DCIT-C-6(2), MUMBAI vs. SAMIRA HABITATS INDIA LIMITED, MUMBAI

The issue arising in Ground No. (i), raised in Revenue’s appeal, pertains to restricting the disallowance made on account of bogus purchases to 50%.

The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the real estate business and is a part of the Samira Group, which is engaged in the construction and development of the real estate project. For the year under consideration, the assessee filed its return of income on 30/09/2011, declaring a total income of INR 2,37,74,450. Pursuant to the search and seizure operation conducted under section 132 of the Act in the case of Samira group on 21/03/2013, notice under section 153C of the Act was issued to the assessee on 24/09/2019. In response to the notice, the assessee filed its return of income on 09/12/2014, declaring a total income of INR 2,37,74,450. During the assessment proceedings, multiple notices were issued, which were not responded to by the assessee. Considering that the assessment was getting barred by limitation, a final opportunity was granted to the assessee to make submissions with respect to all the notices issued. However, the assessee failed to respond to the same. Accordingly, the Assessing Officer (“AO”) proceeded to complete the assessment based on the material available on record on a best judgment basis. During the search proceedings on the Samira , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 5 Group, various evidences pertaining to debiting of bogus purchases were found, which was confronted with the assessee and a specific query was raised. However, no evidence to the contrary was produced by the assessee during the assessment proceedings, despite multiple opportunities provided to the assessee and categorical queries raised in the statutory notices. Further, notices issued under section 133(6) of the Act also remained unserved, and the Inspector deputed to serve the same could not trace the parties from whom the alleged purchase was made. Since the key persons of the group admitted to the modus operandi of taking bogus purchases and also confirmed the quantum of the same before the Income Tax Settlement Commission, the AO, vide order dated 27/03/2015 passed under section 144 read with section 153C of the Act, made an addition amounting to INR 90,49,665 on account of bogus purchases.

The learned CIT(A), vide impugned order, following the decision rendered by the first appellate authority in assessee’s sister concern, i.e. Samira Residences Private Limited, for the assessment year 2009-10, directed the AO to restrict the disallowance on account of bogus purchases to 50%. The learned CIT(A) further directed that the amount disallowed, i.e. the balance 50%, needs to be reduced from the Work in Progress and no addition be made to the total income of the assessee. The relevant findings of the learned CIT(A), vide impugned order, pertaining to this issue are reproduced as follows: –

We have considered the submissions of both sides and perused the material available on record. In the present case, proceedings under section 153C of the Act were initiated against the assessee pursuant to the search and seizure operation conducted under section 132 of the Act in the case of Samira Group. During the search, the bills of the purchase parties from whom the assessee had made genuine purchases were compared with those of the alleged purchase parties who had not supplied any genuine material to the assessee. Upon comparison of the bills, it was observed that the bills of the genuine parties were accompanied by supporting documents, while the bills of the bogus purchase parties did not have any supporting documentation. It is evident from the record that during the search, the statement of the Director of the assessee was recorded on oath under section 132(4) of the Act, wherein he admitted as follows: –

Thus, the Director claimed that the assessee received unaccounted cash after giving the cheque for bogus expenses, which was used by it at the time of purchase of land from the farmers who insist upon cash payment over and above the agreement value. The Director of the assessee further accepted that the purchases made from entities, such as M/s Karma Ispat Ltd., M/s Vimal Sales Corporation and M/s Vastu Trading Co. by the assessee along with other sister concerns, including Samira Residence Private Limited, are not accompanied by supporting documents and in the absence of the same, the genuineness of the purchases cannot be verified. Before the learned CIT(A), the assessee submitted that 50% of the cash generated from bogus purchases was utilised for business purposes and the assessee incurred various development expenditure in the form of levelling of land, fencing, construction of compound and roads, supply of electricity and water, etc. Further, part of , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 9 these expenses, such as wages paid to the labourers, hiring of vehicles and equipment for which the assessee has to hire local suppliers, are of such a nature that the same need to be paid in cash. The assessee further submitted that besides the above, payment in cash was also required to be made for the purchase of land from farmers, intermediaries and the like. Therefore, the assessee submitted that it was forced to enter into the deal in such a fashion that the accounted funds, which went out of the hands of the company through banking channels, were utilised thereafter in cash for various business purposes. In this regard, the assessee referred to statements of various brokers recorded under section 131 of the Act during the search, as noted on pages 13-25 of the impugned order, wherein they admitted that the assessee made certain payments in cash. Accordingly, the assessee submitted before the learned CIT(A) that multiple employees/parties have stated the same fact that the expenditure for agricultural land and other expenses were incurred in cash, and therefore, at least 50% of the cash generated from the alleged bogus purchases was utilised for business purposes. Further, it was submitted that the seized material itself substantiated the above contention.

