ACIT CENTRAL CIRCLE -7(2), MUMBAI, MUMBAI V. BENCO FINANCE & INVESTMENTS PRIVATE LIMITED, MUMBAI

ITA 6775/MUM/2024

AI Insights

The case involves an appeal by the revenue against the order of the CIT(A) which had deleted the addition made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961, concerning unexplained cash credits in the form of share capital and share premium received by Benco Finance & Investments Pvt Ltd. The AO had initially made the addition citing insufficient evidence regarding the creditworthiness and genuineness of the transactions. However, the CIT(A) reversed this decision, leading to the revenue's appeal. The Tribunal examined the documents and arguments presented by both parties, including the financial statements, bank statements, and other relevant documents, and concluded that the assessee had adequately proved the legitimacy of the transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46933 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Other Referred Cases: Navodaya Castle (P) Ltd. v. CIT, Major Metals Ltd, Precision Finance Pvt. Ltd., Sumati Dayal, Kamdhenu Steel & Alloys Limited and Others, Orissa Corporation (P) Ltd, Rohini Builders, Nemi Chand Kothari, Shiv Dhooti Pearls & Investments Ltd, Zafar Ahmad & Co CIT, Varanasi, PCIT v. Ami Industries (India) (P.) Ltd, Pr. CIT v. NRA Iron & Steel (P.) Ltd, ITO v. Chiripal Poly Films Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K.R. SUBHASH
• Assessee Lawyers: VIJAY MEHTA
• Keywords: Question of law; Corroborative evidences; Unexplained cash credit; Fair market value; Onus to prove; Capital receipt; Search and seizure; Accommodation entries; Source of fund; Earning of tax free income; Deemed to accrue or arise in india; Rule 8D; Bogus
• Section: 250; 68; 56(2); 43; 22; 69; 13; 14A; 72; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI BR BASKARAN, ACCOUNTANT MEMBER & SHR SANDEEP GOSAIN, JUDICIAL MEMBER ITA No. 6775/Mum/2024 (Assessment Year: 2013-14) ACIT, Central Circle – 7(2) Room No. 637, Aayakar Bhavan, Mumbai – 400020. Vs. Benco Finance & Investments Pvt Ltd A-9(2) MIDC Industrial Estate Taloja, Mumbai – 410208 PAN/GIR No. AABCB9349R (Applicant) (Respondent) CO. No. 65/Mum/2025 [Arising out of ITA No. 6775/Mum/2024] (Assessment Year: 2013-14) Benco Finance & Investments Pvt Ltd A-9(2) MIDC Industrial Estate Taloja, Mumbai – 410208 Vs. ACIT, Central Circle – 7(2) Room No. 637, Aayakar Bhavan, Mumbai – 400020. PAN/GIR No. AABCB9349R Assessee by Shri Vijay Mehta Revenue by Dr. K.R. Subhash, CIT-DR Date of Hearing 12.03.2025 Date of Pronouncement 09.04.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: 2 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai The present appeal has been filed by the revenue and CO has been filed by the assessee challenging the impugned order dt. 29.10.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A), for the A.Y 2012-14. First of all we take up revenue appeal in ITA No. 6775/Mum/2024. ITA No. 6775/Mum/202, A.Y 2013-14 2. The only ground raised by the revenue in this appeal is with regard to challenging the order of Ld. CIT(A) in deleting the addition u/s 68 of the Act. 3. As per the facts of the present case, the assessee is engaged in finance and investment activities. The search and seizure operation u/s 132(1) of the Act was conducted on ‘Ruchi soya Group’ on 29.01.2012 and the assessee being the group company was also covered. However during the assessment proceedings the AO was not satisfied with the explanation of share premium and consequently made addition of Rs. 10,81,38,000/- u/s 68 of the Act and further addition u/s 14A of the Act were also made. 4. On appeal, Ld. CIT(A) deleted the addition u/s 68 of the Act but sustained addition u/s 14A of the Act. 5. Now after having heard the counsels for both the parties at length, perusing the material placed on record, 3 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai judgments cited before us and also the orders passed by the revenue authorities. We found from the records that while making the additions AO has observed as under: 7.1.1. Observation in the assessment order- In the assessment order, the AO has observed as under - “During the course of assessment proceedings, it was found on perusal of the balance sheet that the assessee had increased its authorized share capital from Rs. 5,51,00,000/- (55,10,000 shares of Rs. 10/- each) to Rs.6,11,00,000/- (61,10,000/- shares of Rs. 10/- each). The assessee was asked to submit the details of the shares allotted during the year along with the share premium charged. The assessee was also asked to submit the names and addresses of the parties to whom the shares have been allotted along with documentary evidences to establish the identity and creditworthiness of the parties investing in the share capital and genuineness of the transactions. The assessee submitted that the assessee had issued 10,78,412/- shares of Rs. 10/- each at a premium of Rs.90/-. The assessee has submitted the details of the parties/companies who have invested in the share capital during the year under consideration. The same is as under: The assessee also filed the following documents: a) Certificate of incorporation of the investor's company; b) Memorandum of Association and Articles of Association of Company, c) Form of application of equity shares filed by the Investor's company, d) Copies of Allotment Advices given by the Appellant to the Investor's Company, e) Copy of Form 2 Return of Allotment filed with ROC by assessee. 4 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai f) Copy of FIRC Certificate in relation to remittances received. g) Copy of Form FC-GPR On perusal of the details filed by the assessee, it was seen that the investments had been mainly made by a non-resident company. The assessee had not filed any documentary evidences to prove the creditworthiness of the company investing in the share capital of the assessee and genuineness of the transactions. Therefore, vide order sheet entry dated 09.03.2016, the assessee was asked to showcause why the share capital along with the share premium should not be treated as unexplained cash credit u/s 68 of the IT Act, and added to the total income. 