M S Amtek Ring Gears Ltd New Delhi v. Dcit New Delhi

1 Ita No 5023 Ors Del 2014 In The Income Tax Appellate Tribunal Delhi Bench A New Delhi Before Shri R K Panda Accountant Mem Ber And Ms Suchitra Kamble Judi Cial Member Ita No 5023 Del 201 4 A Y 2005 06 Ita No 5024 Del 201 4 A Y 2006 07 Acit Central Circle 14 New Delhi Appellant Vs Amtek Ring Gears Ltd 4 Lsc Bhanot Apartments Pushp Vihar New Delhi Aabcb 4094 M Respondent Ita No 4948 Del 2014 A Y 2005 06 Ita No 4949 Del 2014 A Y 2006 07 Amtek Ring Gears Ltd C O M S Rra Taxindia D 28 South Extension Part 1 New Delhi Aabcb 4094 M Appellant Vs Dcit Central Circle 14 New Delhi Respondent Appellant By Smt Aparna Karan Cit Dr Respondent By Dr Rakesh Gupta Adv Somil Agarwal Adv Order Per Suchitra Kamble Jm These Appeals Are Filed By The Revenue As Well As A Ssessee Against The Order Dated 26 03 2014 Passed By Cit A Xxxiii New Delhi Date Of Hearing 18 09 2017 Date Of Pronouncement 14 12 2017 2 Ita No 5023 Ors Del 2014 2 The Grounds Of Appeal Are As Under Ita No 5023 Del 2014 A Y 2005 06 1 On The Facts And In The Circumstances Of The Case The Cit A Has Erred In Law And On Facts In Directing The A O To Recomputed The Disallowance U S 14 A Of The Income Tax Act Whe N The Disallowance Was Computed Specifically According To The Method Prescribed In Rule 8 D Of The Income Tax Rule S 1962 2 On The Facts And In The Circumstances Of The Case The Cit A Has Erred In Law And On Facts In Directing The A O To Verify The Nature Of Use Of Loan And Purpose Of Interest By Mi Sinterpreting Rule 8 D Of The Income Tax Rules As The Said Rule Do Es Not Allow Any Such Scope In Its Application 3 The Order Of The Cit A Is Erroneous And Is Not Ten Able On Facts And In Law 3 The Grounds Of Appeals Are As Under Ita No 4948 Del 2014 A Y 2005 06 1 I On The Facts And In The Circumstances Of The Ca Se The Order Passed By The Leaned Assessing Officer Is Bad In Law And The Learned Cit A Erred In Holding That There Is No Jurisdictional In Firmity In Passing The Order Ii Without Prejudice To The Generality Of Above G Round The Learned Cit A Failed To Appreciate That Income Shown In The Retur N Filed U S 139 1 Had Become Final Which Could Not Be Disturbed In Absen Ce Of Any Adverse Material Found In The Course Of Search 2 On The Facts And In The Of The Case The Learned C It A Erred In Holding That I The Ao Had Jurisdiction To Make Disallowance U S 14 A Even When No Assessment Or Re Assessment Was Pending Bef Ore Him And No Fresh Material Whatsoever Was Found In Respect O F This Issue In The Course Of Search 3 Ita No 5023 Ors Del 2014 Ii There Was No Presumption That Appellants Ow N Funds Were Invested In Shares In A Situation Where Share Capit Al And Reserves Far Exceeded The Value Of Such Investments Iii It Cannot Be Ruled Out That Funds From Cas H Credit Account Could Have Been Used For Acquisition Of Shares Iv Investment In Group Companies Should Be Red Uced From Average Investment Only If Such Investment Is Made Prior To Six Years Covered U S 153 A And V Specific Loan By Way Of Long Term And Foreig N Used For Acquiring Capital Assets Should Be Reduced From T Otal Assets While Applying The Formula Mentioned In Rule 8 D 3 The Learned Cit A Erred In Sustaining A Part Of Th E Disallowance Made By The Ao U S 14 A Read With Rule 8 D And Not De Leting The Whole Of Such Addition 4 That In Any Case The Action Of Learned Cit A In Confirming A Part Of The Disallowance Of Rs 24 80 460 Made By The Lea Rned Ao And That Too Without Any Incriminating Material Found As A R Esult Of Search Is Bad In Law And Against The Facts And Circumstances Of T He Case 5 That Having Regard To The Facts And Circumstances O F The Case Ld Cit A Has Erred In Law And On Facts In Not Reve Rsing The Action Of Ld A O In Charging The Interest U S 234 B And 234 C Of T He Income Tax Act 1961 Ita