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TMI Blog2024 (7) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. We uphold the Ld.CIT(A) s decision to restrict the disallowance under Section 14A to the exempt income earned by the assessee. Bogus LTCL - loss on sale of shares treated as unexplained transaction - AO's conclusion was primarily based on data from the AST and information from higher authorities, particularly the Investigation Wing, Kolkata - CIT(A) deleted addition - HELD THAT:- We uphold the decision of the Ld.CIT(A) to delete the disallowance made by the AO. We concur with the Ld.CIT(A)'s observation that the AO failed to provide substantial evidence to disprove the genuineness of the transactions. We note the following key-points that AO's disallowance was based on information from the Investigation Wing without conducting independent verification or inquiries. The assessee provided comprehensive documentary evidence to substantiate the genuineness of the transactions. The investigation reports did not specifically implicate the assessee or their broker. The AO did not give the assessee an opportunity for cross-verification by failing to share the underlying information. - Decided against revenue. Addition of Speculation loss claimed under the head incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the following grounds of appeal: 1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 35,62,964- u/s. 14A of the Act. 1.1. The Ld. CIT(A) has failed to appreciate that investment of Rs. 23,68,79,628/- was made in shares during the year, dividend income from which is exempt from tax. 1.2. The Ld. CIT(A) has failed to appreciate that since the assessee is not maintaining any separate account from which such investments had been made, the provision of Rule 8D are clearly applicable. 1.3. The Ld. CIT(A) has failed to appreciate that the assessee apart from making a bald assertion that it had the interest free funds available for making such investments, has not lead any evidence to prove that it had the necessary interest free cash flow during the time of making such investment. 1.4. The Ld. CIT(A) has failed to appreciate that as per Section 106 of Evidence Act, when any fact is especially within the knowledge of any person, the burden of proving the fact is upon him 1.5. The Ld. CIT(A) has erred in facts and in law while deleting the disallowance on the ground that no exempt income had been eared by the assessee from such investment. 2. The Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8D and restricted by the Ld.CIT(A) to Rs. 23,970/-. The facts of the issue are such that during the year under consideration, the assessee has earned Dividend Income of Rs. 23,970/- as exempt income. As claimed by the assessee, the company has not made any direct expense to earn this exempt income and has not borrowed any funds specifically to fund the acquisition of such investments. It also has not incurred any administrative expense to earn this exempt income. The assessee on its own deducted Rs. 10,000/- on ad-hoc basis considering the same is spent for earning exempt income. Break-up of the total amount of capital assets/investments capable of yielding exempt income was as follows: Particulars A.Y. 2014-15 in Rs. A.Y. 2013-14 in Rs. Strategic Investment 7,82,14,632 7,82,13,731 Other Investment 22,13,075 77,13,075 Total 8,04,27,707 8,59,26,806 The Value of assets and the amount of own funds available with the assessee was as under: Particulars As at 31-3-2014 in Rs. As at 31-3-2013 in Rs. Value of Assets 23,68,79,628.00 19,82,24,725.00 Share Capital 24,58,500.00 24,58,500.00 Reserves and Surplus 16,90,54,097.95 16,32,40,339.81 Total Interest free funds 17,15,12,597.95 16,56,98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above facts of the case and the fact that identical issue on similar lines has been decided by this office in the immediately preceding years i.e. A. Y. 2013-14 dated 26/05/2017, A.Y. 2012-13 dated 17/04/2016 and also in A. Y. 2011-12 dated 20/08/2015, following the same and on merits, the disallowance u/s. 14A r.w. Rule-8D is restricted to Rs. 23,970/- i.e. exempt income in the form of dividend received. Since the appellant himself has suo moto made the disallowance of Rs. 10,000/- on adhoc basis in computation of total income, therefore, the remaining disallowance to the extent of Rs. 13,970/- is found correct and the same is confirmed and relief is granted for the balance disallowance. In other words, the disallowance u/s. 14A is confirmed to the extent of Rs. 13,970/-. The related grounds of appeal are accordingly partly allowed. 5. The Ld.Counsel for the assessee reiterated the points submitted before the AO and the Ld.CIT(A) and placed reliance on the judgement of the Hon ble Gujarat High Court in the case of PCIT v. Gujarat Flurochemicals Ltd. reported in (2023) 459 ITR 242 :: 295 Taxman 200 (Guj.). 6. On the other hand, the Ld.Departmental Representative relied on the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) s decision to restrict the disallowance under Section 14A to the exempt income earned by the assessee, amounting to Rs. 23,970/-. Consequently, the Revenue s appeal on this ground is dismissed. On Ground No.2 9. This ground pertains to addition of Rs. 1,71,03,200/- made by AO on account of loss on sale of shares of Indian Infotech and Software Ltd. (loss of Rs. 44,21,400/-) and Shree Shalin Textile Ltd. (loss of Rs. 1,26,81,800/-) and treating the same as unexplained transaction. 10. The brief facts of the issue are such that during the year under consideration, the assessee had incurred a loss on sale of share of these two shares. The AO, on the basis of data available on AST and information received from higher authorities, issued a show-cause notice to the assessee as to why this loss claimed on sale of these penny stock should not be disallowed. In response to the said notice, the assessee vehemently contented that such action sought to be made is merely based on suspensions and surmises. The assessee further stated that the company is doing business of trading in equity shares, equity derivatives, currency derivatives, etc. and the company is an established player in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated the facts and took us through the order of the Ld.CIT(A) and placed reliance on some judicial pronouncements including that of Hon ble Gujarat High Court Judgment in the case of Prudent Finance (P) Ltd. (2013) 43 taxmann.com 317. 12. On the other hand, the Ld.DR relied on the order of AO. 13. We have heard the rival contentions and perused the material available on record. The AO disallowed the loss claimed by the assessee on the sale of shares amounting to Rs. 1,71,03,200/- on the ground that transactions were non-genuine. The AO's conclusion was primarily based on data from the AST and information from higher authorities, particularly the Investigation Wing, Kolkata. The AO contended that these transactions were fabricated and lacked authenticity. The Ld.CIT(A) found that the AO's disallowance was based solely on the information from the Investigation Wing without conducting independent inquiries or verifying the substantial evidence provided by the assessee. Furthermore, the Ld.CIT(A) noted that: The investigation reports did not specifically name the assessee or their broker. The AO failed to provide the assessee with the information on which the addition was based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transactions. We note the following key-points: The AO's disallowance was based on information from the Investigation Wing without conducting independent verification or inquiries. The assessee provided comprehensive documentary evidence to substantiate the genuineness of the transactions. The investigation reports did not specifically implicate the assessee or their broker. The AO did not give the assessee an opportunity for cross-verification by failing to share the underlying information. 15.1. Therefore, we dismiss this ground of Revenue s appeal and confirm the deletion of disallowance of Rs. 1,71,03,200/- made by the AO on account of loss on the sale of shares. On Ground No.3 16. This ground relates with disallowance of Rs. 13,45,857/- made by AO on account speculation loss claimed under the head income from other sources . The facts are such that the assessee carries on business under the normal provisions as well as the speculation business for which profit and loss account was worked out separately. The assessee claimed Rs. 13,45,857/- as proportionate depreciation relating to speculation business. AO concluded that the assessee claimed this as speculation loss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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