5.1 In response to the query raised the assessee has submitted copies of the bank statements of the above mentioned three parties i.e. East West Global Ltd., Trade Overseas Ltd. & Bhavna Goel, reflecting the transactions and submitted that the other documents have been filed.. during the course of earlier hearings. The assessee further submitted that all the above said documents clearly proved the genuineness of the transactions beyond doubt and requested that no addition u/s 68 may be made. 5.2 The explanation of the assessee in duly considered. On perusal of the documents filed by the assessee, it is seen that the assessee has filed the certificate of incorporation and memorandum of association of East West Global Ltd. which has been incorporated in British Virgin Islands, the same does not even include the names of the shareholders of the company. With regard to the other company i.e. Trade Overseas Ltd., the assessee has not filed even the above said documents and as such the assessee has not been able to prove the identity of the above said companies. The assessee has not filed any evidence to prove the identity of Ms Bhavana Goel. The assessee has not furnished any evidence which goes to prove the creditworthiness of the above said parties/companies. The assessee has not been able to file the balance sheet, profit & loss account and other documents of the companies investing in the share capital of the company to 5 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai prove the creditworthiness. of the companies. The bank statements filed by the assessee are only for the specific period i.e. when the payments towards the share capital had been made. The source of the credit in the bank accounts of the persons investing in the share capital of the assessee is not proved. It is seen from the bank account of Trade Overseas Ltd., that there are certain credit entries from National Steel & Agro Industries which is a related/ sister concern of the assessee company. Similarly, the bank statement of Ms. Bhavana Goel, submitted is for one day i.e. 3.01.2013, and the source of credit in the bank account is not proved. 5.3 In view of the above discussion and facts of the case, it is clear that the assessee has not been able to prove the identity of the parties creditworthiness of the parties and companies investing in the share capital and genuineness of the transactions. The assessee has not offered any satisfactory explanation about the nature and source of the amount credited in its books of accounts. The Hon'ble Supreme Court has in the case of Navodaya Castle (P) Ltd. v. CIT (2015) 230 Taxman 268 upheld the order of the Hon'ble High court wherein it was held that certificate of incorporation, PAN etc., were not sufficient for purpose of identification of subscriber when there was material to show that subscriber was a paper company and not a genuine investor. The creditworthiness is not proved by showing issue and receipt of a cheque furnishing a copy of the statement of bank account, there should be evidence of a positive nature to show that the subscribers had made genuine investment. The Bombay High Court in the case of Major Metals Ltd (359 ITR 450) has upheld the order of the Settlement Commission, wherein it was held that the share application money along with the premium was fictitious and an attempt by the assessee to launder its own unaccounted funds in the guise of such receipts and the same had to be brought to tax in accordance with the provisions of sec 68 of the 1.T. Act. Both these decision a clearly applicable to the facts of the current case. The onus of proving the source of a sum of money found to have been received by the assessee is him and when the 6 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai nature and source of receipt cannot be satisfactorily explained then the same is to be treated as unexplained credit and no further burden lies on the revenue to show that the income is from any particulars source. The Calcutta High Court in the case of Precision Finance Pvt. Ltd. (208 ITR 465) has held that mere proof of identity of creditor or that the transactions were by cheque is not sufficient. The Supreme Court in the case of Sumati Dayal (214 ITR 801) held that if the explanation offered by the assessec about the nature and source thereof of any sum credited in the books of accounts then the same is chargeable to tax as income of the assessee. The proviso to section 68 of the I.T. Act, specifies as under: 7 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai \"that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory, unless- a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited, and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: It is clear from the above facts that the explanation offered by the assessee with regard to the creditworthiness of the persons advancing the loans and the genuineness of the transactions is not satisfactory and the assessee has not proved the creditworthiness of the persons advancing the loans and the genuineness of the transactions as provided in the above said proviso to sec 68 of the I.T. Act. Therefore, the share capital along with the share premium amounting to Rs. 10,78,41,369/ received from the above mentioned parties/companies are nothing but accommodation entries and 8 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai is treated an unexplained cash credit u/s 68 of the IT Act, and added to the total income of the assessee”.. 6. On the contrary, Ld. AR reiterated the same arguments as were raised by him before the Ld. CIT(A) and the same is reproduced herein below: On the said issue, the appellant has made the submission, part of which is reproduced as under: In a nutshell, the allegations of the Ld. AO as per para 5.2 of the assessment order are as follows. 9 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Genuineness of the transaction Name of the investor Ld. AO allegations Appellant rebuttal Trade overseas Ltd Certain credit entries from National steel and agro industries Refer para 34 on page 15 1. The Appellant had submitted all there requisite details which were in its possession at that particular point in time for proving the three essential ingredients, namely – identity & creditworthiness of investor and genuineness of the transaction. If the learned AO required anything specific, the same should have been conveyed to the Appellant. However, instead, the learned AO opted to proceed in making adverse inferences and passed the 10 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai assessment order. 2. Thus, the learned AO concluded the assessment and passed the assessment order undersection143(3)of the Act dated29 March 2016 without application of mind and without providing adequate opportunity to the Appellant. Further, in the assessment order, the learned AO mentioned that the Appellant has not furnished any evidence which goes to prove the creditworthiness of the investors and that the Appellant has also not filed the balance sheet, profit and loss account, and other documents of the company investing in its share capital. The learned AO thus made general allegations of non- submission of documents / non-demonstration of identity, creditworthiness, and genuineness of transaction without pointing out any deficiency in the document/evidence already placed on record by the Appellant. 