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TMI Blog2023 (4) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ahmedabad Commodity Traders Group on 18.12.2014. Thereafter assessment u/s. 143(3) was completed determining the total income of Rs. 3,24,07,399/- with addition on account of unexplained cash of Rs. 1,10,989/-, disallowance of losses booked in penny stocks of Rs. 73,12,905/- and disallowance u/s. 14A and Book Profit u/s. 115JB of Rs. 51,12,885/- and demanded tax thereon. 3. Aggrieved against the assessment order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) considered the submissions made by the assessee and deleted the additions made by the Assessing Officer as follows: Unexplained CASH: 5.1 From the perusal of assessment order it is seen that the appellant is engaged in the business of shares and securities, commodities, F & O derivatives etc. and that during the year the appellant had carried out transactions through various brokers from NSE/BSE/MCX/NMCE platforms. During the search proceedings at the business premises, cash amounting to Rs.3,93,090/- was found. During the assessment proceedings the appellant had submitted the cash ledger account and had shown its own cash balance of Rs.2,82,101/- on the date of search which in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant has strength. The appellant has proved the genuineness of the transactions beyond doubt by furnishing contract notes and ledger accounts from the books of brokers. It is also seen that the assessing officer has disallowed the losses in scripts of Alang Industrial Gases and the valuation of closing stocks in scripts of Kappac Pharma on mere premises and general information from SEBI and the Investigation Wing, Kolkata. The AO does not have any documentary proof which can even indicate that the assessee has actually incurred losses to reduce its profits. The AO has not even established that the scripts of Alang Industrial Gases and Kappac Pharma were penny stocks. Under the circumstances it has to be held that the AO has not even an iota of evidence to question genuineness of the transactions and valuation of closing stocks. Further based on the judicial precedents of the jurisdictional High Court and the jurisdictional ITAT relied upon by the appellant, the disallowance of loss of Rs. 73,12,905 /- has to be deleted. The related ground succeeds. Disallowance under section 14A: 5.11 It is seen that the addition of Rs.51,12,885/- by way of disallowance u/s.14A has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to retain further disallowances of Rs.4,36,626/- in place of addition of Rs.51,12,885/- made in the assessment order. The related ground succeeds partly. 5.13 The appellant has also taken a ground that addition of Rs.51,12,885/- should not have been made for the purpose of book profit u/s.115JB. In this regard it has been contended that there is no provision in the explanation to the said section for making and adjustment of such expenses. However, I find that section 115JB allows for-increasing of the profit by the amount of expenditure relatable to any income to which section 10 other than clause 38 applies (clause (f) of Explanation 1). However, for its submission reliance has been placed by the appellant on ACIT vs. Vireet Investment P. Ltd. 82 taxmann.com 415 (Delhi SB) and CIT vs. Gujarat State Fertilizers and Chemicals Ltd. 358 ITR 323 (Guj.). In view of the case laws relied upon by the appellant, it is held that the disallowance u/s. 14A could not have been added/adjusted for computation of book profit u/s.115JB. 3. Aggrieved against the Revision order, the Revenue is in appeal before us raising the following Grounds of appeal: 1. On the facts and in the circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sister concern namely M/s. Affluence Shares and Stock Brokers Pvt. Ltd., the addition made by the A.O. is not sustainable in law. 6.2. The Ld. D.R. appearing for the Revenue could not bring on record any contra statements as observed by the Ld. CIT(A). In the absence of the same, the deletion made by the Ld. CITA) does not require any interference. Thus the ground no. 1 raised by the Revenue is dismissed. 7. Ground no. 2 namely deletion of addition on account of disallowance made u/s. 14A r.w. Rule 8D of the Act. The Ld. A.O. made addition of Rs. 51,12,885/- by way of disallowance u/s. 14A r.w. Rule 8D. The Ld. CIT(A) after considering the submissions of the assessee held that the disallowance u/s. 14A to the extent of exempt income received by the assessee by way of dividend income of Rs. 10,56,851/- only. However the assessee already made self-disallowance of Rs. 6,20,225/-, the A.O. was directed to retain further disallowance of Rs. 4,36,626/- as against the original disallowance of Rs. 51,12,885/-. 7.1. The Ld. CIT(A) has followed the Jurisdictional ITAT, Ahmedabad judgments and Hon'ble Gujarat High Court in confining the disallowance to the extent of exempt earned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) CIT V/s. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat) (iv) Meenadevi N. Gupta V/S, ACIT [2013] 35 taxmann.com 211 (Ahmedabad - Trib.) (v) CIT V/s. Odeon Builders (P.) Ltd. [2019] 110 taxmann.com 64 (SC), (vi) Chandra Prakash Jhunjhunwala in ITA No. 2351/Kol/2017 dated 09- 08-2019 (vii) Shashi Bala Bajaj - ITAT Kolkata in ITA No. 1547/Kol/2018 dated 16- 11-2018 (viii) PCIT V/s. Prem Pal Gandhi 401 ITR 253 (P&H) (ix) PCIT V/s. Dhawani Mahendra Shah - Tax Appeal No. 674/2017 dated 12-09-2017 Gujarat High Court (x) PCIT V/s. Bharati Somchand Shah - Tax Appeal No.1023/2017 dated 22-01-2018 Gujarat High Court (xi) Shantaben Parasmal Jain V/s. DCIT ITAT Ahmedabad in ITA No. 726/Ahd/2017 dated 15-10-2018 10. The Jurisdictional High Court of Gujarat in the case of Himani M. Vakil (cited supra) held as follows: "Assessee filed her return declaring certain amount as short term capital gain arising from sale of shares - Assessing Officer taking a view that share transactions were bogus, added amount of capital gain to assessee's taxable income as unexplained cash credit - Tribunal, however, concluded that genuineness of transactions was duly proved by c ..... 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