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TMI Blog2016 (7) TMI 1669X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue for AY 2010-11. Since all the appeals were heard together, they are being disposed of through this common order for the sake of convenience. We now take up the appeals one by one: ITA 2490/Del/2011- AY 2003-04 2. In this appeal the sole issue contested by the Department is the deletion of addition of Rs. 16,795,247/- made by the AO by disallowing the notional interest paid by the assessee attributable on the non interest bearing advances of Rs. 139,593,723/- to Sh. Arun Kapoor out of interest bearing funds. It was the AO's contention that the assessee company had given an interest free loan/advance to Sh. Arun Kapoor amounting to Rs. 80,075,724/- & Rs. 59,518,000/-. The AO was of the opinion that since the assessee company had paid interest on its borrowed funds and no interest was charged from Sh. Arun Kapoor, the interest attributable on the loan given to Mr. Kapoor was liable to be disallowed. It was the assessee's contention that Sh. Arun Kapoor had embezzled/misappropriated the funds of the company and a case with the police authorities (FIRs) was also lodged against Sh. Arun Kapoor. It was also submitted that this fact has been duly verified by the Ld. CIT (Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for AY 2003-04 is dismissed. ITA No. 2491/D/2011 AY 2004-05 3. In this appeal the Department has contested the action of the ld. CIT(Appeals) on two issues viz. (i) deletion of addition of Rs. 16,143,877/- on account of notional interest added to the income of the assessee and held as attributable to the non interest bearing advance of Rs. 134,532,307/- to Sh. Arun Kapoor. (ii) Deletion of addition of Rs. 5,614,948/- made by the AO u/s 14A of the Act. 3.1 It is seen that the first issue is identical to the issue raised by the Department in AY 03-04. In view of our findings and adjudication on the issue in AY 03-04, we dismiss this ground of the department's appeal. 3.2 As far as the disallowance of Rs. 5,614,948/- u/s 14A is concerned, it was the contention of the assessee before the AO that the provisions of sec. 14A did not apply in the relevant asstt year as no exempt income had been earned on the bonds/investments. It was the assessee's contention that the investments in mutual funds were made during AY 03-04 and these were made out of the free reserves of the company. The company was having free reserves amounting to Rs. 636,176,555/- and further there was a depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure and inter-corporate deposit. It was the assessee's submission that no part of the interest bearing funds (viz. Issue of debentures) had gone into making investments in the said two companies. It was pointed out that the income from the operations of the Assessee was Rs.313.53 crores and with the availability of other interest free funds with the assessee the amount available for investments out of its own funds were to the tune of Rs.398.19 crores. In view thereof, it was submitted that from the analysis of the balance-sheet, the assessee had enough interest free funds at its disposal for making the investments. The CIT (Appeals) on examining the said material, agreed with the contention of the assessee and accordingly deleted the addition made by the Assessing Officer and directed him to allow the same under the provisions of the Income Tax Act, 1961. The Revenue being aggrieved by the order preferred an Appeal before the ITAT who upheld the order of the CIT (Appeals) and dismissed the Appeal of the Revenue. From the order of the ITAT, the Revenue approached the Hon'ble High Court by way of an Appeal. After examining the entire factual matrix of the matter and the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72/D/2011 AY 2005-06 4. In this Departmental appeal, the department has raised three issues viz. (i) deletion of disallowance of Rs. 19,384,066/- made by the AO u/s 14A of the Act on account of interest attributable to investments in mutual funds out of borrowed funds; (ii) deletion of addition of Rs. 16,143,877/- on account of interest attributable to alleged interest free advance of Rs. 134,532,307/- made to Sh. Arun Kapoor and (iii) deletion of additions made under various expenses. 4.1 It is seen that ground no. 2 pertaining to addition on account of notional interest has been decided in favour of the assessee in Departmental Appeal no. 2490/Del/2011 for AY 2003-04 and following the same we dismiss this ground of the Departmental appeal. 