3. Details of documents submitted to prove the identity and creditworthiness of the investor and genuineness of the transaction as part of the Factual Paper Book (‘FPB’) vide our earlier submission are summarized below: 11 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 12 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 13 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 14 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 15 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 4. It is the Appellant’s humble yet forceful submission that as a result of the various documents already filed with the learned AO / being filed before Your Honors with respect to concerned investors, no iota of cause exists for applying provisions of section 68 of the Act to the present case in as much as the onus cast on the Appellant as mandated by the said section had been effectively and comprehensively discharged. Accordingly, the said addition isneitherwarrantednorjustifiedonthefactsofthecasenorinla w.Theactionofthe learned AO mitigates not only against the spirit but also the letter of the applicable provisions of the Act. 5. In this connection before proceeding further it would be worthwhile to reproduce the provisions of section 68 of 16 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai the Act which reads as follows: - Where any sum is found credited in the books of an Appellant maintained for any previous year, and the Appellant offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the officer, satisfactory, the sum so credited may be charged to income-tax as the income of the Appellant of that previous year. 6. Section 68 of the Act is an anti-tax evasion provision and was incorporated into the Act to obviate the possibility of the introduction of unaccounted /undisclosed money in the books of accounts. The object behind the insertion of Section 68 in the Act is to assess such income when it surfaces and assess it in the hand soft he person in whose book it surfaces. The above section, as applicable for the year under appeal, casts an onus upon an Assessee, the duty to adequately, satisfactorily, and substantively explain the source of any cash credit in his books of accounts and no further. 7. As laid down by various Courts the three important ingredients of section 68 of the Act are proof of identity and creditworthiness of the investor and genuineness of the transaction. The various ingredients of Section 68 of the Act and the manner in which they need to be satisfied, in the light of various judicial decisions are discussed below: - A. IDENTITY In order to prove the identity of the Investor an Assessee is required to prove, based on concrete documentary evidence, that the Investor exists and is uniquely identifiable based on certain characteristics/distinct features. B. CREDITWORTHINESS In common as well as financial parlance, the creditworthiness of an Investor refers to an assessment of his ability to lend money based on an analysis of his/their financial and other parameters. The said 17 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai meaning when extrapolated in the context of the Act would refer to the ability of the investor to invest money. C. GENUINENESSOFTHETRANSACTION The third limb of Section 68 viz. onus to prove the genuineness of the transactions seeks “to ensure that the sub-stratum/pivot of the transaction stands on a firm edifice and is not a camouflage in any manner.” While determining the applicability of Section 68 of the Act to any transaction, a set of mutually linked and related factors have to be considered in totality by adopting a holistic, as opposed to a constricted view, so long as the transaction meets the basic legal requirements and there are no defining circumstances or compelling evidence to suggest that the apparent is not real. Any attempt to disregard the apparent nature of any transaction by going underneath it has to be based on clinching evidence and unfailing arguments and not on unsustainable hypothesis, conjectures, surmises, and omnibus statements like opinions or appearances or by perceptions/preconceived notions about the general manner in which transactions entered are presumably structured. In the instant case, there are no circumstances to even suggest, let alone prove conclusively that the transactions are not genuine, and that the onus cast under section 68 of the Act has not been discharged. 8. The manner in which the above ingredients have been met and satisfied in the instant case before Your Honors is being discussed as follows: - Identity Allegation by learned AO-Certificate of incorporation (‘COI’) and Memorandum of association( ‘MOA’) are not filed for Trade Overseas Limited 9. In respect of share application money received from 2 Foreign companies, it can be seen from the above table 1 and Table 2 that a plethora of documents have been submitted to prove the identity of both the companies. The list of documents is reproduced hereunder for quick reference: 18 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai • Certificate of Incorporation, • Memorandum of Understanding(’MOA’), • Articles of Association(‘AOA’), The above documents were already submitted during the assessment proceedings. Further learned AO’s allegation that COI and AOA of Trade Overseas Limited is not filed is factually incorrect since the same is already placed on its record. Allegation by learned AO – COI and MOA does not include the name of shareholders of East West Global Limited 10. Learned AO’s allegations that MOA and AOA do not contain the name and address of the shareholder are merely a conjecture. Certificate of Incorporation is a statutory document issued by the Authorities of BVI in accordance with their legal requirements. As per the domestic law of the investor’s country there are formats / templates for MOA and AOA and FICs have complied to such formats and templates in which there is no requirement for the inclusion of name of the shareholder/member in the MOA and AOA. Accordingly, merely because the name of the shareholder is not mentioned in the MOA / AOA does not render the document invalid especially when such document is duly and validly issued by the Regulatory Authority of a third country in compliance with their own laws. 11. Further, since none of these companies are assessed to tax in India, documents like PAN and income tax returns are not available. Additionally, audited financial statements of both companies have been submitted with Your Honors as part of the Factual Paper book. Financial statements, on