M/s Dhanashree Developers P. Ltd., Mumbai V. DCIT, New Delhi

ITA 1848/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 2290 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SARAS KUMAR
• Keywords: Bogus purchase; Principle of natural justice; Opportunity of cross examination; Maximum Marginal Rate; Earning of tax free income; Revised return; TDS; Rule 8D; Set aside
• Section: 271(1)(c); 69C; 143(3); 234B; 14A; 251; 80IC; 143(2); 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: G: NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT ME MBER ITA NO:- 1848/DEL/2016 (ASSESSMENT YEAR: 2010-11) DHANASHREE DEVELOPERS P. LTD., 303, WESTERN EDGE-1, WESTER EXPRESS HIGHWAY, ABOVE METRO MALL, BORIVALI, (EAST), MUMBAI PAN-AACCD6182F VS. DCIT, CENTRAL CIRCLE - 4 NEW DELHI APPELLANT RESPONDENT APPELLANT BY NONE RESPONDENT BY SH. SARAS KUMAR, SR. DR ORDER PER ANADEE NATH MISSHRA, AM [A]. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGA INST THE ORDER DATED 20.01.2016 PASSED BY LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-30, NEW DELHI [IN SHORT, LD.CIT(A)] PERTAINING TO ASS ESSMENT YEAR 2010-11. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL :- 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CON FIRMING AN ADDITION OF RS 72,50,159/- ON ACCOUNT OF BOGUS PURC HASES ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION DEPARTME NT WHICH IN TURN RELIED ON INFORMATION FROM VAT DEPARTMENT WITHOUT A PPRECIATING THAT THE PURCHASES WERE FULLY SUPPORTED AND VERIFIABLE B Y INVOICES AND PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES. 2. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CO NFIRMING THE DISALLOWANCE BY RELYING ON THE STATEMENTS OF THE DE ALERS WITHOUT GIVING ANY OPPORTUNITY OF CROSS EXAMINATION AS ALSO WITHOUT BRINGING ANY CORROBORATIVE MATERIAL APART FROM THE STATEMENT S. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE LEARNE D CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANC E TO THE EXTENT OF ITA NO: - 1848/DEL/2016 PAGE | 2 RS 29,94,307/- AND RS 4,11,961/- REFLECTED IN WORK IN PROGRESS AND VAT CREDIT RESPECTIVELY WHICH WAS NOT DEBITED TO TH E PROFIT AND LOSS ACCOUNT. 4. LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIR MING DISALLOWANCE OF RS 90,42,612/- U/S 14A R.W.S. RULE 8D WITHOUT RECORDING ANY SATISFACTION THAT ANY EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INCOME. 5. LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THER E WAS NO EXEMPT INCOME EARNED DURING THE YEAR AS ALSO NO INT EREST BEARING FUNDS WERE UTILIZED FOR MAKING INVESTMENTS FOR TAX FREE INCOME. 6. LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIR MING THE DISALLOWANCE U/S 14A IN ABSENCE OF ANY NEXUS OF EXP ENDITURE WITH TAX FREE INCOME. [B]. ASSESSMENT ORDER DATED 28.03.2013 WAS PASSED BY THE ASSESSING OFFICER (AO, FOR SHORT) UNDER SECTION 143(3) OF T HE INCOME TAX ACT, 1961. IN THIS ASSESSMENT ORDER, THE AO MADE A FURTHER DIS ALLOWANCE OF RS. 90,42,612/- UNDER SECTION 14A OF THE INCOME TAX ACT R.W.R. 8D OF INCOME TAX RULES IN ADDITION TO SUO MOTO DISALLOWANCE OF RS. 90,42,612/- MADE BY THE ASSESSEE UNDER SECTION 14A OF I.T. ACT. FURT HER, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 90,42,612/- OUT OF DEDUCTION UNDER SECTION 80IC OF INCOME TAX ACT, 1961 AMOUNTING TO R S. 32,49,88,100/- CLAIMED BY THE ASSESSEE. THE RELEVANT PORTIONS OF T HE ASSESSMENT ORDER ARE REPRODUCED BELOW FOR EASE OF REFERENCE:- 5. INFORMATION HAS BEEN RECEIVED FROM THE DIT(INV. )-1, DELHI VIDE LETTER F. NO. DIT (INV.)-1/MVAT/DEL/2012-13/87 DATED 26.02 .2013 ENCLOSING THEREWITH DETAILS OF NON-GENUINE / BOGUS BILLS AVAI LED BY THE ASSESSEE M/S DHANSHREE DEVELOPERS PVT. LTD. THIS INFORMATION WAS RECEIVED BY THE DIT (INV.), DELHI FROM DGIT (INV.), MUMBAI WHO IN TURN RECEIVED THE SAME FROM THE VAT DEPARTMENT, MUMBAI. ACCORDING TO THE INFORM ATION RECEIVED, M/S DHANSHREE DEVELPERS PVT. LTD. DURING THE FINANCIAL YEAR 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11 HAS AVAILED ACCOMMODATION B ILLS TOTALING TO RS. 72,50,159/- FROM THE FOLLOWING PERSONS WHO ARE ENGA GED IN PROVIDING BOGUS BILLS (HAWALA DEALERS):- S. NO. NAME OF THE HAWALA DEALER PAN NO. F.Y. IN WHICH AMOUNT OF BILL ITA NO: - 1848/DEL/2016 PAGE | 3 BILLS AVAILED 1 SUPREME ENTERPRISE AKRPM9147P 2009-10 2007980 2 NEWZONE MULTI TRADE PVT. LTD. AAECM7719B 2009-10 30758 3 MAHALAXMI CORPORATION/PRAGATI CORPORATION AACPD7542C 2009-10 334409 4 DARSHAN TRADE CORPORATION AVIPP6026G 2009-10 732472 5 AMBIKA TRADE IMPEX BPRPS5234M 2009-10 237456 6 ROHIT ENTERPRISES AAIPV8196J 2009-10 782097 7 HARIOM TRADERS ADMPL1842L 2009-10 3124987 TOTAL 7250159 THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 15.03.201 3 WAS ASKED TO CLARIFY ITS POSITION REGARDING OBTAINING OF THE ABOVE MENTIONED BOGUS BILLS AND ALSO TO SHOW CAUSE AS TO WHY THE ABOVE MENTIONED AMOUNT OF RS.72 ,50,159/- SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE INFO RMATION IN. POSSESSION OF THIS OFFICE WAS ALSO COMMUNICATED TO THE ASSESSEE. 5.1. THE ASSESSEE VIDE REPLY DATED {8.03.2013 SEND BY SPEED POST AND RECEIVED IN THIS OFFICE ON 28.03.2013 VIDE DV. NO.759 SUBMITTED AS UNDER: WITH REFERENCE TO ABOVE, OUR REPRESENTATIVE MR, AJ DIGHE, CHARTERED ACCOUNTANT APPEARED BEFORE YOUR HONOR ON 15.03.2013 AND 16.03,2013 AND SUBMITTED THE INFORMATION ASKED FOR AND HAS DIS CUSSED THE CASE. DURING THE COURSE OF HEARING, AS INFORMED TO OUR AL L IT HAS COMMUNICATED TO US THAT YOUR ARE IN POSSESSION OF CERTAIN INFORMATI ON RECEIVED FROM SALES TAX DEPARTMENT, MUMBAI ACCORDING TO WHICH OUR COMPA NY HAS COMMUNICATED BY THE SALES TAX DEPARTMENT HAS BOOKED FICTITIOUS PURCHASES AMOUNT TO RS. 72,50,159/- AND AR WAS ASKE D TO SUBMIT HIS SAY ON THIS. THE TIME WAS ASKED BY AR TILL 19.03.2013 O N WHICH WE HAVE TO SEND OUR REPLY TO REACH YOU BY 2P' MARCH, 2013. WE WOULD LIKE TO SUBMIT AS UNDER: I. DURING THE PI Y. 2009-10, WE WERE CARRYING SOME LAB OUR SOME LABOUR CONTRACTS AND CERTAIN GOVERNMENT PROJECTS. THE TOTA L PURCHASES OR LABOUR CONTRACT EXPENSES WERE AROUND 117 CRORES. TH E LIST OF ALLEGED FICTITIOUS PURCHASES AS RECEIVED BY YOU FROM SALES TAX DEPARTMENT SHOWN TO AR CONTAINS PURCHASES FROM SIX PARTIES AMO UNTING TO RS. 72,50,159/- II. WE ARE VERIFYING THE SAID TRANSACTIONS WITH PURCHA SE DEPARTMENT AND AT SITES. DURING THE F.Y. 2009-10 WE WERE CARRY ING PROJECTS OF BORIVALI STY WALK, ES1C AND NASHIK. III. WE HAVE PREPARED A STALE MERIT SHOWING THE DETAILS OF ABOVE PURCHASES, VAT PAID ON THE SAME AND HOW MUCH WAS CH ARGED TO PROFIT AND LOSS ACCOUNT AND HOW MUCH IS CARRIED TO WORK IN ITA NO: - 1848/DEL/2016 PAGE | 4 PROGRESS. WE ARE ENCLOSING HEREWITH CHART SHOWING T HE DETAILS O F PURCHASES AND AMOUNTS CHARGED TO PROFIT AND LOSS AC COUNT ETC. IT IS OUR PRACTICE THAT ONLY THAT PERCENTAGE OF PURCHASES IS CHARGED TO PROFIT AND LOSS ACCOUNT ON WHICH REVENUE IS DECLARE D AND BALANCE IS INCLUDED IN THE AMOUNT OF WORK IN PROGRESS AT THE E ND OF THE YEAR. IV. IV. AS SUCH, IT WILL HE SEEN FROM THE CHART ENCLOSE D THAT RS.38,43,891/- IS DEBITED TO PROFIT AND LOSS ACCOUN T AND RS,29,94,307/- IS INCLUDED IN THE FIGURE OF WORK IN PROGRESS OS AT THE END OF THE YEAR. THE FIGURE OF RS. 4,11,961/- WHICH IS VAT IS CONSIDERED SEPARATELY. IN THIS SITUATION TOTAL FIGU RE OF 72,50,159/- CAN IN NO CIRCUMSTANCES BE DISALLOWED, WHILE COMPUT ING TAXABLE INCOME. WE WOULD LIKE TO REQUEST AS FOLLOWS: A. THE. INFORMATION RECEIVED FROM SALES TAX DEPART MEN1 W INFORMED TO OUR AR ON 16.03.2013 WHICH IS AT THE FAG END OF THE ASSESSMENT PROCEEDINGS FOR WHICH WE HAVE VERY LIMITED TIME TO JUSTIFY OUR CASE, AS OUR OFFICE IS AT MUMBAI AND THE ASSESSING OFFICE R IS STATIONED AT DELHI. B. WE ARE VERIFYING THAT TRANSACTIONS AND CAN REVER T ONLY AFTER CONDUCTING DEEP INVESTIGATION IN THE MATTER. C. FURTHER TIME MAY PLEASE BE ALLOWED FOR SUBMISSIO N OF THE DETAILS CALLED FOR D. BESIDES, THE PARTY CONCERNED MAY BE CALLED FOR C ROSS EXAMINATION TO FIND OUT THE TRUTH REGARDING THE SALE OF MATERIA LS TO US. BESIDES, THE MATERIAL HAS BEEN USED IN OUR SITE AND THE PAYM ENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE ONLY. E. WITHOUT PREJUDICE TO WHAT IS STATED HEREINABOVE, IN THE EVENT OF YOUR MAKING ANY ADDITIONS IT SHALL BE DEFINITELY BA SED ON THE CHART PRESENTED BY US AND THE TOTAL PURCHASES MAY NOT BE DISALLOWED IN ASSESSMENT, CONSIDERING THAT SOME PART OF PURCHASES HAS GONE IN WORK IN PROGRESS EVEN THOUGH WE DO NOT AGREE WITH T HIS PROPOSITION AT ALL. 5.2. THE SUBMISSION OF THE ASSESSEE HAS BEEN CAREFU LLY CONSIDERED. IT IS CLEAR FROM THE SUBMISSION THAT THE ASSESSEE HAS NO SPECIFIC CL ARIFICATION TO OFFER IN ITS DEFENCE. SO FAR AS THE CLAIMING OF EXPENDITURE BY W AY OF THE ABOVE MENTIONED BILLS IS CONCERNED, THE SAME HAS NOT BEEN DISPUTED. THE A SSESSEE HAS ONLY SUBMITTED THAT THE ENTIRE PURCHASES FROM THE ABOVE PARTIES HA VE NOT BEEN CLAIMED AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT. IT HAS BE EN CONTENDED THAT A PART OF THE PURCHASES HAVE BEEN DEBITED TO THE PROJECT WORK IN PROGRESS ACCOUNT. INSTEAD OF GETTING THE PURCHASES VERIFIED BY PRODUCING THE PAR TIES, THE ASSESSEE HAD ASKED FOR MORE TIME FOR VERIFYING THE TRANSACTIONS. IT CA N BE SEEN FROM THE RECORDS THAT THE ASSESSEE WAS GIVEN TIME FROM15.03.2013 TILL 28. 