During the hearing, the learned Departmental Representative (“learned DR”) by placing reliance upon the decision of the Hon’ble Jurisdictional High Court in PCIT v/s Kanak Impex (India) Ltd, reported in [2025] 172 Taxmann.com 283 (Bom.), submitted that since the assessee could not prove the genuineness of the purchase transaction, the entire amount claimed by the Director of the assessee company as bogus purchases for the year under consideration should be disallowed without granting any deduction.

From the perusal of the decision of the Hon’ble Jurisdictional High Court in Kanak Impex (supra), we find that in the facts of that case pursuant to the information received from the Sales Tax Department, proceedings under section 147 of the Act were initiated on the basis that the taxpayer is a beneficiary of accommodation entry transaction in the form of bogus purchases. During the assessment proceedings, despite several notices, the assessee did not file any response. Further, the notices issued under section 133(6) of the Act at the address of the persons from whom the taxpayer had purchased the goods were also returned “unserved”. As the assessee did not appear before the AO during the reassessment proceedings, and also failed to prove the genuineness of the purchase transaction, the AO made the addition of the entire amount of bogus purchases. In further appeal, the learned CIT(A) estimated 12.5% of the bogus purchases as an addition to be made instead of confirming the entire bogus purchases, placing reliance upon the decision of the Hon’ble Gujarat High Court in CIT v/s Simit P Sheth, reported in [2013] 356 ITR 451 (Guj.). The Tribunal, in further appeal, by placing reliance upon the decision of the Hon’ble Jurisdictional High Court in Mohd. Haji Adam, reported in [2019] 103 Taxmann.com 459 (Bom.), dismissed the appeal filed by the Revenue and directed the AO to restrict the addition to the extent of bringing the gross profit rate of disputed purchases to the same rate as that of the other purchases. The Hon’ble Jurisdictional High Court, allowing the appeal filed by the Revenue, held that the onus of proving the genuineness of the expenditure claimed as a deduction is on the assessee. The Hon’ble High Court held that the primary onus is on the assessee to discharge his burden , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 11 to prove the purchases, which the assessee has claimed as a deduction under the Act for arriving at the taxable income. The Hon’ble High Court held that the genuineness of the purchases would, inter alia, also include an explanation with regard to the source of payment for such purchases. It was held that in the facts of the case, the taxpayer did not appear before the AO during the reassessment proceedings to prove the deduction claimed for purchases, and there was no justification to establish the purchases. The Hon’ble High Court held that there is no justification in the findings of the learned CIT(A) in restricting the disallowance to 12.5% of such purchases once it came to the conclusion that the taxpayer failed to prove the genuineness and source of purchases, and also confirmed its involvement in the modus operandi. It was further held that the Tribunal also misdirected itself by approaching the issue with the erroneous belief that it was estimating profit. Thus, the Hon’ble High Court held that if this approach of the CIT(A) and the Tribunal is accepted, then it would be contrary to the provisions of section 69C of the Act, which mandates the assessee to explain the source of expenditure. Since in the facts of the case the taxpayer did not attend the reassessment proceedings and there was no explanation of the source of expenditure incurred for making the bogus purchases, the Hon’ble Jurisdictional High Court in Kanak Impex (supra) restored the addition made under section 69C of the Act.

Before considering the applicability of the ratio of the Hon’ble Jurisdictional High Court in Kanak Impex (supra) to the present case, it is pertinent to reiterate certain relevant facts of this case. It is undisputed that in the present case, the Director of the assessee explained in its statement, , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 12 as noted on page 12 of the assessment order, the modus operandi of accommodation entries availed by the group companies, wherein after giving the cheque for bogus expenses, the assessee received the unaccounted cash which was used by it for various purposes as noted above, including the purchase of land from the farmers. It is further pertinent to note that the assessee never disputed the fact that the transaction with M/s Karma Industries Ltd was bogus, and the Director, vide his statement recorded under section 132(4) of the Act, also offered additional undisclosed income amounting to INR 90,49,665 in the hands of the assessee for the year under consideration, which ultimately resulted in the impugned addition. Further, it is pertinent to note that the AO neither disputed payment through cheque by the assessee to M/s Karma Industries Ltd. nor brought any material on record to doubt the source of expenditure by the assessee. Therefore, we find that the facts of the present case are on a different footing from the facts that were under consideration before the Hon’ble Jurisdictional High Court in Kanak Impex (supra). Thus, we are of the considered view that the reliance placed by the learned DR on the decision of the Hon’ble Jurisdictional High Court in Kanak Impex (supra) is completely misplaced.