pages 72 and 137 of FPB, clearly depict the name of the shareholder of the FICs. This should fully meet learned AO’s requirement of providing the name of the shareholder of East West Global Limited. Allegation by earned AO– No evidence filed to prove the identity of Ms. Bhavna Goel 12. With respect to non-resident investor Ms. Bhavna 19 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Goel, the following documents are already placed on record which clearly prove the identity of the investor • A declaration of Ms. Bhavna investing in the shares of the Appellant depicted her Permanent Account Number and Passport number. • Copy of centricity bill • ThestatutoryreturnfiledwiththeRBIalsocontainedthedetails ofthenameandaddressof Ms. Bhavna Goel. 13. The said investor is the daughter of Mr. Santosh Shahra who was one of the directors/ promoters of the Appellant Company during the year under consideration. There cannot be even an iota of doubt about the identity of Ms. Bhavna Goel as alleged by the learned AO. Further, the investor’s income tax return is filed before Your Honors on pages 173–181 of FPB. Nevertheless, the said document could have been fetched by the learned Ld.AO also given that the PAN of the investor was already provided by the Appellant. Thus, the contention of the learned AO that the identity of Ms. Bhavna Goel is not proved is incorrect and out of place. CREDITWORTHINESS 14. The question of the manner in which the onus under section 68 has to be discharged is to be looked at with different perspectives and varying parameters in each different circumstance and no standards/guidelines can be laid out in this regard. However, in a case where money has flown through normal banking channels and the transaction has been confirmed by the parties thereto and not been repudiated in any manner the question of creditworthiness itself gets answered in the affirmative. 15. In this connection, it is respectfully submitted that the provisions of Section 68 of the Act, as applicable to the year under appeal, did not put the onus on the Appellant to prove the source of source in case of non-residents in order to prove the credit worthiness of the investors. In other words, the provisions of Section 68 of the Act, as in operation for the year under review, only mandate the 20 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai source to be proved which onus had clearly been discharged by the Appellant Company. The learned AO was not justified in putting more onerous conditions than what is provided under the law. 16. In the instant case, there is no material on record to prove or even remotely suggest that the amounts received have emanated from the coffers of the Appellant Company. In fact, it may be reiterated that the share application money was received through normal and regular banking channels, which fact stands duly corroborated and confirmed by the documents duly placed on record. Allegations by learned AO 17. The Learned Ld.AO has alleged the following: • No documents submitted to prove creditworthiness. • Balancesheet,profitandlossandotherdocumentsofcompanie sinvestinginthe share capital of the Appellant are not submitted. 18. Without prejudice to the above that the Appellant is not required to prove the source of source of funds, the Appellant submits the financial statements of FIC to prove their creditworthiness (refer to pages 63 to 79 and pages 129 to 144 of the FPB). A snapshot of the net worth of FIC and investment made in the Appellant is provided as below: Table4:NetworthofFICandinvestment made. Sr. No. Name of the Investor Total Amount invested Net worth of the investor companies (Investment /net worth ) (%) 1 Tade Overseas Ltd 3,86,46,000 28,75,95,826 13.44 2 East West Global Ltd 4,17,92,500 29,70,13,970 14.07% 3 8,04,38,500 58,92,64,980 13.76% 21 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai *ConvertedintoequivalentRs.byapplyinganaveragerateof1U SD=Rs.59.53. As can be seen from the above, both the FIC companies have substantial Shareholders Fund and operational profits which are sufficient enough to support the investment made by themintheAppellant.Infact,theinvestmentsmadeintheAppell antonlyconstitute~14%of their respective net worth. This only goes to prove that the FIC had adequate creditworthiness to make the said investments in the Appellant Company. Allegation by learned AO - Source of the credit in the bank accounts of the investor is not proved. 19. With respect to Ms. Bhavna Goel, it may be noted that she is the daughter of Mr. Santosh Shahra, who is one of the directors/promoters of the Appellant Company. The balance in her bank account as of 1 January 2013 was ~USD 6,83,192.50 of which the sum of USD 5,00,000/- was remitted to the Appellant company for investment in shares of Appellant company. Her creditworthiness in no manner can be doubted. Further, the Appellant has obtained the Net-worth certificate of Ms. Bhavna Goel as of 31 December 2013 as duly certified by her Chartered Accountants based out of UAE. The same is enclosed as Annexure 1 to this submission. As can be appreciated from the said certificate, her net worth was a staggering ~ USD 15.5 million. Further, the amount of USD 500,000 invested in the Appellant company only accounted for ~ 3.23% of her total net worth. This makes it amply clear that Ms. Bhavna Goel had adequate creditworthiness and a substantial amount of net worth for investing in shares of the Appellant. Thus, the above submission clearly establishes and proves the creditworthiness of the investors beyond doubt. No requirement to prove source of source in case of non-resident 20. The learned AO has referred to the proviso to 22 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai section 68 of the Act, the extract of which is reproduced herein below. “……….. Provided that where the assessee is a company, (not being a company in which the public are substantially interested) and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.”. (Emphasis supplied) 21. The Finance Act, 2012 has amended section 68 by insertion of the above-mentioned proviso (w.e.f. 1 April 2013) so as to make it applicable to receipt of share application money, share premium, share capital, or any such amount by a closely held company from a resident in the absence of satisfactory explanation. 