BUSINESS INDIA,MUMBAI vs. ASST CIT 12(1), MUMBAI

The assessee has raised the following grounds of appeal: - “1. On the facts and circumstances of the case, the learned CIT(A) erred in confirming disallowance of Rs.83,16,207 on account of diminution in value of shares held as stock in trade.

None appeared on behalf of the assessee despite repeated posting of case. The assessee is not appearing since beginning despite service of notice through RPAD. Having left with no option except we heard the learned D.R. for Revenue and to proceeded to decide the appeal on the basis of the material available on record.

The learned D.R. for the Revenue supported the order of the Authorities and argued that the assessee claimed similar loss in A.Y. 2004- 05 which was disallowed and was confirmed by the learned CIT(A) vide order dated 18.10.2010. The assessee has not substantiated about the claim of loss. Thus no relief was given to the assessee. The assessee has not filed any documentary evidence to substantiate its contentions. For disallowance under Section 14A the learned D.R. argued that during the relevant assessment year under consideration the assessee made investment in mutual funds and debited interest expenses of `46,83,688/- in Profit & Loss Account. The AO worked out the disallowance by invoking the formula provided under Rule 8D. The assessee failed to substantiate its contention about deleting the disallowance worked out by the AO. It was further argued that the assessee has neither failed any documentary evidence nor any submission to substantiate the contentions, hence the appeal of the assessee be dismissed.

We have considered the submissions of the learned D.R. for Revenue and perused the orders of the Authorities below. The assessee claimed loss on account of diminution in value of shares of `83,16,207/-. The AO show caused the assessee as to why the said claim not to be disallowed. The assessee contended that the expenditure is allowable under Section 37 or the Act. The contention of the assessee was not accepted by the AO holding that the said pro visions are not allowable under Section 37. The M/s. Business India AO further concluded that the assessee’s claim to be in the business of trading of shares and is taking closing stock at cost price and claiming provision for diminution. The assessee in the subsequent year the opening stock has taken at cost price of shares. Thus the assessee was valuing shares at cost price and not market price. Hence the AO concluded that it was a mere notional loss which is not allowable. The learned CIT(A) confirmed the disallowance holding that the assessee claimed similar loss in A.Y. 2004-05 and on appeal the same was confirmed vide order dated 18.10.2010. The learned CIT(A) confirmed the disallowance following the earlier year’s precedent.

Before us neither the assessee has come forward nor filed any documentary evidence to prove this contention. Thus we do not find any reason to interfere in the findings of the learned CIT(A). Thus the disallowance of `83,16,207/- claimed on account of diminution of value in shares is sustained.

The other ground relates to disallowance of `19.08,112/- under Section 14 of the Income Tax Act. The AO while passing the assessment order invoked provisions of Rule 8D and disallowed interest expenses of `12,09,112/- and 0.5% of average value of investments, worked out at `16,99,327/-. Thus a total sum of ` 29,08,439/- was disallowed. The learned CIT(A) observed that provisions of Rule 8D were not applicable in the year under consideration. The learned CIT(A) examined the Balance Sheet of the assessee and concluded that all partner’s capital account was in negative or there was not reserves and surplus. Unsecured loans opening balance was `3.10 crores whereas the closing balance was `3.61 crores, thereby an increase of `49 lakhs in secured loans. There was an increase in unsecured loans of `1.90 crores as opening balance was `172.39 crores and closing balance was `174.29 crores. The loans and advances given – opening balance was `43.58 crores whereas the closing balance was `59.47 cores thereby an increase of `15.89 crores. On the basis of this observation the learned CIT(A) concluded that the investments were made from interest bearing funds. The learned CIT(A) confirmed the M/s. Business India interest expenditure of `12,09,112/-. However, the disallowance on account of administrative expenses was reduced to `6,99,000/-. The learned CIT(A) sustained the disallowance to `19,08,112/- giving partial relief to the assessee.

Before us the assessee has not filed any documentary evidence or fund flow statement to substantiate its contention. We have seen that the learned CIT(A) passed the order after considering the facts available before him. Thus we do not find any illegality or infirmity in the order passed by the CIT(A).

In the result, the appeal filed by the assessee is dismissed.