03.2013 TO RECONCILE ITS ACCOUNTS AND FILE ITS REPLY. HOWEVER, THE ASSESSEE FAILED TO DO SO. ITA NO: - 1848/DEL/2016 PAGE | 5 5.3. AS PER THE INFORMATION RECEIVED BY THIS OFFICE , STATEMENTS OF THE ABOVE MENTIONED HAWALA DEALERS WERE RECORDED BY THE INVES TIGATION WING OF THE MAHARASTRA SALE TAX / VAT DEPARTMENT. SH. MUNISH RA JNIKANT MODI, WHO IS THE PROPRIETOR OF M/S SUPREME ENTERPRISES IN HIS STATEM ENT CATEGORICALLY CONFESSED TO PROVIDING ONLY BILLS. IN RESPONSE TO THE SPECIFIC Q UESTION RAISED BY THE ASSISTANT COMMISSIONER OF SALE TAX (INV.) M THE STATEMENT REC ORDED ON 18-11-2008 HIS REPLY WAS AS UNDER Q NO, 28 - DO YOU CARRY ON ANY REAL BUSINESS OF SA LE OR PURCHASE OF GOODS? ANS. NO. I DONT KNOW ANYTHING ABOUT THE BUSINESS. I HAVE NOT CARRIED ANY BUSINESS WHAT EVER DONE IS BY MR. HEMANT MUNI AND M R. MAHESH HIS MEN. / ONCE AGAIN CONFIRM THAT 1 HAVE NOT SOLD OR PURCHASE ANY GOODS. SIMILARLY, SH. HASHMUKH H. PANCHAL PROPRIETOR OF M/ S DARSHAN TRADE CORPORATION VIDE HIS LETTER DATED 08-12-2011 SUBMIT TED TO THE ASSISTANT COMMISSIONER OF SALE LAX (1-28)(INV.-B), MUMBAI ADM ITTED THAT HE HAD NOT DONE ANY GENUINE BUSINESS AND HAD ISSUED ONLY TAX INVOIC ES. HE ALSO MENTIONED THAT HE IS WILLING TO SUBMIT HIS AFFIDAVIT REGARDING HIS BUSINESS ACTIVITY. HIS SALE TAX REGISTRATION, WAS ALSO CANCELLED BY THE MUMBAI VAT DEPARTMENT. A COPY OF AFFIDAVIT DATED 09-12-2011 SUBMITTED BY HIM HAS ALS O BEEN RECEIVED BY THIS OFFICE. SIMILAR INFORMATION HAS ALSO BEEN RECEIVED IN RESPE CT OF SH. KAMLESH K. SETH PROPRIETOR OF M/S AMBICA TRADE IMPEX AND IN RESPECT OF OTHER HAWAIA DEALERS. THE INFORMATION HAS BEEN SUPPLIED BY THE MAHARASTRA VAT DEPARTMENT TO THE DGI.T (INV.), MUMBAI AND FROM THERE IT HAS BEEN DISSEMINA TED TO THIS OFFICE. 5.4 THE INFORMATION RECEIVED FROM THE MAHARASTRA VA T DEPARTMENT IS SPECIFIC AND NOT GENERAL OR VAGUE. THE INFORMATION CONTAINS THE DETAILS OF THE BENEFICIARIES PARTY, IN THE PRESENT EASE ASSESSEE M/S DHANSHREE D EVELOPERS (P) LTD. (FORMERLY KNOWN AS M/S PEARLS DHANSHREE INFRASTRUCTURE (?) LT D.), PAN NO. OF THE BENEFICIARY, NAME OF THE HAWALA DEALER, TIN NO. OF THE HAWALA DEALER, PAN NO. OF THE HAWALA DEALER AND THE AMOUNT OF BOGUS BILLS OF PURCHASES OBTAINED FROM THE HAWALA DEALERS. THE INFORMATION WAS CONFRONTED TO T HE ASSESSEE. THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASE S MADE FROM THESE HAWALA DEALERS. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE HAS IN FLATED ITS PURCHASES BY AN AMOUNT OF RS.72.50,159/- BY AVAILING BOGUS/NON-GENU INE BILLS FROM HAWALA DEALERS AS MENTIONED ABOVE DURING THE F.Y. 2009-10 RELEVANT TO A.Y.2010-11. THEREFORE, PURCHASES AMOUNTING TO RS.72,50,159/- AR E DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE J ASSESSEE BEING BOGUS PURC HASE MADE DURING THE YEAR FROM HAWALA DEALERS. PENALTY PROCEEDINGS II/S 271 ( 1)(C) ARE BEING INITIATED SEPARATELY. (ADDITION OF RS.72.50,159/-) 6. PERUSAL OF THE P&L ACCOUNTS REVEAL THAT THE ASSE SSEE HAS DEBITED AN AMOUNT OF RS.56.356/- ON ACCOUNT OF INTEREST ON LATE PAYMENT OF VAT AMOUNTING AND RS. 59,167/- ON ACCOUNT OF INTEREST ON LATE PAYMENT OF TDS. SINCE THESE PAYMENTS ARE OF PENAL IN NATURE, THE SAME ARE DISALLOWED AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO: - 1848/DEL/2016 PAGE | 6 (ADDITION OF RS.72.50,159/-) 7. FROM THE BALANCE SHEET OF THE ASSESSES FOR THE Y EAR ENDING 31-03-2010, IT IS SEEN THAT THE ASSESSEE COMPANY HAD MADE INVESTMENTS AGGREGATING TO RS. 124,60,24,010/- IN EQUITY SHARES AND IN NON CUMULAT IVE REDEEMABLE PREFERENCE SHARES, SINCE, THE INVESTMENTS MADE BY THE ASSESSEE WILL YIELD INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE UNDER THE PROVISION OF INCOME TAX ACT, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY TH E PROVISIONS OF SECTION 14A BE NOT INVOKED. THE ASSESSEE HAS SUBMITTED THE FOLLOWI NG REPLY:- THIS IS TO SUBMIT THAT THE COMPANY HAS RECEIVED TH E TAX FREE INCOME IN THE FORM OF DIVIDEND AMOUNTING TO PM, 33,410/-. THIS DI VIDEND IS RECEIVED ON THE SHARES OF MODEL CO. OPERATIVE BANK. THE COMPANY HAS MAILED THE LOAN FROM THE HANK AND IT IS THE PRE CONDITION OF THE LO AN THAT THE SHARES OF CERTAIN AMOUNTS HAS TO BE PURCHASED BY THE BORROWER FROM THE BANK THE SHARES ARE NOT PURCHASED AS INVESTMENTS OR TO EARN THE DIVIDEND OR TAX FREE INCOME. IT IS ALSO TO BE NOTED THAT THERE IS NO ANY EXPENDITURE INCURRED FOR PURCHASE OF THESE SHARE OF THE BANK. CONSIDERING THE ABOVE, THE PROVISIONS OF SECTION 14 A OF THE IT. ACT ARE NOT ATTRACTED IN THIS CASE AND PENDING ON THIS THERE IS NO DISALLOWANCE MADE WHILE FILING THE RETURN OF INCOME. 8. I HAVE CONSIDERED THE REPLY FILED BY THE ASSESSE E, 1 DO NOT FIND ANY FORCE IN THE REPLY SUBMITTED BY THE ASSESSEE, PROVISION OF SECTI ON 14A. ARE MANDATORY IN NATURE. SECTION 14A OF THE ACT .READS AS UNDER- SECTION 14A OF THE ACT STATES:- 'FOR THE PURPOSE OF THE COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITUR E INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FROM PART OF T HE TOTAL INCOME UNDER THIS ACT. THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHOD AS MAY BE PRESCR IBED, P ME ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSES SEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT PART OF THE TOTAL INCOME UNDER THIS ACT. THE PROVISION OF SUBSECTION (2) SHALL ALSO APPLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURR ED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. ' 9. FROM THE ABOVE, IT IS EVIDENT THAT THE PROVISION OF SECTION 14 A ARE MANDATORY IN NATURE. THE PROVISIONS ARE ALSO APPLICABLE TO A CAS E WHERE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED IN EARNING OF THE INCOME N OT INCLUDIBLE IN TOTAL INCOME. FURTHER, RULE 8D OF THE INCOME TAX RULES PROVIDES T HE BASIS OF COMPUTING THE EXPENDITURE RELATING TO EARNING OF INCOME WHICH IS NOT INCLUDED ILL THE TOTAL INCOME. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE DERIV ED TAX EXEMPT INCOME IN THE ITA NO: - 1848/DEL/2016 PAGE | 7 FORM OF DIVIDEND. SINCE, THE ASSESSEE HAS NOT MADE ANY SUO-MOTTO DISALLOWANCE U/S 14A OF THE INCOME TAX ACT AND HAS CONTENDED THA T NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO THE INCOME NOT INCLUDIBLE I N THE TOTAL INCOME, I AM LEFT WITH NO ALTERNATIVE THAN TO INVOKE THE PROVISION OF SECT ION 14A OF THE INCOME TAX ACT. I THEREFORE, MAKE A DISALLOWANCE OF RS. 90,42,612/- U /S 14A OF THE ACT, COMPUTED IN ACCORDANCE WITH THE PROVISION OF RULE ED OF THE INC OME TAX RULES AS UNDER: - THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NO T FROM PART OF THE TOTAL INCOME SHALL BE AGGREGATE OF THE FOLLOWING AMOUNTS NAMELY: (I). THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME NIL (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPE NDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTR IBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY: A. INTEREST EXPENSES RS. 44,01,462/- B. AVERAGE INVESTMENT RS. 120,46,24,010/- C. AVERAGE ASSETS RS. 175,59,59,525/- AXB/C RS. 30,19,492/- (III) AN AMOUNT EQUAL TO ONE HALF PERCENT OF THE AV ERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART O F THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 0.5% OF AVERAGE VALUE OF INVESTMENT I.E. B RS.60,23.120/- TOTAL [(I)+(II)+F(III)] RS.9 0,42,612/- THEREFORE, I MAKE A DISALLOWANCE OF RS. 90,42,612/- IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. SINCE THE ASSESSEE HAS NOT DISALLOWED THE EXPENSES INCURRED FOR EARNING OF EXEMPT INCOME, IN VIEW OF THE PROVISIONS OF THE SEC TION 14A READ WITH RULE 8D OF THE INCOME TAX RULES, HENCE, I AM SATISFIED THAT TH E ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME, ACCORDINGLY P ENALTY PROCEEDINGS ARE INITIATED U/S 271(1) (C) OF THE I.T. ACT, 1961 SEPARATELY. WITH THIS REMARKS, THE TOTAL INCOME OF THE ASSESSEE COMPANY IS COMPUTED AS UNDER: INCOME RETURNED AS PER REVISED RETURN ADD: -ADDITION ON ACCOUNT OF BOGUS PURCHASES (AS DISCUSSED ABOVE) RS. 72,50,159/- -ADDITION AS PER PARA 6 ABOVE RS. 1,15,523/- -DISALLOWANCE U/S 14A OF THE ACT ITA NO: - 1848/DEL/2016 PAGE | 8 (AS DISCUSSED ABOVE) RS. 90,42,612/- TOTAL RS. 8,27,24,554/- ASSESSED AT AN INCOME OF RS. 8,27,24,554/-. GIVE CR EDIT FOR PREPAID TAXES. TAX ACCORDINGLY. CHARGE INTEREST U/S 234A & 234B OF THE ACT AS APPLICABLE. PENALTY PROCEEDING U/S 271(1)(C) OF THE I.T. ACT, 1961 HAVE BEEN INITIATED SEPARATELY AS DISCUSSED ABOVE. ISSUE NECESSARY FORMS. [C] THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CI T(A), WHO CONFIRMED BOTH THE AFORESAID ADDITIONS. THE RELEVANT PORTIONS OF THE AFORESAID IMPUGNED APPELLATE ORDER DATED 20.01.2016 ARE REPRO DUCED AS UNDER FOR THE EASE OF REFERENCE:- 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS. IN THIS CASE, ASSESSMENT ORDER U/S 143(3) WAS COMPLETED VIDE ORDER DATED 28. 03.2013 AT TOTAL INCOME RS. 8,27,24,554/-, AS AGAINST THE RETURNED I NCOME OF RS. 6,63,16,260/-, AFTER MAKING THE FOLLOWING ADDITIONS : (I) ON ACCOUNT OF BOGUS PURCHASES : RS. 7 2,50,159/- (II) ON ACCOUNT OF DISALLOWANCE U/S 14A : RS. 90 ,42,612/- (III) ON ACCOUNT OF INTEREST PAYMENT ON : RS. 1,15,523/- LATE PAYMENT OF VAT/TDS HOWEVER, THE APPELLANT HAS CHALLENGED ONLY THE FIRS T TWO ADDITIONS IN THIS APPEAL. 4. GROUND NO. 1 IS GENERA! IN NATURE AND DOES NOT R EQUIRE ANY SPECIFIC ADJUDICATION. 5. GROUNDS NO. 2 IS RELATING TO THE ADDITION OF RS. 72,50,159/-, ON ACCOUNT OF FICTITIOUS/BOGUS PURCHASES ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION DEPARTMENT. 