22. It is submitted that the provision of section 68 cast primary onus on the assessee to explain the sum credited in its books of account. Hitherto, the assessee was under no obligation to explain the source of the source. The Explanatory Memorandum to the Finance Bill, 2012 states that it is “an additional onus” to establish the source of source in case the share application money is received from resident shareholders. The relevant extract from the Explanatory Memorandum to Finance Bill, 2012 is reproduced here: 23 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai “…. It is, therefore, proposed to amend section 68 of the Act to provide that the nature and source of any sum credited, as share capital, share premium etc., in the books of a closely held company shall be treated as explained only if the source of funds is also explained by the assessee company in the hands of the resident shareholder. However, even in the case of closely held companies, it is proposed that this additional onus of satisfactorily explaining the source in the hands of the shareholder, would not apply if the shareholder is a well regulated entity,i.e.aVentureCapitalFund,VentureCapitalCompan yregisteredwiththe Securities Exchange Board of India (SEBI). This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent years. …” 23. As can be seen from the above, the First Proviso is applicable to investors who are ‘resident’. The first proviso, even after the amendment coming into effect from AY 2013-14 is not applicable to non-residents or foreign companies. The said understanding is crystal clear from the plain reading of the first proviso. 24. Thus, the Legislature has restricted the application of the first proviso to only resident investors by deploying the specific words ‘being a resident’ after the words ‘the person’. Even after the first proviso came into effect from AY 2013- 14, the same is not applicable to non-residents and foreigners. There is no ambiguity whatsoever in the above- mentioned proviso being not applicable to share capital investment made by Non-residents and foreigners. 25. ThelearnedAOhasallegedthatthebankstatementsdon otcontainthedetails of the funds brought by the foreign investors. It is submitted that the Appellant is only obliged to explain the source and not the source of the source. The proviso to section 68 does not apply to foreign 24 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai investors. The proviso restricts the applicability to ‘Resident Investors’ and is not applicable to Non-resident Investors. The Appellant has submitted all the requisite details about the identity, genuineness, and creditworthiness of the transactions along with supporting as mentioned herein above. The Appellant is not under obligation to explain the source of source that to when the investor is a foreign company. It is a settled question of law that the assessee ought to explain the source of credit and not source of source of such credit. Thus, the statement by the learned AO that the source of credit in the bank accounts of the person investing in the share capital not proved is of no relevance and out of place since there is no onus on the Appellant to prove the source of source as discussed above. 26. In this regard, Your Honors attention is invited to the decision of the Hon’ble Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others (2012) 206 Taxman 254 (Delhi) wherein the following has been held: - “38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of landing entries. But, it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability. 39.We may repeat what is often said, that a delicate balance has to be maintained while walking on the tight rope of sections 68 and 69 of the Act. On the one hand, no doubt, such kind of dubious practices are rampant, on the other hand, merely because there is an acknowledgement of such practices would not mean that in any of such cases coming before the Court, the Court has to presume that the assessee in questions as indulged in that practice. To make the assessee responsible, there has to be proper evidence. It is equally important that an innocent person cannot be fastened with liability without 25 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai cogent evidence. One has to see the matter from the point of view of such companies (like the assessee herein) who invite the share application money from different sources or even public at large. It would be asking for a moon if such companies are Asked to find out from each and every share applicant/subscribers to first satisfy the assessee companies about the source of their funds before investing. It is for this reason the balance is struck by catena of judgements in laying down that the Department is not remediless and is free to proceed to reopen the individual assessment of such alleged bogus shareholders in accordance with the law. That was precisely the observation of the Supreme Court in Lovely Export(supra) which holds the fields and is binding. “In conclusion, we are of the opinion that once adequate evidence/material is given, asstated by us above, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has ‘created” evidence, the Revenue is supposed to make thorough probe of the nature indicated above before it could nail the assessee and fasten the assessee with such a liability under Sections 68 and 69 of the Act.” (Emphasis supplied) It should also be noted that the Special Leave Petition filed before the Hon’ble Supreme Court by the Revenue against the above decision of the Hon’ble Delhi High Court has been subsequently dismissed by their Lordships of the Hon’ble Supreme Court and as such the decision of the Hon’ble Delhi High Court in the case of CIT vs Kamdhenu Steel & Alloys Limited and Others (supra) has attained conclusive judicial finality. 27. Reliance is further placed on the following judgments wherein it has clearly been held that no addition under section 68 based on an attempt to look into the source of the sourceof deposit can be sustained: • CommissionerofIncome– TaxvsOrissaCorporation(P)Ltd[(1986)159ITR78(SC)]; • Deputy Commissioner of Income Tax vs Rohini 26 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Builders[(2002)256ITR360 (Guj)]; • NemiChandKotharivsCommissionerofIncome- taxandAnother[(2003)264ITR254 (Gauhati)]; • CIT vs Shiv Dhooti Pearls & Investments Ltd [(2016) 237 Taxman104 (Delhi)]; • Zafar Ahmad & Cov CIT, Varanasi [(2013) 30 taxman. Com 267(Allahabad). Further, section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the Assessee. It cannot but be said again that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assessee. This burden, which is placed on the assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee’s burden to prove either the genuineness of the transaction executed between the creditors and the sub-creditors nor is it the burden of the assessee to prove the creditworthiness of the sub-creditors. In this regard, reliance is placed on Hon’ble Gauhati High Court in the case of Nemi Chand Kothari v. Commissioner of Income-tax [2004] 136 Taxman 213 (Gauhati) and Hon’ble Delhi High Court in the case of Mod Creations( P.) Ltd.v .Income TAX Officer [2011] 13taxmann. com114 (Delhi). 