No 4949 Del 2014 A Y 2006 07 1 On The Facts And In The Circumstances Of The Case The Order Passed By The Leaned Assessing Officer Is Bad In Law And The Learned Ci T A Erred In Holding That There Is No Jurisdictional Infirmity In Passing The Order Ii Without Prejudice To The Generality Of Above G Round The Learned Cit A Failed To Appreciate That Income Earlier Assessed As Per The Order Of Learned Cit A Had Become Final Which Could Not Be Disturbed In Absence Of A Ny Adverse Material Found In The 4 Ita No 5023 Ors Del 2014 Course Of Search 2 On The Facts And In The Of The Case The Learned Cit A Erred In Holding That I The Ao Had Jurisdiction To Make Disallowance U S 14 A Even When No Assessment Or Re Assessment Was Pending Before Him And No Fresh M Aterial Whatsoever Was Found In Respect Of This Issue In The Course Of Search Ii There Was No Presumption That Appellants Own Funds Were Invested In Shares In A Situation Where Share Capital And Reserves Far Exce Eded The Value Of Such Investments Iii It Cannot Be Ruled Out That Funds From Cash Credit Account Could Have Been Used For Acquisition Of Shares Iv Investment In Group Companies Should Be Reduced Fro M Average Investment Only If Such Investment Is Made Prior To Six Years Covered U S 153 A And V Specific Loan By Way Of Long Term And Foreign Use D For Acquiring Capital Assets Should Be Reduced From Total Assets While Applying The Formula Mentioned In Rule 8 D 3 The Ld Cit A Erred In Sustaining A Part Of The Disallowance Made By The Ao U S 14 A Read With Rule 8 D And Not Deleting The Whol E Of Such Addition More So When Income Earlier Assessed Had Become Final 4 That In Any Case The Action Of Learned Cit A In Confirming A Part Of The Disallowance Of Rs 46 29 210 Made By The Learned Ao And That Too Without Any Incriminating Material Found As A Result Of Search Is Bad In Law And Against The Facts And Circumstances Of The Case 5 That Having Regard To The Facts And Circumstance S Of The Case Ld Cit A Has Erred In Law And On Facts In Not Reversing The Acti On Of Ld Ao In Charging The Interest U S 234 B And 234 C Of The Income Tax Act 1 961 Ita No 5024 Del 2014 A Y 2006 07 1 On The Facts And In The Circumstances Of The Cas E The Ld Cit A Has Erred In Law And On Facts In Directing The A O To Recomputed The Dis Allowance U S 14 A Of The Income Tax 5 Ita No 5023 Ors Del 2014 Act When The Disallowance Was Computed Specificall Y According To The Method Prescribed In Rule 8 D Of The Income Tax Rules 1962 2 On The Facts And In The Circumstances Of The Cas E The Ld Cit A Has Erred In Law And On Facts In Directing The A O To Verify The Nature Of Use Of Loan And Purpose Of Interest By Misinterpreting Rule 8 D Of The Income Tax Rules As The Said Rule Does Not Allow Any Such Scope In Its Application 3 The Order Of The Cit A Is Erroneous And Is Not Tenable Of Facts And In Law 3 For The Sake Of Convenience We Are Taking Up The Facts For A Y 2005 06 As The Same Are Identical With The Fac Ts Of A Y 2006 07 M S Amtek Ring Gears Formerly Known As B Enda Amtek Ltd Was Incorporated On 13 Th Day Of July 1995 The Company Is Engaged In The Business Of Manufacturing Automotive Components Such As Gear Fly Wheel Ring Gear And Assembly Etc A Search And Seizure Operation U S 13 2 Of The Income Tax Act 1961 Was Conducted By The Investiga Tion Wing Of The Department On 22 3 2011 In The Case Of Amtek Group Of Cases Subsequently The Case Was Centralized With Central Circle 14 New Delhi Vide Order Dated 30 09 2011 A Ccordingly Notice U S 153 A Of The Act Was Issued To The Assess Ee On 03 10 2011 To File The Return Of Income In Respons E To The Said Notice Return Declaring An Income Of Rs 1 28 24 0 76 Was Filed On 12 4 2017 Against The Original Return File D U S 139 1 Of The I T Act Declaring Income Of Rs 1 28 24 07 6 On 31 10 2005 Notice U S 143 2 And 142 