It is further worth noting that the AO made the impugned addition under the head “income from business”. It is the plea of the assessee that since 50% of the cash generated from bogus purchases was utilised for business purposes, the disallowance on account of bogus purchases should be restricted to that extent. Thus, as per the assessee, as the income taxed under the head “income from business” was utilised by the assessee for business , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 13 purposes only, i.e. purchase of land and developing the same, the addition should be reduced correspondingly. At this stage, it is relevant to refer to the provisions of section 115-BBE(2) of the Act, which deny deduction of any expenditure or allowance under any provisions of the Act while computing the income referred to, inter alia, in section 69C of the Act. Since, in the present case, the impugned addition was not made under any of the provisions as referred to in section 115-BBE(1), and instead, the same was made under the head “income from business”, therefore, section 115-BBE(2) of the Act has no applicability to the facts of the present case.

We find that considering the similar facts, the coordinate bench of the Tribunal in case of assessee’s sister concern in DCIT v/s Samira Residences Private Limited, in ITA No. 1775/Mum./2018, for the assessment year 2009- 10, vide order dated 29/06/2021, upheld the findings of the learned CIT(A), which were relied upon in the impugned order in the present case. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as follows: –

Therefore, respectfully following the decision of the coordinate bench of the Tribunal rendered in the case of assessee’s sister concern, we do not find any infirmity in the findings of the learned CIT(A) in restricting the disallowance on account of bogus purchase to 50%. Accordingly, the same is upheld, and Ground No. (i) raised in its Revenue’s appeal is dismissed.

The brief facts of the case pertaining to this issue, as emanating from the record, are: As one of the key findings of the search and seizure operation was that the assessee indulged in the practice of taking on-money on sale of land/flats, which were not recorded in the books of accounts, notice under section 142(1) of the Act was issued to the assessee during the assessment proceedings. In the absence of any response from the assessee, the AO, vide assessment order, made an addition of INR 20 lakhs to the income of the assessee under the head “income from other sources”. The learned CIT(A), vide impugned order, following the decision of the Tribunal in assessee’s own case for the assessment year 2006-07, directed the AO to restrict the addition on account of on-money to 10% after considering the , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 15 unaccounted/unexplained expenditure incurred by the assessee. Being aggrieved, the Revenue is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. It is evident from the record that in the statement recorded during the search and seizure proceedings, the Director of the assessee admitted that at the time of sale of property, the assessee received on-money in cash. We find that while considering a similar issue in assessee’s own case for the assessment year 2006-07, wherein a similar addition was made by the AO in view of the statement given on oath by the Director of the assessee, the coordinate bench of the Tribunal in M/s Samira Habitats India Ltd V/s ACIT, in ITAs No. 529 and 531/Mum/2022, vide order dated 20/10/2022, after considering the statements of the brokers recorded during the search proceedings, observed as follows: –

We find that the said order was modified on 11/08/2023, passed in MA No. 304/Mum/2023, arising out of rectifying the typographical error in para-10 of the aforesaid order as follows: – , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 16

Therefore, respectfully following the decision rendered in assessee’s own case cited supra, we do not find any infirmity in the findings of the learned CIT(A) in directing the AO to restrict the addition on account of on-money to 10%. Accordingly, the same is upheld, and Grounds No. (ii) to (iv) raised in Revenue’s appeal are dismissed.

The issue arising in Grounds No. (v) and (vi), raised in Revenue’s appeal, pertains to the deletion of the addition made on account of unexplained cash expenditure.

