AMI INDUSTRIES (INDIA) P. LTD, MUMBAI V. DCIT RG 1(1), MUMBAI

ITA 7748/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3421 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 30-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANTANU KUMAR SAIKIA
• Keywords: Unexplained cash credit; Earning of tax free income; Capital expenditure
• Section: 14A; 68; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI A BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO. 5181/MUM/2014 (ASSESSMENT YEAR: 2010-11) DCIT 1(1), R. NO.579, AAYAKAR BHAVAN, MUMBAI-20 APPELLANT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD., (NOW KNOWN AS AMIT TECH (INDIA) PVT. LTD.), 6, FELTHAM HOUSE, J. N. HEREDIA MARG, BALLARD ESTATE, MUMBAI 400001 RESPONDENT & ITA. NO. 353/MUM/2015 (ASSESSMENT YEAR: 2011-12) DCIT 1(1)(1), R. NO.579, AAYAKAR BHAVAN, MUMBAI-20 APPELLANT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD., (NOW KNOWN AS AMIT TECH (INDIA) PVT. LTD.), 6, FELTHAM HOUSE, J. N. HEREDIA MARG, BALLARD ESTATE, MUMBAI 400001 RESPONDENT & ITA. NO. 7748/MUM/2014 (ASSESSMENT YEAR: 2011-12) ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 2 M/S. AMI INDUSTRIES (INDIA) PVT. LTD., (NOW KNOWN AS AMIT TECH (INDIA) PVT. LTD.), 6, FELTHAM HOUSE, J. N. HEREDIA MARG, BALLARD ESTATE, MUMBAI 400 001 APPELL ANT VS. DCIT 1(1), AAYAKAR BHAVAN, ROOM NO.533/579, MUMBAI-20 RESPONDENT PAN: AABCA4593L / BY REVENUE : SHRI SANTANU KUMAR SAIKIA, D.R. / BY ASSESSEE : SHRI J. P. BAIRAGRA, A.R. / DATE OF HEARING : 11 & 12.08.2016 /DATE OF PRONOUNCEMENT : 26.08.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THESE THREE APPEALS, TWO BY REVENUE AND ONE BY ASSE SSEE ARE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TA X (APPEALS)-1, MUMBAI, DATED 18.06.2014 FOR A.Y. 2010 -11 AND 29.10.2014 FOR A.Y. 2011-12. SINCE, ALL THREE APPE ALS PERTAIN TO SAME ASSESSEE AND ON MOSTLY SIMILAR ISSUE, SO TH EY ARE BEING DISPOSED OF BY COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO.5181/MUM/2014 FOR A.Y. 2010-11, REVENU E HAS FILED APPEAL ON FOLLOWING GROUNDS: ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 3 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON MADE U/S.68 OF I.T. ACT, WITHOUT APPRECIATING THE F ACT THAT ASSESSEE FAILED TO DISCHARGE ITS ONUS TO ESTAB LISH IDENTITY, GENUINENESS AND CREDITWORTHINESS OF COMPANIES, WHICH HAD INVESTED IN SHARE APPLICATION MONEY AND THE ASSESSING OFFICER ESTABLISHED THESE T O BE NON GENUINE. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN HOLD ING THAT THE ASSESSING OFFICER WAS NOT RIGHT IN DISALLO WING 80% OF THE EXPENSES CLAIMED AS INTEREST REPAYMENT, PROFESSIONAL FEES AND ADMINISTRATIVE EXPENSES AND DELETING THE ADDITION OF RS.5,05,87,952/- WITHOUT APPRECIATING THE FACT THAT THESE EXPENSES HAVE NO RELEVANCE FOR BUSINESS OF THE ASSESSEE, DURING THE YEAR. 3. ASSESSEE FILED ITS RETURN OF INCOME AT A LOSS OF RS.5,04,64,311/-. ASSESSMENT WAS COMPLETED U/S.143 (3) OF THE ACT DATED 28.03.2013 AT INCOME OF RS.34,01,23,6 40/- WHERE ADDITION U/S.68 AMOUNTING TO RS.34 CRORES AND ADDITION OF RS.5.05 CRORES ON ACCOUNT OF EXPENDITURE OF CAPI TAL NATURE WAS MADE. MATTER WAS CARRIED BEFORE THE FIRST APPE LLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRA NTED RELIEF TO THE ASSESSEE. 4. SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REV ENUE INTER ALIA SUBMITTED THAT CIT(A) ERRED IN DELETING THE ADDITION MADE U/S.68 OF THE ACT WITHOUT APPRECIATING THE FAC T THAT ASSESSEE FAILED TO DISCHARGE ITS ONUS TO ESTABLISH IDENTITY, GENUINENESS AND CREDITWORTHINESS OF COMPANIES, WHIC H HAD INVESTED IN SHARE APPLICATION MONEY AND THE ASSESSI NG OFFICER ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 4 ESTABLISHED THESE TO BE NON GENUINE. FURTHER, LD. D EPARTMENTAL REPRESENTATIVE SUBMITTED THAT IN THE CIRCUMSTANCES OF THE CASE, CIT(A) ERRED IN HOLDING THAT ASSESSING OFFICE R WAS NOT RIGHT IN DISALLOWING 80% OF THE EXPENSES CLAIMED AS INTEREST REPAYMENT, PROFESSIONAL FEES AND ADMINISTRATIVE EXP ENSES AND DELETING THE ADDITION OF RS.5,05,87,952/- WITHOUT A PPRECIATING THE FACT THAT THESE EXPENSES HAVE NO RELEVANCE FOR BUSINESS OF ASSESSEE, DURING THE YEAR UNDER CONSIDERATION. ACC ORDINGLY, THE ORDER CIT(A) BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHER HAND, LD. AUTHORIZED REPRES ENTATIVE SUPPORTED THE ORDER OF CIT(A) AND REITERATED THE SU BMISSION BEFORE CIT(A) AS DETAILED IN SUBMISSION FILED BY LE ARNED AUTHORIZED REPRESENTATIVE OF ASSESSEE WERE RELIED. 5. AFTER GOING THROUGH RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE IS ENGAGE D IN THE BUSINESS OF PROVIDING I.T. RELATED SERVICE I.E. PRO VIDING SOFTWARE AND HARDWARE MATERIALS DEVELOPED/MANUFACTURED AND D EALING IN SHARE BUSINESS TRANSACTIONS. 5.1 FIRST ISSUE IS WITH REGARD TO ADDITION U/S.68 O F THE ACT IN RESPECT OF SHARE APPLICATION MONEY RECEIVED, WHICH WAS DELETED BY CIT(A). AS STATED ABOVE, ASSESSEE COMPANY IS MANUFACTURING AMR AND OTHER HARDWARE MATERIALS, WHI CH WERE SUPPLIED TO ITS VARIOUS CLIENTS. THIS BUSINESS WAS STARTED FROM A.Y. 2009-10 ONWARD. EARLIER, ASSESSEE COMPANY WAS MANUFACTURING VARIOUS TYPES OF AUTOMOBILE PARTS AS PER THE REQUIREMENT OF CUSTOMER FROM ITS FACTORY, PUNE, WHI CH WAS ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 5 CLOSED. SUBSEQUENTLY, ASSESSEE COMPANY HAS STARTED MANUFACTURING OF AMR AND OTHER HARDWARE MATERIAL WH ICH SUPPLIED TO VARIOUS CLIENTS AND HAVING ITS HEAD OFF ICE AT MUMBAI AND BRANCHES AT HYDERABAD, SECUNDERABAD, KOL KATA, BARODA, JAIPUR, DELHI, PUNE ETC. ASSESSEE COMPANY HAS EMPLOYED MORE THAN 250 EMPLOYEES DURING YEAR, MAINL Y IT ENGINEERS AND PROFESSIONALS. DURING YEAR ASSESSEE COMPANY RECEIVED SHARE APPLICATION MONEY OF RS.34 CRORE FRO M THREE KOLKATA BASED COMPANIES VIZ. PARASMANI MERCHANDISE PVT. LTD. RS.13.50 CRORE, RATANMANI VANJIJYA PVT. LTD. RS.2 C RORES AND ROSEBERRY MERCHANT PVT. LTD. RS.18.50 CRORES. ASSE SSING OFFICER ISSUED SHOW CAUSE NOTICE TO THESE COMPANIES ON THE ADDRESS GIVEN BY HIM AND IN THEIR RETURN OF INCOME. THESE NOTICE REMAINED UNSERVED BY POSTAL AUTHORITIES. 5.2 VIDE LETTER DATED 02.03.2013, ASSESSEE COMPANY SUBMITTED NEW ADDRESSES OF THESE THREE COMPANIES TO GETHER WITH FRESH COPY OF FORM NO.18 FILED WITH THE REGIST RAR OF COMPANIES FOR SHIFTING THEIR REGISTERED OFFICE W.E. F. 21.02.2013 AND ACCORDING TO WHICH, THE NEW ADDRESS WAS AS UNDE R: 7/1A, GRANT LANE, 1 ST FLOOR, ROOM NO.25, KOLKATA, WEST BENGAL 700012. NOTICES ISSUED THEREAFTER WERE SERVED ON THESE THRE E COMPANIES ON NEW ADDRESS. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 6 5.3 ASSESSEE COMPANY SUBMITTED BEFORE ASSESSING OFF ICER FOLLOWING DOCUMENTS IN RESPECT OF THESE THREE COMPA NIES FROM WHOM SHARE APPLICATION MONEY WAS RECEIVED: A) PAN NUMBER OF THE COMPANIES, B) COPIES OF INCOME TAX RETURN FILED BY THESE THREE COMPANIES FOR ASSESSMENT YEAR 2010-11 C) CONFIRMATION LETTER IN RESPECT OF SHARE APPLICAT ION MONEY PAID BY THEM; AND D) COPY OF BANK STATEMENT THROUGH WHICH CHEQUES WER E ISSUED. IN THE MEANTIME, ASSESSING OFFICER REFERRED THE MAT TER TO THE INVESTIGATION WING AT KOLKATA FOR MAKING INQUIRIES OF THE THREE COMPANIES FROM WHOM SHARE APPLICATION MONEY HAS BEE N RECEIVED. AS MENTIONED BY ASSESSING OFFICER IN ASS ESSMENT ORDER, HE HAS RECEIVED REPORT FROM INVESTIGATION WI NG OF KOLKATA TOGETHER WITH THE DOCUMENTS COLLECTED FROM THESE THREE COMPANIES AND ALSO COPY OF STATEMENT OF DIRECTOR RE CORDED BY THEM. VIDE LETTER DATED 20.03.2013, IT WAS INFORME D BY ASSESSEE COMPANY THROUGH ITS CHARTERED ACCOUNTANT T HAT INVESTIGATION WING AT KOLKATA HAD ALREADY SUMMONED THESE THREE COMPANIES, RECORDED THE STATEMENT OF THEIR DI RECTOR AND OBTAINED THE REQUIRED DOCUMENTS IN RESPECT OF INVES TMENT AS SHARE APPLICATION MONEY BY THESE COMPANIES AND REPO RT OF THEIR INQUIRY WAS ALREADY SENT. COPY OF LETTER HAS BEEN ENCLOSED AT PAGE 48 OF PAPER BOOK FILED BY ASSESSEE . IN VIEW OF THIS, SAID COMPANIES HAVE NOT SEPARATELY SENT THEIR REPLY TO ASSESSING OFFICERS NOTICES. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 7 5.4 IN REPLY TO THE SHOW CAUSE NOTICE AS TO WHY SHA RE APPLICATION MONEY SHOULD NOT BE TREATED AS UNEXPLAI NED CREDIT U/S.68 OF THE ACT, ASSESSEE COMPANYS REPRESENTATIV E SUBMITTED ON BEHALF OF ASSESSEE VIDE LETTER DATED 2 6.03.2013, COPY OF SAME IS PLACED ON PAGE NOS. 45 TO 47 OF PAP ER BOOK. HOWEVER, ASSESSING OFFICER HAS TAKEN PART COGNIZANC E OF THE SAID LETTER. ASSESSING OFFICER HAS NOT CONSIDERED THE REPORT SENT BY DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATIO N), UNIT 1(4), KOLKATA THOUGH HE HAS MENTIONED THE SAME IN H IS ORDER. HOWEVER, HE HAS DRAWN HIS OWN CONCLUSION WITHOUT APPRECIATING ANY EVIDENCE ON RECORD AND TREATED THE SHARE APPLICATION MONEY AS UNDISCLOSED INCOME OF ASSESSEE COMPANY. 5.5 ASSESSING OFFICER HAS NOT GIVEN COPY OF REPORT OF DDI (INVESTIGATION)-UNIT 1(4), KOLKATA TO ASSESSEE FOR ITS COMMENTS AND EXPLANATION. WHEN THERE WAS NOTHING AGAINST SA ID THREE COMPANIES WITH REGARD TO SHARE APPLICATION RECEIVED FROM SAID THREE COMPANIES, ASSESSING OFFICER HAS NOT CALLED F OR COMMENTS, EXPLANATIONS OF ASSESSEE COMPANY ON THE F ACTS AND DOCUMENTS SENT BY INVESTIGATION WING OF KOLKATA. I N VIEW OF ABOVE, ADDITION OF RS.34 CRORES MADE BY ASSESSING O FFICER BY TREATING THE SHARE APPLICATION MONEY AS UNEXPLAINED CREDIT U/S. 68 OF THE ACT, WAS UNWARRANTED IN LAW AND SAME WAS NOT BASED ON REASONED FINDING. AS MENTIONED ABOVE, IT IS CLEAR THAT ASSESSEE COMPANY HAS FILED THE DOCUMENTS REGARDING SHARE APPLICATION MONEY RECEIVED FROM SAID THREE COMPANIE S BEFORE ASSESSING OFFICER. FILING OF THESE DOCUMENTS WERE A GAIN ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 8 CONFIRMED BY ASSESSING OFFICER VIDE LETTER DATED 28 .12.2012 WHICH IS PLACED ON PAGE NO.28 TO 41 OF THE PAPER BO OK INTER ALIA SUBMITTED THAT FURTHER FINANCE WAS REQUIRED FO R PUTTING ADDITIONAL CAPACITY OF MANUFACTURING AMR ETC. AND F OR BUYING OWN PREMISES AT VARIOUS PLACES FOR THE BUSINESS AND FOR THAT PURPOSE, THE SHARE APPLICATION MONEY WAS TAKEN FROM THESE THREE COMPANIES. VIDE LETTER DATED 20.03.2013, IT W AS INTIMATED TO THE ASSESSING OFFICER THAT THE ENQUIRI ES WERE CONDUCTED BY INVESTIGATION WING, KOLKATA AND THEY H AVE SUMMONED THE PARTIES, RECORDED THEIR STATEMENTS AND OBTAINED THE REQUIRED DOCUMENTS AND EVIDENCE INCLUDING THE L EDGER ACCOUNT OF ASSESSEE AS APPEARING IN THEIR BOOKS IN SUPPORT OF THE SHARE APPLICATION MONEY PAID BY THEM. IT WAS AL SO INFORMED THAT IN VIEW OF THESE, IT WAS NOT NECESSAR Y FOR THE ASSESSEE COMPANY TO SUBMIT FURTHER EVIDENCES/ DOCUM ENTS REGARDING SHARE APPLICATION MONEY RECEIVED BY IT. ASSESSING OFFICER HAS GIVEN ITS FINAL FINDING THAT; I. THESE COMPANIES WERE MERELY ENTITIES ON PAPER WI THOUT PROPER ADDRESS OF THEIR FUNCTIONING AND A SINGLE PE RSON CONTROLLING ITS AFFAIRS. II. THESE COMPANIES HAVE NO FUNDS OF THEIR OWN TO M AKE HUGE INVESTMENT. III. THESE COMPANIES HAVE NOT RESPONDED TO THE LETT ER WRITTEN TO THEM, WHICH COULD HAVE ESTABLISHED THEIR CREDITW ORTHINESS AND HELD THAT THE FUNDS OF RS.34 CRORES INTRODUCED BY ASSESSEE COMPANY IN THE GRAB OF SHARE APPLICATION MONEY, AS MONEY ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 9 FROM UNEXPLAINED SOURCES AND, THEREFORE, TREATED TH E SAME AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. 