28. Further, the Appellant would like to rely on the Circular No. 05 dated 20 February 1969, wherein it is mentioned that money brought into India by non-residents for investment or other purposes is not liable to Indian income-tax. A relevant extract of the same is enclosed herewith for Your Honor’s quick reference. “2.Moneybrought into India by non-residents for investment or other purposes is not liable to Indian income-tax. Therefore, there is no question of a remittance into the country being subjected to income-tax in India. The question of assessment to tax arises only when there is no evidence to show that the amount, in question, in fact represents such remittance. In other words, in the absence of proper supporting evidence, the taxpayers’ 27 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai story that the money has been brought into India from outside may be disbelieved by the Income-tax Officer who may then proceed to hold that the money had in fact been earned in India. 3. If the money has been brought into India through banking channels or in the form of assets like plant and machinery or stock-in-trade, for which the necessary import permits had been obtained, no questions at all are asked by the Income-tax Officers as to the origin of the money or assets brought in. It is only in case where the money is claimed to have been brought from outside otherwise than through banking channels and there is no evidence regarding the transfer of the money, that the department has to make enquiries about the source thereof.” (Emphasis Supplied) The Hon’ble Delhi High Court in CIT v. Russian Technology Centre Pvt. Ltd. (ITA Nos.547, 549 & 555 of 2013) per their order dated15 December 2016, while dismissing the appeal filed by the Department upheld the ITAT order reported in [2013] 37 taxmann.com 400 (Delhi - Trib.) that if the identity of non-resident remitter is established and money has come in through banking channel, it cannot be treated as deemed income under section 68 or 69 of the Act. In the decision, while granting relief ,the ITAT had relied on the afore said CBDT Circular No.5 dated 20 February 1969. The relevant extract of the same is reproduced here in under for Your Honor’s ready reference. “On the issue CBDT Circular and Finlay Corporation judgment (supra) also we are in agreement with the ld. Counsel for the assessee that in these circumstances of the case moneys remitted by non-residents through banking channel outside India has to be held as capital receipts, not exigible to tax and cannot be treated as deemed Income on the fictions created by sections 68 and 69 of the Act. In consideration of all these observations, we are inclined to hold that the share application money as raised in the ground so appeal cannot be held as non-genuine and added as income of the assessee u/s 68 of the Act. Consequently, additions 28 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai made on this count, as raised in grounds of appeal, are deleted. Assessee's grounds of appeal on this issue are allowed.” (Emphasis supplied) 29. Without prejudice to the above and to keep the matters beyond doubt, the Appellant would even like to prove source of the source. On perusal of the Audited Financial statements of these foreign investor companies, it is evident that these companies had sufficient net worth to make investments in the Appellant company. Further, the Appellant would like to draw your kind attention to the copy of the extract of the Bank statement of foreign investor companies submitted in the Factual Paper book which reflects the source of money from which the above investment is made. Accordingly, the Appellant has tabulated the nature and source of credits in the bank account of foreign investor companies out of which it has invested monies in the Appellant. 3. 29 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Allegation by learned AO-Certain credit entries from National Steel and Agro industries in the Bank of Trade Overseas Limited 30 The learned AO in the assessment order has stated that certain credits in the bank account of Trade Overseas Limited are appearing in the name of National Steel & Agro Industries Limited which is a related party. It may be noted that Trade Overseas Limited has invested in preference shares issued by National Steel & Agro Industries Limited, a related party. National Steel & Agro Industries Limited declared a dividend on Preferential Shares in accordance with the provision of the Companies Act. The said credit entry in the bank account of Trade Overseas Limited is on account of the dividend on preference shares declared and paid by the said Company. The same can also be verified from Schedule 12 of the audited financial statements of Trade Overseas Limited on page144 of the FPB. Merely because there is a dividend earned from an Indian company does not render the monies any dubious character. 30 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Thus, as can be seen from the above table, even the source of source of funds in the hands of the investor stands explained thereby exhaustively proving that the investors were creditworthy to invest in the shares of the Appellant. 31 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Genuineness 31 Amount received through Telegraphic Transfer (TT) proper banking channel– FIRC Certificates submitted a) Extract of Bank statement The Appellant has already submitted a relevant extract of bank statement sof the FIC and NRI investor evidencing the remittance being made through TT. The bank statement Clearly reveals that Non-resident investors have made investments in the Appellant company. b) Copy of FIRC and FC-GPR Copy of FIRC in relation to remittances received along with a copy of Form FC-GPR in respect of the shares invested has already been submitted with Your Honors. c) The bank statement submitted of Ms. Bhavna Goel contains her name, address, and account number. At the same time, the learned AO overlooked the vital fact that Ms. Bhavna Goel is the daughter of Mr. Santosh Shahra, a director / promoter of the Appellant company. 