AO was not justified in making the addition on the basis of statements given by the third parties before the Sales Tax Department, without conducting any other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statements given by the parties before the Sales tax department.
Next ground of appeal is about disallowance of interest paid by the assessee to HO amounting to Rs.8.57Crores.During the assessment proceedings, AO found that interest of Rs.8,56,15, 525/- was paid by the assessee to HO on subordinate debts and term borrowing.
In absence of any finding recorded in the assessment order or in the penalty order to the effect that repayment of loans/ deposit was not under a bonafide transaction and was made with a view to evade tax, the cause shown by the assessee was a reasonable cause and in the view of section 273B no penalty could be imposed.
Briefly stated facts of the case are that the assessee, an individual derives income from manufacture of wire & wire ropes. The return was filed declaring total income at ` 4,07,734/-. However, the assessment was completed at an income of ` 5,08,730/- vide order dated 25.06.2007 passed u/s 143(3) of the Act.
Learned counsel submitted that during the course of search and seizure action, no incriminating document, material or unaccounted assets were found from the assessee. Even for the year of search i.e. A.Y. 2008-09, no addition has been made.
The only issue arising in the instant appeal is the maintainability or otherwise in law, and in the facts and circumstances of the case, of the deletion of the penalty levied u/s.271AAA of the Act by the ld. CIT(A) vide his impugned order, which is in fact a combined order for A.Ys. 2004-05, 2008-09 and 2009-10.
While perusing the profit and loss account of the assessee, the AO noticed that the assessee has claimed a loss of Rs.93,63,235/- on account of loss on foreign currency futures. The AO was of the strong belief that the loss cannot be allowed in the light of the provisions of section 43(5) of the Income Tax Act, 1961 (the Act) r.w. clause (ac) of section 2 of the Securities Contracts (Regulation) Act 1956.
In the instant case, the revised return of income was filed within the time prescribed u/s 139(5) of the Act. Even though the assessed filed the revised return of income after the receipt of notice u/s 143(2) of the Act, yet the admitted fact remains that the assessing officer did not seek any type of particulars in that notice.
Since there is no mention of the approval sought from the CIT on the reasons, as recorded by the AO to initiate reassessment proceedings, the entire initiation has been vitiated and become bad in law.
The assessee’s second ground is in respect of disallowance of repair and maintenance expenses of a rented premises at Rs. 42.66 lacs. The assessee, it was explained, had taken an office premises on rent in October, 2007 for a period of five As the said premises was old and not in use for a long time, it incurred the impugned expenditure towards repair and renovation of the said premises.