4.2 As far as the disallowance of Rs. 19,384,066/- u/s 14A is concerned, it is seen that the ld. CIT (Appeals) has given a categorical finding in Para 4.6 of the impugned order that the assessee had interest free funds at its disposal and no loans could be said to have been utilized for the purpose of investment in mutual funds. The ld. CIT (Appeals) has also relied on the statement of the statutory auditors attached to the accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the vouchers procured from various locations before the AO after a long period is in onerous task. The ld. CIT (A) also held that no comments have been made in the tax audit report regarding the genuineness of the expenditure claims. Having perused the records and also the reasoning adopted by the Ld. CIT (A) on this issue as well as the fact that the Ld. DR could not successfully controvert the observations of the Ld. CIT (A), we find no reason to differ from the conclusion arrived at by the ld. CIT (Appeals) and while upholding his finding on the issue, we dismiss ground no. 3 of the Department's appeal. 4.4 In the final result, the Department's appeal for AY 05-06 is dismissed. ITA No. 784/Del/2010 & ITA No. 913/D/2010 AY 2006-07 5. As far as the assessee's appeal i.e. ITA No. 784 is concerned, apart from contesting the disallowance u/s 14A in Ground No. 1, (which will be dealt along with the similar ground in the department's appeal) the assessee in his appeal has contested the upholding of the disallowance of Rs. 2 lakhs out of consultancy charges in Ground No. 2. A perusal of the assessment order reveals that the AO has given a finding that the AR of the assessee was aske ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the Ld. CIT (A). A perusal of the assessment order reveals that the AO has opined that on 21/12/2005 the assessee company had incurred cash expenses of Rs. 40,000/-. The AO held that this was a violation of the provisions of sec. 40A (3) and Rule 6DD and accordingly, disallowed Rs. 8,000/- being 20% of the cash expenses. The ld. CIT (Appeals) also upheld this disallowance. It is seen that section 40A(3) provides that where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds Rs. 20,000/- a disallowance shall be made. However, it is apparent from the assessment order that this disallowance has been made without bringing out the fact on record as to whether these cash expenses of Rs. 40,000/- pertained to one single payment or comprised of a bundle of small payments made for different purposes. Hence, in absence of any specific recording of fact by the AO, we are unable to uphold this disallowance and set aside the order of the ld. CIT (Appeals) on this issue and direct the AO to delete this addition. Accordingly, grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial is not being adjudicated upon. 5.6 In the final result the appeal of the assessee is partly allowed. 5.7 In ITA No. 913/Del/2010 for AY 06-07, the Department has contested the action of the ld. CIT (Appeals) on as many as 18 counts. They are being taken up one by one as under: 5.7.1 Deletion of disallowance of Rs. 9,948,023/- u/s 14A by restricting the disallowance from Rs. 13,565,438/- to Rs. 3,617,415/-. This ground is common both to the assessee's appeal as well as the departmental appeal. The assessee has challenged the upholding of disallowance of Rs. 3,617,415/- in its appeal, whereas the department has challenged the deletion of Rs. 9,948,023/-. The AO made disallowance u/s 14A of the Income Tax Act in respect of Sahibabad Unit only amounting to Rs. 13,565,438/- which was restricted to Rs. 3,617,415/- under Rule 8D by the ld. CIT (Appeals). The Department has objected to restriction of this disallowance and is ground no. 1 of the Departmental appeal. It was the assessee's contention before the AO that investments of Rs. 113,045,323/- were made out of free resources of the company amounting to Rs. 673,570,626/- and that there were no borrowings by the company for inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h investment was made out of the sale proceeds of prior year investments and out of dividend earned during the year. The ld. AR submitted that when the investment is made out of own funds and surplus funds, then no disallowance can be made u/s 14A of the Act and for this proposition he placed reliance on the following case laws: 1. CIT vs. Winsome Textile Industries Ltd. 319 ITR 204 (P&H); 2. CIT vs. Metal Man Auto Pvt. Ltd. 336 ITR 434 (P&H); 3. CIT vs. Hero Cycles Ltd. 323 ITR 518 (P&H); 4. CIT vs. Abhishek Industries Ltd. 231 Taxman 85 (P&H); 5. CIT vs. Gujarat Narmada Valley Fertilizers Company, 42 Taxman.com 270 (Guj.); 6. CIT vs. UTI Bank Ltd. 32 taxman.com 370 (Guj.); 7. TNT Motors Ltd. vs. ACIT 154 ITD 306 (ITAT)(Del.); 8. CIT vs. Reliance Utilities 313 ITR 340 (Mum.). 