32 The above-mentioned facts prove beyond doubt the identity, creditworthiness, and genuineness of the investment made by FIC. 33. It is pertinent to note that several group companies held shares of the Appellant. Complete details thereof are disclosed at Note 2 - ‘Share Capital’ of the financial statements of the Appellant for FY 2012-13 (kindly refer page 185 of FPB). Amongst various shareholders, the new shareholders viz. i) Trade Overseas Limited ii) East West Global Limited and iii) Bhavna Goel had all invested in shares of the Appellant at Rs. 100 per share through private placement route. Details of the said investment is as below: 32 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 34 As stated above, the Appellant raised funds from its promoter’s relatives, friends and other known investors at a fair value of Rs. 100 per share through private placement of shares. It may be noted that the ordinary book value of the shares computed as per the latestavailablebalancesheetatthetimeofmakinginvestmenti. e.31stMarch2012, was around Rs.141 per share determined as follows: 33 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 35 Keeping the above in mind, based on mutual negotiation and prevailing circumstances then, Rs. 100 per share was agreed between the parties as the fair price of the shares for the purpose of issuance of shares. Accordingly, the Appellant had issued shares at fair value of Rs. 100 per share to the aforesaid 3 investors. 1. The Appellant would like to rely on the ruling of the Hon’ble Bombay High Court in the case of PCIT v. Ami Industries (India) (P.) Ltd .[2020] 116 taxmann. com3 4 (Bombay) wherein a copy of PAN, income tax return, bank statements of the shareholders, and investee’s bank statement were considered as sufficient for proving the genuineness of the transaction. Further, It also distinguished the Hon’ble Supreme Court’s decision in the case of Pr. CIT v. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48. A relevant extract of the said order is reproduced herein under for your quick reference: “21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P.) Ltd. (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either non- existent or lacked credit-worthiness. It is in these 34 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case.” (Emphasis supplied) 37 In respect of shareholders paying the high premium, Hon’ble Madras High Court in the case of Lalitha Jewellery Mart (P.) Ltd. v. Deputy Commissioner of Income-tax [2018] 99 taxmann.com 408 (Madras) held as under: “Further, they are finding fault with the assessee for the alleged failure of its investors in proving beyond doubt that they have the capacity to invest at the moment they did in the assessee-company. That is clearly a perverse view, as the Assessing Officer is not expected to perform a near impossibility. The assessee cannot call upon its investors to disclose all such business transactions they carried on in the immediate past and as to how much they made from their respective business enterprises. The assessee cannot also call upon its investors to prove their good business sense in investing in the assessee- company, as such investors cannot gain any controlling stake.” 38 respect of the shares issued at a high premium, the Appellant would like to rely on the Hon’ble Mumbai Tribunal ruling in the case of ITO v. Chiripal Poly Films Ltd [2019] 104 taxmann.com 172 (Mumbai - Trib.) which is reproduced as under: “21. Even amendment to section 68 brought by Finance Act, 2012 does not refer to valuation. The insertion of the proviso to section 68 of the Act by Finance Act, 2012 casts an additional onus on the closely held companies to prove source in the shareholders subscribing to the shares of companies. During the course of the hearing, the Ld Counsel explained that the explanatory memorandum to the Finance Bill 2012 makes it clear that the additional onus is only with respect to source of funds in the hands of the shareholders before the transaction can be accepted as a genuine one. Even the amended section does not envisage the valuation of share premium. This is further evident from a parallel amendment in section 56(2) of the 35 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Act which brings in it s ambit so much of the share premium a shared by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the LdCIT- DR'scontentionsthatsection68oftheActcan he applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) of the Act redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time. 22. In view of the matter, the Ld Counsel explained that it is a settled law that where two views are possible, the view favorable to the assessee should be adopted as held by Hon'ble Supreme Court in case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192.” 39 Applying the aforesaid decisions ,since the Appellant has furnished the financial statements / net worth certificate, bank statements, mca / fema filings, etc. in respect of the share monies received and shares allotted, the identity, creditworthiness and genuineness of the transaction stands established. accordingly, the addition made under section 68 of the act by the learned ao ought to be deleted. 40 Further, it is settled law that in the matter of cash credit, the initial onus lies on the Assessee to prove the genuineness of the transaction along with the identity of the lender/investor and his creditworthiness. In the present case, the learned AO has not brought on record any new material or evidence to prove that the share application money is on account of alleged Unexplained Credit. 41 The action of the learned Ld.AO is based on mere “appearances” and blatantly ignores the actual ground realities. It may be submitted that any conclusion with the potential of far- reaching adverse consequences should be based on concrete evidence and not hearsay or assumed and imaginary circumstances. 36 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai 42 The reasons furnished by the learned AO in making the impugned addition are, to put it mildly, generic in nature and not backed by any concrete evidence or irrefutable logic. It should be noted that without unearthing any evidence or backing his claim with irrefutable arguments, the learned AO has merely proceeded to question, without any basis, a legally compliant and correctly executed business transaction. 43 It may again be emphasized that the entire amount has been received by the Appellant Company through normal banking channels by account payee cheques/demand drafts/electronic transfer. The evidence furnished clearly reveals the source of funds, in fact the source of source of funds, particulars of the bank account through which payments had been received, and the Income-tax particulars whereby the identity and creditworthiness of the lender are established conclusively. The Appellant Company has comprehensively discharged the onus cast upon it by Section 68 of the Income-tax Act, 1961 requiring it to prove the identity and creditworthiness of the parties and the genuineness of the transactions. It has furnished all requisite documentary evidence(s) as envisaged by the statute in this regard. There is no direct or indirect or even conjectural evidence to disprove the transactions in any manner. 