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TMI Blog2024 (5) TMI 1163X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be called for. Thus considering the fact that he had sufficient self owned funds available with him to source the investment in the exempt income yielding investment in his capital account with M/s. Anoop Road Carriers, no disallowance of any part of the expenditure was called for in his case u/s. 14A of the Act. Disallowance of the administrative expenditure made by the A.O u/s. 14A r.w.r. 8D(2)(iii), as the Ld. AR had failed to come forth with any plausible explanation as to on what basis the same could not be sustained, therefore, we uphold the same to the said extent. Thus, the Ground of appeal No.1 raised by the assessee is partly allowed in terms of the aforesaid observations. Addition u/s. 41(1) - cessation of liability - outstanding liability had not been discharged till date, the A.O held the same as a liability that had ceased to exist - HELD THAT:- Mere fact that the liability is outstanding for the last many years in the books of account of the assessee and had been brought forward from the preceding years cannot on such standalone basis justify the addition u/s. 41(1) of the Act. Also, there is nothing available on record which would reveal that the same was in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017-18, in which, transaction of purchase of coal had materialized. - SHRI RAVISH SOOD, JUDICIAL MEMBER For the Appellant : S/shri Sunil Kumar Agrawal Vimal Agrawal, CAs For the Respondent : Shri Satya Prakash Sharma, Sr. DR ORDER PER RAVISH SOOD, JM: 1. The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 17.08.2022, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short the Act ) dated 22.12.2018 for the assessment year 2016-17. The assessee has assailed the impugned order on the following grounds of appeal: 1. On the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining the disallowance of Rs. 2,94,308/- made u/s. 14A. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in sustaining the addition of Rs. 10,00,000/- u/s. 41(1). 3. On the facts and circumstances of the case, the ld. CIT(A) erred in not allowing the TCS credit amounting to Rs. 9,60,514/-. 4. The assessee craves leave to add, urge, alter, modify and withdraw any ground/grounds before or at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected at source (TCS) of Rs. 9,60,514/-. 6. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. As is discernible from the records, the CIT(Appeals) taking cognizance of the fact that the assessee despite sufficient opportunity, had failed to participate in the course of the proceedings before him, thus, after summarily referring to the observations of the A.O approved the same and dismissed the appeal. 7. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal. 8. I have heard the ld. Authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. (A) Disallowance u/s. 14A r.w.r. 8D : Rs. 2,94,308/- 9. Apropos the disallowance of the assessee s claim for deduction of expenditure u/s. 14A of the Act it transpires that the same comprises of two parts, viz. (i) disallowance of direct expenditure (interest) under Rule 8D(2)(i) : Rs. 2,09,936/-; and (ii) disallowance under Rule 8D(2)(iii) of administrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction on his part in working out disallowance u/s. 14A r.w.r. 8D, I am unable to concur with the same. As is discernible from the assessment order, the A.O while framing the assessment had at length recorded his observations as to how assessee s claim that no part of expenditure could be attributed towards earning of exempt income was not to be accepted. I, thus, finding no substance in the aforesaid claim of the assessee decline to accept the same. 11. As regards the claim of the Ld. AR that as the assessee had sufficient self owned funds, therefore, no disallowance of any part of the interest expenditure was warranted in his case, I principally concur with the same. The Hon ble High Court of Bombay in the case of CIT vs. HDFC Bank Ltd. (2014) 366 ITR 505 (Bom) had observed that no disallowance for interest could be made based on the reasoning that if the assessee has more interest free funds than the tax-free investments, then a presumption would arise that tax free investments would be out of the interest-free funds. In fact, the aforesaid view is further supported by the judgment of the Hon ble Supreme Court in the case of South Indian Bank Ltd. Vs. CIT (2021) 438 ITR 1 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eried, it was the claim of the assessee that he had received the aforesaid amount of Rs. 10,00,000/- in FY 2014-15 but as the party was not identified at that time, therefore, it was reflected against the name of M/s. Laxmi Mahila Nagrik (supra). However, the assessee submitted that after its identification in FY 2017-18, the aforesaid name was corrected and substituted by that of the actual lender, viz. M/s. Kalindi Power Limited. As the assessee could not substantiate his aforesaid claim by placing on record the confirmation of M/s. Kalindi Power Limited and also considering the fact that the said outstanding liability had not been discharged till date, the A.O held the same as a liability that had ceased to exist u/s. 41(1) of the Act. Accordingly, the A.O based on his aforesaid observation made addition of Rs. 10,00,000/- u/s. 41(1) of the Act. 15. On appeal, the CIT(Appeal) finding no infirmity in the view taken by the A.O upheld the same. 16. As observed by me herein above, the A.O while framing assessment had observed that the assessee had claimed to have received an amount of Rs. 10,00,000/- as advance from M/s. Laxmi Mahila Nagrik. On being queried, it was submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cannot on such standalone basis justify the addition u/s. 41(1) of the Act. Also, there is nothing available on record which would reveal that the same was in the nature of a trading liability which the assessee had claimed as deduction. Ostensibly, Section 41(1) of the Act, inter alia, contemplates where any deduction has been made in the assessment for any year in respect of the trading liability incurred by the assessee and subsequently during any previous year the assessee has obtained some benefit in respect of trading liability by way of remission or cessation thereof, then the amount of benefit accruing to him shall be deemed to be profits and gains of business or professions, which, accordingly, would be chargeable to income tax as his income of that previous year. As the A.O had failed to place on record any material which would justify the addition of the aforesaid amount of Rs. 10,00,000/- u/s. 41(1) of the Act, therefore, I am of a strong conviction that the matter in all fairness requires to be revisited by him. I, thus, on the basis of my aforesaid deliberations, restore the matter to the file of the A.O with a direction to re-adjudicate the same after affording a r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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