M/S Naresh Kumar & Co Pvt Ltd., Kolkata V. J.C.I.T (OSD) CC - XX,kolkata., Kolkata

ITSSA 13/KOL/2013

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 1317 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Unexplained expenditure; Document seized; Earning of tax free income; Proportionate interest; Bad and doubtful debts; Validity of assessment; Documents seized
• Section: 153A; 14A; 132; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER IT (SS) A NO. 13 / KOL / 2013 ASSESSMENT YEAR :2008-09 M/S NARESH KUMAR & CO. PVT. LTD., 9B, WOOD STREET, KOLKATA 700 016 [ PAN NO. AABCN 2864 P ] V/S . JCIT,(OSD),CENTRAL CIRICLE-XX, KOLKATA /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI RAVI TULSIYAN, FCA /BY RESPONDENT SHRI NIRAJ KUMAR, CIT-DR /DATE OF HEARING 17-11-2015 /DATE OF PRONOUNCEMENT 11-12-2015 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-III, KOLKATA IN APPEAL NO.259/ CC-XX/CIT(A)C-III/11- 12/KOL. DATED 27.11.2012. ASSESSMENT WAS FRAMED BY JCIT(OSD), CC-XX, KOLKATA U/S 144/153A OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 26.12.2011 FOR ASSE SSMENT YEAR 2008-09. ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE ARBITRARY, ERRONEOUS, WITHOUT PROPER REASONINGS, INVALID AND BAD IN LAW, TO THE EXTENT TO WHICH THEY ARE PREJUDICIAL TO THE INTERESTS OF THE APPELL ANT. 2(A). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE VALIDITY OF THE ASSESSMENT M ADE U/S. 144/153A OF THE INCOME-TAX ACT, 1961, IN SPITE OF THE FACT THAT NEITHER HE NOR THE A.O COULD MENTION ANY SPECIFIC DEFAULT ON THE PART OF T HE APPELLANT IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 2 ASSESSEE, WHICH COULD HAVE ENTITLED THE AO TO MAKE THE ASSESSMENT U/S. 144 OF THE ACT. 2(B). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE VALIDITY OF THE ASSESSMENT M ADE U/S 144/153A OF THE ACT BY OBSERVING THAT THE AO HAD ALLOWED MULTIPLE OPPORTUNITIES TO THE APPELLANT CALLING CERTAIN DETAILS BUT ALL THE I NFORMATION REQUISITIONED BY HIM WERE NOT FURNISHED BY THE APPELLANT, ALTHOUGH THE AO COMPLETING THE ASSESSMENT WAS THERE FOR ONLY A SHORT WHILE AND DURING THAT PERIOD ALSO HE WAS HARD PRESSED FOR COMPLETING A LARGE NUM BER OF TIME-BARRING ASSESSMENTS AND THEREFORE, COULD NOT HAVE ALLOWED M ULTIPLE OPPORTUNITIES TO THE APPELLANT AND ALSO THAT THE CI T(A) HIMSELF COMPLETED THE APPELLATE PROCEEDINGS SIMPLY ON THE B ASIS OF THE REMAND REPORT SUBMITTED BY THE AO AND INFORMATION A LREADY SUBMITTED BY THE APPELLANT AT THE ASSESSMENT STAGE. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN UPHOLDING THE VALIDITY OF THE ASSESSMENT M ADE U/S 144/153A OF THE ACT, IN SPITE OF THE FACT THAT THE AO HAD NOT I SSUED THE STATUTORY NOTICE CALLING UPON THE APPELLANT ASSESSEE TO SHOW CAUSE WHY THE ASSESSMENT SHOULD NOT BE COMPLETED TO THE BEST OF H IS JUDGMENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN OBSERVING THAT ALTHOUGH THE APPELLANT HAD FURNISHED THE POSITION OF ITS OWN FUNDS VIS--VIS THE TOTAL INVESTMENT IN SHARES, BUT IT DID NOT SHOW THAT THE SHARES HAD BEEN ACQUIRED BY IT FROM I TS OWN FUND WITHOUT TAKING BENEFIT OF LOANS, NEGLECTING TO TAKE INTO CO NSIDERATION THE FACT THAT DURING THE YEAR UNDER CONSIDERATION, NO SHARES HAD BEEN PURCHASED BY THE APPELLANT COMPANY AND IN THAT VIEW, IN SUSTAINI NG THE DISALLOWANCE U/S. 14A OF THE ACT, IN PRINCIPLE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN UPHOLDING THAT THE TWO AMOUNTS OF DUMPER M AINTENANCE CHARGES AT 12,84,166/- AND LOADING SUPPLY CHARGES AT 11,56,882/- WERE UNACCOUNTED EXPENDITURE OF THE APPELLANT COMPA NY AND THEREFORE NEEDED TO BE ADDED TO THE APPELLANTS INCOME, SIMPL Y ON THE BASIS OF THE REMAND REPORT SUBMITTED BY THE AO AND WITHOUT A PPLYING HIS OWN MIND AND ALSO BY TOTALLY REJECTING THE EXPLANATION FURNISHED BY THE APPELLANT IN THAT REGARD. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN SUSTAINING ADDITIONS TO THE BUSINESS INCOM E BY 2,63,877/- U/S 14A OF THE ACT, 12,84,166/- BY WAY OF ADDITION OF DUMPER MAINTENANC E CHARGES AND 11,56,882/- AS ADDITION OF LOADING SUPPLY CHARGES 11,56,882/-. IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 3 2. FIRST ISSUE IS REGARDING THAT THE LD. CIT(A) ERR ED IN UPHOLDING THE VALIDITY OF ASSESSMENT MADE U/S.144 R.W.S. 153A. AT THE OUTSET, WE FIND THAT ASSESSMENT WAS COMPLETE D BY ASSESSING OFFICER U/S. 144/153A OF THE ACT BECAUSE THE ASSESSEE COULD NOT APPEAR ON THE DATES OF HEARINGS FIXED BY AO TO SUBMIT THE NECESSARY DET AILS IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS AND IT WAS ALSO A TIME-BARRI NG CASE. THEREFORE, THERE WAS NO OPTION LEFT WITH THE AO TO COMPLETE THE ASSE SSMENT U/S 144/153A OF THE ACT. HOWEVER, LD. AR OF ASSESSEE STATED THAT AL L THE DETAILS WERE DULY SUBMITTED BEFORE THE AO WELL IN ADVANCE ON TIME AND THE ALLEGATION THAT THE ASSESSEE HAS FAILED TO PRODUCE ITS BOOKS OF ACCOUNT DOES NOT HOLD ANY MERIT. HOWEVER, BOTH LD. AR AND LD. DR AGREED NOT TO GO IN TO THE INTRICACIES OF MAKING THE ASSESSMENT U/S 144 OF THE ACT. CONSIDERI NG THE SAME WE REJECTED THIS GROUND OF ASSESSEES APPEAL AND DECIDED TO HEA R THE CASE ON MERIT. 3. SECOND GROUND IS REGARDING THAT LD. CIT(A) HAS E RRED IN SUSTAINING THE ADDITION MADE BY AO TO THE INCOME OF ASSESSEE AT 2,63,877/- U/S 14A OF THE ACT. 4. THE FACTS OF THE CASE ARE THAT THERE WAS A SEARC H AND SEIZURE OPERATION U/S 132 OF THE ACT ON DATED 13.01.2010 IN THE CASE OF NARESH KUMAR GROUP. THE MAIN BUSINESS OF THE GROUP IS HANDLING & SUPERV ISION OF SALE OF COAL FOR VARIOUS COMPANIES VIZ., TSL, HINDALCO, IFFICO, TATA POWER, TISCO, ACC, L&T AND