Authorities have put the onus on the assessee to prove that the said bank account is bogus. In this regard, assessee has categorically stated that the said account was not opened by the assessee. The bank has not replied to the query of the Assessing Officer. So adverse inference on the assessee cannot be made in this regard. In our considered opinion, interest of justice will be served if the matter is remitted to the file of the Assessing Officer to consider the issue afresh.
Hon’ble Punjab & Haryana High Court in the case of CIT vs. Panchvati Motors (P) Ltd. in ITA No.292 of 2008, dated 3.05.2011 has held that in a case where no objection regarding valid service was taken before the completion of assessment, provisions of sec. 292BB will be applicable to all pending assessments as on 1.04.2008. Since the provisions of sec. 292BB(1) are applicable for Assessment Year in question as the proceedings were pending as on that date and the assessee had not raised any objection during the course of assessment proceedings and had participated in the assessment proceedings, the assessment cannot be annulled on the ground that valid notice u/s 143(2) was not served on the assessee. Accordingly in our considered opinion as held by the Hon’ble Punjab & Haryana High Court in the case of Panchvati Motors (P) Ltd. (supra), assessment cannot be annulled.
With respect to assessment framed u/s 143(3) dated 30.11.2010, addition of Rs.1,32,52040/- was made, against which the assessee filed appeal and CIT(A) deleted such addition vide order dated 31.5.2011 against which the department filed appeal and Tribunal upheld the order of CIT(A) vide order dated 25.10.2011 in I.T.A No.3641/Del.2011 for assessment year 2008-09. Meanwhile, Assessing Officer passed another order u/s 154/143(3) on 3.2.2011 making the same addition, against which assessee filed appeal and CIT(A) deleted the impugned addition while following his earlier order dated 31.5.2011.
In this case has not rejected the books results of the assessee, nor has given any specific reasoning why the GP rate adopted by the assessee should be disturbed. Assessee has shown GP rate 24.54%. 20.53% GP was accepted by the Tribunal in the assessee’s own case in earlier years. Thus, nothing has been brought on record to prove lacunae in the assessee’s books of accounts, neither any reason has been stated why the GP rate should be disturbed and GP should be estimated at 30%. We find that there is no cogent basis in the Assessing Officer’s decision in making the addition in this case. In our considered opinion, Ld. Commissioner of Income Tax (Appeals) has taken a right view in the matter which does not need any interference on our part. Accordingly, we uphold the same.
It is found that surrender was made subject to no penalty vide letter of the assessee filed before the Assessing Officer during assessment proceedings, which clearly indicate that surrender was being made with a condition that no penal action will be made and to avoid further litigation and to buy peace and jurisdictional High Court decisions in the case of CIT v. Saran Khandsari Sugar Works [2000] 246 ITR 216/[2002] 120 Taxman 319 (All.) and CIT v. Mansa Ram & Sons [1977] 106 ITR 307 (All.) were in favour of the assessee and Commissioner (Appeals) has followed these decisions while deleting the impugned penalty. Moreover, department has not been able to bring on record any contrary superior Courts decisions in this regard. Therefore, there is no valid ground to interfere in the order passed by the Commissioner (Appeals) which is upheld and appeal of the department is dismissed being devoid of any merit. As a result, the appeal of the department is dismissed.
The Tribunal observed that the commission paid was disallowed by invoking provisions under Section 36(1)(ii) and not by invoking Section 40A(2)(b)(ii) of the Act. This implies that the AO had not disputed the services rendered by Renu Munjal but he was of the opinion that dividend had been paid in the garb of commission because it actually reduced the corpus available for distribution as dividend. Section 36(1 )(ii) of the Act had been incorporated to check, inter-alia, private companies from avoiding tax by distributing their profits to their members (showing them to be their employees) by way of commission and not by way of dividend. The AO was not correct in holding that the corpus for paying the dividend had reduced as it does not reflect the correct legal position with reference to section 36(1 )(ii) of the Act.
Reference was made to the decisions of Apex Court rendered in the case of M.P. Electricity Board 35 STC 188 (sic). In this case it was held that electricity is goods within the meaning of section 2(3) of Central Province and Virar Sales-tax Act. This decision was rendered in the context of the language of a particular statute. As such this meaning cannot be extended to the facts of the present case
In this case it is an undisputed fact that the tax on the entire income received by these assessees was required to be deducted at source at the appropriate rates by the respective payers u/s 195 of the Act . The Revenue have not placed before us any material controverting these findings of the ld. CIT(A) nor pointed out any contrary decision so as to enable us to take a different view in the matter.
Disallowance u/s 14A required a finding of incurring of expenditure and where it was found that for earning exempted income, no expenditure had been incurred, disallowance u/s 14A could not stand. In the present case, as seen, the AO has not established any nexus whatsoever between the borrowed funds and the investment made. Therefore, Hero Cycles (supra), is applicable.
Coming to the revenue’s objection that the assessee borrowed the funds from Indiabulls Financial Services Ltd., in our view, this cannot constitute a factor as in none of the case laws or CBDT circular it has been held that borrowings will not be allowed in investment transactions. In our view the investment in capital assets also can be carried out by way of borrowed funds. There being no bar notified by the law, judicial pronouncement or CBDT Circular, we are unable to accept this view.