5.1 THE A.O. HAS MADE THE ABOVE ADDITION AND FINDIN GS OF THE A.O, IN ASSESSMENT ORDER U/S 143(3) DATED 28.3.2013, ARE RE PRODUCED AS UNDER;- 2. THE CASE WAS SELECTED FOR SCRUTINY AND THE FIRS T NOTICE U/S 143(2) WAS ISSUED BY THE INCOME TAX OFFICER 9(1)(3). MUMBA I ON 25.08.2011. FURTHER NOTICE U/S 143(2) OF INCOME TAX ACT ALONG WITH A DETAILED QUESTIONNAIRE WAS ISSUED ON 30.11.2012. IN RESPONSE TO THE NOTICE SHRI A. J. DI GHE, CHARTERED ACCOUNTANT AND AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE ATTENDED FROM TIME TO TIME AND DISCUSSED THE CASE AND SUBMIT TED REPLIES. ITA NO: - 1848/DEL/2016 PAGE | 9 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REDEV ELOPMENT OF HOUSING SOCIETIES IN THE AREA IN AND AROUND MUMBAI AND THIS IS THE FOURTH YEAR OF THE COMPANY. IT HAS ALSO CARRIED OUT THE WORK ALLOTTED BY THE LOCAL AUTHORITIES VIZ. MMRDA FOR THE SKYWALK PROJECT ETC. DURING THE YEAR THE ASSESSEE HAS ALSO EXECUTED LABO UR CONTRACTS. 4. THE AR SUBMITTED THE DETAILS CALLED FOR AND ALSO ACCOUNTS OF THE COMPANY. FROM THE VARIOUS DISCUSSIONS HELD AS WELL AS THE DETAILS FILED BY THE ASSESSES, THE INCOME OF THE ASSESSEE I S ASSESSED AS UNDER. 5. INFORMATION HAS BEEN RECEIVED FROM THE DIT (INV .) - I, DELHI VIDE LETTER F.NO. DIT (LNV.)-L/MVAT/DEL/2012-13/87 DATED 26.02. 2013 ENCLOSING THEREWITH DETAILS OF NON- GENUINE/BOGUS BILLS AVAIL ED BY THE ASSESSEE M/S DHANSHREE DEVELOPERS PVT. LTD. THIS INFORMATION WAS RECEIVED BY THE DIT (INV.), DELHI FROM DGIT (LNV.), MUMBAI WHO IN TURN RECEIVED THE SAME FROM THE VAT DEPARTMENT, MUMBAI. ACCORDING TO THE INFORM ATION RECEIVED, M/S DHANSHREE DEVELOPERS PVT, LTD. DURING THE FINANCIAL YEAR 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11 HAS AVAILED ACCOMMODATIO N BILLS TOTALING TO RS. 72,50,159/- FROM THE FOLLOWING PERSONS WHO ARE ENGAGED IN PROVIDING BOGUS BILLS (HAWALA DEALERS):- S. NO. NAME OF THE HAWALA DEALER PAN NO. F. Y, IN WHICH BILLS AVAILED AMOUNT OF BILL 1 SUPREME ENTERPRISE AKRPM9147P 2009-10 2007980 2 NEWZONE MULTI TRADE PVT. LTD. AAECM7719B 2009-10 30758 3 MAHALAXMI CORPORATION/'PRAGATI CORPORATION AACPD7542C 2009-10 334409 4 DARSHAN TRADE CORPORATION AVIPP6026G 2009-10 732472 5 AMBIKA TRADE IMPEX BPRPS5234M 2009-10 237456 6 ROHIT ENTERPRISES AAIPV8196J 2009-10 782097 7 HARIOM TRADERS ADMPL1842L 2009-10 3124987 TOTAL 7250159 THE ASSESSEE VIDE ORDER SHEET ENTRY DATED 15.03.201 3 WAS ASKED TO CLARIFY ITS POSITION REGARDING OBTAINING OF THE ABO VE MENTIONED BOGUS BILLS ITA NO: - 1848/DEL/2016 PAGE | 10 AND ALSO TO SHOW CAUSE AS TO WHY THE ABOVE MENTIONE D AMOUNT OF RS. 72,50,159/- SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE INFORMATION IN POSSESSION OF THIS OFFICE WAS ALSO C OMMUNICATED TO THE ASSESSEE. 5.1. THE ASSESSEE VIDE REPLY DATED 18.03.2013 SEND BY SPEED POST AND RECEIVED IN THIS OFFICE ON 28.03.2013 VIDE DY. NO. 759 SUBMITTED AS UNDER: WITH REFERENCE TO ABOVE, OUR REPRESENTATIVE MR. A. J. DIGHE, CHARTERED ACCOUNTANT APPEARED BEFORE, YOUR HONOR ON 15.03.201 3 AND 16.03.2013 AND SUBMITTED THE INFORMATION ASKED FOR AND HAS DIS C USED THE CASE. DURING THE COURSE OF HEARING, AS INFORMED TO OUR AR IT HAS COMMUNICATED TO US THAT YOU ARE IN POSSESSION OF CERTAIN INFORMATIO N RECEIVED FROM SALES TAX DEPARTMENT, MUMBAI ACCORDING TO WHICH OUR COMPANY H AS COMMUNICATED BY THE SALES TAX DEPARTMENT HAS BOOKED FICTITIOUS P URCHASES AMOUNT TO RS.72,50,1597/- AND AR WAS ASKED TO SUBMIT HIS SAY ON THIS. THE TIME WAS ASKED BY AR TILL 19.03.2013 ON WHICH WE HAVE TO SEND OUR REPLY TO REACH YOU BY 21ST MARCH, 2013. WE WOULD LIKE TO SUB MIT AS UNDER: I. DURING THE F.Y. 2009-10, WE WERE CARRYING SOME L ABOUR CONTRACTS AND CERTAIN GOVERNMENT PROJECTS. THE TOTAL PURCHASE S OR LABOUR CONTRACT EXPENSES WERE AROUND 117 CRORES. THE LIST OF ALLEGED FICTITIOUS PURCHASES AS RECEIVED BY YOU FROM SALES TAX DEPARTMENT SHOWN TO AR CONTAINS PURCHASES FROM SIX PARTIES AMO UNTING TO RS. 72.50,159/-. II. WE ARE VERIFYING THE SAID TRANSACTIONS WITH PUR CHASE DEPARTMENT AND AT SITES. DURING THE F.Y. 2009-10 WE WERE CARRY ING PROJECTS OF BORIVALI SKY WALK, ES1C AND NASHIK. III. WE HAVE PREPARED A STATEMENT SHOWING THE DETAI LS OF ABOVE PURCHASES, VAT PAID ON THE SAME AND HOW MUCH WAS CHARGED TO PR OFIT AND LOSS ACCOUNT AND HOW MUCH IS CARRIED TO WORK IN PROGRESS . WE ARE ENCLOSING HEREWITH CHART SHOWING THE DETAILS OF PURCHASES AND AMOUNTS CHARGED TO PROFIT AND LOSS ACCOUNT ETC. IT IS OUR PRACTICE THA T ONLY THAT PERCENTAGE OF PURCHASES IS CHARGED TO PROFIT AND LOSS ACCOUNT ON WHICH REVENUE IS DECLARED AND BALANCE IS INCLUDED IN THE AMOUNT OF W ORK IN PROGRESS AT THE END OF THE YEAR. IV. AS SUCH, IT WILL BE SEEN FROM THE CHART ENCLOSE D THAT RS. 38,43,891/- IS DEBITED TO PROFIT AND LOSS ACCOUNT AND RS.29.94,307 /- IS INCLUDED IN THE FIGURE OF WORK IN PROGRESS AS AT THE END OF THE YEA R. THE FIGURE OF ITS 4 11,961/- WHICH IS VAT IS CONSIDERED SEPARATELY. IN THIS SITUATION TOTAL FIGURE OF 72,50,159/- CAN IN NO CIRCUMSTANCES BE DI SALLOWED WHILE COMPUTING TAXABLE INCOME. WE WOULD LIKE TO REQUEST AS FOLLOWS: A. THE INFORMATION RECEIVED FROM SALES TAX DEPARTME NT IS INFORMED TO OUR AR ON 16. 03.2013 WHICH IS AT THE FAG END OF TH E ASSESSMENT ITA NO: - 1848/DEL/2016 PAGE | 11 PROCEEDINGS FOR WHICH WE HAVE VERY LIMITED TIME TO JUSTIFY OUR CASE, AS OUR OFFICE IS AT MUMBAI AND THE ASSESSING OFFICER I S STATIONED AT DELHI. B. WE ARE VERIFYING THAT TRANSACTIONS AND CAN REVER T ONLY AFTER CONDUCTING DEEP INVESTIGATION IN THE MATTER. C. FURTHER TIME MAY PLEASE BE ALLOWED FOR SUBMISSIO N OF THE DETAILS CALLED FOR. D. BESIDES, THE PARTY CONCERNED MAY BE CALLED FOR C ROSS EXAMINATION TO FIND OUT THE TRUTH REGARDING THE SALE OF MATERIALS TO US . BESIDES, THE MATERIAL HAS BEEN USED IN OUR SITE AND THE PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUE ONLY. E. WITHOUT PREJUDICE TO WHAT IS STATED HEREINABOVE, IN THE EVENT OF YOUR MAKING ANY ADDITIONS IT SHALL HE DEFINITELY BASED O N THE CHART PRESENTED BY US AND THE TOTAL PURCHASES MAY NOT BE DISALLOWED IN ASSESSMENT, CONSIDERING THAT SOME PART OF PURCHASES HAS GONE IN WORK IN PROGRESS EVEN THOUGH WE DO NOT AGREE WITH THIS PROPOSITION A T ALL. ' 5.2. THE SUBMISSION OF THE ASSESSES HAS BEEN CAREFU LLY CONSIDERED. IT IS CLEAR FROM THE SUBMISSION THAT THE ASSES SEE HAS NO SPECIFIC CLARIFICATION TO OFFER IN ITS DEFENCE. SO FAR AS THE CLAIMING OF EXP ENDITURE BY WAY OF THE ABOVE MENTIONED BILLS IS CONCERNED, THE SAME HAS NO T BEEN DISPUTED. THE ASSESSES HAS ONLY SUBMITTED THAT THE ENTIRE PURCHAS ES FROM THE ABOVE PARTIES HAVE NOT BEEN CLAIMED AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT. IT HAS BEEN CONTENDED THAT A PART OF THE PURCHASES HAV E BEEN DEBITED TO THE PROJECT WORK IN PROGRESS ACCOUNT. INSTEAD OF GETTIN G THE PURCHASES VERIFIED BY PRODUCING THE PARTIES, THE ASSESSEE HAD ASKED FO R MORE LIME FOR VERIFYING THE TRANSACTIONS. IT CAN BE SEEN FROM THE RECORDS THAT THE ASSESSEE WAS GIVEN TIME FROM 15,03.2013 TILL 28.03.2013 TO R ECONCILE ITS ACCOUNTS AND FILE ITS REPLY. HOWEVER, THE ASSESSEE FAILED TO DO SO. 5.3. AS PER THE INFORMATION RECEIVED BY THIS OFFICE , STATEMENTS OF THE ABOVE MENTIONED HAWALA DEALERS WERE RECORDED BY THE INVES TIGATION WING OF THE MAHARASHTRA SALE TAX/VAT DEPARTMENT. SH. MUNISH RAJ NIKANI MODI, WHO IS THE PROPRIETOR OF MS SUPREME ENTERPRISES IN HIS STATEMENT CATEGORICALLY CONFESSED TO PROVIDING ONLY BILLS. IN RESPONSE TO T HE SPECIFIC QUESTION RAISED BY THE ASSISTANT COMMISSIONER OF SALE TAX (INV.) IN THE STATEMENT RECORDED ON 18-11-2008 HIS REPLY WAS AS UNDER:- Q NO. 28 - DO YOU CARRY ON ANY REAL BUSINESS OF SA LE OR PURCHASE OF GOODS? ANS NO. I DON'T KNOW ANYTHING ABOUT THE BUSINESS. / HAVE NOT CARRIED ANY BUSINESS WHAT EVER DONE IS BY MR. HEMANT MUNI AND M R. MAHESH HIS MEN. 1 ONCE AGAIN CONFIRM THAT /HAVE NOT SOLD OR PURCHAS E ANY GOODS. ITA NO: - 1848/DEL/2016 PAGE | 12 SIMILARLY, SH. HASHMUKH H. PANCHAL PROPRIETOR OF M/ S DARSHAN TRADE CORPORATION VIDE HIS LETTER DATED 08-12-2011 SUBMIT TED TO THE ASSISTANT COMMISSIONER OF SALE TAX (I- 28)(INV.-B), MUMBAI AD MITTED THAT HE HAD NOT DONE ANY GENUINE BUSINESS AND HAD ISSUED ONLY TAX I NVOICES. HE ALSO MENTIONED THAT HE IS WILLING TO SUBMIT HIS AFFIDAVI T REGARDING HIS BUSINESS ACTIVITY. HIS SALE TAX REGISTRATION WAS ALSO CANCEL LED BY THE MUMBAI VAT DEPARTMENT. A COPY OF AFFIDAVIT DATED 09-12-2011 SU BMITTED BY HIM HAS ALSO BEEN RECEIVED BY THIS OFFICE. SIMILAR INFORMAT ION HAS ALSO BEEN RECEIVED IN RESPECT OF SH. KAMLESH K. SETH PROPRIETOR OF M/S AMBICA TRADE IMPEX AND IN RESPECT OF OTHER HAWALA DEALERS. THE INFORMA TION HAS BEEN SUPPLIED BY THE MAHARASTRA VAT DEPARTMENT TO THE DGTT (INV.) , MUMBAI AND FROM THERE IT HAS BEEN DISSEMINATED TO THIS OFFICE. 5.4 THE INFORMATION RECEIVED FROM THE MAHARASTRA VA T DEPARTMENT IS SPECIFIC AND NOT GENERAL OR VAGUE. THE INFORMATION CONTAINS THE DETAILS OF THE BENEFICIARIES PARTY, IN THE PRESENT CASE ASSESS EE M/S DHANSHREE DEVELOPERS (P) LTD. (FORMERLY KNOWN AS M/S PEARLS D HANSHREE INFRASTRUCTURE (P) LTD.), PAN NO. OF THE BENEFICIAR Y, NAME OF THE HAWALA DEALER, TIN NO. OF THE HAWALA DEALER, PAN NO. OF TH E HAWALA DEALER AND THE AMOUNT OF BOGUS BILLS OF PURCHASES OBTAINED FROM TH E HAWALA DEALERS. THE INFORMATION WAS CONFRONTED TO THE ASSESSEE. THE ASS ESSEE HAS FAILED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM TH ESE HAWALA DEALERS. FROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE HAS IN FLATED ITS PURCHASES BY AN AMOUNT OF RS. 72,50.159/- BY AVAILING BOGUS/NON- GENUINE BILLS FROM HAWALA DEALERS AS MENTIONED ABOVE DURING THE F. Y. 2009-10 RELEVANT TO A.Y.2010-11. THEREFORE, PURCHASES AMOUNTING TO RS. 72,50,159/- ARE .DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE AS SESSEE BEING BOGUS PURCHASE MADE DURING THE YEAR FROM HAWALA DEALERS. PENALTY PROCEEDINGS IDS 271(L)(C) ARE BEING INITIATED SEPARATELY. 