44. Further, additional case laws in support of the claim that no addition ought to be made in the instant case are discussed in detail in Annexure 2. Making investment–Sole discretion of the investor 45 It is submitted that the decision to invest in a company is at the sole discretion of the investor. The investors have their own perceptions and calculations on whether to invest in the company and at what price. The Department or any other person cannot step into the shoes of the investor to decide whether the investment made is of prudence in nature. 46. Based on the above discussions, the various arguments advanced on behalf of the Appellant Company 37 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai can be summarized as follows: - • The entire amount had been received from Overseas Companies / NRI through normal banking channels which transaction has not been disputed/challenged in any manner • Investors have positively confirmed the fact of making the investment • Audited financial statements, net-worth certificate, and relevant bank statements have been furnished establishing the identity, creditworthiness, and genuineness of transactions. • there is neither shred/iota of evidence to prove that the funds received actually emanated from the coffers of the Appellant Company nor has the learned AO been able to bring any evidence on record to prove the same. 47. In view of the above, it is humbly prayed that the Appellant, having explained the share application money received during the year under consideration, the addition made under section 68 of the Act amounting to Rs. 10,78,41,369/- may kindly be deleted. 7. We have also evaluated the provisions of Sec. 68 of the Act, wherein it has been specifically mentioned that “where any sum is found credited in the books of assessee and the assessee offered no explanation about the nature and source thereof from the explanation offered by him is not in the opinion of the AO satisfactory, then the sum so credited may be charged as income for the previous year”. Now in view of above explanation we have analized the facts of the present case and found that the same is not satisfactory. As per the facts of the present case the assessee has provided its explanation supported by documentary 38 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai evidences to prove identity and net worth of the investors and also about the genuineness of the transactions, therefore AO had no reasons to reject the explanation put forth by the assessee. Even before us the assessee has provided the rebuttal to the observations made by the AO and we noticed that AO has relied upon the two decisions i.e M/s. Navodaya Castle Pvt Ltd Vs. CIT and M/s Global Metal & Energy Pvt Ltd but in our view the parametria contained in those decisions are different from the facts of the present case. Therefore the same are found not applicable. Even the conclusion of the AO with regard to branding the transaction of the assessee has “accommodation entries” does not have any foundation at all. No new facts or circumstances or documents have been placed before us to rebut or confront the orders passed by Ld. CIT(A). therefore we have no reason to interfere into the well reasoned order passed by the Ld. CIT(A). Therefore we dismiss this ground raised by the revenue and uphold the order of the CIT(A). CO No. 65/Mum/2025, A.Y 2013-14 8. As far as the addition u/s 14A of the Act are concern, in this regard, we noticed that assessee has taken specific ground that he had not received any exempt income during the year under consideration, therefore disallowance u/s 14A is uncalled for, but stand of the revenue is that CBDT 39 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai Circular No. 5/2024 makes it clear that expenses which are relatable to earning of such exempt income, have to be considered for disallowance irrespective of the fact whether such income was earned or not. 9. After having heard the counsels for both the parties and considering the fact and legal proposition in the present case, we are of the view that CBDT vide circular No. 5/2024 had clarified that Rule 8D r.w.s 14A of the Act provides for disallowance of expenditure even a tax payer in a particular year has not earned any exempt income. However it is triet law that CBDT Circulars are biding only on revenue authority and not on the assessee which has been upheld by the Hon’ble Supreme Court in the case of CIT Vs. Hero Cycle Pvt Ltd., 228 ITR 463(1997) (SC). 10. Moreover, Hon’ble Delhi High Court in the case of Pr. CIT Vs. IL & FS Energy Development Company Ltd, [2017] 399 ITR 483 (Delhi HC) has categorically held that “no disallowance can be made u/s 14A of the Act in the absence of the exempt income as the CBDT Circular dated 11.02.2014 cannot override the express provisions of Sec. 14A r.w.r 8D” and the relevant paras of the case law is read as under:”. 17. The words \"in relation to income which does not form part of the total income under the Act for such previous year\" in the above Rule 8 D (1) indicates a correlation between the exempt income earned in the AY and the expenditure incurred to earn 40 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai it. In other words, the expenditure as claimed by the Assessee has to be in relation to the income earned in 'such previous year'. This implies that if there is no exempt income earned in the AY in question, the question of disallowance of the expenditure incurred to earn exempt income in terms of Section 14A read with Rule 8D would not arise. 24. For all of the aforementioned reasons, this Court is of the view that the CBDT Circular dated 11th May 2014 cannot override the expressed provisions of Section 14A read with Rule 8D.\" 11. Therefore considering the facts that the assessee has not earned any dividend income during the year under consideration and not incurred any interest expenditure. Therefore keeping in view the judicial precedents, we allow this ground of appeal raised by the assessee and direct the AO to delete the addition. 12. In the result, the appeal filed by the revenue stands dismissed and the CO filed by the assessee stands allowed. Order pronounced in the open court on 09.04.2025. Sd/- Sd/- (BR BASKARAN) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 09/04/2025 KRK, PS 41 ITA No. 6775/Mum/2024 & CO. 65/Mum/2025. Benco Finance & Investment Pvt Ltd, Mumbai आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u000eथ / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मु\u0003बई / DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, स\u000eािपत ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai "