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TMI Blog2024 (8) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of the transaction. Therefore find no infirmity in the impugned order deleting the addition made under section 68 on account of unsecured loans taken by the assessee. Consequently, the disallowance of interest payment under section 69C also does not have any basis, and therefore the same is also rightly deleted by the learned CIT(A). Decided against revenue. Disallowance u/s 14A r.w.r. 8D - absence of tax-free income - CIT(A) deleted addition - HELD THAT:- We find that during the year the assessee earned a net gain on the sale of investments and there is no receipt of exempt income u/s 10 - Further from the ledger of the short-term capital gain, we find that the total gain on the sale of investments. Therefore, we find merit in the submission of the assessee that the amount considered as exempt income by the AO is in fact the gains earned by the assessee from the investments. The Revenue could not bring any material to controvert the aforesaid factual position. We find that in Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. We further find that in Pr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) as modified by order dated 25/01/2018 passed under section 154 of the Act, the Revenue has raised the following grounds:- 1. Whether on the facts and in the circumstances of the instant case and in law, the Ld. CIT(A) was justified in allowing the appeal of the assessee on the issue of unsecured loan and interest paid thereon, without clearly establishing the source of lenders as per proviso to section 68 of Act and subsequent application of section 69C of the Act. 2. Whether on the facts and in the circumstances of the instant case and in law, the Ld. CIT(A) was justified in allowing the appeal of the assessee on the issue of I14A disallowance, by holding that if no exempt income is included in the total income, then no disallowance can be made ignoring the fact that an Explanation is added to section 14A with retrospective effect stating that disallowance u/s. 14A has to be made even if there is no exempt income. 3. Whether on the facts and in the circumstances of the instant case and m law, the Ld. CIT(A} was justified in allowing the appeal of the assessee on the issue of 14A disallowance by holding that section 14A is applicable only when the expenditure relating to exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any supporting documents/details. After multiple opportunities, the assessee on 20/12/2017 filed a part-submission providing copies of loan confirmation along with copies of return of income for the assessment year 2015-16 in respect of 15 persons, who had provided unsecured loans to the assessee during the year. Subsequently, on 27/12/2017 the assessee furnished copies of loan confirmation along with copies of return of income for the assessment year 2015-16 in respect of the 11 persons who had provided the unsecured loans to the assessee during the year, via Inward Tapal Register (Dak). 7. The Assessing Officer ( AO ) vide order dated 28/12/2017 passed under section 143(3) of the Act held that since the details were filed by the assessee at the fag end of the limitation period for completion of scrutiny assessment, no time is left to carry out an independent enquiry by way of issuing notices under section 133(6)/131 of the Act, to the persons who provided unsecured loans, to cross verify the genuineness and creditworthiness of those persons. The AO held that no other option is left but to rely upon the documents/details submitted by the assessee in respect of the unsecured lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd two appeals before us. 10. During the appellate proceedings before the learned CIT(A), the assessee made the following submissions and filed the documentary evidence of each loan lender separately: In case of Appellant Company, the Appellant has fulfilled onus by submitting explanations and documentary evidence including PAN and address details of the parties to prove the genuineness of each loan party separately, as under: a) Loan taken from Mr. Rakesh Chaumal amounting to Rs. 74,00,000/-: In relation to the loan taken from Mr. Rakesh Chaumal, we would like to state that Mr. Rakesh Chaumal is one of the promoters of the Appellant Company. He is a director as well as shareholder of the Appellant Company and there is a running account of Mr. Chaumal in the books of the Appellant Company, whereby many transactions are affected as per the need of the Company. During the course of assessment, we have furnished information about the status of Mr. Chaumal as promoter, director and shareholder of the Company and we have also submitted his Ledger confirmation with address and PAN. In view of the above, we have fulfilled onus to prove genuineness of the loan. The Ld. DCIT did not conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DCIT has not conducted any further independent enquiry to cross examine the party and also not called for information u/s. 133(6) of the Act from the party to verify the genuineness of the loan transaction during the proceedings. However, Ld. course of assessment made short disallowance of Rs. 76,97,304/- (Rs. 80,00,000/- Less Rs. 3,02,696/-) in unsecured loan u/s 68 of the Act and Interest Rs. 5,50,339/- (Rs. 5,73,041/- Less Rs. 22,702/-) for which Rectification application has been filed and Order also passed. The Appellant Company being aggrieved by Rectification order passed u/s. 154 by the Ld. DCIT on 07.01.2019 preferred an appeal separately on this ground. d) Loan taken from Syncom Formulations India Limited amounting to Rs. 55,00,000/-: The Ld. DCIT had erred in making an addition on account of loan taken from Syncom Formulations India Limited amounting Rs. 55,00,000/- considering the same as unauthenticated loan. During the course of assessment proceedings, we have submitted PAN and address details of Syncom Formulations India Ltd. In view of the above, we have fulfilled onus to prove genuineness of the loan. The Ld. DCIT has not given the sufficient time to the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,73,041/- Attached Attached* Attached* Syncom Formulations India Limited 55,00,000/- 3,93,534/- Attached Attached Attached Manmade Fibers Pvt Ltd. 50,00,000/- 2,52,756/- Attached Attached Attached Miraj Commercial Trading Pvt Ltd 80,00,000/- 6,75,879/- Attached Attached Attached Total 2,85,52,696/- 21,32,708/- For Pazel International Ltd., The Ld. DCIT has made short disallowance of Rs. 76,97,304/- (Rs. 80,00,000/- Less Rs. 3,02,696/-) in unsecured loan u/s 68 of the Act and Interest Rs. 5,50,339/- (Rs. 5,73,041/- Less Rs. 22,702/-). The same was again rectified by the Ld. DCIT in the Order passed u/s 154 of the Act dated 07.01.2019 for which separate appeal has been preferred by the Appellant Company. 11. Since the assessee produced additional evidence in support of its contention which was not filed before the AO during the assessment proceedings, the learned CIT(A) sought the remand report from the jurisdictional AO in respect of such additional evidence. It is evident from the record that despite repeated reminders the AO failed to submit the remand report within the stipulated time. Therefore, the learned CIT(A) decided the appeal based on the material available on record and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as to why the disallowance under section 14A read with Rule 8D should not be made. In response thereto, the assessee submitted that it has not received any income which is exempt under section 10 of the Act. However, the AO did not agree with the submissions of the assessee and computed the disallowance of Rs. 69,26,663 and added the same to the total income of the assessee. 15. In its application dated 09/01/2018 filed under section 154 of the Act, the assessee submitted that it has earned capital gain/profit from the sale of mutual funds/investments (non-STT) of Rs. 25,60,370, which has wrongly been treated as exempt income and disallowance under section 14A read with Rule 8D has been computed. However, the AO vide order dated 25/01/2018 passed under section 154 of the Act did not agree with the submission of the assessee on the basis that the assessee had not submitted these details at the time of assessment. Further, the AO held that the disallowance under section 14A of the Act shall not exceed the exempt income is a debatable issue and hence the same does not fall within the purview of the mistake apparent from the record. Accordingly, the assessee s request for rectificati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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