of U/s. BMPL in (he assessment year 2010-11 that no longer remains relevant now in view of the facts discussed above. In the circumstances, the addition of allegedly unproved credits of ₹ 2,57,77,000/- made by the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der. He has made the addition, "Taking to consideration above history of assesses company corroborated by adverse report of investigating agency of CBI's stature......" There is no other investigation, finding or observation by the assessing officer for making this addition. 5.5.2 It is noted that the same addition has also been made in the subsequent assessment for AY 2007-08. The issue has been dealt in detail in the appellate order for that year. That being the case, addition made in the instant assessment year tantamount to double taxation and is, therefore, not sustainable, this ground of appeal is, therefore, allowed and the addition of ₹ 20,00,000/-on account of share application money is deleted." 10. On appraisal of the above mentioned finding, it is quite clear that the addition in sum of ₹ 20,00,000/- has been raised in the A.Y. 2007-08, therefore, there is no need to raise the addition in current year being the same would be tantamount the double taxation. Accordingly the facts are not distinguishable at this stage also. Nothing new evidence has been produced so taking into account all the facts and circumstances, we are of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 14A mandates that it is only when having regard to the accounts of the assessee. the Assessing Officer is not satisfied with the correctness of the claim of the in respect of expenditure incurred in relation to income which not form part of the total income under the Act, that he can proceed to make a determination under the Rules;" 5.6.4 In Union Bank of India v. ACIT, ITA. No. 5347/M/2007, Hon'ble ITAT following the decision in the case of Wimco Seedling Ltd. v. DCIT 107 ITD 267 Delhi TM, held that only expenditure which has been proved to have been incurred in relation to the earning of tax free income, can be disallowed, and the section cannot be extended to disallow even expenditure which is assumed to have been incurred for the purpose of earning the tax free income. In delite Enterprises (ITA. No. 2983/M/2005 (BOM) wherein it was held that if there is no income earned by the assessee which is claimed to be exempt, no disallowance u/s 14A can be made. 5.6.5 In facts and circumstances of the case, the disallowance u/s 14A cannot be upheld. This ground of appeal is allowed." 12. On appraisal of the above mentioned finding, it is quite clear that the CIT(A) has de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding the case in ITA. No. 1498/M/2017, therefore, there is no need to repeat the same. However the figure is different. ISSUE NO.1 16. Under this issue the revenue has challenged the deletion of the addition of ₹ 29,55,500/-. The said amount is the part of the credit balance which has already been adjudicated while decided the issue no. 1 in ITA. No.1498/M/2017. This amount is the credit balance in the books of account which has been reflected in the year also. The CIT(A) deleted the same on the basis of the same ground which he had already discussed while deciding the appeal of the assessee for the A.Y. 2006-07. The relevant finding is hereby reproduced as under: - "7.3.1 This ground relates to addition of ₹ 1,79,55,500/- as unapproved credit. Although the ao has not specified the section under which the addition is made, it can only be presumed to have been made as unexplained cash credit u/s 68 or cessation of liability u/s 41(1) of the Act. Therefore, both these aspects will have to be examined against the facts and circumstances of the case. 7.3.2 The AO has discussed this issue under para 4 of his order. He observed that the amount of ₹ 1,79,55 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y sufficient cause from filing those evidences and the same is under exceptions provided under Rule 46A. Therefore, in my opinion, the additional evidences submitted by The appellant pertaining to this ground of appeal as well as other grounds of appeal are admissible as additional evidence under Rule 46A of Income Tax Rules 1962. 7.3.5 On this issue the remand report of {he assessing officer makes comments under para 6. In respect of HFCL, he has accepted that opening and closing balance was ₹ 1,50,00,000/-, which has been paid back in FY 2012-13. He further observed that HFCL had taken and advanced huge loans during the year. Further, liabilities stood at ₹ 319.13 crores, assets were ₹ 669.74 crore sales turnover had gone up from ₹ 763.49 crore as on 31.03.2006 to ₹ 1143.20 crore in the current year. He further observed, "the modus operand of Arun Dalmia group needs to be taken into account while examining these transactions". In respect of BPPL, KKF and P. Sharma, the assessing officer acknowledged confirmations and also accepted the loans are "quite old' Apart from these observations, the assessing officer did not offer any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 11-1-2008]: If the share application