The brief facts of the case pertaining to this issue, as emanating from the record, are: During the search proceedings, evidence of cash loans taken and cash interest paid by the assessee were found. Accordingly, notice was issued to the assessee during the assessment proceedings. However, the assessee offered no explanation regarding the source of such expenditure. Accordingly, the AO, vide assessment order, in the absence of any explanation and/or documentary evidence regarding the recording of expenditure in the books of account, treated the interest payment in cash to be in the nature of unexplained expenditure taxable under section 69C of the Act. Further, upon , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 17 perusal of the details of interest payment in cash, the AO noted that they were in excess of INR 20,000, which is in contravention of the provisions of section 40A(3) of the Act. In the absence of any response from the assessee, the AO treated the interest payment in cash to be disallowable under the provisions of section 40A(3) of the Act. Accordingly, the AO made an addition of INR 1,39,24,500 on account of interest payment in cash.

The learned CIT(A), vide impugned order, deleted the addition made by the AO, by observing as follows: –

Having considered the submissions of both sides and perused the material available on record, we find that the learned CIT(A) granted the relief to the assessee on the basis that the interest expenditure incurred by the assessee is in the nature of business expenditure and the same is paid out of the alleged unaccounted cash receipts, which are far greater than the interest , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 18 payments. However, we find that the learned CIT(A) failed to appreciate that these interest payments in cash were in excess of the limit provided under the provisions of section 40A(3) of the Act, and the same was also one of the reasons for disallowing the interest expenditure and making the impugned addition. Thus, even if the findings of the learned CIT(A) that the source of payment of interest in cash was the cash receipts are accepted, even then the conditions as laid down in the provisions of section 40A(3) of the Act need to be satisfied. During the hearing, the learned Authorised Representative (“learned AR”) by referring to the remand report of the AO, forming part of the paper book from pages 173-179, submitted that no such expenditure was claimed by the assessee. From the perusal of para-5.2 of the remand report on page 176 of the paper book, we find that the same refers to the cash payment of INR 7,25,000, which was also added by the AO under section 40A(3) of the Act. Further from the perusal of the assessment order, we find that the addition of INR 7,25,000 was a separate addition made by the AO in para-20 of the assessment order under section 40A(3) of the Act. Therefore, we do not find any merit in the aforesaid submission of the learned AR. Since there is no material contrary to the findings of the AO that the interest expenditure incurred in cash was in excess of the limit provided in the provision of section 40A(3) of the Act, we are of the considered view that the AO righty made the addition amounting to INR 1,39,24,500 to the total income of the assessee. Accordingly, the said addition is upheld, and Ground No. (vi) raised in Revenue’s appeal is allowed. In view of the aforesaid findings, Ground No. (v) raised in Revenue’s appeal needs no separate adjudication as it also pertains to the same addition.

The issue arising in Ground No. (vii), raised in Revenue’s appeal, pertains to the deletion of the addition made on account of unexplained cash deposits as per the ITS data.

The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, it was seen from the ITS data for the year under consideration that the assessee had made cash deposits totalling INR 1,06,06,000. However, the source of the same was not explained. Further, the assessee was specifically asked to reconcile the entries as appearing in the ITS along with documentary proof. However, no reconciliation for the same was submitted. In the absence of any details being filed by the assessee, the AO, vide assessment order, made an addition of INR 1,06,06,000 to the total income of the assessee as deemed income in the nature of unexplained cash deposits. The learned CIT(A), vide impugned order, deleted the addition made by the AO on the basis that all the deposits were duly recorded in the books of account and the source of such cash deposit stands explained. Being aggrieved, the Revenue is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. In the present case, on the basis of data available on the ITS, it was noticed that the assessee made cash deposits total amounting to INR 1,06,06,000 during the year under consideration. We find that during the remand proceedings before the AO, the assessee submitted the ledger account of the cash book in order to support its submission that , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 20 the cash deposits made in the bank during the year under consideration were out of the cash in hand. From the perusal of para-5.5 of the remand report, on pages 177-178 of the paper book, we find that ongoing through the ledger account, the AO noted that the assessee has shown opening cash balance of INR 64,04,602 in September 2010, INR 1,53,63,350 in August 2010, INR 4,81,582 in May 2010, INR 19,20,439 in January 2011, INR 14,21,002 in December 2010, and INR 67,44,116 in March 2011. However, despite noting the aforesaid details from the ledger account of the cash book, the AO did not agree with the contentions of the assessee that cash deposited in the bank was out of the cash in hand of the assessee. In the factual paper book filed before us, the assessee has placed on record the statement of its bank account maintained with the Bank of India, the HDFC Bank and Axis Bank. Further, the assessee has also placed on record the cash book. On the basis of these details, which were also furnished during the remand proceedings, the learned CIT(A) observed as follows: -

No material has an brought on record by the Revenue contrary to the aforesaid findings of the learned CIT(A). Further, there is no material available on record contrary to the claim of the assessee that it had a sufficient cash , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 21 balance for making the cash deposits during the year under consideration. As a result, we do not find any infirmity in the findings of the learned CIT(A) on this issue, and accordingly, the same are upheld. Consequently, Ground No. (vii) raised in Revenue’s appeal is dismissed.