5.2 DURING THE APPELLATE PROCEEDINGS, LD. AR HAS FI LED WRITTEN SUBMISSION / OBJECTIONS VIDE LETTER DATED 18.01.201 6. THE RELEVANT PORTION IS REPRODUCED AS UNDER:- SUBMISSIONS IN RESPECT OF ADDITION ON ACCOUNT OF B OGUS PURCHASES OF RS. 72,50,159/- 1. IT IS SUBMITTED THAT THE LEARNED AO HAS REFERRED TO THREE DEALERS STATEMENT OF M/S SUPREME, ENTERPRISES, M/S DARSHAN TRADE CORPORATION AND M/S AMBIKA TRADE IMPEX. THE LEARNED AO HAS DISA LLOWED PURCHASES FROM NEWZONE MULTI TRADE PVT. LTD, MAHAIAXMI CORPOR ATION, ROHIT ENTERPRISES AND HARIOM TRADERS BUT THE LEARNED AO D OES NOT REFER TO ANY MATERIAL WHATSOEVER REGARDING THESE PARTIES IN THE ASSESSMENT ORDER. IT IS THEREFORE SUBMITTED THAT THE PURCHASES HAVE BEEN DI SALLOWED WITHOUT EVEN BRINGING ANY MATERIAL RELATING TO THESE PARTIES. ITA NO: - 1848/DEL/2016 PAGE | 13 2. THE LEARNED AO HAS CONFRONTED THE INFORMATION AT THE FAG END OF THE ASSESSMENT PROCEEDINGS. THE LEARNED AO DID NOT GRAN T ANY OPPORTUNITY OF CROSS EXAMINATION. MERELY ON THE BASIS OF STATEMENT OF THIRD PARTY WITHOUT ANY CORROBORATIVE MATERIAL, NO DISALLOWANCE CAN BE MADE. 3. THE APPELLANT HAS PRODUCED THE BILLS OF PURCHASE S AS ALSO THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. T HE BILLS CONTAIN ADDRESSES, VAT NUMBERS OF THE SUPPLIERS. THE LEARNE D AO DID NOT MAKE ANY FURTHER ENQUIRY. THE IDENTITY OF THE SUPPLIERS HAS BEEN PROVED. IT WAS INCUMBENT ON THE AO TO HAVE GATHERED SOME CORROBORA TIVE MATERIAL IN ORDER TO SHOW THAT THE PURCHASES ARE BOGUS. RELIANCE IS PLACED ON THE FOLLOWING DECISIONS- ACIT V SHRI RAMILA SHAH ITA NO. 5246/MUM/2013 RAMESH KUMAR AND CO V ACIT ITA NO. 2959/MUM/2014 DCIT V SHRI RAJEEV KALATHI ITA NO. 6727/MUM/2012 SHRI GANPATRAJ A SANGHAVI V ACIT ITA NO. 2826/MUM/2 013 4. RELIANCE IS PLACED ON DECISION OF BOMBAY HIGH CO URT IN CASE OF BABULAL BORANA V 1TO 282 I.TR 251 WHEREIN THE BOMBAY HIGH C OURT HELD THAT WHERE THE IDENTITY OF THE PERSONS FROM WHOM GOODS A RE PURCHASES HAS BEEN EXPLAINED, PAYMENT ARE MADE BY ACCOUNT PAYEE C HEQUES, TRANSACTIONS ARE RECORDED IN BOOKS, NO ADDITION CAN BE MADE. 5. THE LEARNED AO HAS NOT REJECTED SALES IN CASE OF THE APPELLANT. THE LEARNED AO HAS ACCEPTED THE BOOKS RESULTS. SIMPLY O N THE BASIS OF INFORMATION FROM THE SALES TAX DEPARTMENT, THE LEAR NED AO DIRECTLY PROCEEDED TO DISALLOW THE PURCHASES. RELIANCE IS PL ACED ON THE DECISION OF BOMBAY HIGH COURT IN CASE OF NIKUNJ EXIMP ENTERPRIS ES (P) LID REPORTED IN 216 TAXMAN 171 WHEREIN THE HON HIGH COURT HELD THAT ONCE SALES ARE ACCEPTED, THE PURCHASES CANNOT BE TREATED AS INGENU INE IN THOSE CASES WHERE THE APPELLANT HAD SUBMITTED ALL DETAILS OF PU RCHASES AND PAYMENTS WERE MADE BY CHEQUES, MERELY BECAUSE THE SELLERS/SU PPLIERS COULD NOT BE PRODUCED BEFORE THE AO. 6. IN AC IT V, KISHANLAL JEWELS (P.) LTD. (2012) 14 7 TTJ 308 (DEL) (TRIB.) IT IS HELD THAT THE ASSESSEE WHILE FURNISHING NECESSARY I NFORMATION REGARDING THE TRANSACTIONS AND THE AFORESAID PARTIES LIKE PUR CHASE BILLS ISSUED AGAINST GOODS PURCHASED, SALES- TAX REGISTRATION NU MBERS OF THE PARTIES, PANS, THEIR CONFIRMATIONS AND BANK STATEMENTS SHOWI NG THE DEBIT OF THE AMOUNT PAID THROUGH ACCOUNT PAYEE CHEQUES TO THEM I N THE ACCOUNT OF ASSESSEE AND CREDITED IN THE BANK ACCOUNT OF SELLER S, HAD DISCHARGED ITS PRIMARY ONUS, THEREAFTER THE ONUS SHIFTED ON THE DE PARTMENT TO REBUT THE SAME. ADDITION UNDER SECTION 69C WAS HELD TO BE NOT JUSTIFIED. 7. IN CIT V. U.K. BROS. (1987)163 ITR 249 (GUJ.)(IL C). IT IS HELD THAT PURCHASES MADE BY ASSESSEE. SUBSEQUENT STATEMENTS B Y SELLERS IN SALES ITA NO: - 1848/DEL/2016 PAGE | 14 TAX PROCEEDINGS THAT THEY HAD ISSUED BOGUS VOUCHERS . NO EVIDENCE THAT BOGUS VOUCHERS WERE ISSUED TO ASSESSEE. PAYMENTS BY ACCOUNT PAYEE CHEQUES. AMOUNT REPRESENTED PURCHASES CANNOT BE DIS ALLOWED. 8. HONBLE SUPREME COURT IN THE CASE OF TIN BOX CO. VS. CIT (2001) 249 ITR 216 (SC) 'AN ASSESSMENT MADE WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY OF SETTING OUT HIS CASE WAS LIABLE TO H E SET ASIDE'. 9. THE HON'BLE SUPREME COURT OBSERVED IN THE CASE O F DHAKESWARI COTTON MILLS LTD. V. CIT (1954) 26 ITR 775 (SC), IF THE AO PROPOSES TO USE ANY MATERIAL AGAINST THE ASSESSEE, WHICH IS OBTAINED BY PRIVATE ENQUIRY, IT SHOULD HAVE BEEN COMMUNICATED TO THE ASSESSEE SO AS TO KNOW FULL PARTICULARS OF THE CASE AND THE FAILURE TO DO SO VI TIATES THE CASE OF THE REVENUE. 10. CIT V. 'EASTERN COMMERCIAL ENTERPRISES (1994)21 0 ITR 103 (CAL) (HC) THE ASSESSEE IS ENTITLED TO CROSS-EXAMINE THE PERSO N WHO WAS EXAMINED BY THE A.O. CROSS - EXAMINATION IS THE SINE QUA NON OF DUE PROCESS OF TAKING EVIDENCE AND NO ADVERSE INFERENCE CAN BE DRAWN AGAI NST A PARTY UNLESS THE PARTY IS PUT ON NOTICE OF THE CASE MADE OUT AGA INST HIM. HE MUST HE SUPPLIED THE CONTENTS OF ALL SUCH EVIDENCE BOTH ORA L AND DOCUMENTARY, SO THAT HE CAN PREPARE TO MEET THE CASE AGAINST HIM. T HIS NECESSARY ALSO POSTULATES THAT HE SHOULD CROSS -EXAMINE THE WITNES S HOSTILE TO HIM. 11. IN CIT V. J M D. COMMUNICATIONS P. LTD (2010) 3 20 ITR 17 (ST) (SC) (ITA NO 106 OF 2007 DT16-1-2009(DELHI)(HC) IT IS HE LD THAT THE PERSON WHO HAS ISSUED THE BILLS HAS GIVEN THE STATEMENT THAT H E WAS CARRYING ON THE BUSINESS OF ISSUING BOGUS ACCOMMODATION BILLS ON CO MMISSION BASIS WITH THE ASSESSEE, AND THIS WAS NOT PUT TO THE ASSESSEE FOR REBUTTAL OR CROSS- EXAMINATION, HIGH COURT HELD NO SUBSTANTIAL QUESTIO N OF LAW. ON SLP BY REVENUE THE COURT HELD THAT IF THE AO WANTS TO USE. SOME STATEMENT MADE BEFORE HIM, THEN ON REQUEST BY THE ASSESSEE, IS BOU ND TO PUT THE DEPONENT FOR CROSS .EXAMINATION. 12. IN KISHINCHAND CHELLARAM V. CIT (1980) 125 ITR 713 (SC) SUPREME COURT HELD THAT THOUGH THE PROCEEDINGS UNDER THE IN COME-TAX ACT ARE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE, THE DEPAR TMENT IS BOUND TO AFFORD AN OPPORTUNITY TO CONTROVERT AND CROSS EXAMINE THE EVIDENCE ON WHICH THE DEPARTMENT PLACES ITS RELIANCE. OPPORTUNITY OF CROS S EXAMINATION MUST BE GIVEN. THE CONSEQUENCE OF BREACH OF NATURAL JUSTICE IS THAT EITHER THE ADDITION IS VOID OR MAILER MAY HAVE TO HE TO BE REM ANDED TO LOWER AUTHORITIES. 13. IN G. G. DIAMOND INTERNATIONAL V DY. CAT (2006) 104 TTJ 809 (MUM.) (TRIB.) IT IS HELD THAT IT IS NOT CASE OF THE REVEN UE THAT THE ASSESSEE IS NOT MAINTAINING BOOKS OF ACCOUNT. THE PURCHASES ARE REC ORDED IN THE BOOKS OF ACCOUNT. PAYMENTS ARE MADE BY CHEQUE TO THE IMMEDIA TE PURCHASERS. THEY ITA NO: - 1848/DEL/2016 PAGE | 15 ACCEPTED AND CONFIRMED THE SALE. TO HOLD OTHERWISE, THERE SHOULD BE SOME EVIDENCE IN THE POSSESSION OF THE REVENUE. SUSPICIO N, HOWEVER STRONG, CANNOT TAKE THE PLACE OF EVIDENCE AND THAT ALONE CA NNOT HE THE CRITERIA FOR DECIDING THE MATTER. 14. IN DCIT V. SHRI RAJEEV G. KALAIHIL, (MUM) (TRIB ) (ITA NO. 6727/M/2012 DT. 20/8/2014. BENCH D AY .2009-10) SUSPICIOUS PU RCHASES - NAME ON WEBSITE OF SALES TAX DEPARTMENT AS HAWALA DEALER NO T ENOUGH TO DISALLOW PURCHASES. HELD, THE AO HAD MADE THE ADDITION AS ON E OF THE SUPPLIERS WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. THE TRIBUNAL OBSERVED THAT THIS WAS A GOOD STARTING POINT FOR MA KING FURTHER INVESTIGATION AND TO TAKE IT TO ITS LOGICAL END. BU T, THE AO LEFT THE JOB AT INITIAL POINT ITSELF. IT WAS FURTHER HELD THAT SUSP ICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE AND THE AO COULD HAVE CALLED FOR THE DETAILS OF THE BANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT W HETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT WE ALSO ENCLOSE THE DETAIL OF PURCHASES WITH COPIES INVOICES AND DETAIL OF PARTY WISE LEDGER ACCOUNTS AND COPIES OF BANK STATE MENTS REFERRING TO THE PAYMENTS MADE TO THESE PARTIES. WE HUMBLY REQUEST YOUR HONOUR TO CONSIDER ABOVE AND REST WE LEAVE TO YOUR HONOURS FINE SENSE JUDGMENT. 5.3 FINDINGS:- THE FINDINGS ARE AS UNDER: 5.4 I HAVE CAREFULLY CONSIDERED ASSESSMENT ORDER, W RITTEN SUBMISSIONS, CASE LAWS RELIED UPON AND ORAL ARGUMENTS OF LD, AR. THE OBJECTIONS/ARGUMENTS OF THE APPELLANT ARE DISCUSSED AS UNDER:- (I) AS PER THE ASSESSMENT ORDER, THE A.O, HAS GIVEN FINDINGS THAT PAYMENTS WERE MADE TO 7 ALLEGED BOGUS PARTIES/HAWAL A DEALERS, AMOUNTING TO RS, 72,50,159/- BY THE ASSESSEE. THIS FINDING OF THE A.O. WAS BASED ON THE INFORMATION RECEIVED FROM THE VAT DEPARTMENT, MUMBAI THROUGH DIT(INV.)