money is received by the assesseecompany from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot rded as undisclosed income of the assessee-company. v. CIT V First Point Finance Ltd. 2006 286 ITR 477 Raj, CIT V. Bhawani Oil Mills Ltd. 49 DTR 212: Where it is found that the investors are genuinely existing persons, I hey have filed confirmations in respect of investments made by them and their statements are also recorded, amount of share application money cannot be treated as unexplained cash credit and no addition can be made under section 68. vi. Shree BarkhaSynthetics Ltd v. Asstt CIT [2006J 283 ITR 377 / 155 Taxrnan 289 (Raj.), Uma Polymers (P) Ltd, v. Dy. 07[2006) 101 TTJ 124 (Jodh)(TM): Where the share application money is received by The assesseecompany through banking channel, the assessee has only to prove the existence of person in whose name share application money is received. Once the existence of investor is proved, it is no further burden of assessee to prove whether the person itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid on it under section 68 and addition could not be made merely for the reason that no confirmation letters were filed in respect of some of the depositors xi. ClT v. Orissa Corpn (P.} Ltd, [1986] 159 ITR 78 /25 Taxman 8QF (SC) :ln this case assessee gave the names and addresses of the creditors. It was in the knowledge of the Revenue that the creditors were income-tax assessee. The revenue apart from issuing notices under section 131 did not pursue the matter further. It did not examine the source of income of the alleged creditors to find out whether they were creditworthy. Therefore, it was held that in these circumstances, assessee could not do any further and it had discharged the burden laid on it. xii. In One/if Trading Co. Ltd. v. Commissioner of income-tax (1963) 49 ITR 723 (Bom.), one of the questions referred to the Bombay High Court was whether there was any material before the Tribunal to hold that a sum standing in the books of the assessee to the credit of a third party belonged to the assessee. The Bombay High Court discussed The nature and significance of cash credits in such cases and observed as follows: "When cash credits appear in the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or allowance for the same in year 7.3.9 The appellant company has undisputedly not obtained any amount in respect of such loss or expenditure during the relevant previous year and as such the first part of the provision of section 41(1) is not applicable. With regards to the second part of section 41(1), the appellant company did not derive any benefit in respect of such trading liability by way of remission or cessation thereof in as much as liability in respect of all creditors are admittedly payable as on the relevant balance sheet date and as such the second of the provision is also not applicable. 7.3 10 In case of remission there has to be a waiver by the creditor in favour of the assessee either unilaterally or through contractual agreement. To the extent such remission or waiver of the liability is granted assessee would get benefit and accordingly to that extent same would be taxable under section 41(1) subject to the basic condition that such liability remitted has been taken into account in the trading account or in the profit and loss account in the current year or in an earlier year Thus, there has to be a positive act on the part of the creditor in the current ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation (subsequent years) and such question could be examine only in the year in which the entries were first made in the account of the sundry creditors. 7.3.14 Unpaid liabilities cannot be added to assessee's Income by the assessing officer under section 41(1) merely because they remained unpaid for a sufficiently long time. The legal position is that unless there is evidence to show that the creditor has remitted the debt or otherwise by operation of law the liability to pay him has ceased, there can be no benefit arising to the assessee within the meaning of clause (a) of section 41(1) Unless notices were issued to the creditors and they had stated that they had given up the claims against the assessee, no decision could be taken by the AO, merely on the ground that the debts remained unpaid m the assessee's books for a number of years, that the liability had ceased or had been remitted- CIT vs. Hotline Electronics Limited Taxman 245/18 taxman.com (Delhi). 7.3.15 The fact that the creditors remain unpaid even at the time of assessment does not imply that the liability towards these creditors against the appellant ceases to exist because these creditors are still ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported by judgement of Hon'ble SC in Tirunelveli Motor Bus Service Co. Ltd. v. CIT, 78 ITR 55. 7.3.17 In the instant case, not only did the appellant discharge its onus of establishing identity and creditworthiness of creditors and genuineness of transaction the AO has admitted that all the balances were very old. It is settled law that such old balances cannot be added u/s 68 for the current year. Furthermore, as discussed above, the addition can also not be made u/s 41(1). Therefore, addition of ₹ 1,79,55,500/- as unproved creditors is deleted. This ground of appeal is allowed." 