5.6 WE FIND THAT IN RESPECT OF SHARE APPLICATION MO NEY RECEIVED BY ASSESSEE COMPANY, THE ASSESSEE COMPANY HAS FILED THE FOLLOWING DOCUMENTS BEFORE THE ASSESSING OFFICE R (I) PAN OF THE SAID THREE COMPANIES; (II) COPIES OF INCOME-TAX RETURNS FILED BY THESE CO MPANIES FOR ASST. YEAR 2010-11; (III) CONFIRMATION LETTER IN RESPECT OF SHARE APPLI CATION MONEY PAID BY THEM; AND (IV) COPY OF BANK STATEMENT OF THESE THREE COMPANIE S FROM WHERE THE CHEQUES WERE ISSUED SINCE THE DIT - INVESTIGATION, KOLKATA HAS ALREADY CONDUCTED FULL ENQUIRY OF THESE THREE COMPANIES, COLLECTED TH E REQUIRED DOCUMENTS AND RECORDED THE STATEMENTS OF DIRECTOR O F THESE THREE COMPANIES. FURTHER, ASSESSEE COMPANY FILED C OPIES OF FOLLOWING DOCUMENTS: (I) SHARE APPLICATION FORM DULY RECEIVED WITH THE S HARE APPLICATION MONEY FROM THESE THREE COMPANIES. (II) BOARD RESOLUTION PASSED BY THESE THREE COMPANI ES FOR INVESTMENT IN THE APPELLANT COMPANY; AND (III) MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE SE THREE COMPANIES. ASSESSEE ALSO FILED PETITION UNDER RULE 46A DATED 0 6.01.2014 WITH REQUEST TO ADMIT THESE THREE DOCUMENTS MENTION ED ABOVE, WHICH WERE NOT FILED BEFORE ASSESSING OFFICER. CIT (A) FORWARDED THESE DOCUMENTS VIDE LETTER DATED 10.01.2014 TO ASS ESSING ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 10 OFFICER FOR COMMENTS ON MERIT AND REPORT REGARDING ADMISSIBILITY OF THE EVIDENCE, WHICH WAS INCORPORAT ED IN PARA 4.6 OF HIS ORDER. ASSESSING OFFICER REPORTED VIDE LETTER DATED 12.06.2014, WHICH WAS ALSO INCORPORATED IN PARA 4.6 OF CIT(A)S ORDER. ASSESSEE IN REPLY, ON SUBMISSION GIVEN TO A SSESSING OFFICER DURING COURSE OF ASSESSMENT PROCEEDINGS, TH E CONTENTS OF WHICH HAVE BEEN DEALT ABOVE AND COPIES OF LETTER S ENCLOSED IN COMPILATION, WHICH ARE DETAILED AS UNDER: (I) COPY OF LETTER DATED 28.12.2012 (AS DETAILED ON PAGE NOS. 56 & 57 OF THE PAPER BOOK FILED BY ASSESSEE. (II) COPY OF LETTER DATED 07.01.2013 AS MENTIONED O N PAGE NO. 55 OF THE PAPER BOOK FILED BY ASSESSEE. (III) COPY OF LETTER DATED 02.03.2013 ALONG WITH EN CLOSURES I.E. FORM NO. 18 OF THESE THREE COMPANIES AS DETAILED ON PAGE NOS. 49 TO 54 OF THE PAPER BOOK FILED BY ASSESSEE. (IV) COPY OF LETTER DATED 20.03.2013 AS PLACED ON P AGE NO. 48 OF PAPER BOOK FILED BY ASSESSEE. (V) COPY OF LETTER DATED 26.03.2013 AS PLACED ON PA GE NOS. 45 TO 47 OF PAPER BOOK FILED BY ASSESSEE. FROM THE ASSESSMENT ORDER, IT IS OBVIOUS THAT AFTER RECEIVING REPORT FROM THE INVESTIGATION WING, KOLKATA DATED 1 8.03.2013, ASSESSING OFFICER HAS DRAWN HIS OWN CONCLUSION WHIC H WAS NOT BASED ON ANY FACTS AND FIGURES AS ASSESSING OFFICER HAS NOT MENTIONED ANYTHING IN THE ORDER ON WHAT BASIS THE C ONCLUSION WAS ARRIVED ON AND WHAT WERE THE FACTS AND MATERIAL S AVAILABLE WITH HIM. THEREFORE, THE ADDITION MADE BY HIM U/S.6 8 OF THE ACT ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED WITHOUT ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 11 CONSIDERING THE VARIOUS FACTS BROUGHT TO THE KNOWLE DGE OF ASSESSING OFFICER, WHICH IS NOT JUSTIFIED. 5.7 AS PER THE PROVISIONS OF SECTION 68 OF THE ACT, FOR ANY CASH CREDIT APPEARING IN THE BOOKS OF ASSESSEE, THE ASSE SSEE IS REQUIRED TO PROVE THE FOLLOWING- (A) IDENTITY OF THE CREDITOR (B) GENUINENESS OF THE TRANSACTION (C) CREDIT-WORTHINESS OF THE PARTY (I) IN THIS CASE, THE ASSESSEE HAS ALREADY PROVED T HE IDENTITY OF THE SHARE APPLICANT BY FURNISHING THEIR PAN, COP Y OF IT RETURN FILED FOR ASST. YEAR 2010-11. (II) REGARDING THE GENUINENESS OF THE TRANSACTION, ASSESSEE HAS ALREADY FILED THE COPY OF THE BANK ACCOUNT OF T HESE THREE SHARE APPLICANTS FROM WHICH THE SHARE APPLICATION M ONEY WAS PAID AND THE COPY OF ACCOUNT OF THE ASSESSEE IN WHI CH THE SAID AMOUNT WAS DEPOSITED, WHICH WAS RECEIVED BY RTGS. (III) REGARDING CREDIT-WORTHINESS OF THE PARTY, IT HAS BEEN PROVED FROM THE BANK ACCOUNT OF THESE THREE COMPANI ES THAT THEY HAD THE FUNDS TO MAKE PAYMENT FOR SHARE APPLIC ATION MONEY AND COPY OF RESOLUTION PASSED IN THE MEETING OF THEIR BOARD OF DIRECTORS. (IV) REGARDING SOURCE OF THE SOURCE, ASSESSING OFFI CER HAS ALREADY MADE ENQUIRIES THROUGH THE DDI (INVESTIGATI ON), KOLKATA AND COLLECTED ALL THE MATERIALS REQUIRED WH ICH PROVED THE SOURCE OF THE SOURCE, THOUGH AS PER SETTLED LEG AL POSITION ON THIS ISSUE, ASSESSEE NEED NOT TO PROVE THE SOURCE O F THE SOURCE. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 12 (V) ASSESSING OFFICER HAS NOT BROUGHT ANY COGENT MA TERIAL OR EVIDENCE ON RECORD TO INDICATE THAT THE SHAREHOLDER S WERE BENAMIDARS OR FICTITIOUS PERSONS OR THAT ANY PART O F THE SHARE CAPITAL REPRESENT COMPANYS OWN INCOME FROM UNDISCL OSED SOURCES. ACCORDINGLY, NO ADDITION CAN BE MADE U/S. 68 OF THE ACT. IN VIEW OF ABOVE REASONED FACTUAL FINDING OF CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF 80% OF THE EXPENSES CLAIMED AS INTEREST REPAYMENT BY TREATING SAME AS PRE-OPERATIVE EXPENSES OF CAPITAL NATURE. ASSESSEE HAS CHALLENGED THE ACTION OF ASSESSING OFFICER ADDITION OF 80% OF ADMINISTRATIVE EXPENSES OF RS.2,46,99,156/- AND 80% OF INTEREST EXPENSES OF RS.3,85,35,784/- AMOUNTING TO RS.5,05,87,952/-. ACCORDING TO ASSESSING OFFICER, ASSESSEE HAS NOT CARRIED MANUFACTURING AND TRADING DURING YEAR. HE HAS MENTIONED THAT PURCHASED ARTICLES MAINLY COMPRISED RENEWABLE ENERGY DEVICES AND SPARES WHICH WAS HAVING NO LINKA GE WITH SALES MADE. ASSESSING OFFICER MENTIONED THAT THESE EXPENSES WERE NOT DIRECTED TOWARDS THE PRESENT BUSINESS ACTI VITIES OF ASSESSEE. SO, HE DISALLOWED THE SAME BEING IN CAP ITAL NATURE. 6.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE A UTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F ASSESSEE AND HAVING CONSIDERED THE SAME CIT(A) GRANTED RELIE F TO THE ASSESSEE BY OBSERVING AS UNDER: 6.3 I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSMENT ORDER AND SUBMISSION OF THE APPELL ANT. IT IS NOTICED THAT THE A.O. HAS DISALLOWED THE AMOUNTS AS PRE- ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 13 OPERATIVE EXPENSES BY ALLOWING 1/5 TH AND REMAINING 4/5 TH HAS BEEN DISALLOWED. THEREFORE, IT IS NOT THE CASE OF THE A.O. THAT SOME PARTICULAR EXPENSES ARE DISALLOWABLE FOR DISQUALIFICATIONS U/S.37 OF THE I.T. ACT BECAUSE 1/ 5 TH OF THE EXPENSES ARE ALLOWED AS IN THE MANNER OF SECTION 35 D OF THE I.T. ACT. THERE IS NO QUESTION ON THE NATURE OF EXP ENSES FOR BEING FOR NON BUSINESS PURPOSE OR IN THE NATURE OF CAPITAL EXPENDITURE AS SUCH, LIABLE TO BE DISALLOWED. THERE IS NO SPECIFIC DISCUSSION TO THE EFFECT THAT THE EXPENSES UNDER QUESTION ARE DISALLOWABLE FOR ANY OF THE SPECIFIC R EASONS APPLICABLE UNDER SECTION 37 OF THE I.T. ACT FOR THI S PURPOSE, WHICH HAVE BEEN CLAIMED BY THE APPELLANT IN THAT MA NNER. THE GROUPING AND DESCRIPTION OF EXPENSES IN THE BOO KS OF ACCOUNTS OF THE APPELLANT IS PRIMA FACIE REVENUE IN NATURE AS SAME HAVE BEEN RECORDED IN THE BOOKS AND FINAL A CCOUNTS IN THAT MANNER AND ALSO ACCEPTED IN THE AUDIT REPOR T. IT IS ALSO ON RECORD THAT THE APPELLANT HAS ONGOING BUSIN ESS AND THE EXPENSES ARE STATED TO BE RELATING TO SUCH ONGO ING BUSINESS. THE AC. HAS NOT BROUGHT ON RECORD ANY REA SON OR MATERIAL TO CONTRADICT THE NATURE OF EXPENSES, THE ENTRIES IN THE ACCOUNT BOOKS AS MADE AND ANY COGENT MATERIAL T HAT SAME ARE RELATED TO A DIFFERENT BUSINESS OF THE APP ELLANT IN A PRE-OPERATIVE STAGE. UNDER THE CIRCUMSTANCES, THE A C. HAVING ALLOWED 1/51H OF SUCH EXPENDITURE ACTED ERRONEOUSLY, WITHOUT BASIS AND CONTRARY TO LAW AS T HERE IS NO DISPUTE THAT ASSESSEE HAD COMMENCED ITS BUSINESS IN EARLIER YEARS. THE DECISIONS RELIED UPON BY THE APP ELLANT ON THIS ISSUE ARE APPLICABLE TO THE FACTS AND CIRCUMST ANCES OF THE CASE. THE DECISION IN THE CASE OF CIT VS. MAHIN DRA UGINE & STEEL COMPANY LTD. (2002) 120 TAXMAN (BORN.) IS R ELEVANT IN THE PRESENT CONTEXT WHERE IT WAS HELD THAT 'SECT ION 35D WOULD APPLY ONLY IN RESPECT OF EXPENDITURE WHICH IS OTHERWISE NOT ALLOWABLE UNDER THE LAW, FOR EXAMPLE CAPITAL EXPENDITURE. IT IS ON RECORD THAT THE A.O. HAS NO T HELD THAT THE EXPENSES UNDER QUESTION ARE NOT ALLOWABLE U/S.3 7 OF THE I.T. ACT AS CLAIMED BY THE APPELLANT NEITHER HAS GI VEN ANY OF THE REASONS ATTRACTING DISALLOWANCE U/S.37 OF THE I .T. ACT. THEREFORE, FOR THE REASONS DISCUSSED ABOVE, GROUND NO. 6 IS ALLOWED. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 14 SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENU E AS DISCUSSED ABOVE. 6.2 AFTER GOING THROUGH RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER HAS DISALLOWED 80% UNDER THE HEAD ADMINISTRATIVE EXPENS ES SAME AS PRE-OPERATIVE EXPENSES OF CAPITAL NATURE. ASSES S COMPANY ALREADY FILED ALL THE DETAILS REGARDING THESE EXPEN SES TOGETHER WITH DETAILS OF INTEREST PAID AND RECEIVED, COPIES OF WHICH WERE FILED BEFORE US IN RESPECT OF FOLLOWING MAJOR EXPEN SES WHICH ARE AS UNDER: A) DETAILS OF INTEREST PAID & RECEIVED AS DETAILED AT PAGE NO. 238 OF PAPER BOOK FILED BY ASSESSEE. B) DETAILS OF PROFESSIONAL FEES AS MENTIONED AT PAG E NOS. 239 TO 241 OF PAPER BOOK FILED BY ASSESSEE. C) DETAILS OF TRAVELLING EXPENSES AS MENTIONED AT P AGE NO.242 OF PAPER BOOK FILED BY ASSESSEE. D) DETAILS OF TELEPHONE/MOBILE EXPENSES AS MENTIONE D AT PAGE NOS. 243 TO 262 OF PAPER BOOK FILED BY ASSESSE E. IT REVEALS THAT ASSESSING OFFICER HAS NOT GIVEN ANY REASON WHY A PARTICULAR EXPENDITURE WAS NOT INCURRED FOR THE P URPOSE OF BUSINESS AND THEREFORE NOT ALLOWABLE. HE HAS ONLY ESTIMATED BY STATING THAT 80% OF THESE EXPENSES WERE NOT ALLO WABLE. ASSESSING OFFICER HAS TREATED 80% OF THESE EXPENSES WHICH WERE DISALLOWED AS PRE-OPERATIVE EXPENSES OF CAPITA L NATURE WITHOUT ASSIGNING ANY REASON AND THE BASIS OF BIFUR CATION ON WHICH HE HELD THAT THESE ARE PRE-OPERATIVE EXPENSES OF CAPITAL NATURE. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 15 6.3 THE BUSINESS OF ASSESSEE COMPANY WAS ALREADY EX PLAINED TO ASSESSING OFFICER VIDE LETTER DATED 28.12.2013 W HICH WAS INCORPORATED BY ASSESSING OFFICER IN PARA 10.4 OF H IS ORDER INTER ALIA SUBMITTED THAT EARLIER ASSESSEE COMPANY WAS MANUFACTURING VARIOUS TYPES OF AUTOMOBILE PARTS AS PER THE REQUIREMENT OF CUSTOMER FROM ITS FACTORY AT PUNE, W HICH IS NOW CLOSED AND SINCE A.Y. 2009-10, THE ASSESSEE COMPANY HAS STARTED MANUFACTURING OF AMR AND OTHER HARDWARE MAT ERIAL WHICH WERE SUPPLIED TO VARIOUS CLIENTS AND HAVING I TS HEAD OFFICE AT MUMBAI AND BRANCHES AT HYDERABAD, SECUNDE RABAD, KOLKATA, BARODA, JAIPUR, DELHI, PUNE, ETC. REGARDIN G THE INTEREST EXPENSES ALSO, FULL DETAILS WERE FILED AND EXPLANATION WAS GIVEN BY LETTER DATED 28.09.2013 WHICH WAS PART LY INCORPORATED IN THE ASSESSMENT ORDER IN PARA 10.4. THIS BEING A SPECIALIZED BUSINESS WHEREIN HARDWARE AND SOFTWAR E BOTH ARE REQUIRED AND IT TAKES TIME TO FULLY EXPLOIT THE MAR KET AND GET THE CUSTOMERS. ASSESSEE COMPANY HAS GOT THE FRUITS OF THESE EXPENSES AND EFFORTS IN THE SUBSEQUENT YEARS, WHICH WAS CLEARLY ESTABLISHED FROM THE FOLLOWING DATA OF THE SALES, MAJOR EXPENSES AND NET PROFIT FOR LAST A.YS. 2009-10, 201 0-11 AND SUBSEQUENT A.YS. 2011-12 AND 2012-13 - STATEMENT SH OWING SALES, MAJOR EXPENSES AND NOT PROFIT ARE AS UNDER: PARTIULARS F.Y. 2008-09 A.Y. 2009-10 F.Y. 2009-10 A.Y. 2010-11 F.Y. 2010-11 A.Y. 2011-12 F.Y. 2011-12 A.Y. 2012-13 SALES & SERVICES MANUFACTURING EXPENSES OTHER MAJOR EXPENSES - PROFESSIONAL CHARGES 49,67,481 31,14,278 1,34,52,155 2,30,000 26,09,120 20,78,208 1,34,72,831 5,63,250 31,68,03,154 20,73,10,286 1,04,57,280 99,45,182 38,52,16,323 18,75,25,252 2,26,27,948 4,50,11,226 ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 16 - SALARIES - TRAVELLING EXPENSES SUBTOTAL OF MAJOR EXPENSES NET PROFIT BEFORE TAX 7,27,464 10,35,095 35,89,422 1,18,53,624 1,44,09,619 1,50,71,176 2,39,91,884 7,94,92,798 (1,21,90,112) (5,34,24,447) 8,72,82,400 9,73,01,945 IT SHOWS THAT ASSESSING OFFICER HAS NOT GIVEN A REA SONABLE FINDING THAT ASSESSEE COMPANY HAS ALMOST NOT CARRIE D ANY