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TMI Blog2021 (2) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of section 14A read with rule 8D for making the disallowance against the exempted income. Accordingly, we confirm the disallowance made by the AO which was subsequently confirmed by the learned CIT(A) towards the administrative expenses. Disallowance of deduction claimed u/s. 35(1)(ii) - investigation wing of Kolkata in the case of ''School of Human Genetics and Population Health (here in after SHGPH) in survey as accepted by the office bearer and chartered accountant that the SHGPH has been working as entry provider through bogus bills and donation - institution is receiving bogus donation through the banking channel and thereafter remitting the amount in cash to donor - HELD THAT:- Admittedly, the basis of disallowance was the material gathered during the survey under section 133A of the Act at SHGPH but the same was not supplied as well as no opportunity of cross examination was provided to the assessee despite the specific request made to the AO. It is the settled law that there cannot be any addition/disallowances of the claim made by the assessee until and unless the materials on the basis of which the addition/disallowance was proposed, provided to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore deserves to be quashed. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest U/S. 234A/B/C of the Act. 6. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s. 271(1)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 3. The first issue raised by the assessee vide ground nos. 1 2 is that the learned CIT(A) erred in confirming the action of AO by invoking the provisions of section 14A r.w.r. 8D of Rules without recording dissatisfaction about its claim. 4. The brief fact of the case on hand is that the assessee is a private limited company and engaged in the business of manufacturing of various grade of precipitated Silica. The assessee in the year under consideration claimed exemption of ₹ 1,61,84,338/- under section 10(34) of Act with respect to its dividend income. The assessee also claimed interest expenses of ₹ 287.10 lakh in the return of income. But there was no expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investment. Therefore there cannot be any disallowance of interest expense. Similarly, the ld. AR also contended that there was no satisfaction recorded by the AO before invoking the provisions of section 14A r.w.r. 8D of Income Tax Rule which was mandatory. The ld. AR reiterated the submission made before the lower authorities. 9. On the other hand, the learned DR before us submitted that the assessee failed to establish based on the documentary evidence that the borrowed fund was not utilized in the investments. The ld. DR vehemently supported the order of the authorities below. 10. We heard the rival contention of the both parties and perused the materials available before us. The fact of the case has been elaborated in previous paragraph, hence for the sake of brevity we are not inclined to repeat the same. At the outset we note that the AO has made the addition on two folds i.e. on account of interest expenses and on account of administrative expenses. 10.1. Regarding the addition made on account of interest expenses, we note that the assessee has substantial amount of interest free fund in the form of share capital and reserve which exceeds the amount of investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, it was pointed out that there cannot be any disallowance of administrative expenses. However, we find that the AO has derived his satisfaction by raising a query for making the disallowance under section 14A read with rule 8D, which is reproduced as under: In the instant case, the explanation of the assessee company is not satisfactory and accordingly the method of determining amount of expenditure in relation to income not includable in the total income specified in the Rule 8D of the Income Tax rules 1962 is followed. 10.5. The ld. AR has also not submitted before us any details of the expenditure suggesting/justifying that no expenditure was incurred by the assessee in connection with the impugned exempted income. As such the onus lies upon the assessee to provide the documentary evidence that it has not incurred any expense against the exempted income. In the absence of such details, the AO had no option except to resort to the provisions of section 14A read with rule 8D for making the disallowance against the exempted income. Accordingly, we confirm the disallowance made by the AO which was subsequently confirmed by the learned CIT(A) towards the administ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata has given a categorical finding after carrying out survey operation that the said organization was accepting the donation in cheque and returning the cash to the respective donors. In the reply to show cause notice, the assessee has denied having received any cash. However, for such return of cash there cannot be any operators/bogus billers were engaged in bogus donation syndicate. The aforesaid institution i.e. school of Human Genetics and Population Health accepted that they have facilitated the bogus donation in lieu of commission. Therefore, deduction deduction claimed by the assessee company to the tune of ₹ 3.50 Crore is disallowed and added to the total income of the Company. 13. Aggrieved assessee preferred an appeal to the learned CIT(A) who has also confirmed the order of the AO by observing as under: 6.3.4 As can be seen from above, the earlier notification declaring School of Human Genetics and Population Health, Kolkata as eligible institute has been rescinded with retrospective effect from 1.04.2007, thus after the above notification the payments made to School of Human Genetics and Population Health, Kolkata are not eligible for deduction u/s. 35 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw that there cannot be any addition/disallowances of the claim made by the assessee until and unless the materials on the basis of which the addition/disallowance was proposed, provided to the assessee for the rebuttal and cross-examination. In this regard we find support and guidance from the judgment of Hon'ble Supreme court in case of Maneka Gandhi vs. Union of India reported in AIR 1978 SC 597 wherein Hon'ble Supreme Court has laid down that rule of fair hearing is necessary before passing any order. We also take guidance and support from the order of the Hon'ble Supreme Court in case of I.C.D.S. Ltd. vs. CIT reported in 117 taxmann.com 723 wherein the Hon'ble court held as under: Be it noted that one of the issues involved is about not extending opportunity to the appellant to cross-examine the witnesses relied upon by the Assessing Officer. If the Department wants to rely on their evidence, it may be necessary to provide opportunity of cross-examination of these witnesses to the appellant, which can be done by the First Appellate Authority itself, 17.2. Similarly, we also note that the revenue has not brought anything on record suggesting that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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