The issue arising in Ground No. (viii), raised in Revenue’s appeal, pertains to the deletion of the addition made on account of the sale of property as reported in the ITS data.

The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, from the information available on ITS, it was noticed that the assessee sold properties for a total consideration of INR 37,41,00,750. Accordingly, during the assessment proceedings, the assessee was asked to reconcile the same along with the necessary documentary proof. In the absence of any details/information being furnished by the assessee, the AO, vide assessment order, made an addition of INR 37,41,00,750 on account of the sale of property as per the ITS data. The learned CIT(A), vide impugned order, decided this issue in favour of the assessee, and deleted the addition made by the AO on the basis that the ledger account and sale agreements duly show that the impugned amount was already offered to tax by the assessee. Being aggrieved, the Revenue is in appeal before us.

Having considered the submissions of both sides and perused the material available on record, we find that during the remand proceedings before the AO, the assessee furnished copy of the sale deeds vide submission , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 22 dated 28/02/2017 in respect of the property transactions, total amounting to INR 37,41,00,750 as appearing in the ITS data. However, the AO, on the basis that the assessee has not furnish the complete details of all the sales offered in the profit and loss account for the year under consideration, disagreed with the submissions of the assessee that the transaction reflected in the ITS has already been offered as income for the year under consideration. In the factual paper book filed before us, the assessee has placed on record the ledger account along with the registered deed of conveyance in respect of the properties, whose sale transaction was reflected in the ITS data. The learned CIT(A), vide impugned order, on the basis of the aforesaid information filed by the assessee, concluded that the assessee has already offered to tax the entire amount of INR 37,41,00,750. The relevant findings of the learned CIT(A), vide impugned order, are reproduced as follows: –

During the hearing, the Revenue did not bring any material on record to controvert the aforesaid findings of the learned CIT(A), according the same are upheld. Accordingly, Ground No. (viii) raised in Revenue’s appeal is dismissed.

The issue arising in Ground No. (ix), raised in Revenue’s appeal, pertains to the deletion of the addition made on account of unexplained expenditure as per the ITS data.

The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, on the basis of the information available on the ITS, it was noticed that the assessee has incurred expenditure total amounting to INR 17,06,979 in respect of payments to hotels and restaurants. Since the assessee failed to furnish basic details such as party-wise breakup of expenses, etc., the AO, vide assessment order, added the sum of INR 17,60,979 to the total income of the assessee as unexplained expenditure. The learned CIT(A), vide impugned order, granted partial relief to the assessee and restricted the addition to INR 7,43,089 on the basis that payments in respect of two bills total amounting to INR 7,43,089, are not recorded in the books of account of the assessee. Being aggrieved, the Revenue is in appeal before us.

Having considered the submissions of both sides and perused the material available on record, we find that the learned CIT(A), on the basis , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 24 that the expenditure totalling to INR 10,17,890 was duly recorded in the books of account in the sales promotion ledger and the bank statement has also shown the payments made, deleted the addition to that extent. As per the assessee, the said payment was made in the nature of sales promotion expenses and was incurred for meeting the various business needs. The relevant findings of the learned CIT(A), vide impugned order, are reproduced as follows: –

In the absence of any material contrary to the findings of the learned CIT(A), we do not find any infirmity in the impugned order on this issue. Accordingly, the same is upheld, and Ground No. (ix) raised in Revenue’s appeal is dismissed.

The issue arising in Ground no.(x), raised in Revenue’s appeal, pertains to the deletion of the disallowance of interest on delayed payment/short deduction of TDS.

Having considered the submissions of both sides and perused the material available on record, we find that the learned CIT(A), vide impugned order, deleted the disallowance of interest on delayed payment/short deduction of TDS under section 37(1) of the Act on the basis that the interest paid on delayed payment/short deduction of TDS is not penal but compensatory in nature.