-L, DELHI. THEREFORE, THE A .O. ALLOWED THE OPPORTUNITY TO SUBSTANTIATE THE CLAIM OF ALLEGED PU RCHASES MADE, ON ACCOUNT OF WHICH PAYMENTS WERE MADE TO THE ALLEGED HAWALA DEALERS, THE ASSESSEE HAS FILED ITS SUBMISSION VIDE LETTER D ATED 18.3.2013, WHICH IS REPRODUCED BY THE A.O. IN THE ASSESSMENT O RDER. HOWEVER, THE A.O. WAS NOT SATISFIED WITH THE SUBMISSION SINCE TH E ASSESSEE COULD NOT GET VERIFIED THE BOGUS PURCHASES BY PRODUCING THESE ALLEGED PARTIES AND THE SUFFICIENT TIME WAS ALLOWED TO DO SO. (II) IN THE STATEMENT RECORDED BY THE VAT DEPARTMEN T, MUMBAI, WHICH IS AGAIN REPRODUCED IN THE ASSESSMENT ORDER IN PARA 5, 3, IT IS CLEAR THAT THE ALLEGED PARTIES DENIED ANY BUSINESS ACTIVITIES CARR IED OUT FOR THE APPELLANT. THERE WAS A SPECIFIC INFORMATION FROM TH E VAT DEPARTMENT, ITA NO: - 1848/DEL/2016 PAGE | 16 MUMBAI, THAT THE ALLEGED PURCHASES FROM 7 PARTIES H AVE BEEN MADE FROM HAWALA DEALERS AND THEREFORE, SAME ARE NOT GENUINE. THEREFORE, THE A.O. CAME TO THE CONCLUSION THAT THE APPELLANT FAILED TO PROVE THE GENUINENESS OF PURCHASES MADE FROM THESE ALLEGED HAWALA DEALERS AND MADE THE ADDITION OF RS, 72,50,159/-. (III) DURING THE APPELLATE PROCEEDINGS, THE APPELL ANT HAS SUBMITTED THAT NO MATERIAL HAS BEEN REFERRED BY THE A.O. IN ASSESS MENT ORDER AND ALSO NO OPPORTUNITY WAS GIVEN TO CROSS-EXAMINE. THIS ARG UMENT OF THE APPELLANT IS NOT ACCEPTABLE SINCE THE A.O. HAS REFE RRED ONLY 7 PARTIES FOR BOGUS PURCHASE, AS AGAINST THE TOTAL PURCHASES OF R S. 116,84,02,349/- DEBITED IN THE P & L A/C. FURTHER, IN THE ASSESSMEN T PROCEEDINGS, THE APPELLANT WAS ALLOWED THE OPPORTUNITY TO SUBSTANTIA TE ITS CLAIM FROM 15.3.2013 TO 28.3.2013 AND THEREFORE, CONTENTION OF THE APPELLANT THAT NO ADEQUATE OPPORTUNITY WAS ALLOWED, IS NOT FOUND T O BE CORRECT. CONCLUSION: FROM THE ABOVE, IT IS CLEAR THAT THE APPELLANT FAIL ED TO SUBSTANTIATE THE CLAIM OF ALLEGED BOGUS PURCHASES FROM 7 HAWALA DEALERS AMOUNTING TO RS. 72,50,159/-, BEFORE THE A.O. AND AS WELL AS IN THE APPELLATE PROCEEDINGS. IN THE SUB-GROUND NO. 2.4, IT HAS BEEN CLAIMED WITHOUT PREJUDICE BY THE APPELLANT THAT THE A.O. OUGHT TO H AVE RESTRICTED THE ADDITION TO THE EXTENT OF RS. 38,43,891/-, SINCE AN AMOUNT OF RS. 34.06,268/- (RS. 29,94,307./- + RS. 4,11,961/-), IS ACTUALLY NOT DEBITED IN THE P & L A/C. IN VIEW OF THE ABOVE, I DO NOT FIND ANY INFIRMITY I N THE A.OS ORDER AND ADDITION OF RS. 72,50,159/- ON ACCOUNT OF BOGUS PUR CHASE, I S HEREBY CONFIRMED. ACCORDINGLY, GROUND NO. 2, IS HEREBY DISMISSED. 6. GROUNDS NO. 3 IS RELATING TO THE ADDITION OF RS. 90,42,612/-, BY INVOKING THE PROVISIONS OF SECTION 14A OF INCOME TA X ACT AND UNDER RULE 8D. 6.1 THE A.O. HAS MADE THE ABOVE ADDITION AND FINDIN GS OF THE A.O. IN ASSESSMENT ORDER U/S 143(3) DATED 28.3.2013, ARE RE PRODUCED AS UNDER:- 7. FROM THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR ENDING 31-03- 2010, IT IS SEEN THAT THE ASSESSEE COMPANY HAD MADE INVESTMENTS AGGREGATING TO RS. 124,60,24,010/- IN EQUITY SHARES AND IN NON CUMULATIVE REDEEMABLE PREFERENCE SHARES. SINCE, THE INVESTMENT S MADE BY THE ITA NO: - 1848/DEL/2016 PAGE | 17 ASSESSEE WILL YIELD INCOME WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE UNDER THE PROVISION OF INCOME TAX ACT, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 14A BE NOT INVOKED. THE ASSESSEE HAS SUBMITTED THE FOLLOWING REPLY:- THIS IS TO SUBMIT THAT THE COMPANY HAS RECEIVED TH E TAX FREE INCOME IN THE FORM OF DIVIDEND AMOUNTING TO RS, 33,410/-. THIS DI VIDEND IS RECEIVED ON THE SHARES OF MODEL CO. OPERATIVE BANK. THE COMPANY HAS AVAILED THE LOAN FROM THE BANK AND IT IS THE PRE CONDITION OF THE LO AN THAT THE SHARES OF CERTAIN AMOUNTS HAS TO BE PURCHASED BY THE BORROWER FROM THE BANK. THE SHARES ARE NOT PURCHASED AS INVESTMENTS OR TO EARN THE DIVIDEND OR TAX FREE INCOME. IT IS ALSO TO BE NOTED THAT THERE IS NO ANY EXPENDITURE INCURRED FOR PURCHASE OF THESE SHARE OF THE BANK. CONSIDERING THE ABOVE, THE PROVISIONS OF SECTION 14 A OF THE IT, ACT ARE NOT ATTRACTED IN THIS CASE AND PENDING ON THIS THERE IS NO DISALLOWANCE MADE WHILE FILING THE RETURN OF INCOME 8. I HAVE CONSIDERED THE REPLY FILED BY THE ASSESSE E. / DO NOT FIND ANY FORCE IN THE REPLY SUBMITTED BY THE ASSESSEE. PROVISION O F SECTION 14A ARE MANDATORY IN NATURE. SECTION 14A OF THE ACT READS A S UNDER SECTION 14A OF THE ACT STATES:- FOR THE PURPOSE OF THE COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER, NO DEDUCT ION SHALL HE ALLOWED IN RESPECT OF EXPEND ITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FROM PART OF THE TOTAL INCOME UNDER THIS ACT. THE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHO D AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT PAR! OF THE TOTAL INCOME UNDER THIS ACT. THE PROVISION OF SUB-SECTION (2) SHALL ALSO APPLY I N RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BE EN INCURRED BY HIM IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THIS ACT. 9. FROM THE ABOVE, IT IS EVIDENT THAT THE PROVISION OF SECTION 14A ARE MANDATORY IN NATURE. THE PROVISIONS ARE ALSO APPLIC ABLE TO A CASE WHERE ASSESSEE CLAIMS THAT NO EXPENDITURE WAS INCURRED IN EARNING OF THE INCOME, NOT INCLUDIBLE IN TOTAL INCOME. ITA NO: - 1848/DEL/2016 PAGE | 18 FURTHER, RULE 8D OF THE I NCOME TAX RULES PROVIDES THE BASIS OF COMPUTING THE EXPENDITURE RELATING TO EARNING OF IN COME WHICH IS NOT INCLUDED IN THE TOTAL INCOME. DURING THE YEAR UNDER CONSIDERATION, ASSESSEE DERIVED TAX EXEMPT INCOME IN THE FORM OF D IVIDEND. SINCE, THE ASSESSEE HAS NOT MADE ANT SUO-MOTTO DISALLOWANCE U/ S 14A OF THE INCOME TAX ACT AND HAS CONTENDED THAT NO EXPENDITUR E HAS BEEN INCURRED IN RELATION TO THE INCOME NOT INCLUDIBLE I N THE TOTAL INCOME, I AM LEFT WITH NO ALTERNATIVE THAN TO INVOKE THE PROVISI ON OF SECTION 14A OF THE INCOME TAX ACT. I THEREFORE, MAKE A DISALLOWANCE O F RS. 90,42,612/- U/S 14A OF THE ACT, COMPUTED IN ACCORDANCE WITH THE PROVISION OF RULE 8D OF THE INCOME TAX RULES AS UNDER:- THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME SHALL BE AGGREGATE OF THE FOLLOWING AM OUNTS NAMELY:- (I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME. (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPENDITU RE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRE CTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT AN AMOUNT COMPU TED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY: A. INTEREST EXPENSES RS. 44,01,462/- B. AVERAGE INVESTMENT RS. 120,46,24,010/- C. AVERAGE ASSETS RS. 175,59,59,525/- A X B/C RS. 30,19,492/- (III) AN AMOUNT EQUAL TO ONE HALF PERCENT OF THE AVERAGE OF THE VALUE OF INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 0.5% OF AVERAGE VALUE OF INVESTMENT I.E. B RS. 60,2 3,120/- TOTAL [(I)+(II)+(III)] RS. 90,42,612/- THEREFORE, I MAKE A DISALLOWANCE OF RS. 90,42,612/- IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT. SINCE THE ASSESSEE HAS NOT DISALLOWED THE EXPENSES INCURRED FOR EARNING OF EXEMPT INCOME, IN VIEW OF THE PROVISIONS OF THE SEC TION I4A READ WITH RULE 8D OF THE INCOME TAX RULES HENCE, I AM SATISFIED TH AT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME ACCO RDINGLY PENALTY PROCEEDINGS ARE INITIATED U/S 271(1) (C) OF THE IT. ACT,1961 SEPARATELY. ITA NO: - 1848/DEL/2016 PAGE | 19 6.2 DURING THEAPPELLATE PROCEEDINGS, LD. AR HAS FIL ED WRITTEN SUBMISSION/OBJECTIONS VIDE LETTER DATED 16.10.2015. THE RELEVANT PORTION IS REPRODUCED AS UNDER:- 1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E LEARNED AO OBSERVED THAT IN THE BALANCE SHEET FOR THE YEAR ENDED UP TO 31.3.2010, THE APPELLANT HAD MADE INVESTMENT IN EQUITY SHARES IN NON-CUMULAT IVE REDEEMABLE PREFERENCE SHARES OF RS 1,24,60,24,010/-, ACCORDING TO HIM, AS THESE INVESTMENTS YIELD INCOME NOT INCLUDIBLE IN INCOME O F THE APPELLANT, THE PROVISIONS OF SECTION 14A ARE APPLICABLE. THE APPEL LANT CONTENDED BEFORE THE LEARNED AO THAT THERE IS NO EXPENDITURE INCURRE D FOR EARNING ANY TAX FREE INCOME AND THEREFORE THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. THE LEARNED AO CONCLUDED IN PARA 9 THAT THE PROVISI ONS OF SECTION 14A READ WITH RUE SB ARE MANDATORY, SINCE THE APPELLANT HAD EARNED (TAX FREE INCOME IN THE FORM OF DIVIDEND. THE LEARNED AO FURT HER OBSERVED THAT THE APPELLANT HAS NOT MADE ANY SUO MOTO DISALLOWANCE AN D CLAIMED THAT THERE IS NO EXPENDITURE IS INCURRED FOR EARNING ANY TAX F REE INCOME, THE PROVISIONS OF SECTION 14A HAVE TO BE MANDATORILY INVOKED. THE LEARNED AO THEREFORE COMPUTED THE DISALLOWANCE AS PER CLAUSE (II) OF RS 30,19,492/- AND (HI) OF RS 60,23,120/- OF RULE 8D. 2. THE INVESTMENT IN SHARES AND THE DIVIDEND INCOME AT THE END OF THE YEAR UNDER CONSIDERATION IS AS UNDER- NAME AMOUNT DIVIDEND AMAYA INFRASTRUCTURE PVT LTD. 1,24,08,26,000/- - PRODYON TECH PVT. LTD. 20,00,000/- - GRACE PLASTO FAB PVT LTD 15,00,000/- - PUNJAB & MAHARASHTRA COOP BANK 14,00,000/- MODEL COOP BANK LTD 2,98,010/- 33, 410/- 3. IT IS SUBMITTED THAT THE APPELLANT HAS RECEIVED DIVIDEND INCOME OF RS. 33,410/- ON SHARES OF A COOPERATIVE BANK FROM WHICH THE APPELLANT HAS AVAILED A LOAN FACILITY. THE INVESTMENT IN SHARES W AS MADE AS A PRECONDITION OF LOAN FACILITY, FURTHER THE INVESTME NT IN PREFERENCE SHARES WAV MADE OUT OF PAID UP CAPITAL OF RS 20 CRORES AND SHARE PREMIUM ACCOUNT OF RS 180 CRORES WHICH WAS MADE IN THE EARL IER YEARS. THE ENTIRE INVESTMENT IN PREFERENCE SHARES THEREFORE IS MADE F ROM OWN FUNDS OF THE APPELLANT. THERE IS NO NEXUS WITH THE BORROWINGS AN D THE INVESTMENT IN PREFERENCE SHARES. THE LEDGER ACCOUNT OF EXTRACTS O F SHARE CAPITAL ACCOUNT AND SHARE PREMIUM ACCOUNT WITH THE INVESTMENT IN PR EFERENCE SHARES AS ALSO BANK STATEMENT SHOWING RECEIPT OF FUNDS AND DI SBURSEMENT FOR INVESTMENT IN PREFERENCE SHARES, FORM PART OF PAPER BOOK. 4. THE APPELLANT COMPANY RECEIVED SHARE APPLICATION MONEY FROM FOLLOWING COMPANIES IN DIFFERENT YEARS AS UNDER- ITA NO: - 1848/DEL/2016 PAGE | 20 NAME OF THE COMPANY FY AMOUNT M/S ANKITA MERCANTILE P LTD 2007-08 99,90,00,000/- PACL INDIA LTD 2007-08 41,00,00,000/- PACL INDIA LTD 2008-09 54,00,00,000/- TOTAL 1,94,90,00,000/- FROM THE AFORESAID AMOUNT THE ASSESSEE PURCHASED SH ARES OF M/S AMAYA INFRASTRUCTURE PVT. LTD., AS UNDER- FY AMOUNT 2007-08 1,05,55,50,000/- 2008-09 11,05,26,000/- 2009-10 7,47,50,000/- TOTAL 1,24,08,26,000/- THE ABOVE DETAILS SHOW THAT THE INTEREST HEARING FU NDS WERE NOT USED FOR MAKING ABOVE INVESTMENTS. THE INVESTMENT WAS MADE I N EARLIER YEARS. 