1 Of The Inc Ome Tax Act 1961 Were Issued Along With A Questionnaire Da Ted 24 09 2012 And Fixed For Hearing On 01 10 2012 In Response To Various Statutory Notices C A Along With Vice Pres Ident Of Amtek Group Of Companies Attended The Proceedings A Nd 6 Ita No 5023 Ors Del 2014 Furnished Necessary Details Information And Docume Nts Called For From Time To Time Which Were Taken On Record B Y The Assessing Officer In View Of The Information Filed The Case Was Discussed With The Ars Of The Assessee A Search And Seizure Action Was Conducted On The Premises Belonging To A Mtek Group Company At Various Places On 22 03 2011 During The Search The Corporate Office Registered Office Factories And Residences Of The Directors Were Covered During T He Course Of Search Conducted On 22 03 2011 A Number Of Incrimin Ating Documents Were Found And Seized From The Premises 9 Tolstoy Marg Connaught Place New Delhi These Seized Mate Rial Was Marked Annexure A L A 2 A 4 A Ll These Document S Were The Ledger Accounts Of Two Firms Namely M S Lord Indus Tries And M S Compax Industrial System The Documents Also C Onsist Of Retail Invoices Of 10 Different Parties These Reta Il Invoices Were Raised In The Name Of M S Lords Industries And M S Compax Industrial System Being The Buyers The Name And Ad Dress Of The Consignee Is One Of The Five Group Companies Of Amtek Further The Seized Material Also Contains Ledger A Ccounts Of M S Lords Industries And Ms Compax Industrial Sys Tem During The Year Under Consideration A Gross Turnove R Of Rs 79 29 Cores Was Shown With G P Ratio Of 21 97 And N P Ratio At 7 40 The A O Observed That The Assessee Made I Nvestment Of Rs 902 35 Crores In Equity Shares To Earn Divid End Income From Such Investment Hence Disallowance Of Expense S Related To Earn Exempt Income Which Do Not Form Part Of The Total Income Of The Assessee U S 14 A Of The I T Act 196 1 Were 7 Ita No 5023 Ors Del 2014 Attracted The Assessee Did Not Attribute Any Expen Diture Towards Dividend Income Which Did Not Form Part Of Total Income As Per Computation Of Income Filed He Was A Sked To File Detail Of Expenses As Per Rule 8 D And Show Caused V Ide Order Sheet Entry Dated 06 03 2013 As To Why Expenses Inc Urred To Earn Exempt Income As Dividend Which Did Not Form P Art Of The Total Income Should Not Be Disallowed U S 14 A Of Th E I T Act 1961 As Per Rule 8 D The Reply Of The Assessee Was Duly Considered But Not Accepted By A O As The Assessee Has Not Quantified Attributed The Expenses U S 14 A Of The I T Act And Not Disallowed In The P L Account Which Were Relat Ed To The Exempt Income Not Forming The Part Of The Total Inc Ome The Assessing Officer Observed That While Certain Expen Ses Like Managerial Expenses Bank Charges Etc Must Have Bee N Incurred By The Assessee To Earn The Exempt Income In The Shape Of Dividend Of Rs 2 87 825 Which Was Claimed Exempt U S 10 34 Of The I T Act 1961 The A O Was Not Sat Isfied With The Contentions Of The Assessee And Made Disallowan Ce Of Rs 24 80 460 Was Added Back To The Income Of The Assessee 4 Being Aggrieved By The Assessment Order The Ass Essee Filed Appeal Before The Cit A The Cit A Partly A Llowed The Appeal Of The Assessee 5 The Ld Ar Submitted That There Were No Incrimin Ating Documents Papers Found And Seized From Any Of The P Remises Belonging To The Assessee Company During The Search Operation Therefore The Issue Is Covered By The Honble Delhi 8 Ita No 5023 Ors Del 2014 High Court Decision In Case Of Cit Vs Kabul Chawla 380 Itr 573 The Ld Ar Further Submitted That There Is No Dividend Income In This Particular Year Therefore The Rati O Of Decision Of Honble Delhi High Court In Case Of Cit Vs Holcim India P Ltd Will Be Applicable 6 The Ld Dr On The Other Hand Vehemently Opposed The Contentions Of The Ld Ar The Ld Dr Further Submi Tted That The