14. On appraisal of the above mentioned finding, we noticed that the CIT(A) has duly discussed the each and every facts of the case and arrived at this conclusion that the unpaid liability cannot be added to the assessee's income by the AO u/s 41(1) of the Act merely on the ground that the same was unpaid for sufficiently long time. The entries have also been reflected in the books of account of the creditors. The assessee also proved the identity, creditworthiness of the creditors and genuineness of the transaction by producing the sufficient evidence on record. We found no illegality and irre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report speaks about the genuineness of the claim. The AO admits that debit note containing the details of the certificate number, distinctive numbers of the shares as also acknowledgement of shares having been received by the concerned buyer are on record. These shares were part of the stock in trade of the appellant company. The loss arriving to the appellant on account of the transaction has rightly accrued to it and the AO has brought no finding on record to dispute that. After the examining the record when the AO found genuineness of the transaction and accordingly submitted the report before the CIT(A), therefore, undoubtedly, the CIT(A) has rightly allowed the claim of the assessee. The facts are not distinguishable at this stage also. Hence, we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, we decide this issue in favour of the assessee against the revenue. ISSUE NO.4 19. Issue no. 4 is in connection with that the deletion of the addition of ₹ 10,000/- u/s 14A r.w. Rule 8D of the Act, 1961. The AO raised the addition on the basis of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that only expenditure which has been proved to have been incurred in relation to the earning of tax free income, can be disallowed, and the section cannot be extended to disallow even expenditure which is assumed to have been incurred for the purpose of earning the tax free income. In delite Enterprises (ITA. No. 2983/M/2005 (BOM) wherein it was held that if there is no income earned by the assessee which is claimed to be exempt, no disallowance u/s 14A can be made. 5.6.5 In facts and circumstances of the case, the disallowance u/s 14A cannot be upheld. This ground of appeal is allowed." 20. On appraisal of the above mentioned finding, it is quite clear that the CIT(A) has deleted the addition on the basis of this fact that the assessee did not earn the exempt income in the relevant assessment year and also relied upon the decision of the Hon'ble ITAT Mumbai Bench in case of Union Bank of India Vs. ACIT, ITA. No. 5347/M/2007 and in view of the decision of Bombay High Court in Delite Enterprises (ITA.No.2983/M/2005). It is specifically held that the assessee did not earn any exempt income so no disallowance u/s 14A of the Act read with rule 8D can be made. The facts are not di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -), [Ground No.3. - M/S. Structarch Developers Pvt. Ltd (₹ 60.000/-) and M/s. Satya Securities Ltd (₹ 3,70,000/- Ground No 4] - M/s. Udaipur Properties & Finance Ltd (₹ 15,00,000/-) and M/s. Parth Trade links Pvt. Ltd (₹ 8,15.,000/-) [Ground No 5] 7.3.2 The assessing officer has dealt with these additions under paras 4,5 & 6 of his order in the course of hearing earlier, the appellant furnished detailed submissions and evidences to substantiate its claim of genuineness of credits. These included: - Confirmation of accounts - Ledger account - Bank statement highlighting the Transaction - Balance sheet 7.3.3 These were duly forwarded to the assessing officer to seek remand report. The assessing officer has dismissed all evidences under para 9 of his remand report merely expressing his suspicion He has not denied or contested identity or creditworthiness of the above mentioned parties but dismissed all the evidences by observing, "in view of the fact that Arun Daimia group has floated large numbers of companies to indulge in transactions running into crores of rupees… even if supported by proper evidences, needs to be constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute that the relevant assessment year the assessee did not earn any exempt income. The finding of the CIT(A) is hereby reproduced for ready reference: - ""5.6.1 This ground of appeal relates to disallowance of ₹ 10,000 u/s 14A. The assessing officer has summarily dismissed all explanation offered by the appellant and made the disallowance relying on the decision of Hon'ble Bombay High Court in the case of M/s Godrej Boyce Ltd vs DCIT, 328 ITR 81 (BOM). 