ITO - 30(1)(1), MUMBAI vs. BALVINDRSINGH HARBANSINGH KOHLI, MUMBAI

The Revenue in appeal has assailed the findings of CIT(A) on two counts:

Shri Chetan M. Kacha representing the Department submitted that during the course of assessment proceedings, the Assessing Officer observed that in the Balance Sheet of assessee there are huge unsecured loans. The assessee was asked to furnish creditworthiness of lenders , genuineness of the loans and the identity of the lenders. The assessee failed to discharge its onus in proving creditworthiness of parties and genuineness of the loans, hence, the Assessing Officer made addition of Rs.5,38,98,756/-. The ld.Departmental Representative further submitted that during the period relevant to the assessment year under appeal, the assessee had made investments to the tune of Rs.4,88,48,347/- and had paid interest expenditure of Rs.1,02,54,981/- . The assessee had not made any suo-motu disallowance under section 14A of the Act. The Assessing Officer computed the disallowance u/r 8D at Rs.18,71,657/-. The CIT(A) deleted the disallowance without considering CBDT Circular No.4/2014 dated 11/02/2014.

Per contra, Shri Vijay Shah appearing on behalf of the assessee vehemently defended the impugned order and prayed for dismissing the appeal of Revenue. The ld. Authorized Representative of the assessee submitted that in First Appellate proceedings, the assessee had furnished additional evidences. The CIT(A) had sought remand report from the Assessing Officer The Assessing Officer made no adverse comments in respect of the loan creditors in the remand report, hence, the CIT(A) deleted the addition.

Both sides heard and orders of authorities below examined. In ground No.1 of appeal, the Revenue has assailed deleting of addition u/s. 68 of the Act. We find that the assessee had taken unsecured loans from two parties:

In ground No.3 of appeal, the Revenue has assailed deleting of disallowance u/s.14A of the Act. Undisputedly, during the period relevant to the assessment year under appeal the assessee has earned no exempt income. The Hon'ble Supreme Court of India in the case of DCIT vs. State Bank of Patiala, 99 taxmann.com 286 has held that disallowance u/s. 14A of the Act cannot be made where the assessee has earned no exempt income. The findings of CIT(A) on this issue are in accordance with law propounded by Hon’ble Apex Court. Ground No.3 of the appeal is dismissed being devoid of any merit.

In the result, appeal by the Revenue is dismissed.

The assessee has filed Cross Objections in appeal by the Revenue supporting the findings of CIT(A) Since, we have dismissed appeal of the Revenue, the Cross Objections filed by assessee have become infructuous and the same are dismissed as such.

In the result, appeal by Revenue and cross objections by assessee are dismissed.