Cit A Erred In Directing The Assessing Officer To Recompute The Disallowance U S 14 A Of The Act When The Disall Owance Was Computed Specifically According To The Method Presc Ribed Under Rule 8 D By The Assessing Officer The Ld Dr Submit Ted That The Assessing Officer Has Rightly Disallowed The Cl Aim Of The Assessee And Made Proper Additions 7 We Have Heard Both The Parties And Perused All T He Record The Contentions Of The Ld Ar That No Incriminating Material Found Was Duly Considered By The Cit A In His Orde R Thus There Is No Need To Interfere With The Same The Ci T A Held As Under 4 3 Decision I Have Considered The Assessment Order Written Sub Mission And Oral Arguments Of Ld Ar During The Appellate Procee Dings Entire Addition Of Bogus Purchases Have Been Made O N The Basis Of Alleged Purchase Invoices Copy Of Ledger In Th E Books Of Amtek Group Of Companies In The Name Of Lord Industries M S Compax Industrial System Found Seized From The Premise A T 9 Tolstoy Marg New Delhi Therefore It Is Necessary To Adjudicate On The Evidential Value Of These Seized Documents During The Appella Te Proceedings Ld Ar Has Filed Copy Of Such Seized Documents The Natures Of Seized 9 Ita No 5023 Ors Del 2014 Documents Are Discussed In The Assessment Order Als O I Have Perused These Seized Documents Closely Firstly I Would De Al With Evidential Value Of The Seized Document I Evidential Value Of Seized Documents During The Search Seizure Proceedings Various Bi Lls Issued By Various Companies For Different Period Were Seized On The Top Of The Bills It Is Written Retail Invoice Such Bill Contains Invoi Ce No Commercial Invoice No Date Time Of Issue Purchase Order Date Des Cription Of Goods Sold And Value In Rs Etc Each Bill Shows Name Of The Buyer As Either M S Lor Ds Industries Or M S Compax Industrial System Name Address Of Consign Ee Is Shown As One Of The Five Amtek Groups Of Companies Namely 1 M S Amtek Auto Ltd 2 M S Amtek India Ltd 3 M S Ring Gears Ltd 4 M S Amtek Crankshaft India Ltd 5 M S Ahmednagar Forging Ltd Each Bill Contains Stamp Of Respective Amtek Group Of Companies With Gate Entry No Date Vehicle No The Goods Sold A S Per Bill Are Of Auto Parts The Business Of The Appellant Company Alongw Ith Other 4 Companies Of Amtek Group Are Also Manufacturing Of Auto Parts Therefore There Is Chance Of Using These Materials By These Companies During The Search Proceedings Statement Of Sh Arv Ind Dham Was Recorded U S 132 4 In The Statement Of Sh Arvind Dham Never State That These Are Proforma Invoices Details Of Relevance O F His Statement Would Be Discussed Subsequently During The Assessment Proceeding The Appellant Exp Lained That These Are Not Purchase Bill But Only Proforma Invoices I T Was Further Explained That The Appellant Company Intended To Purchase Goo Ds From M S Lord Industries And M S Compax Industrial System Has G Iven Advance These Two Entities Were Trying To Purchase These Auto Pan S From Associate Companies Of The Appellant Company Which Could Not Take Place Therefore The Advance Given To M S Lord Industries M S Compax Industrial System Was Returned Back Ld Ar Has Argu Ed That Adverse Inference Cannot Be Taken On Photocopy Of Alleged B Ogus Bills Seized Without Any Further Evidence Relied Upon Various Judicial Pronouncements In This Regard 1 Have Examined The Facts These Seized 10 Ita No 5023 Ors Del 2014 Documents Are Not Only Purchase Bills It Is Suppor Ted By Ledger Of M S Lord Industries M S Compax Industrial System Which Tal Lies With The Books Of Accounts Further These Seized Bills Contain The P Rocurement Details Of Goods Which Are Used By The Appellant Company As Ra W Material For Its Business The Appellant Also Confirm To The Extent That These Bills Are Proforma Invoice For Which Advances Were Given Further During The Search Post Search Enquiry I