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TMI Blog2019 (11) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeal) has erred in upholding the disallowance of Rs. 5,22,238/- being 20% of fee paid to ROC as capital expenditure." 4. The issue which arises in the present appeal is whether in the absence of any incriminating document found during the course of search in the premises of the searched person, any proceedings can be initiated against the assessee u/s 153C of the Act. 5. Briefly the facts and circumstances of the case are that search and seizure operation u/s 132 of the Act was carried out in Suresh Nanda Group of cases on 28.02.2007. In the said operation, residential premises of Sh. Vivek Agrawal, the President and Chief Operating Officer of the assessee company was also covered. Thereafter, notice u/s 153C of the Act was issued to the assessee company after recording satisfaction. In response thereto, the assessee filed return of income declaring NIL income. The case of the assessee was taken up for scrutiny. The Assessing Officer vide para 3 notes that on perusal of return of income and other documents, it was observed that the assessee had charged expenditure as preliminar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which is made in the hands of the assessee is 20% fee paid to ROC for increase in share capital. The disallowance has not been made on the basis of any incriminating material found during the course of search. In absence of the same, the Assessing Officer cannot exercise his jurisdiction u/s 153C of the Act for the captioned Assessment Year. We place reliance on the ratio laid down by the Hon'ble Apex Court in the case of Sinhgad Technical Education Society(supra) and Hon'ble Delhi High Court in the case of Kabul Chawla (supra). Hence, the assessment order passed by the assessee u/s 153C r.w.s. 143(3) do not stand. The additional ground raised by the assessee is thus allowed. 11. Since we have held the assessment to be bad in law, there is no need to go into the merits of the issue raised. 12. Now, coming to the appeal of the assessee for Assessment Years 2007-08 & 2008-09 wherein the similar issues have been raised. The grounds of appeal raised by the assessee in Assessment Year 2007-08 read as under:- 1. "The order of the learned Commissioner of Income-tax (Appeal) is bad in law and in facts. 2. That on the facts and in the circumstances of the case, the learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties. It was acknowledged that Y2K System was the holding company of the assessee company and the loan was advanced to meet the general corporate expense and working capital requirements and also to repay existing overdraft loan. The loan was US dollars 2 million. The loan had to be repaid after three years from the date on which the assessee received the funds or such later dates as may be mutually agreed in writing. The said loan was provided interest free to the assessee. The copy of the agreement is placed at page 32 to 39 of the paper book. The agreement was for a period of four years i.e. upto 31.03.2005. The assessee entered into agreement dated 04.10.2006 under which the earlier agreement ending on 31.03.2005 was extended upto 31.03.2010. In the said agreement, interest @ 6 % was to be charged w.e.f. 01.04.2006. The case of the authorities below is that the interest was disallowable in the hands of the assessee as the loan received by the assessee in Assessment Year 2003-04 was held to be unexplained. In this regard, Ld.AR for the assessee has pointed out that the Tribunal in ITA No.5854/Del/2014, relating to Assessment Year 2003-04 with lead order in ITA No.5852/De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income-tax (Appeal) has erred in upholding the disallowance of foreign exchange loss of Rs. 2,20,90,211/- on the ground that loan of US$ 20,00,000 obtained from M/s Y2K Systems International Ltd, Mauritius, was treated as unexplained in A.Y. 2003- 04 and increase in loan amount due to foreign exchange loss cannot be allowed in A.Y. 2009-10. 2.1 That the Ld. CIT(A) has erred in upholding the disallowance of foreign exchange loss without considering the submissions made before him and order of the ITAT dated 24.07.2012 in appellant's own case in ITA Nos. 1424 to 1427/Del/2012 for A.Ys. 2001-02 to 2004- 05. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in upholding the disallowance of Rs. 32,935/- made u/s 14A of the Income-tax Act, 1961 ignoring the decision of Bombay High Court in CIT v. Reliance Utility and Power Ltd 178 Taxman 135 (Bom)." 20. The first issue raised in the present appeal is against the disallowance of foreign exchange loss of Rs. 2,20,90,211/-. The second issue raised is against the disallowance made u/s 14A of the Act of Rs. 32,935/-. 21. Brief facts relating to Ground Nos. 2 & 3 are in relation to the loan raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction or added as income in the hands of the assessee, as the case may be. The assessee has filed tabulated chart in this regard wherein in Assessment Year 2005-06 loss arises in the hands of the assessee of Rs. 17,20,000/-, which has been allowed as a deduction. Further, the gain arising in all the other years has been added in the hands of the assessee. Following the similar principle of accounting, the assessee in the year under consideration had debited expenditure of Rs. 2.22 crore, which merits to be allowed as revenue expenditure. Accordingly, we hold so. We also find that the said issue stands covered by the ratio laid down by the decision of Hon'ble Supreme Court in the case of CIT vs Woodward Governor India Pvt.Ltd. (supra). Hence, Ground Nos. 2 & 3 raised by the assessee are allowed. 25. Now coming to the next issue that the disallowance made u/s 14A of the Act wherein no exempt income has been earned by the assessee during the year. Following the ratio laid down by the Hon'ble High Court in the case of Cheminvest Ltd. vs CIT [2015] 378 ITR 33 (Del.), we hold that no disallowance in such cases is to be made in the hands of the assessee. Hence, Ground No.4 raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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