We find that the Hon’ble Bombay High Court in Ferro Alloys Corporation Ltd. v/s CIT, reported in (1992) 196 ITR 406 (Bom), held that the interest levied for delayed payment of TDS is not an allowable business expenditure. The relevant findings of the Hon’ble Bombay High Court, in the aforesaid decision, are reproduced as follows: -

We further find that the issue whether the interest under section 201(1A) of the Act paid by the assessee was an expenditure incidental to business and allowed as a deduction from the profits and gains of the business, came up for consideration before the Hon’ble Madras High Court in CIT vs. Chennai Properties & Investment Ltd., reported in [1999] 239 ITR 435 (Madras). While answering the issue in negative and in favour of the Revenue, the Hon’ble Madras High Court, after considering the decision of the Hon’ble Supreme Court in the case of Bharat Commerce & Industries Ltd. v/s CIT, reported in [1998] 230 ITR 733 (SC), observed as follows: - “14. As already noticed, the payment of interest which takes colour from the nature of the levy with reference to which such interest is paid and the tax required to be paid but not paid in time, which rendered (sic) the assessee liable for payment of interest, was in the nature of a direct tax and in settlement of the income-tax payable under the Income-tax Act. The interest paid under section 201(1A), therefore, would not assume the character of business expenditure and cannot be regarded as a compensatory payment as contended by the learned counsel for the assessee.

The counsel for the assessee in support of his submission that the interest paid by the assessee was merely compensatory in character besides relying , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 27 on the case of Mahalakshmi Sugar Mills Co. (supra) also relied on the decisions of the Apex Court in the cases of Prakash Cotton Mills (P.) Ltd. v. CIT[1993] 201 ITR 684 / 67 Taxman 546 ; Malwa Vanaspati & Chemical Co. v. CIT[1997] 225 ITR 383 and CIT v. Ahmedabad Cotton Mfg. Co. Ltd. v. CIT[1994] 205 ITR 163. In all those cases, the Court was concerned with an indirect tax payable by the assessee in the course of its business and admissible as business expenditure. Further, liability for interest which had been incurred by the assessee therein was regarded as compensatory in nature and allowable as business expenditure.

Thus, respectfully following the decisions of the Hon’ble High Courts as cited supra, we do not find any merits in the claim of the assessee in seeking deduction under section 37(1) of the Act in respect of interest on delayed payment/short deduction of TDS. Accordingly, the impugned order on this issue is set aside, and the disallowance made by the AO is upheld. As a result, Ground no. (x) raised in Revenue’s appeal is allowed.

The issue arising in Ground No. (xi), raised in Revenue’s appeal, pertains to disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962 (“the Rules”).

The brief facts of the case are that during the assessment proceedings, it was noticed that the assessee had earned exempt dividend income amounting to INR 78,000 during the year under consideration. Further, it was noticed that expenditure such as interest is debited to the profit and loss account, however, no expenditure has been treated as attributable to the earning of exempt income by the assessee, and no disallowance under section 14A of the Act has been made. Accordingly, the assessee was asked to show cause as to why the disallowance under section 14A of the Act should not be made. In the absence of any response from the assessee, the AO, vide assessment order, computed the disallowance of INR 4,35,137 under section 14A read with Rule 8D of the Rules. The learned CIT(A), vide impugned order, following the judicial precedents, directed the AO to restrict the disallowance to the extent of exempt income earned by the assessee. The relevant findings of the learned CIT(A) on this issue are reproduced as follows: –

In the result, the appeal by the Revenue for the assessment year 2011- 12 is partly allowed.

During the hearing, Ground No. 1 raised in the cross objection was not pressed. Accordingly, the same is dismissed as not pressed.

The issue arising in Ground No. 2, raised in assessee’s cross-objection, pertains to the addition made on account of unexplained expenditure as per the ITS data.

We have considered the submissions of both sides and perused the material available on record. As noted in the foregoing paragraphs, the learned CIT(A) upheld the part disallowance amounting to INR 7,43,089 made on account of unexplained expenditure as per the ITS data. The learned CIT(A), after perusal of the details submitted by the assessee during the remand proceedings, noticed that the expenditure to an extent of INR , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 31 10,17,890 was duly recorded in the books of account in the sales promotion ledger and the bank statement shows the payments made. It was further noticed that payments in respect of two bills, i.e. Bill No. 54301 dated 16/06/2010 amounting to INR 6,06,650 and Bill No. 35517 dated 14/12/2010 amounting to INR 1,26,439, are not recorded in the books of accounts. Accordingly, the learned CIT(A) confirmed the addition to the extent of INR 7,43,089. During the hearing, the learned AR, apart from merely submitting that the addition is only based on the ITS data without any further enquiry, did not bring any material on record to prove the genuineness of the aforesaid expenditure. Accordingly, we do not find any infirmity in the findings of the learned CIT(A) in upholding the disallowance to an extent of INR 7,43,089, and the same is upheld. As a result, Ground No. 2 raised in assessee’s cross- objection is dismissed.