Nspectors Were Sent At The Address Of The Sellers As Per The Purch Ase Invoices All The Inspectors Of Income Tax Reported That Thes E Purchases Parties Do Not Exist At The Address Given In The Invoices These Specimen Inspectors Report Is Scanned Reproduced In The Assessment Or Der During The Appellate Proceedings Ld Ar Has Taken S Imilar Argument Further Ld Ar Has Argued That These Seized Documen Ts Were Found Seized From Third Party Therefore It Has No Evide Ntial Value In The Case Of The Appellant Ld Ar Has Further Argued That During The Search Pro Ceedings The Production Purchase Incharge Have Denied To Have Purchase The Materials From M S Lord Industries Or M S Compax In Dustrial System Or Any Of The Companies Who Had Issued The Invoice Fi Nally Ld Ar Argued That No Bogus Purchase Was Carried Out By The Appel Lant Company As Per The Invoices Of Consignment Sales Seized During The Search Survey Operation Post Search Enquiry It Was Found That Consignment Agent M S Lord Industries An D M S Compax Industrial System Does Not Operate From The Address Mentioned In The Purchase Invoice Seized Relevant Statements Of The Owner Of The Address Or Occupant Or Peon Or Chowkidar Are Reproduced In The Assessment Order Further It Was Ascertained That Proprietor Of M S Compax Industrial System M S Lord Industries Are A Only Paid Employ Ee Of Arntek India Ltd On The Basis Of These Facts The Ld Assessing Officer Has Concluded That Both Consignment Agents Namely M S Lord Industries M S Compax Industrial System Are Bogus Entities Created By M S Amtek Group For Bogus Purchases I Have Considered The Entire Facts Evidences Rela Ted To The Seized Purchase Invoice And Ledger Of M S Lord Industries M S Compax Industrial System Arguments Of The Appellant That These Purchase Invoices Are Proforma Invoices Cannot Be Accepted Because No Where In The Purchase Invoices It Is Written As Proforma Invoices Furthe R Each Purchase Invoice Contains Date Purchase Order Date Quantity Amou Nt Alongwith Handling Changes For Most Important Features Of Each Seized Purchase Invoices Is 11 Ita No 5023 Ors Del 2014 That Each Invoices Are Stamped By Respective Amtek Group Of Companies Mentioning Unit With Date Entry No Vehicle Numb Er The Item Of Purchase Mentioned In The Purchase Invoices Are Raw Material To Be Used For Further Processing By The Respective Units In View Of The Above Facts It Is Undoubtedly Clear That These Goods Have Been Rec Eived By The Respective Units Of The Appellant Company Other Four Amtek G Roup Of Companies The Appellant Has Nowhere Explained The Purpose Of Keeping Such Bogus Bill Even If These Bills Are Treated As Prof Orma Invoice Why Such Invoices Are From Proven Nonexistent Concerns Prof Orma Invoices If At All Have To Be From Existing Concerns Further Ld Ars Argument That The Payment Made To M S Lord Industries M S Compax Industrial System Are Only Financial Transaction And Represents Advance Given For Purchase Of Materi Al Which Was Returned Subsequently Cannot Be Accepted The Seized Ledger Of Lord Industries M S Compax Industrial System Shows These Amount Of Purchases Debited Alongwith Commission On Such Purchases Which Is Re Versed In The Books Of Account At The End Of The Year This Process Contin Ued For Many Financial Years How Advance Is Given For Purchase For Many F Inancial Years Every Year Advance Is Given Purchases Alongwith Commiss Ion Is Debited In The Accounts The Same Is Reversed At The Close Of Eve Ry Year In One Year Such Stray Transaction May Happen Similar Transaction C Annot Happen In Consecutive Assessment Years On Repeatative Basis After Considering These Facts I Am Of The Considere D View That The Appellant Company Has Made Purchases As Per These P Urchases Invoices Seized However Such Purchases Are Not Made From The Person Who Have Issued The Bills As They