5.6.2 During the year under consideration, the appellant has not received any dividend income exempt from tax nor has it claimed any exempt income. The assessing officer has not considered the fads of the case and made the disallowance u/s. 14A in a routine and automatic manner 5.6.3 The Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg Co. Ltd. vs. DCIT (328 ITR 81) (Bom) has held that Rule 6D is not automatic to invoke Rule 8D, The assessing officer should, after considering the accounts of the appellant give a finding that he is not satisfied with the correctness of the claim of the appellant in respect of such expenditure in relation: to income- which does not form part of the total income under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been decided by the CIT(A) judiciously and correctly which is not liable to be interfere with at this appellate stage. Accordingly, this issue is decided in favour of the assessee against the revenue. ITA. NO.1501/M/2017 28. The Revenue has filed the present appeals against the order dated 29.11.2016 passed by the Commissioner of Income Tax (Appeals)-8, Mumbai [hereinafter referred to as the "CIT(A)"] relevant to the A.Y. 2011-12. 29. The Revenue has raised the following grounds: - "1. Whether on the facts and circumstances of the case and in law, the CIT(A) was right in deleting the addition of ₹ 10,00,00,000/-on account of Unsecured loans u/s.68 of the I.T, Act, 1961. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of ₹ 15,20,700/- on account of unproved creditors u/s,68 of the I.T. Act,1961. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of ₹ 10,32,138/- being unproved credit balances in respect of loans & advances given u/s.68 of the I.T. Act, 1961, 4. Whether on the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the appellant are similar in the instant appeal. Following the reasoning's given in my order for assessment year 2006-07 in the appellant's own case and relying on the ratios of several decisions cited therein, addition of ₹ 10 crores is deleted. This ground of appeal is allowed." 32. On appraisal of the above said finding, we noticed that the appellant has submitted the confirmation of M/s. Satya Securities Ltd, audit report of M/s. Satya Securities Ltd. audited balance-sheet, ITR etc. The assessee has discharged the initially onus to establish identity creditworthiness and genuineness of the claim. The matter of controversy has been discussed examined by the CIT(A) while deciding the appeal of the assessee for the A.Y. 2006-07. Following the same ratio of finding, the CIT(A) has allowed the claim of the assessee. The facts are not distinguishable at this stage also. Therefore, we found no illegality and infirmity in the order passed by the CIT(A) in question. Accordingly, we decide this issue in favour of the assessee against the revenue. ISSUE NO.2 33. Under this issue the revenue has challenged the deletion of the addition of ₹ 15,20,700/- on account of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsultants Ltd. (WFCL-₹ 85,138/- and M/s. Watermark Systems (India) Pvt. Ltd. (WFCL and Ms/ WSPL, Audit reports, audted balance-sheets, ITR etc. Thus, the appellant had discharged initial onus to establish identity, creditworthiness and genuineness in the context of section 68 of the Act. All facts and circumstances, nature of evidences filed and submissions made are similar to those at ground no. 1 above. Accordingly, addition of ₹ 10,32,138/- is deleted. This ground of appeal is allowed." 36. The amount in question in sum of ₹ 10,32,138/- was received from group concerns M/s. Watermark Financial Consultants Ltd. in sum of ₹ 85,138/- and M/s. Watermark Systems (India) P. Ltd. of ₹ 9,47,000/-. The appellant filed the confirmation letter from both the parties, audit reports, audited balance-sheets, ITR etc. and initially the discharged its onus. The CIT(A) has also relied upon the finding which he had already given while deciding the appeal bearing in ITA. No.1498/M/2017 for the A.Y. 2006-07. The facts are not distinguishable at this stage also. Therefore, we found no illegality and infirmity in the order passed by the CIT(A) in question. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Is evident from the following observations of the Hon'ble High Court: "Subsection (2) of Section 14A does not enable the Assessing Officer to apply the method prescribed by Rule BD without determining in the first instance the correctness of the claim of the assessee, having regard to the accounts of the assessee. Subsection (2) of Section 14A mandates that it is only when having regard to the accounts of the assessee. the Assessing Officer is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred in relation to income which does not form of the total income under the Act, that he can proceed to make a determination under the Rules;" 5.5.5 The Hon'ble Mumbai Tribunal in the case of Auchtel Products Ltd. vs ACIT 152 SOT 39] (Mum. - Trib,) has held that the assessing officer cannot make the disallowance under Rule 8D of the Rules, without rendering any opinion on the correctness of the assessee's claim. The relevant extracts of the said decision are as under: "The correct sequence, for making any disallowance under section 14A is to, firstly, examine the assesses claim of having incurred some expenditure OF ..... X X X X Extracts X X X X X X X X Extracts X X X X
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