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TMI Blog2024 (5) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... alue of investments. 5. That the Ld. CIT (A) is not justified in confirming the disallowance of Rs. 84,00,000/- on account of debit balances written off. 6. That the Ld. CIT (A) is not justified in confirming the disallowance of Rs. 92415/-on account of section 40(a) of Income Tax Act 1961. 7. That the Ld. CIT (A) is not justified in confirming the addition of Rs. 1,09,630/- U/s 14A of the Income Tax Act 1961 whereas as per assessee has not incurred any expenditure for earning the income which do not form part of total income. 8. That the Ld. CIT (A) is not justified in confirming the addition of Rs. 1,21,47,451/- on account of unsecured loans u/s 68 of the Income Tax Act 1961 without discussing on merits, whereas all the loans are taken through proper banking channel and verifiable. 9. That the Ld. CIT (A) is not justified in confirming the levy of interest u/s 234B, 234D and 244A of the Income tax Act 1961. 10. That the appellant prays for leave to add, alter, amend or vary from all or any of the grounds of appeal at or before the time of hearing of appeal." 2. At the time of hearing, no one appeared on behalf of the assessee. It is seen from the records that there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of investment of INR 1,22,76,100/-. He contended that it was pointed out by the AO that Auditor of the assessee himself had clearly reported depletion in value of investment of INR 1,22,76,100/- as expenditure of capital in nature. Further, in respect of debit balance written off, he contended that such amount could not have been claimed as business loss and the Auditor has recorded it as a capital expenditure. Further, the AO has correctly made disallowance u/s 40(a) of the Act and also disallowance by invoking the provision of section 14A of the Act. He submitted that the assessee failed to rebut the findings of AO. He prayed that appeal of the assessee be dismissed with cost. 7. We have heard the Ld. Sr. DR for the Revenue and perused the material available on records. Undisputedly, there was no representation before Ld.CIT(A) on behalf of the assessee. He therefore, in the absence of any supporting evidences, dismissed the appeal of the assessee. By way of the present appeal, the assessee has challenged the correctness of the action of the lower authorities. But the assessee has failed to furnish the evidences contradicting the finding of AO. We find that the Assessing Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revious year and ; B. The debt or part thereof should have been taken into account in computing the income of the assessee of the previous year in which it was written off or in any earlier previous year. Since the conditions of section 36(2) r.w.s. 36(1)(vii) written off r.w.s. 36(2) of the IT Act are not satisfied, the debit balances written off could not be claimed as bad debt written off. (d) The claimed debit balances of Rs. 84,00,000/- written off can also not be claimed as business loss in the facts and circumstances of the case, as assessee failed to prove that these debit balances were in ordinary course of business and are not of capital in nature. Advances made during ordinary course of business, which were not recoverable in spite off efforts made can be written off and claimed. For instance, advances made in ordinary course of business for supply of raw material is admissible as deduction while advances made by a lawyer to his clients for purchase of properties is not admissible as deduction. (e) Tax auditor ,in his tax audit report in Form NO. 3CD filed during the course of assessment proceedings by assessee itself has clearly held debit balances written off a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also to be disallowed. The disallowance of administrative expenses and interest expenses on earning of dividend income claimed exempt is also held/permitted by the Hon'ble Supreme Court in the case of CIT vs. United General Trust, 200 ITR 488 (SC). 5.4 Keeping in view the provisions of Section 14A of the Act as also the decision of the Hon'ble Supreme Court in the case of CIT Vs. United General Trust Ltd. (supra) and many other following decisions of the Coordinate Benches of the Hon'ble ITAT viz. (a) Southern Petro Chemicals Industries (2005), 93 TTJ 161 (b) Harish Krishnakanta Bhatt (2004), 91 ITD 311 (c) S.G. Investments and Industries Ltd. (2004), 89 ITD 44 (d) Everplus Securities & Finances Ltd. (2006), 285 ITR (AT) 112, It is held that all expenses connected with the exempt income have to be necessarily disallowed regardless of whether they are direct or indirect, fixed or variable, and managerial or financial in accordance with law. In this connection, the provisions of sub-section (2) and (3) of Section 14A of the Act inserted by the Finance Act 2006 deserve to be noted. 5.5 The procedure for computation of disallowance has now been provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il x 2,19,25,938/12,29,20,520 Nil (iii) Average value of investment -Opening Balance of Investments 2,81,42,078 -Closing Balance of Investments 1,57,09,798 -Average value of above investment 2,19,25,938 -1/2% of average value of investment 1,09,630 Disallowance u/s 14A of the Act i.e. aggregate of (i), (ii) and (iii) 1,09,630 5.8 Hence, an amount of Rs. 1,09,630/- is disallowed u/s 14A of the I.T. Act and added to the total taxable income. (Addition Rs. 1,09,630/-) Unsecured loans 6. During the course of assessment proceedings while examining the balance sheet and profit and loss account, it has been observed that during the assessment year under consideration, unsecured loans of assessee has been increased at Rs. 1,21,47,451/- (Rs.1,60,73,535 Rs. 39,26,084/-). Assessee was asked to file confirmations from the parties on account of which additions were made to the unsecured loans during the financial year under consideration vide order sheet entry dated 03.11.2010. Assessee was also required to give complete n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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