Are Proven To Be Bogus Ent Ities As These Goods Have Been Received By The Respective Units Of Amtek Grou P Through Specific Entry No Date Vehicle No Apparently The Name Of Bogus Entities For Issuing Bill Was To Have Proper Check On Flow Of Ma Terial As Lower Staff Would Not Accept The Material Without Some Name Ld Ars Argument That No Cognizance Has Been Taken In The Assessment Of M S Lord Industries Compax Industri Al System 10 Companies Who Have Issued The Bills Will Not Alter The Above Facts As These Goods Were Purchased From The Gray Market To Prov Ide Control Of Flow Of Goods At The Units Some Name Is Given As Supplier Consignment Agent 12 Ita No 5023 Ors Del 2014 Next Arguments Of Ld Ar That The Alleged Seized Doc Ument Was Not Seized From The Premise Of The Appellant Are Not Co Rrect During The Statement Chairman Of The Group Sh Arvind Dham Has Stated That Due To Renovation Of Head Office Of Amtek Group Which Incl Udes The Appellant Company Was Shifted To 9 Tolstoy Marg In Fact The Appellant Vide Letter Dt 8 03 2013 Has Claimed That Books Of Account In H Ard Disc Was Seized As Per Panchnama Dt 02 03 2011 At 9 Tolstoy Marg New Delhi Premise This Proves That At 9 Tolstoy Marg The Appellant Has T He Office At The Time Of Search Seizure Operation In View Of The Above Facts I Held That The Appella Nt Company Alongwith Other Amtek Group Of Companies Have Made Purchases As Per The Seized Document In Quantity Value Mentioned In Th E Annexure A L A 2 A 4 A L 1 In Fact The Case Laws Referred By The Ld Ar Are N Ot Applicable In The Present Case As There Is Incriminating Mater Ial Found In Assessees Case As Relates To Issue Of 14 A The Cit A Has Given De Tailed Finding There Is No Need To Interfere With The Same The Ci T A Held As Under 5 3 Decision I Have Considered The Assessment Order Written Sub Mission And Oral Arguments Of Ld Ar Carefully During The Appellate Proceedings Ld Ar Has Argued Mainly That The Ld Assessing Officer Without Examining Th E Claim Of Expense With Respect Of Exempt Income In The Books Of Accou Nts Has Made Disallowance U S 14 A Read With Rule 8 D As Per The C Alculation Contained Therein I Have Perused The Assessment Order Closely While Computing Disallowance U R 8 D The Ld Assessing Officer Has Taken Total Investment Of Shares Shown In The Balance Sheet Wi Thout Examining The Types Of Total Investment In Shares Securitie S 13 Ita No 5023 Ors Del 2014 During The Appellate Proceedings Ld Ar Has Explai Ned That Total Investment In Shares Securities Shown In Th E Balance Sheet Consist Of Three Types Of Equity Namely 1 Investment In Group Companies 2 Investment In Overseas Companies 3 Investment In Other Companies He Further Argued That Dividend From The Investment In Overseas Companies Are Taxable In Nature Therefore This Investment Cannot Be Considered While Calculating Average Inve Stment U R 8 D Further He Argued That Investment In Group Compani Es Are Static In Nature And No Expenditure Or Managerial Remuneratio N Is Required For This Investment As These Investments Are Required To Keep Holding In The Group Companies And The Purpose Is Not To Earn Dividend Further These Investment Is Prior To The Block Per Iod U S 153 A Therefore Interest Expenditure Incurred During The Year Is Not Utilized For Procuring These Shares During The Appellate Proceedings Further Ld Ar Ex Plained That Interest Payments On Loan Are Also Of Two Type S Namely I Foreign As Well As Indian Term Loan To Be Utilized For Specific Purposes To Acquire Capital Assets Ii Cash Credit Bank Account And Other Loans Which Are Not For Specific Purposes 1 Have Examined These Facts All Arguments Of Ld Ar I Do Not Agree With The Arguments Of Ld Ar That Sinc E The Appellant Has Its Own Surplus Fund It Can Be Presu Med That Entire Investment Shares And Securities Are From It S Own Surplus