MANUFACTURING OR TRADING ACTIVITIES DURING THE YEAR UNDER CONSIDERATION. SAME IS VERY CLEAR FROM THE FOLLOWI NG DETAILS OF SALES AFFECTED DURING THE YEAR AND PURCHASES MADE D URING THE YEAR. DETAILS OF SALES AND PURCHASES HAVE BEEN ENCL OSED BY ASSESSEE AT PAGE NO. 263 AND 264 RESPECTIVELY OF TH E PAPER BOOK. THE ASSESSING OFFICER WAS NOT JUSTIFIED TO OB SERVE THAT PURCHASE ARTICLES MAINLY COMPRISES RENEWABLE ENERGY DEVICES AND SPARES WHICH WERE HAVING NO LINKAGE WITH THE SA LES. IN THIS REGARD, OUR ATTENTION WAS DRAWN TOWARDS THE DE TAILS OF SALES AND PURCHASES ABOVE AND COPIES OF SAME HAVE B EEN PLACED AT PAGE NOS. 263 & 264 OF PAPER BOOK. DURIN G THE YEAR, ASSESSEE COMPANY HAS CLAIMED TO PURCHASE THE ITEM I .E. 'RTU UNIT' FROM VARIOUS SUPPLIERS AS PER THE SPECIFICATI ON GIVEN TO THEM WHICH WERE EVENTUALLY SOLD TO CUSTOMERS WHICH HAS NOT BEEN DISPUTED BY ASSESSING OFFICER. 6.4 ASSESSEE COMPANY HAS ALREADY STARTED ITS BUSINE SS. NO FACTORY PREMISES WERE UNDER CONSTRUCTION. NO PLANT AND MACHINERY WERE UNDER INSTALLATION AT RELEVANT POINT OF TIME, HENCE NO EXPENDITURE COULD BE TREATED AS PRE-OPERAT IVE EXPENSES OF CAPITAL NATURE. AS PER THE PROVISIONS O F SEC. 37, THERE ARE THREE REQUIREMENT FOR ALLOWING THE EXPENS ES ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 17 (I) EXPENSES ARE INCURRED FOR PURPOSE OF BUSINESS; (II) EXPENSES ARE NOT OF CAPITAL NATURE; AND (III) EXPENSES ARE NOT OF PERSONAL NATURE. THEREFORE, THESE EXPENSES WERE NEITHER OF PERSONAL NATURE, NOR OF CAPITAL NATURE OR OF PRE-OPERATIVE NATURE. THES E WERE ALL OF REVENUE NATURE WHICH WERE INCURRED FOR THE PURPOSE OF CARRYING ON THE BUSINESS AND THEREFORE, SAME ARE OBVIOUSLY A LLOWABLE AS REVENUE EXPENSES DURING THE YEAR. ASSESSING OFFICE R HAS NEITHER GIVEN ANY FINDING AS TO WHY ANY PART OF THE SE EXPENSES WERE TO BE DISALLOWED, NOR HE HAS ISSUED ANY SHOW C AUSE NOTICE WHY HE INTENDS TO DISALLOW PART OF THESE EXPENSES. 6.5 IN VIEW OF ABOVE, CIT(A) WAS JUSTIFIED IN GRANT ING RELIEF TO THE ASSESSEE AS DISCUSSED ABOVE. WE ARE NOT INCLIN ED TO INTERFERE WITH THE FINDING OF CIT(A) ON THIS ISSUE. SAME IS UPHELD. 7. AS A RESULT, APPEAL FILED BY REVENUE IS DISMISSE D. 8. IN ITA NO.353/MUM/2015 FOR A.Y. 2011-12, REVENUE HAS FILED APPEAL ON FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON MADE U/S.68 OF I.T. ACT, WITHOUT APPRECIATING THE F ACT THAT ASSESSEE FAILED TO DISCHARGE ITS ONUS TO ESTAB LISH IDENTITY, GENUINENESS AND CREDITWORTHINESS OF COMPANIES, WHICH HAD INVESTED IN SHARE APPLICATION MONEY AND THE ASSESSING OFFICER ESTABLISHED THESE T O BE NON GENUINE. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 18 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, WITHOUT PREJUDICE TO (1) ABOVE AND IN THE ALTERNATIVE, THE LD. CIT(A) ERRED IN DELETING THE A DDITION MADE U/S 68 OF THE I.T. ACT, WITHOUT APPRECIATING T HE FACT THAT ASSESSEE FAILED TO EXPLAIN THE NATURE OF PREMIUM OF RS.290/- RECEIVED BY THE ASSESSEE AS PAR T OF SHARE APPLICATION MONEY. 9. ISSUE IS COVERED BY THE ORDER OF ITA NO.5181/MU M/2014 FOR A.Y.2010-11, WHEREIN ADDITION WERE MADE WITH RE GARD TO PURCHASE FROM 3 PARTIES, ONE OF THE PARTIES I.E. RA TANMANI VANJIJYA PVT. LTD. IS COMMON IN YEAR UNDER CONSIDER ATION. WE HAVE DISCUSSED AND DECIDED THIS ISSUE IN FAVOUR OF ASSESSE BY PARA 5 OF THIS ORDER. FACTS BEING SIMILAR, SO FOLL OWING SAME REASONING, WE APPROVE THE ORDER OF CIT(A) WHO HAS R IGHTLY GRANTED RELIEF TO ASSESSEE AS DISCUSSED ABOVE. SAM E IS UPHELD. 10. NEXT ISSUE AS RAISED BY REVENUE IS WITH REGARD TO ADDITION U/S.68 OF THE ACT ON SOME PREMIUM ISSUES ON SHARE APPLICATION MONEY, BOTH PARTIES AGREED THAT THIS IS SUE IS NOT ARISING FROM THE ORDERS OF AUTHORITIES BELOW. SO, SAME IS DISMISSED BEING NOT MAINTAINABLE. 11. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMI SSED. 12. IN ITA NO.7748/MUM/2014 FOR A.Y. 2011-12, ASSES SEE HAS FILED APPEAL ON FOLLOWING GROUND: 1. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE U/S14A OF THE INCOME TAX ACT, 1961 REA D WITH RULE 8D AT RS.12,69,980/-. ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 19 13. IN THIS GROUND, ASSESSEE COMPANY HAS CHALLENGED THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION ON A CCOUNT OF DISALLOWANCE U/S.14A OF THE ACT R.W.RULE 8D AMOUNTI NG TO RS.12,69,980/-. DURING THE YEAR, ASSESSEE HAS EARN ED DIVIDEND OF RS.1,88,900/- WHICH IS CLAIMED AS EXEMP T U/S.10(34) OF THE ACT WHILE COMPUTING TOTAL INCOME. ASSESSEE COMPANY HAS CLAIMED TO HAVE NOT USED ANY BORROWED F UNDS FOR INVESTMENT. ACCORDING TO ASSESSEE COMPANY, DISALLO WANCE SHOULD BE RESTRICTED TO THE EXTENT OF DIVIDEND INCO ME EARNED DURING YEAR WHICH IS RS.1,88,900/-. 13.1 WE FIND THAT ITAT D BENCH IN CASE OF M/S. DA GA GLOBAL CHEMICALS PVT. LTD. VS. ACIT IN ITA NO.5592/MUM/201 2, WHEREIN SIMILAR SET OF FACTS HELD AS UNDER: 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRI EF, ARE THAT THE ASSESSEE IS A LIMITED COMPANY, ENGAGED IN TRADI NG OF BULK AND FINE, CHEMICALS, SOLVENT AND PHARMACEUTICA L RAW MATERIALS DECLARED ITS INCOME AT RS.74,40,000/- ON 26/09/2009. THE ASSESSEE CREDITED DIVIDEND INCOME O F RS.1,82,262/- IN ITS PROFIT AND LOSS ACCOUNT. THE A SSESSING OFFICER WHILE FRAMING THE ASSESSMENT INVOKE SECTION 14A R.W. RULE 8D BY CONTENDING THAT ASSESSEE CLAIMED VA RIOUS EXPENSES WHICH ARE RELATED TO EXEMPT INCOME IN ITS PROFIT & LOSS ACCOUNT AND DISALLOWED RS.14,58,412/-. ON APPE AL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) BROADLY THE STAND TAKEN IN THE ASSESSMENT ORDER WAS AFFIRME D AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEF ORE THIS TRIBUNAL. THE TOTALITY OF FACTS CLEARLY INDICATES, AS CLAIMED BY THE ASSESSEE THAT NO BORROWED FUNDS WERE UTILIZE D FOR EARNING THE EXEMPT INCOME BY THE ASSESSEE AND FURTH ER THE DIVIDEND WERE DIRECTLY CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE AND NO EXPENDITURE WAS CLAIMED. WHAT IT MA Y BE, WE FIND THAT THE ASSESSEE ONLY RECEIVED RS.1,82,362 /- AS DIVIDEND INCOME, THEREFORE, THERE IS NO QUESTION OF ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 20 DISALLOWANCE OF RS.14,58.412/- BY INVOKING SECTION 14A R.W. RULE 8D UNDER THE FACTS AVAILABLE ON RECORD. IT WAS ALSO EXPLAINED BY THE LD. COUNSEL FOR THE ASSESSEE THAT ON IDENTICAL FACT IN EARLIER YEARS, NO DISALLOWANCE WA S MADE. IN THE PRESENT ASSESSMENT YEAR ALSO, NO BORROWED FUNDS WERE INVESTED BY THE ASSESSEE FOR MAKING INVESTMENT IN S HARES OR FOR EARNING DIVIDEND INCOME. AT BEST, IF ANY DISALL OWANCE COULD BE MADE THAT CAN BE RESTRICTED TO RS. 1,485/- WHICH WERE CLAIMED AS DEMAT CHARGES. DISALLOWANCE U/S 14A R.W. RULE 8D CANNOT EXCEED THE EXEMPT INCOME. IN VIEW OF THIS FACT, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE. T HE APPEAL OF THE ASSESSEE IS THEREFORE, ALLOWED. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BE HALF OF REVENUE, FACTS BEING SIMILAR, SO FOLLOWING SAME REA SONING, WE HOLD THAT ANY DISALLOWANCE CAN BE MADE THAT CAN BE RESTRICTED TO THE EXEMPT INCOME CLAIMED BY ASSESSEE, SO, DISAL LOWANCE U/S.14A R.W. RULE 8D IS RESTRICTED TO THAT EXTENT. ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 14. AS A RESULT, ASSESSEES APPEAL IS PARTLY ALLOWE D. 15. IN THE RESULT, BOTH REVENUES APPEALS ARE DISMI SSED WHILE ASSESSEES APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 26 TH DAY OF AUGUST, 2016. SD/- SD/- ( RAJESH KUMAR ) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBE R MUMBAI: DATED 26/08/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE ITA NOS.5181 & 7748/MUM/14 & 353/MUM/15 A.YS. 10-11 & 11-12 [DCIT VS. M/S. AMI INDUSTRIES (INDIA) PVT. LTD.] PAGE 21 3. ! / CONCERNED CIT 4. !- / CIT (A) 5. )*+ ,--, , / DR, ITAT, MUMBAI 6. +12 34 / GUARD FILE. BY ORDER / , / , ,