5. IN SO FAR AS THE INTEREST PAID DURING THE YEAR A RE CONCERNED, THE TOTAL INTEREST PAID AND DEBITED TO P & L A/C FOR THE YEAR UNDER CONSIDERATION IS RS44,01,000/-. THIS INTEREST IS PAID ON TOTAL LOANS OF RS 52 CRORES OF WHICH MORE THAN RS 40 CRORES WERE RAISED DURING THE YEAR WHEREAS THE INVESTMENT IN PREFERENCE SHARES OF OTHER COMPANIES IS VERY OLD AND MADE IN EARLIER YEARS. THE BORROWING FUNDS HAVE BEEN USED F OR BUSINESS PURPOSE OF THE APPELLANT COMPANY. 6. SECTION 14A OF THE ACT IS RELEVANT AND REPRODUCE D BELOW:- 14.4, (1) FOR THE PURPOSES OF COMPUTING THE TOTAL INCOME UNDER THIS CHAPTER NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDI TURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. (2) THE ASSESSING OFFICER SHALL DETERMINE THE AMOUN T OF EXPENDITURE INCURRED IN RELATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IN ACCORDANCE WITH SUCH METHO D AS MAY BE PRESCRIBED, IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOM E WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT: (3) THE PROVISIONS OF SUB-SECTION (2) SHALL ALSO AP PLY IN RELATION TO A CASE WHERE AN ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BE EN INCURRED BY MM IN ITA NO: - 1848/DEL/2016 PAGE | 21 RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT. PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL EMPOWER THE ASSESSING OFFICER EITHER TO REASSESS UNDER SECTION 147 OR PASS AN ORDER ENHANCING THE ASSESSMENT OR REDUCING A REFUND ALREA DY MADE OR OTHERWISE INCREASING THE LIABILITY OF THE ASSESSEE UNDER SECT ION 154, FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2001. 7. SECTION 14A OF THE ACT POSTULATES AND STATES THA T NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED BY AN AS SESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE. TOTAL INCOM E UNDER THE ACT. UNDER SUB SECTION (2) TO SECTION 14A OF THE ACT, THE ASSE SSING OFFICER IS REQUIRED TO EXAMINE (HE ACCOUNTS OF THE ASSESSEE AND ONLY WHEN HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE I N RESPECT OF EXPENDITURE IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER CAN DETERMINE THE AMOUNT OF EXPENDITURE WHICH SHOULD BE DISALLOWED IN ACCORDANCE WITH SUCH METHOD AS PRESCRIBED, I.E. RIDE 8D OF THE RULES (QU OTED AND ELUCIDATED BELOW). THEREFORE, THE ASSESSING OFFICER AT THE FIR ST INSTANCE MUST EXAMINE THE DISALLOWANCE MADE BY THE ASSESSEE OR THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE WAS INCURRED TO EARN THE EXEMPT INCOME. IF AND ONLY IF THE ASSESSING OFFICER IS NOT SATISFIED ON THIS COUNT AF TER MAKING REFERENCE TO THE ACCOUNTS, THAT HE IS ENTITLED TO ADOPT THE METHOD A S PRESCRIBED I. E. RULE 8D OF THE RULES. THUS, RULE 81) IS NOT ATTRACTED AND A PPLICABLE TO ALL ASSESSEE WHO HAVE EXEMPT INCOME AND IT IS NOT COMPULSORY AND NECESSARY THAT AN ASSESSEE MUST VOLUNTARILY COMPUTE DISALLOWANCE AS P ER RULE 8D OF THE RULES. WHERE THE DISALLOWANCE OR NIL' DISALLOWANCE MADE BY THE ASSESSEE IS FOUND TO BE UNSATISFACTORY ON EXAMINATION OF ACC OUNTS, THE ASSESSING OFFICER IS ENTITLED AND AUTHORIZED TO COMPUTE THE D EDUCTION UNDER RULE 80 OF THE RULES. THIS PRE-CONDITION AND STIPULATION AS NO TICED BELOW IS ALSO MANDATED IN SUB RULE (I) TO RULE 8D OF THE RULES. 12. RULE 8D OF THE RULES, AGAIN FOR THE SAKE OF CON VENIENCE, IS REPRODUCED BELOW:- 8D. (1) WHERE THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED WITH (A) THE CORRECTNESS OF THE CLAIM OF EXPENDITURE MAD E BY THE ASSESSEE; OR (B) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDIT URE HAS BEEN INCURRED, IN RELATION TO INCOME WHICH DOES NOT FORM PART OF T HE TOTAL INCOME UNDER THE ACT FOR SUCH PREVIOUS YEAR, HE SHALL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANCE WITH THE PROV ISIONS OF SUB-RULE (2). THE EXPENDITURE IN RELATION TO INCOME WHICH DOES NO T FORM PART OF THE TOTAL INCOME SHALL HE THE AGGREGATE OF FOLLOWING AMOUNTS, NAMELY; ( I) THE AMOUNT OF EXPENDITURE DIRECTLY RELATING TO I NCOME WHICH DOES NOT FORM PART OF TOTAL INCOME; ITA NO: - 1848/DEL/2016 PAGE | 22 (II) IN A CASE WHERE THE ASSESSEE HAS INCURRED EXPE NDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRE CTLY ATTRIBUTABLE SO AM PARTICULAR INCOME OR RECEIPT, AN AMOUNT COMPUTED IN ACCORDANCE WITH THE FOLLOWING FORMULA, NAMELY: A X B/C WHERE A = AMOU NT OF EXPENDITURE BY WAY OF INTEREST OTHER THAN THE AMOUNT OF INTEREST I NCLUDED IN CLAUSE (IF INCURRED DURING THE PREVIOUS YEAR; B = THE AVERAGE OF VALUE OF INVESTMENT; INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; C = THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR; (III) AN AMOUNT EQUAL TO ONE-HALF PER CENT OF THE A VERAGE OF THE VALUE OF INVESTMENT; INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING IN THE BALANCE SHEET OF THE AS SESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. (3) FOR THE PURPOSES OF THIS RULE, THE TOTAL ASSET S SHALL MEAN, TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET EXCLUDING THE INC REASE ON ACCOUNT OF REVALUATION OF ASSETS BUT INCLUDING THE DECREASE ON ACCOUNT OF REVALUATION OF ASSETS. ' 7. SUB RULE (I) CATEGORICALLY AND SIGNIFICANTLY STA LES THAT THE ASSESSING OFFICER HAVING REGARD TO THE ACCOUNT OF THE ASSESSE E AND ON NOT BEING SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF EXPE NDITURE MADE BY THE ASSESSEE OR CLAIM THAT NO EXPENDITURE WAS INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT, CAN GO ON TO DETERMINE THE DISALLOWANCE UNDER SUB RULE (2) TO RU LE 8D OF THE RULES. SUB RULE (2) WILL NOT COME INTO OPERATION UNTIL AND UNL ESS THE SPECIFIC PRE- CONDITION IN SUB RULE (1) IS SATISFIED. THUS, SECTI ON 14A(2) OF THE ACT AND RULE 8D(1) IN UNISON AND AFFIRMATIVELY RECORD THAT THE COMPUTATION OR DISALLOWANCE MADE BY THE ASSESSEE OR CLAIM THAT NO EXPENDITURE WAS INCURRED TO EARN EXEMPT INCOME MUST BE EXAMINED WIT H REFERENCE TO THE ACCOUNTS, AND ONLY AND WHEN THE EXPLANATION/CLAIM O F THE ASSESSEE IS NOT SATISFACTORY, COMPUTATION UNDER SUB RULE (2) TO RUL E 8D OF THE RULES IS TO BE MADE. 8. THE DELHI HIGH COURT IN MAXOPP INVESTMENT LTD. V S. COMMISSIONER OF INCOME TAX [2012] 347ITR 272, HAS OBSERVED:- SCOPE OF SUB-SECTIONS (2) AND (3) OF SECTION 14A SUB-SECTION (2) OF SECTION 14 A OF THE SAID ACT PRO VIDES THE MANNER IN WHICH THE ASSESSING OFFICER IS TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, IF ITA NO: - 1848/DEL/2016 PAGE | 23 WE EXAMINE THE PROVISION CAREFULLY, WE WOULD FIND T HAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF SUCH EXPENDITURE ONLY IF THE ASSESSING OFFICER, HAVING REGARD TO THE ACCOUNTS OF THE ASSESSEE, IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PART OF THE TOTAL INCOME UNDER THE SAID ACT, IN OTHER WORDS, THE REQU IREMENT OF THE ASSESSING OFFICER EMBARKING UPON A DETERMINATION OF THE AMOUN T OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME WOULD BE TRIG GERED ONLY IF THE ASSESSING OFFICER RETURNS A FINDING THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF (HE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE THEREFORE, THE CONDITION PRECEDENT FOR THE ASSESSIN G OFFICER ENTERING UPON A DETERMINATION OF THE AMOUNT OF THE EXPENDITURE INCU RRED IN RELATION TO EXEMPT INCOME IS THAT THE ASSESSING OFFICER MUST RE CORD THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE. SUB-SECTION (3) IS NOTHING BUT AN OFFS HOOT OF SUBSECTION (2) OF SECTION 14A, SUB-SECTION (3) APPLIES TO CASES WHERE THE ASSESSEE CLAIMS THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION T O INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT, I N OTHER WORDS, SUB-SECTION (2) DEALS WITH CASES WHERE THE ASSESSEE SPECIFIES A POSITIVE AMOUNT OF EXPENDITURE IN RELATION TO INCOME WHICH DOES NOT FO RM PAN OF THE TOTAL INCOME UNDER THE SAID ACT AND SUB-SECTION (3) APPLI ES TO CASES WHERE THE ASSESSEE ASSERTS THAT NO EXPENDITURE HAD BEEN INCUR RED IN RELATION TO EXEMPT INCOME. IN BOTH CASES, THE ASSESSING OFFICER , IF SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE OR NO EXPENDITURE, AS THE CASE MAY BE, CANNOT EMBARK UPON A DETERMINATION OF THE AMOUNT OF EXPENDITURE IN ACCORDANCE WITH ANY PR ESCRIBED METHOD, AS MENTIONED IN SUB-SECTION (2) OF SECTION 14A OF THE SAID ACT, IT IS ONLY IF (HE ASSESSING OFFICER IS NOT SATISFIED WITH THE CORRECT NESS OF THE CLAIM OF THE ASSESSEE, IN BOTH CASES, THAT THE ASSESSING OFFICER GETS JURISDICTION TO DETERMINE THE AMOUNT OF EXPENDITURE INCURRED IN REL ATION TO SUCH INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT IN ACCORDANCE WITH THE PRESCRIBED METHOD. THE PRESCRIB ED METHOD BEING THE METHOD STIPULATED IN RULE 81) OF THE SAID RULES. WH ILE REJECTING THE CLAIM OF THE ASSESSEE WITH REGARD TO THE EXPENDITURE OR NO E XPENDITURE, AS THE CASE MAY BE, IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT, REASONS FOR THE SAME. RULE 8D: AS WE HAVE ALREADY NOTICED, SUB-SECTION (2) OF SECT ION 14A OF THE SAID ACT REFERS TO THE METHOD OF DETERMINATION OF THE AMOUNT OF EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. THE EXPRESSION USED I S - SUCH METHOD AS MAY BE PRESCRIBED', WE HAVE ALREADY MENTIONED ABOVE THA T BY VIRTUE OF NOTIFICATION NO.45 OF2008, DATED MARCH 24, 2008, TH E CENTRAL BOARD OF DIRECT TAXES INTRODUCED RIDE 8D IN THE SAID RULES, THE SAID RULE SD ALSO MAKES IT CLEAR THAT WHERE THE ASSESSING OFFICER, HA VING REGARD TO THE ITA NO: - 1848/DEL/2016 PAGE | 24 ACCOUNTS OF THE ASSESSEE OF A PREVIOUS YEAR, IS NOT SATISFIED WITH (A) THE CORRECTNESS OF THE. CLAIM OF EXPENDITURE MADE BY TH E ASSES SEE; OR (H) THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE SAID ACT FOR SUCH PREVIOUS YEAR, THE ASSESSING OFFI CER SHALL DETERMINE THE AMOUNT OF THE EXPENDITURE IN RELATION TO SUCH INCOM E IN ACCORDANCE WITH THE PROVISIONS OF SUB-RULE (2) OF RULE 8D. WE MAY OBSER VE THAT RULE 8D(1) PLACES THE PROVISIONS OF SECTION 14A.