Fund And Entire Interest Is Paid Only For O Ther Business Transaction Immediate Source Of Investment Has To Be Examined Therefore In My View Loan Fund Either Indian Fund In Terms Of Term Loan For Capital Asset Or Foreign Loan For Acq Uisition Of Capital Assets Cannot Be Used For Acquiring The Sha Res Mutual Fund Whose Income Is Tax Exempt However Use Of Fu Nd From Cash Credit Account For The Acquisition Of Shares W Hose Income Is Exempt Cannot Be Ruled Out Infact If Investment In Such Shares Mutual Fund Is Made From Such Cash Credit Ac Count 14 Ita No 5023 Ors Del 2014 The Immediate Source For Acquisition Of These Asset S Is Interest Bearing Fund In View Of The Above Analysis The Appellant Adhoc Disallowance For Exempt Income Cannot Be Upheld Th Erefore I Hold That Expenditure Incurred For Earning Exempt I Ncome Has Not Been Claimed In The Books Of Accounts Properly Hence Disallowance Is Required To Be Computed U S 14 A Considering The Entire Facts And Circumstances Of T He Case I Direct The Assessing Officer To Recomputed The Disallowance U S 14 A Read With Rule 8 D With Followi Ng Modifications I Reduce The Investment In Overseas Companies From The Total Investment In Shares Dividend While Computing Average Investment As Per Rule 8 D After Verifying That The Income From These Investments Are Taxable In India Ii Further Investment In Companies Of Amtek Group S Hould Be Reduced From Average Investment If Such Group Investment Is Made Prior To Six Ays Covered U S 153 A As No Expenditure Is Apparently Incurred To Maintain S Uch Investment Iii While Computing Interest Disallowance Reduce Inte Rest On Term Loan And Foreign Loan In Any Form To Be Utiliz Ed For Only Acquiring Capital Asset From Total Interest De Bited In P L A C Further Amount Of Such Specific Loan I E Term Loan And Foreign Loan Should Be Reduced From Total Asset As Per The Formulae Provided In Rule 8 D Iv It May Be Mentioned Here That While Making Additi On By Way Of Disallowance U S 14 A The Credit For Self Disallowance Should Be Given Ld Ars Argument That No Disallowance Can Be Made U S 14 A As The Same Is Not Basecfon Any Incriminating Evidence Fou Nd As A Result Of Search And Seizure Operation Cannot Be Accepted 1 Have Pe Rused The Judicial Pronouncements Relied By The Ld Ar In My View Ju Risdictional High Court Of Delhi In The Case Of Anil Bhatia Cited Supra Has Held That The Ld 15 Ita No 5023 Ors Del 2014 Assessing Officer Has Power To Assess Total Income If Incriminating Evidences Are Found During Search For Any Assessmen T Year In Present Case I Have Held That There Are Evidences In Form Of Seized Documents Establishing Unaccounted Purchases And Turnover In Earlier Parts Of The Order Therefore The Assessing Officer Has Power T O Assess Total Income Including Disallowance U S 14 A The Decision Of Holcim India P Ltd Will Not Be Ap Plicable As There Are Expenditure Incurred By The Assessee Thus There Is No Need To Interfere With The Decis Ion Of The Cit A And Hence The Appeals Of The Revenue And The Assessee Are Dismissed 8 In Result The Appeals Of The Revenue And The As Sessee Are Dismissed Order Pronounced In The Open Court On 14th Decemb Er 2017 Sd Sd R K Panda Suchitra Kamble Accountant Member Judicial Member Dated 14 12 2017 R Naheed Copy Forwarded To 1 Appellant 2 Respondent 3 Cit 4 Cit Appeals 5 Dr Itat Assistant Registrar Itat New Delhi 16 Ita No 5023 Ors Del 2014 Date 1 Draft Dictated On 18 09 2017 Ps 2 Draft Placed Before Author 19 09 2017 Ps 3 Draft Proposed Placed Before The Second Member 2017 Jm Am 4 Draft Discussed Approved By Second Member Jm Am 5 Approved Draft Comes To The Sr Ps Ps 15 09 2017 Ps Ps 6 Kept For Pronouncement On Ps 7 File Sent To The Bench Clerk 1 5 09 2017 Ps 8 Date On Which File Goes To The Ar 9 Date On Which File Goes To The Head Clerk 10 Date Of Dispatch Of Order