In the result, the cross-objection by the assessee for the assessment year 2011-12 is dismissed.

We find that the issues arising in Grounds No. (i)-(v), raised in Revenue’s appeal, have already been considered by us while adjudicating Revenue’s appeal for the assessment year 2011-12. Accordingly, our findings/conclusions as rendered in respect of these issues shall apply mutatis mutandis to the present appeal. These grounds are adjudicated accordingly.

The issue arising in Ground No. (vi), raised in Revenue’s appeal, pertains to the deletion of the addition made on account of club expenses.

The brief facts of the case pertaining to this issue, as emanating from the record, are: From the audit report, it was found that the assessee has debited a sum of INR 43,529 to the profit and loss account as club expenses. In the absence of any details regarding the genuineness of the same as business expenditure, the AO, following its approach adopted in assessment , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 33 year 2007-08, made a disallowance of INR 43,529 vide order dated 27/03/2015 passed under section 144 read with section 153C of the Act. The learned CIT(A), vide impugned order, deleted the addition made on account of club expenses. Being aggrieved, the Revenue is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. As per the assessee, the club expenditure amounting to INR 43,529 was incurred by the Directors of the assessee for the promotion of its business. We find that accepting the submission of the assessee, the learned CIT(A), vide impugned order, observed as follows: –

In the absence of any material contrary to the findings of the learned CIT(A), we do not find any infirmity in the impugned order on this issue. Accordingly, the same is upheld, and Ground No. 6 raised in Revenue’s appeal is dismissed.

In the result, the appeal by the Revenue for the assessment year 2009- 10 is partly allowed.

During the hearing, Grounds No. 1 and 3 raised in the cross-objection were not pressed. Accordingly, the same are dismissed as not pressed.

The issue arising in Ground No. 2, raised in assessee’s cross-objection, pertains to the disallowance on account of the salary paid to the Director’s wife.

The brief facts of the case pertaining to this issue, as emanating from the record, are: During the search proceedings, it was found and admitted by the Director of the assessee that the salary was paid to Mrs Milan S. Nerurkar, i.e. the wife of the Director, without rendering any services. Accordingly, the opportunity was granted to the assessee during the assessment proceedings to make its submissions. In the absence of any response from the assessee, , 5710, 5714/Mum/2024 & CO No.11, 12 & 13/Mum/2025 35 the AO, vide assessment order, in light of the categorical admission during the search proceedings, made an addition of INR 24 lakh being the salary paid to the Director’s wife as ineligible business expenditure. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and upheld the addition made by the AO.

Having considered the submissions of both sides and perused the material available on record, we find that it is an admitted position that the wife of the Director did not render any service to the company nor does any activity in the company. Therefore, there is no material available on record to show that the expenditure in terms of salary paid to the Director’s wife was for the purpose of the business of the assessee. Accordingly, we do not find any infirmity in the findings of the learned CIT(A) in upholding the disallowance made by the AO. As a result, the impugned order on this issue is upheld, and Ground No. 2 raised in assessee’s cross-objection is dismissed.

In the result, the cross-objection by the assessee for the assessment year 2009-10 is dismissed.

In the result, the appeal by the Revenue for the assessment year 2012- 13 is partly allowed.

During the hearing, Ground No. 1 raised in the cross objection was not pressed. Accordingly, the same is dismissed as not pressed.

The issue arising in Ground No. 2, raised in assessee’s cross-objection, pertains to the addition made on account of unexplained expenditure as per the ITS data. As a similar issue has already been considered in assessee’s cross-objection for the assessment year 2011-12, accordingly, our findings/conclusions as rendered therein in respect of this issue shall apply mutatis mutandis. As a result, Ground No. 2 raised in assessee’s cross- objection is dismissed.

In the result, the cross-objection by the assessee for the assessment year 2012-13 is dismissed.

To sum up, all the appeals by the Revenue are partly allowed, while all the cross-objections by the assessee are dismissed.