(2) AND (3) IN THE CORRECT PERSPECTIVE. AS WE HAVE, ALREADY SEEN, WHILE DISCUSSING THE PROVISI ONS OF SUB-SECTIONS (2) AND (3) OF SECTION I.4.A, THE CONDITION PRECEDENT F OR THE ASSESSING OFFICER TO HIMSELF DETERMINE THE AMOUNT OF EXPENDITURE IS THAT HE MUST RECORD HIS DISSATISFACTION WITH THE CORRECTNESS OF THE CLAIM O F EXPENDITURE MADE BY THE ASSESSEE OR WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED. IT IS ONLY WHEN THIS CONDITION PRECEDENT IS SATISFIED THAT THE ASSESSING OFFICER IS REQUIRED TO DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO INCOME NOT INCLUDABLE IN TOTED INCOME IN THE MANNER INDICATED IN SUB-RULE (2) OF RIDE 81) OF THE SAID RULES. 9. IT IS, THEREFORE, DEAR THAT DETERMINATION OF THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME UNDER RULE 8D WOULD ONLY COME INTO PLAY WHEN THE ASSESSING OFFICER REJECTS THE CLAIM OF THE ASSE SSEE IN THIS REGARD. IF ONE EXAMINES SUB-RULE (2) OF RULE 8D, WE FIND THAT THE METHOD FOR DETERMINING THE EXPENDITURE IN RELATION TO EXEMPT INCOME HAS TH REE COMPONENTS. THE FIRST COMPONENT BEING THE AMOUNT OF EXPENDITURE DIR ECTLY RELATING TO INCOME WHICH DOES NOT FORM PARI OF THE TOTAL INCOME. THE S ECOND COMPONENT BEING COMPUTED ON THE BASIS OF THE FORMULA GIVEN THEREIN IN A CASE WHERE THE ASSESSEE INCURS EXPENDITURE BYWAY OF INTEREST WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. T HE FORMULA ESSENTIALLY APPORTIONS THE AMOUNT OF EXPENDITURE BY WAY OF INTE REST (OTHER THAN THE AMOUNT OF INTEREST INCLUDED IN CLAUSE (I)) INCURRED DURING THE PREVIOUS YEAR IN THE RATIO OF THE AVERAGE VALUE OF INVESTMENT, IN COME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, TO THE AVERAGE OF THE TOTAL ASSETS OF THE ASSESSEE. THE THIRD COMPONENT IS AN ARTIFICI AL FIGURE - ONE HALF PERCENT OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF THE TOTAL INCOME, AS APPEARING- IN THE BALANCE SHEETS OF THE ASSESSEE, ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. IT IS THE AGGREGATE OF THESE THREE COMPONENTS WHICH WOULD CON STITUTE THE EXPENDITURE IN RELATION TO EXEMPT INCOME AND IT IS THIS AMOUNT OF EXPENDITURE WHICH WOULD BE DISALLOWED UNDER SECTION 14 A. OF THE SAID ACT. IT IS, THEREFORE, CLEAR THAT IN TERMS OF THE SAID R ULE, THE AMOUNT OF EXPENDITURE IN RELATION TO EXEMPT INCOME HAS TWO AS PECTS - (A) DIRECT AND (B) INDIRECT. THE DIRECT EXPENDITURE IS STRAIGHTAWAY TA KEN INTO ACCOUNT BY VIRTUE OF CLAUSE (I) OF SUB-RULE (2) OF RULE 8D. THE INDIR ECT EXPENDITURE, WHERE IT IS BY WAY OF INTEREST, IS COMPUTED THROUGH THE PRINCIP LE OF APPORTIONMENT, AS INDICATED ABOVE. AND, IN CASES WHERE THE INDIRECT E XPENDITURE IS NOT BY ITA NO: - 1848/DEL/2016 PAGE | 25 WAY OF INTEREST, A RULE OF THUMB FIGURE OF ONE HALF PERCENT OF THE AVERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PARI OF THE TOTAL INCOME, IS TAKEN. 10. THE ABOVE DECISION HAS BEEN SUBSEQUENTLY FOLLOW ED BY DELHI HIGH COURT IN CASE OF CTT V TAIKISHA ENGINEERING INDIA L TD 3 70 1TR 338 DEL AND HELD THAT WE NEED NOT, THEREFORE,. GO ON TO SUB RULE (2) TO RULE 8D OF THE RULES UNTIL AND UNLESS THE ASSESSING OFFICER HA S FIRST RECORDED THE SATISFACTION, WHICH IS MANDATED BY SUB SECTION (2) TO SECTION 14A OF THE ACT AND SUB RULE (1) TO RULE 8D OF THE RULES. 11. IN VIEW OF THE ABOVE DECISIONS, IT IS SUBMITTED THAT THE LEARNED AO HAS NOT RECORDED ANY SATISFACTION ABOUT THE EXPENDI TURE BEING INCURRED TO EARN EXEMPT INCOME. THE LEARNED AO NEITHER HAS EXAM INED THE BOOKS OF ACCOUNTS TO ARRIVE AT. THE SATISFACTION. ON THE CON TRARY, THE LEARNED AO PROCEEDED ON THE PRESUMPTION THAT ONCE THERE IS EXE MPT INCOME, THE PROVISIONS OF SECTION 14A ARE MANDATORY. IN OUR RES PECTFUL SUBMISSION, THE ABOVE VIEW OF THE LEARNED AO IS LEGALLY INCORRECT I N VIEW OF THE LAW LAID DOWN IN VARIOUS DECISIONS. 12. IN RESPECT OF INTEREST EXPENDITURE, IT IS SUBMI TTED THAT INTEREST EXPENDITURE IS DIRECTLY ATTRIBUTABLE TO EXEMPT INCO ME. IF THERE IS NO NEXUS, THE DISALLOWANCE U/S 14A WOULD NOT BE APPLICABLE, B OMBAY HIGH COURT IN CAT VS. HDFC BANK LTD., 366 1TR 505 HELD THAT WHERE ASSESSEES CAPITAL, PROFIT RESERVES, ETC., WERE HIGHER THAN INVESTMENT IN TAX FREE SECURITIES, IT WOULD HAVE TO BE PRESUMED THAT INVESTMENT MADE BY A SSESSEE WOULD BE OUT OF INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE AND, CONSEQUENTLY, NO DISALLOWANCE COULD BE MADE U/S J4A. THE HONBLE BOM BAY HIGH COURT IN CTT VS. RELIANCE UTILITIES AND POWER LTD. 313 1TR 3 40 (BOM) HAS HELD THAT IF THERE ARE INTEREST FREE, FUNDS AVAILABLE WITH TH E ASSESSEE SUFFICIENT TO MEET ITS INVESTMENT AND, AT THE SAME LIME, LOAN HAS BEEN RAISED, IT CAN BE PRESUMED THAT (HE INVESTMENTS WERE FROM INTEREST FR EE FINDS AND, RESULTANTLY. NO DISALLOWANCE OF INTEREST CAN BE MAD E. THIRD MEMBER IN VISEN INDUSTRIES LTD. VS. ADDL. C1T 136 TED 309 (MU M) (TM) HAS ALSO TAKEN SIMILAR VIEW. 13. THE DELHI IT AT IN CASE OF ACIT V MOHAN EXPORTS PVT LTD 132 ITD 108 DEL HELD THAT THE LOWER AUTHORITIES WERE EXPECTED T O EXAMINE, WHETHER THE INTEREST PAID IN THIS YEAR IS OR IS NOT DIRECTLY AT TRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. THERE IS A FINDING THAT THE INTE REST IS NOT DIRECTLY RELATED TO RECEIPTS BY WAY OF DIVIDENDS. THEREFORE, IT FOLL OWS THAT THE PAYMENT OF INTEREST IS IN RESPECT OF INCOME OTHER THAN DIVIDEN D INCOME. IN SUCH A SITUATION, THE INTEREST CANNOT BE SAID TO BE A KIND OF GENERAL EXPENDITURE INCURRED FOR EARNING OF VARIOUS KINDS OF INCOMES. T HEREFORE, THE PROVISION CONTAINED IN RULE 8D(2)(II) IS NOT APPLICABLE. IT W AS ALSO THE ARGUMENT OF THE ID. SENIOR DR THAT THE AO HAS FOLLOWED THE PROCEDUR E LAID DOWN IN THE CASE ITA NO: - 1848/DEL/2016 PAGE | 26 OF MAXOPP INVESTMENTS LTD. THE DECISION IS THAT THE AO HAS TO EXAMINE THE EXPENDITURE AND ITS NEXUS WITH THE EARNING OF TAX-F REE INCOME, AS PROVIDED IN SUB-SECTION (2) OF SECTION 14A. IF THERE IS NO S UCH NEXUS, THE DISALLOWANCE CANNOT BE MADE, OTHERWISE THE DISALLOWANCE CAN BE C OMPUTED AS PRESCRIBED UNDER RIDE 8D. IN VIEW OF THE FINDING OF THE ID. CAT (APPEALS), NO INTEREST EXPENDITURE HAD BEEN INCURRED FOR EARNING TAX-FREE INCOME. THEREFORE, THE PROVISION CONTAINED IN RULE 8D(2)(II ) CANNOT BE INVOKED. 14. IN ADD CIT V DHAMPUR SUGAR MILL PVT LTD 370 ITR 194, THE ALLAHABAD HIGH COURT HELD THAT WHERE THE ENTIRE INTEREST EXPE NDITURE WAS ATTRIBUTABLE TO BUSINESS IN WHICH RESULTANT INCOME WAS ASSESSABL E TO TAX, DISALLOWANCE U/S 14A IS NOT WARRANTED. 15. RELIANCE IS ALSO PLACED ON FOLLOWING DECISIONS- MAGARPATLA TOWN DEVELOPMENT AND CONSTRUCTION CO LTD 152 IT'D 469 PUNE. PRIYA EXIBITORS PVT LTD V AC IT 54 SOT 356 DEL DC1T V INTERNATIONAL TRAVEL HOUSE LTD 40 CCH 211 DEL 16. TO SUMMARIZE, IT IS HUMBLY REQUESTED TO CONSIDE R FOLLOWING POINTS: A) THERE IS NO SATISFACTION RECORDED BY LEARNED AO FOR DISALLOWANCE U/S 14A AND IT IS ONLY STATED BY THE LEARNED. AO IN THE ASSESSMENT ORDER THAT THE PROVISIONS OF THE SAID SECTION ARE MANDATORY, H ENCE IN ABSENCE OF PROPER RECORDING OF SATISFACTION THE ADDITION MADE NEEDS TO BE DELETED. B) THERE IS NO NEXUS BETWEEN FUNDS BORROWED AND INV ESTMENT IN SHARES YIELDING TAX FREE INCOME AND THE FACT THAT THE OWNE D FUNDS ARE MUCH MORE THAN THE AMOUNT INVESTED IN SHARES. AS SUCH THE PRO VISIONS OF SECTION 14A OF INCOME TAX ACT IN OUR OPINION ARE NOT ATTRACTED. SUBSEQUENT TO THE ABOVE, LD. AR HAS FILED FURTHER W RITTEN SUBMISSION VIDE LETTER DATED 18.01.2016, WHICH IS REPRODUCED A S UNDER- A LETTER OF CONFIRMATION FROM THE MODEL COOPERATIV E BANK IS ATTACHED WHEREIN THE BANK HAS CONFIRMED THE PAYMENT OF DIVID END TO THE ASSESSEE COMPANY. ALSO FIND ATTACHED A COPY OF HANK STATEMEN T OF THE ASSESSEE COMPANY SHOWING THE ENTRIES FOR SUCH DIVIDEND CREDI TED TO THE BANK ACCOUNT. DIVIDEND INCOME IS EXEMPT U/S 10(34) OF THE INCOME TAX ACT 1961 WHICH READS AS UNDER 10(34) ANY INCOME BY WAY OF DIVIDEND REFERRED TO I SECTION 115-0. SECTION 115-0 REFERS TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES AND IS REPRODUCED BELOW : 115-0. [(I) NOTWITHSTANDING ANYTHING CONTAINED IN A NY OTHER PROVISION OF (HIS ACT AND SUBJECT TO THE PROVISIONS OF THIS SECTION, IN ADDITION TO THE INCOME- TAX CHARGEABLE IN RESPECT OF THE TOTAL INCOME OF A DOMESTIC COMPANY FOR ANY ASSESSMENT YEAR, ANY AMOUNT DECLARED, DISTRIBUTED OR PAID BY SUCH COMPANY BY WA Y OF DIVIDENDS (WHETHER INTERIM OR OTHERWISE) ON OR AFTER THE 1ST DAY OF APRIL, 2003, WHETHER OUT OF CURRENT OR ACCUMULATED PROFITS SHALL BE CHARGED TO ADDITIONAL INCOME-TAX (HEREAFTER REFERRED TO AS TAX ON DISTRIB UTED PROFITS) AT THE RATE OF ITA NO: - 1848/DEL/2016 PAGE | 27 THEREFORE, ANY DIVIDEND TO BE TAXABLE SHOULD BE REC EIVED FROM A DOMESTIC