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TMI Blog2019 (11) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... erest free fund along with copies of ledger account placed in the paper book from serial no. 76 to 90 were submitted and the same were not considered by the assessing officer and CIT(A) before deciding this issue. We have observed that the assessee has submitted such details of interest free funds from Aryavati Impax Pvt. Ltd., Aravati Commodity Pvt. Ltd. and other parties with complete detail of bank account and date of transactions. These undisputed facts were not contradicted by the assessing officer and ld. CIT(A), therefore, the decision of ld. CIT(A) is not justified. Disallowance u/s.14A - HELD THAT:- During the course of appellate proceedings, the ld. counsel has placed reliance on the decision of Hon ble Jurisdictional High Court of Gujarat in the case of Corrtech Energy Pvt. Ltd. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] wherein it is held if no exempt income is earned then no disallowance can be made u/s. 14A of the act. Respectfully following the decision of Hon ble Gujarat High Court, we consider that the decision of ld. CIT(A) in sustaining the addition in respect of fact that no exempt income was earned is not justified , therefore, the appeal of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned addition of ₹ 14,18,613/- requires to be deleted. 2.1 The learned CIT(A) failed to appreciate the fact that the appellant was having sufficient interest free funds available at its disposal and thus as held by various courts of law including the Hon'ble ITAT, Ahmedabad Bench, no addition is warranted. 3. The learned CIT(A) erred in law and on facts in confirming the addition of ₹ 2,01,614/- on account of disallowance U/S.14A of the Act without proper consideration and appreciation of the facts of the case. In view of facts and submissions filed as well as legal position as laid down by various courts of law including the Hon'ble Supreme Court, the impugned addition of ₹ 2,01,614/- requires to be deleted. 3.1 The learned CIT(A) failed to appreciate the fact that no exempt income has been earned by the appellant during the year at all and that the investments have not been made out of borrowed funds. That apart, the AO has not established any proximate cause for disallowance which is the condition precedent for invoking the provisions of Section 14A as laid down by the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Roopesh Rameshchandra Soni 951475/- 3. Manoj B. Soni 935984/- 4. Lalo Babulal Soni 978587/- 5. Jayaniilal mandalia 1006995/- 6. Tinabhai Jayantiial 1047888/- 7. Dharmendra Babulal 1006880/- 8 Batukbhai Kanjibhai Soni 916781/- 9. Bipinbhai Chimanlal Chokshi 917650/- 10. Girish Himmatlal 9,52,140/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... URD purchases. However, the notices issued u/s. 133(6) were returned un-served and found that purchase parties were not existed at the given addresses. Therefore, the purchases remained unverifiable. Consequently, the assessing officer has made disallowance of ₹ 1,16,98,747/- being bogus purchases introduced in the name of different parties mentioned in the assessment order. 5. The assessee has preferred appeal before the ld. CIT(A) The ld. CIT(A) has restricted the addition to the extent of 10% of such purchases and balance addition were deleted. Relevant part of decision of ld. CIT(A) is reproduced as under:- 3.3 I have considered the facts of the case, assessment order and appellant s submission. Assessing officer disallowed purchases of gold jewellery in the name of certain persons on the grounds that the purchases are not verifiable and the payments for the same were made otherwise than account payee cheques. Appellant' had disclosed purchases from certain parties as mentioned in the assessment order quoted above however on verification of these parties, AO found that these parties do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision of honourable ITAT Ahmedabad Bench in the case of Vijay Proteins Ltd. (supra) and also the other decisions quoted by the appellant and reproduced above in the submission of the appellant. In the identical facts, CIT (A) XVI, Ahmedabad in the case of Devendra G Jain, HUF by order dated 10-01-2011 held that in such cases disallowance under section 40 A (3) cannot be made. Since assessing officer considered the purchases bogus and rejected books and addition in respect of the same is confirmed to the extent of 10% in previous para, the decisions relied upon by the appellant are applicable and accordingly no disallowance can be made under section 40 A (3). 6. We have heard the rival contentions on this issue. It is clear from the finding of ld. CIT(A) as cited above in this order that assessing officer has found that parties from whom the assessee has made purchases were not existed at the given addresses and the assessee also could not produce those parties for verification and also could not provide their current location and addresses. Even the notices issued u/s. 133(6) by the assessing officer could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified. Accordingly, this ground of the assessee is allowed. Ground No. 3 (Disallowance u/s. 14A) 9. During the course of assessment, the assessing officer asked the assessee to explain the applicability of section 14A in the case of assessee. The assessee has stated that it has not earned any except income, therefore, no disallowance u/s. 14A be made. The assessing officer has not accepted the explanation of the assessee and computed the disallowance as per rule 8D of the I.T. Rule to the amount of ₹ 2,01,514 after taking into account the investment made by the assessee in the shares. The ld. CIT(A) has sustained the addition. 10. We have heard the rival contention. During the course of appellate proceedings, the ld. counsel has placed reliance on the decision of Hon ble Jurisdictional High Court of Gujarat in the case of Corrtech Energy Pvt. Ltd. 372 ITR 97 wherein it is held if no exempt income is earned then no disallowance can be made u/s. 14A of the act. Respectfully following the decision of Hon ble Gujarat High Court, we consider that the decision of ld. CIT(A) in sustaining the add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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