5.7.2 The ld. AR also submitted that the purpose of keeping such investment was to keep liquid money for huge Govt. orders and that no interest expenditure can be assumed for disallowance u/s 14A if such investments were made for business purposes. Reliance was placed on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Oriental Structural Engineers Ltd. in ITA No. 605/2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14A. However, the assessee has contested this finding of the ld. CIT (A) and has specifically raised ground no. 1 in its appeal on the issue. We find that there is an apparent contradiction in facts as stated by the assessee and as stated by the ld. CIT (A) on this issue. Hence, we deem it appropriate to restore the matter to the file of the AO for fresh adjudication after giving the assessee due opportunity to present its case. 5.7.6 In the result, the ground no. 1 of the Department's appeal is allowed for statistical purposes. 5.8 Ground No. 2 of the appeal contests the deletion of disallowance of Rs. 65,103/- from club expenses. The Ld. DR supported the order of the AO whereas the Ld. AR strongly supported the findings of the Ld. CIT (A) on the issue. It is seen that the AO has stated that the assessee had debited a sum of Rs. 190,914/- in the Sahibabad Unit Account on a/c of subscription fees which were examined on test check basis and gave a finding that Rs. 65,103/- were not incurred in connection with the business activity of the assessee but rather were personal expenses of Sh. Jai Dev Kapoor. The ld. CIT(A) deleted this disallowance by holding that the assessee has paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r personal purposes. In our opinion, once fringe benefit tax is levied on such expenses as has been done in the present case, it follows that the same are treated as fringe benefits provided by the assessee as employer to its employees and the same have to be appropriately allowed as expenses incurred wholly and exclusively incurred by the assessee for the purpose of its business. In that view of the matter, we delete the disallowance made by the Assessing Officer and confirmed by the learned Commissioner of Income Tax(A) out of conveyance and telephone expenses and allow ground No. 4 and 5 of the assessee's appeal." 5.8.1 In the present appeal, the Ld. DR has not disputed the fact that FBT has been paid on the impugned additions and the Ld. CIT (A) has also given a concrete finding on the issue. Hence, drawing strength from the decision of the co-ordinate Bench of ITAT Delhi in ACIT vs Micro Turners (supra) we find no reason to interfere with the finding of the ld. CIT (A) on this issue and accordingly, uphold the adjudication by the ld. CIT (A). Hence, ground no. 2 of the Department's appeal is dismissed. 5.9 Ground No. 3 pertains to the deletion of addition of Rs. 469,274/- on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly dismiss this ground as being in fructuous. Ground no. 5 of the department's appeal is accordingly dismissed. 5.12 Ground No. 6 assails the deletion of additions of Rs. 300,006/- as allegedly being personal expenses of the Directors and Officers of the assessee under 'staff and workers welfare expenses'. The Ld. DR supported the Assessment Order while the Ld. AR supported the order of the Ld. CIT (A). It is seen that the AO had initially disallowed these amounts for non production of bills and vouchers related to this expenditure. In appeal, the assessee submitted the relevant bills/vouchers. The ld. CIT (A) called for a remand report of the AO but the AO failed to do so. The ld. CIT (A) held that since FBT had already been paid these amounts, the addition merited deletion. We are of the considered opinion that once the expenditure has been incurred for business purposes and for the welfare of its employees and the expenditure is properly evidenced by vouchers/documents, no disallowance could have been made. It is also a matter of record that the AO did not offer his comments when a remand report on the issue was requisition from him. It is also a matter of record that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the opinion that the matter stands covered by the said decision of the Tribunal in favour of the assessee. We accordingly, find no reason to interfere on this issue and uphold the view taken by the ld. CIT (A). Ground no. 8 of the department's appeal is dismissed. 5.15 Ground No. 9 contests the deletion of additions of Rs. 429,312/- as allegedly being non-business expenditure. The AO disallowed a sum of Rs. 429,312/- under the sub head "entertainment, wine and beer" under the head "miscellaneous expenses" on the ground that no bills/vouchers were produced and that the assessee had not been able to substantiate its claim. The Ld. DR supported the AO's order. It was submitted by the ld. AR that this issue is covered by the decision of the coordinate Bench of the ITAT in assessee's own case for AY 2000-01. It was further submitted that the copies of bills and vouchers were submitted during the first appellate proceedings on which the ld. CIT (A) had called for comments from the AO. However, the AO chose not to comment on the additional evidences. It was also submitted that since FBT was paid on these expenses, no further disallowance could be made. The ld. CIT (A) deleted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR supported the order of the Ld. CIT (A). These expenses again pertain to Malanpur Unit and the details/evidences thereof could not be produced before the AO during the assessment proceedings. The AO made an adhoc disallowance of Rs. 4 lakhs out of total expenses of Rs. 1,423,353/-as being for non business purposes. Copies of the bills were however, submitted before the ld. CIT(A) and the AO did not offer his comments on these additional evidences when so called upon to do so by the ld. CIT(A). The ld. CIT (A) held that since FBT had already been paid on these expenses, the disallowance was uncalled for. Having considered the factual matrix and the findings of the ld. CIT(A), we are of the concerned opinion that the ld. CIT(A) has correctly held that if FBT had been paid then the expenditure could not be disallowed a second time. Drawing our strength from the decision of the co-ordinate Bench of ITAT Delhi in ACIT vs Micro Turners (supra), we find no reason to interfere with the reasoning adopted by the ld. CIT (A) and uphold the same. Ground no. 12 of the department's appeal is accordingly dismissed. 5.19 Ground nos. 13 to 16 and18 challenge the following deletions: - addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, he also mentions the fact that the AO has mentioned in his remand report that these were fresh evidences. Hence, in the interest of justice, we restore the issue to the file of the AO for fresh adjudication after giving assessee due opportunity to present its case. Ground no. 17 is allowed for statistical purposes. 5.21 In the final result, ITA No. 913/Del/2010 filed by the Department for AY 06-07 is partly allowed. ITA No. 10/Del/2011 AY 2007-08 6. The first ground of the departmental appeal assails the deletion of addition of Rs. 17,029,818/- u/s 14A of the Act. The Ld. DR supported the AO's order while the Ld. AR supported the order of the Ld. CIT (A). It is seen that the AO held that although the assessee has claimed that the investments in shares and mutual funds were made out of free reserves of the company, but it could not be established that the investment was made from free reserves. The AO also held that had the assessee not made investments, it would not have borrowed funds. The AO held that out of the total interest debited, Rs. 17,029,818/- was attributable to investments in shares and mutual funds and was accordingly disallowed. The ld. CIT (A) gave a spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in view the factual finding recorded by the ld. CIT (A) which could not be successfully contested by the Department, we uphold the action of the ld. CIT (A) on this issue. Ground no. 1 is accordingly dismissed. 6.2 Ground no. 2 pertains to deletion of addition of Rs. 16,088,065/- as notional interest attributable to non interest bearing loan advanced to Sh. Arun Kapoor by the assessee. This issue has already been decided in favour of the assessee by us in ITA No. 2490/Del/2011 for AY 03-04 following which we uphold the action of the ld. CIT(A) on this issue. Ground no. 2 is accordingly dismissed. 6.3 Ground no. 3 pertains to deletion of addition of Rs. 300,543/- under the marriage gift expenses, Rs. 281,253/- out of subscription expenses and Rs. 316,723/- out of workers and staff welfare expenses. The Ld. DR supported the AO's order while the Ld. AR supported the order of the Ld. CIT (A). It is seen that while deleting these additions, the Ld. CIT (A) has given a finding that FBT had been paid on these expenses and for that reason, the additions were held as liable for deletion. He also mentioned that he has given a similar relief to the assessee in AY 06-07 and hence the disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the coordinate Bench of the ITAT in assessee's own case for AY 2000-01 and the addition was accordingly deleted. It is seen that this issue/identical issue of advertisement was not before the coordinate Bench of the Tribunal in AY 2000-01 and hence the Ld. CIT (A) has allowed the assessee's ground on a wrong appreciation of facts. Hence we have no option but to restore the issue to the file of the Ld. CIT (A) for de novo adjudication after giving due opportunity of being heard to the assessee. Ground no. 5 of the department's appeal is allowed for statistical purposes. 6.6 Ground no. 6 of the appeal challenges the deletion of disallowance made by capitalizing 2/3rd of the expenses on Glow Sign Boards. The Ld. DR supported the AO's order while the Ld. AR supported the order of the Ld. CIT (A). It is seen that the ld. CIT (A) has held that the issue is covered in favour of the assessee by ITAT in assessee's own case for AY 1978-79 and accordingly, deleted the disallowance. Although, the decision of the coordinate Bench of the ITAT relied upon by the Ld. CIT (A) is not on record, we do find that the issue is covered in favour of the assessee by the decision of the Hon'ble Punja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd. vs. CIT (1965) 56 ITR 52 (SC), it was observed that if the expenditure is so related to the carrying on or conduct of the business that it may be regarded as an integral part of the profit-earning process, then such expenditure is to be taken as revenue expenses. In Lakshmiji Sugar Mills Co. (P) Ltd. vs. CIT (1971) 82 ITR 376 (SC), it was held that if the expenditure is made not for the purpose of bringing into existence any asset or advantage but for running the business or working it with a view to produce the profit, it is a revenue expenditure. It was held that the criteria has to be applied from the business point of view and on a fair appreciation of the whole situation. In CIT vs. Madras Auto Service (P) Ltd. (1998) 148 CTR (SC) 398 : (1998) 233 ITR 468 (SC), it was held as under : "the general principles applicable in determining whether a particular expenditure is capital or revenue are as follows : (1) Outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment; (2) Expenditure may be treated as properly attributable to capital when it is made not only once and for all, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly dismissed. 6.7 Ground no. 7 challenges the impugned action of the ld. CIT (A) in deleting addition of Rs. 10 lacs alleged to be purely personal expenses of the Directors, Officers and their family members under the head "travelling expenses". The Ld. DR supported the AO's order while the Ld. AR supported the order of the Ld. CIT (A). It is seen that the AO has observed that the expenses on account of foreign travel of the President, Vice President and Joint President of the assessee company amounted to Rs. 3,078,432/-. It was the assessee's contention that foreign visits were undertaken to promote exports and to import raw materials and components. However, the AO was of the opinion that the entire foreign travel expenses cannot be said to be wholly and exclusively for business purposes and, therefore, disallowed an adhoc amount of Rs. 10 lacs. The ld. CIT (A) held that the AO has made an adhoc disallowance purely on guess work and on surmises. The ld. CIT (A) also noted that FBT has been duly paid on the expenses and the disallowance merited deletion. Considering the factual matrix of the case as well as the fact that FBT has been duly paid by the assessee on these tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 256,401/- under subscription expenses on the ground that they were personal in nature. The ld. CIT (A) deleted this addition also by taking note of the fact that FBT was paid on these expenses and also that out of the disallowed expenses Rs. 50,000/- was towards subscription to Cycle Manufacturers Association which took care of the collective interest of cycle manufacturers. The balance expenditure pertaining to reimbursement of club membership fee to the top executives of the company was also allowed by the ld. CIT (A) as being wholly and exclusively for business purposes. Having considered the factual matrix on both these issues, we note that identical issue had come up in the departmental appeal bearing ITA No. 913/Del/2010 for AY 06-07 which we have decided in favour of the assessee and against the Department wherein we have relied on the decision of the co-ordinate Bench of ITAT Delhi in ACIT vs Micro Turners (supra). Following the same, we uphold the impugned action of the ld. CIT (A) on this issue. Similarly, as far as the issue of subscription expenses is concerned the department could not controvert the fact that FBT has been paid on these expenses and nor could counter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the ld. CIT (A) has given a categorical finding that an adhoc disallowance of Rs. 5 lacs was made on a/c of foreign travel expenses without pointing out the particular tours which have not been undertaken for business purposes. The ld. CIT (A) has also noted that the exports and imports of the assessee company have increased over the years and that the AO resorted to the adhoc disallowance without any basis. Similarly, the disallowance from entertainment, wine and beer expenses was incurred to entertain the clients, dealers and business associates. It is seen that both the issues of foreign travel expenses as well as entertainment, wine and beer expenses are covered in favour of the assessee by the decision of the ITAT an assessee's own case for earlier assessment years. The case of the assessee gains a stronger footing also from the fact that FBT has been duly paid on these expenses. Drawing support from the decision of the co-ordinate Bench of ITAT Delhi in ACIT vs Micro Turners (supra), we find no reason to interfere with the findings of the ld. CIT (A) on these two issues. As far as the disallowance of Rs. 53,000/- under prize and rewards is concerned, the ld. CIT (A) has sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 473/Del/2011 for AY 08-09 and which have been held against the department. Since, these two issues are identical as aforementioned, following our adjudication on these two issues in ITA No. 3473/Del/2011 for AY 08-09, we dismiss this ground also. 8.2 Ground no. 3 challenges the action of the ld. CIT (A) in deleting the addition of Rs. 5 lacs under consultancy expenses and Rs. 256,610/- under advertisement expenses incurred on the anniversary of the late founder of the assessee company. The Ld. DR supported the AO's order while the Ld. AR supported the order of the Ld. CIT (A). It is seen that these two issues are also identical to ground no. 3 of the department's appeal in ITA No. 3473/Del/2011 for AY 2008-09 and which have been restored to the file of the Ld. CIT (A) for fresh adjudication. The Ld. CIT (A) has decided the issue in favour of the assessee relying on the his decision for AY 08-09 by relying on wrong set of facts and hence we have no option but to restore these two issues to the file of the Ld. CIT (A) for fresh adjudication after giving the assessee due opportunity of being heard. Ground No. 3 is accordingly allowed for statistical purposes. 8.3 Ground no. 4 pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed for statistical purposes. 8.6 In the final result ITA No. 2132/Del/2012 filed by the department is partly allowed. ITA No. 4000/Del/2013 for AY 2010-11 9. Ground no. 1 pertains to deletion of addition of Rs. 16,088,065/- being notional interest attributable to advance made to Sh. Arun Kapoor. This issue has already been settled in favour of the assessee and against the department in ITA No. 2490/Del/2011 for AY 03-04 and followed in subsequent assessment years. Hence, this ground is dismissed. 9.1 Ground no. 2 pertains to deletion of addition of Rs. 13,707/- under marriage gift expenses and Rs. 2,64,550/- under subscription expenses. It is seen that these two additions are identical to ground no. 2 of the department's appeal in ITA No. 3473/Del/2011 for AY 08-09 and which have been held against the department. Identical issues in AY 09-10 were also held in favour of the assessee by us. Since, these two issues are identical as aforementioned, following the decision rendered in ITA No. 3473/Del/2011 for AY 08-09 and followed in AY 09-10 on these issues, we dismiss this ground also. 9.2 Ground no. 3 challenges the action of the ld. CIT (A) in deleting the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) on this issue shows that the issue has been dealt by him in a very casual manner without discussing the specifics of the disallowance and also without bringing on record as to whether the procedure as laid down under Rule 46A was followed or not. Hence, in the interest of justice, we deem it a matter fit to be restored to the file of the CIT (A) for fresh adjudication after giving the assessee a due opportunity of being heard and furnishing the relevant documents after duly calling for a remand report from the AO. Ground No. 6 is allowed for statistical purposes. 9.6 In the final result ITA No. 4000/Del/2013 is partly allowed. ITA Nos. 2489/Del/2011 AY 2006-07 and 4049/Del/2013 AY 2008-09 10. Both these appeals have been preferred by the Department against deletion of penalties imposed u/s 271(1)(c)of the Act. For AY 2006-07, the penalty imposed was Rs. 15,45,612/- on the sole issue of confirmation of addition of Rs. 36,17,415/- u/s 14A read with rule 8D by the Ld. CIT (A). In AY 08-09, the penalty imposed was Rs. 18,27,443/- and was imposed subsequent to the confirmation of disallowance of Rs. 53,76,418/- u/s 14A read with rule 8D by the Ld. CIT (A). For AY 2006-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income." A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned Counsel for revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word particulars" used in the section 271(l)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroffs case (supra) was upset. In Dharamendra Textile Processors' case (supra), after quoting from section 271 extensively and also considering section 271(l)(c), the Court came to the conclusion that since section 271(l)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing Return, there was no nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of in ..... 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