COMPANY AND DIVIDEND DISTRIBUTION TAX SHOULD HAVE B EEN PAID ON SUCH DIVIDEND. IN THE INSTANT CASE THE DIVIDEND IS RECEIVED FROM M ODEL COOPERATIVE BANK LTD., WHICH IS NOT A COMPANY BUT A COOPERATIVE SOCI ETY GOVERNED BY THE LAWS OF COOPERATIVE SOCIETY. A PART OF ANNUAL REPOR T OF THE MODEL COOPERATIVE RANK LTD, IS ATTACHED FOR YOUR PERUSAL. IN THE SECTION AUDIT: IT HAS BEEN MADE VERY CLEAR THAT AUDITORS ARE APPOINTE D BY THE COOPERATIVE DEPT. MUMBAI, WHICH IS A CLEAR EVIDENCE THAT MODEL COOPERATIVE BANK LTD IS A COOPERATIVE SOCIETY AND IS NOT A DOMESTIC COMP ANY. CO OPERATIVE BANKS IN INDIA ARE REGISTERED UNDER THE CO-OPERATIV E SOCIETIES JET AND ARE TAXED AS AN AOP AND NOT AS A DOMESTIC COMPANY. THER EFORE THE DIVIDEND EARNED IS NOT EXEMPT FROM TAX. SINCE THERE IS NO DIVIDEND INCOME EXEMPT EARNED DUR ING THE YEAR, NO DISALLOWANCE U/S 14A CAN BE MADE. RELIANCE IS PLACE D ON DECISION IN CASE OF CHEMINVEST V CIT DT 2ND SEPTEMBER 2015, THE HON DELHI HIGH COURT HELD AS UNDER- (I) THE EXPRESSION DOES NOT FORM PART OF THE TOTAL INCOME IN SECTION 14A OF THE ENVISAGES THAT THERE SHOULD BE AN ACTUAL RECEIP T OF INCOME, WHICH IS NOT INCLUDIBLE IN THE TOTAL INCOME, DURING THE RELEVANT PREVIOUS YEAR FOR THE PURPOSE OF DISALLOWING ANY EXPENDITURE INCURRED IN RELATION TO THE SAID INCOME. IN OTHER WORDS, SECTION 14A WILL NOT APPLY IF NO EXEMPT INCOME IS RECEIVED OR RECEIVABLE DURING THE RELEVANT PREVIOUS YEAR. THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MOODY (SUPRA) WAS RENDERED IN THE CONTEXT OF ALLOWABILITY OF DEDUCTION UNDER SECTION 57(HI) OF THE ACT, WHERE THE EXPRESSION USED IS FOR THE PURPOSE OF MAKING O R EARNING SUCH INCOME SECTION 14A OF THE ACT ON THE OTHER HAND CONTAINS T HE EXPRESSION IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INC. N 1 THE DECISION IN RAJENDRA PRASAD MOODY CANNOT BE USED IN THE REVE RSE TO CONTEND THAT EVEN IF NO INCOME HAS BEEN RECEIVED, THE EXPENDITUR E INCURRED CAN BE DISALLOWED UNDER SECTION 14A OF THE ACT, THE DECISIONS OF DELHI HIGH COURT SQUARELY APPLIES TO THE CASE OF THE APPELLANT AND THEREFORE NO DISALLOWANCE CAN HE MADE . AS THERE IS NO EXEMPT INCOME EARNED SECTION 14A. OF THE INCOME TAX ACT 1961 CANNOT, BE INVOKED AND THEREFORE, PRAYED THAT ADDITION ON ACCOUNT DISALLOWANCE U/S 14A BE DELETED. 6.3 FINDINGS:- THE FINDINGS ARE AS UNDER: 6.4 I HAVE CAREFULLY CONSIDERED ASSESSMENT ORDER, W RITTEN SUBMISSIONS, CASE LAWS RELIED UPON AND ORAL ARGUMENTS OF LD. AR. THE OBJECTIONS/ARGUMENTS OF THE APPELLANT ARE DISCUSSED AS UNDER:- ITA NO: - 1848/DEL/2016 PAGE | 28 (I) IN THE ASSESSMENT PROCEEDINGS, THE APPELLANT H AS STATED THAT, DIVIDEND OF RS. 33,410/- WAS RECEIVED ON SHARES OF M/S. MODE L CO, OPERATIVE BANK LTD. AND THE SHARES WERE PURCHASED BY THE ASSE SSEE AS A PRECONDITION FOR OBTAINING THE LOAN FROM THE BANK. THEREFORE, IT WAS SUBMITTED BY THE ASSESSEE THAT PURCHASE OF SHARE IS NOT AN INVESTMENT IN ORDER TO EARN THE DIVIDEND INCOME. HOWEVER, THIS ARGUMENT OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE A.O., AS THE PROVISION OF SECTION 14A ARE MANDATORY, SINCE ASSESSEE CLAIMED THAT NO E XPENDITURE HAS BEEN INCURRED IN RELATION TO THIS EXEMPT INCOME OF DIVIDEND AMOUNTING TO RS. 33,410/-, THEREFORE, THE A.O. INVOKED THE PROVI SION OF SECTION 14A FOR MAKING THE DISALLOWANCE AND COMPUTED THE SAME A T RS. 90,42,612/- , U/S 813. (II) DURING THE APPELLATE PROCEEDINGS, IT HAS BEEN SUBMITTED BY THE APPELLANT THAT INVESTMENT OF RS. 124,60,24,010/-, IN SHARE WA S MADE IN 5 COMPANIES, WHICH INCLUDES INVESTMENT OF RS. 2,98,01 0/-, IN M/S. MODEL CO. OPERATIVE BANK LTD. ALSO. HOWEVER, THE APPELLAN T RECEIVED DIVIDEND ONLY FROM 1 COMPANY M/S. MODEL CO. OPERATIVE BANK L TD. THEREFORE, FROM THESE FACTS IT IS NOT CORRECT TO CLAIM THAT TH E INVESTMENT IN SHARES IN ALL THE 5 COMPANIES, WERE MADE AS A COMPULSION ON A CCOUNT OF LOAN, (III) DURING THE APPELLATE PROCEEDINGS, IT WAS CLAI MED BY THE APPELLANT FOR FIRST TIME IN THE APPELLATE PROCEEDINGS, THAT DIVID END PAID BY M/S. MODEL CO. OPERATIVE BANK LTD IS TAXABLE, AS SAME IS NOT E XEMPT U/S 10(34). THIS ARGUMENT OF THE APPELLANT IS NOT ACCEPTABLE FO R THE REASON THAT: > THE APPELLANT HAS CLAIMED IT AS EXEMPT IN THE R ETURN OF INCOME NOT ONLY A.Y. 2010-11, BUT ALSO IN SUBSEQUENT ASSESSMENT YEA RS. > THE AUDITOR HAS ALSO NOT SUGGESTED IN THE AUDI T REPORT THAT THIS DIVIDEND INCOME IS TAXABLE. > THIS ARGUMENT WAS NEVER TAKEN BEFORE THE A.O. IN THE ASSESSMENT PROCEEDINGS. IN VIEW OF THE ABOVE AND ALSO THE FACT THAT DOCUMEN TS FURNISHED BY THE APPELLANT IN THE APPELLATE PROCEEDINGS, DO NOT SUBS TANTIATE ITS CLAIM MADE IN THE APPELLATE PROCEEDINGS. (IV) FURTHER, IF THE ASSESSEE HAS EARNED ANY INCOME , WHICH DOES NOT FORM PART OF TOTAL INCOME, THEN AS PER SECTION 14A(1), O F THE ACT, NO DEDUCTION SHALL BE ALLOWED, IN RESPECT OF EXPENDITURE INCURRE D IN RELATION TO SUCH EXEMPT INCOME. IN THE CASE OF THE APPELLANT, NO EXP ENDITURE DIRECTLY OR INDIRECTLY HAS BEEN WORKED OUT AND DISALLOWED IN TH E COMPUTATION OF INCOME MED ALONG WITH RETURN OF INCOME, IN RELATION TO SUCH EXEMPT INCOME. THE ARGUMENT OF THE APPELLANT THAT NO EXPENDITURE H AS BEEN INCURRED FOR EARNING SUCH EXEMPT INCOME, IS NOT ACCEPTABLE FOR T HE REASON THAT: THAT DECISION OF THE SENIOR MANAGEMENT PERSON(S) I S/ARE REQUIRED TO DECIDE THE INVESTMENT, FOR EARNING SUCH EXEMPT I NCOME AND FOR THIS PURPOSE, CONSCIOUS DECISION HAS TO BE TAKEN BY THE ITA NO: - 1848/DEL/2016 PAGE | 29 MANAGEMENT/CONCERNED PERSON(S). SUCH SENIOR MANAGEM ENT OFFICIAL/PERSON(S), ARE ALWAYS PAID IN FORM OF REMU NERATION, CONSULTANCY ETC. IT IS NOT POSSIBLE TO EMPLOY A PERSON IN THE COMPAN Y, WHO IS NOT PAID BY THE COMPANY. IT IS NOT POSSIBLE FOR A PERSON TO ENGAGE AND INVOL VE, IN THE BUSINESS ACTIVITIES/DECISION MAKING, WITHOUT COMPEN SATING THEM DIRECTLY OR INDIRECTLY. THIS IMPLIES THAT ANY INVES TMENT DECISION FOR EARNING EXEMPT INCOME, SUO-MOTO IS NOT POSSIBLE, AS HUMAN INTERVENTION IS ALWAYS REQUIRED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE A LLEGED CLAIM OF THE APPELLANT THAT NO EXPENDITURE IS INCURRED, IS NOT A CCEPTABLE. THE EXPENDITURE INCURRED, IN RELATION TO EXEMPT INCOME, HAS TO BE DETERMINED AS PER RULE 8D OF THE I.T. RULES, 1962, AS THE APPELLA NT HAS FAILED TO PROVIDE DETAILS OF SUCH EXPENDITURE INCURRED IN RELATION TO EXEMPT INCOME. ACCORDINGLY, THE AO, IS JUSTIFIED, IN INVOKING RULE 81), TO DETERMINE THE AMOUNT OF EXPENDITURE, IN RELATION TO THE EXEMPT IN COME. CONCLUSION IN VIEW OF THE ABOVE, THE ARGUMENTS OF THE APPELLAN T ARE NOT ACCEPTABLE AND I DO FIND ANY INFIRMITY IN THE CALCU LATION MADE UNDER RULE 8D BY THE AO IN DETERMINING THE DISALLOWANCE U/S 14 A. THEREFORE, DISALLOWANCE OF RS. 90,42,618/-, MADE BY THE AO U/S 14A, IS HEREBY CONFIRMED. ACCORDINGLY, GROUND NO. 3, IS HEREBY DISMISSED. 7. IN THE RESULT, THE APPEAL IS DISMISSED. [D]. THIS PRESENT APPEAL HAS BEEN FILED BY THE ASSE SSEE IN INCOME TAX APPELLATE TRIBUNAL (ITAT, FOR SHORT) AGAINST THE AFORESAID IMPUGNED APPELLATE ORDER DATED 20.01.2016 OF THE LD. CIT(A). AT THE TIME OF HEARING, REVENUE WAS REPRESENTED BY SHRI SARAS KUMAR, THE LD . DEPARTMENTAL REPRESENTATIVE (IN SHORT 'LD. DR'). HOWEVER, NONE W AS PRESENT FROM THE ASSESSEE'S SIDE. IN THE ABSENCE OF ANY REPRESENTATI ON FROM ASSESSEE'S SIDE, AT THE TIME OF HEARING BEFORE US, WE HEARD THE LD. DR. THE LD. DR RELIED ITA NO: - 1848/DEL/2016 PAGE | 30 UPON THE ORDER OF THE ASSESSING OFFICER AND THE AFO RESAID IMPUGNED ORDER DATED 20.01.2016 OF THE LD. CIT(A). AFTER PERUSAL O F THE ORDER OF THE AO AND THE AFORESAID IMPUGNED ORDER DATED 20.01.2016 O F THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS PASSED SPEAKING ORDER ON MERITS. RELEVANT PORTION OF THE IMPUGNED ORDER OF THE LD. CIT(A) HAS ALREADY BEEN REPRODUCED IN FOREGOING PARAGRAPH (C) OF THIS ORDER . WE FIND THAT THE LD. CIT(A) HAS GIVEN DETAILED REASONS FOR HIS DECISION ON MERITS IN THE AFORESAID IMPUGNED APPELLATE ORDER DATED 20.01.2016 OF LD. C1T(A). DURING APPELLATE PROCEEDINGS IN INCOME TAX APPELLAT E TRIBUNAL (ITAT, FOR SHORT) NO MATERIAL HAS BEEN BROUGHT FOR OUR CON SIDERATION TO PERSUADE US TO TAKE A VIEW DIFFERENT FROM THE VIEW TAKEN BY THE LD. CIT(A) IN THE IMPUGNED ORDER ON MERIT. AFTER HEARING THE LD. DR A ND AFTER PERUSAL OF MATERIALS ON RECORD, AND FURTHER, IN VIEW OF THE FO REGOING DISCUSSION, WE DECLINE TO INTERFERE WITH THE AFORESAID IMPUGNED AP PELLATE ORDER DATED 20.01.2016 OF LD. CIT(A); AND THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. [E] BEFORE WE PART; WE EXPLICITLY CLARIFY THAT THE ASSESSEE WILL BE AT LIBERTY TO APPROACH ITAT FOR RESTORATION OF THE APP EAL IN ACCORDANCE WITH PROVISO TO RULE 24 OF INCOME TAX (APPELLATE TRIBUNA L), RULES, 1963. IF THE ASSESSEE DOES APPROACH ITAT FOR RESTORATION OF THE APPEAL IN ITAT, THE MATTER WILL BE CONSIDERED IN ACCORDANCE WITH LAW HA VING REGARD TO THE FACTS AND CIRCUMSTANCES. ITA NO: - 1848/DEL/2016 PAGE | 31 [F] IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 05/12/2019. SD/- SD/- (AMIT SHUKLA) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED: 05.12.2019 SH COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DRAFT DICTATED 18.11.2019 DRAFT PLACED BEFORE AUTHOR APPROVED DRAFT COMES TO THE SR.PS/PS ORDER SIGNED AND PRONOUNCED ON FILE SENT TO THE BENCH CLERK 05.12.2019 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER. DATE OF UPLOADING ON THE WEBSITE 05.12.2019