THE GROUP IS CONTROLLED BY SRI NARESH KUMAR , SRI ARJUN KUMAR, SMT. SUNITA KUMARI AND SMT. JESSIMA KUMARI. THE GROUP IS HEADED BY ITS FLAGSHIP COMPANIES LIKE M/S NARESH KUMAR & CO., M/S NARESH K UMAR & CO. PVT. LTD., M/S ARJUN ASSOCIATES PVT. LTD., ETC. SINCE THE ASSE SSEE BELONGS TO GROUP THEREFORE IT WAS DULY COVERED U/S 132 OF THE ACT. D URING THE YEAR UNDER CONSIDERATION, AO MADE REQUISITION TO ASSESSEE FOR SUBMISSION OF VARIOUS DETAILS FOR THE PURPOSE OF ASSESSMENT. HOWEVER, ASS ESSEE FAILED TO SUBMIT THE DESIRED DETAILS BEFORE THE AO. THEREFORE, THE ASSES SMENT WAS FRAMED U/S. IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 4 144/153A OF THE ACT. ACCORDINGLY, AO ASSESSED THE B USINESS INCOME AT RS. 18.30 LAKHS LTCG RS. 25 LAKHS AND STCG RS. 20 LAKHA U/S. 144 R.W.S. 153A OF THE ACT AND RAISED THE DEMAND OF TAX. 5. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. C IT(A). AT THE TIME OF APPELLATE PROCEEDINGS, LD. CIT(A) CALLED FOR VARIOU S DETAILS FROM THE ASSESSEE AND TOOK THE REMAND REPORT FROM AO ON THOSE DETAILS . LD. CIT(A) FOUND THAT ASSESSEE IS HAVING INCOME FROM THE EXEMPTED SOURCES I.E., DIVIDEND INCOME BUT NO EXPENSES IN RELATION TO THAT HAS BEEN DISALL OWED. THE LD. CIT(A) CALLED FOR THE REMAND REPORT OF AO WHO HAS DISALLOWED THE EXPENSES AS PER RULE 8D OF THE ACT FOR AN AMOUNT OF RS. 14,71,539/- AS DET AILED UNDER : DIRECT EXPENSES --- NIL PROPORTIONATE INTEREST EXPENSES 76,45,348 (A) X 1,64,52,000 (B) / 69,25,63,261 (C) --- 1,81,617.00 ADMINISTRATIVE EXPENSES 0.5% OF 25,79,84,375 (D) --- 12,89,922.00 TOTAL DISALLOWANCE U/S. 14A AS PER RULE 8D --- 14,71,539.00 (A) --- INTEREST ON BANK LOAN AS DEBITED TO P & L A CCOUNTS (B) --- AVERAGE OF INVESTMENT IN SHARES AS ON THE F IRST DAY AND LAST DAY OF THE YEAR, INCOME FROM WHICH IS EXEMPT FROM TAX --- AVERAGE OF TOTAL ASSETS AS ON THE FIRST DAY A ND LAST DAY OF THE YEAR. (D) --- TOTAL ADMINISTRATIVE EXPENSES (SUM OF EXPEN SES CLUBBED UNDER EMPLOYEE COST, ADMINISTRATION AND SELLING COST AND OTHER LESS BAD DEBTS) AS PER P & L ACCOUNTS HOWEVER THE LD. CIT(A) DISREGARDED THE WORKING OF A O BY OBSERVING AS UNDER: AS PER THE BALANCE SHEET OF THE APPELLANT, WHICH IS PLACED ON PAGE 7 OF THE PAPER BOOK, THE VALUE OF INVESTMENTS, BOTH A T THE BEGINNING AND AT THE END OF THE RELEVANT PREVIOUS YEAR, WERE OF R S.1,64,52,000/-, THEREFORE, THE AVERAGE OF THE VALUE OF INVESTMENTS COMES TO RS.1,64,52,000/- 0.5% OF WHICH COMES TO RS.82,260/- . HENCE, THE CORRECT AMOUNT OF DISALLOWANCE U/S. 14A AS PER AOS OWN WORKING SUGGESTED IN HIS REMAND REPORT SHALL BE AS FOLLOWS: PARTICULARS AMOUNT(RS) DIRECT EXPENSES NIL PROPORTIONATE INTEREST EXPENSES 1,81,617/- ADMINISTRATIVE EXPENSES 82,260/- 2,63,877/- IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 5 THEREFORE, THE DISALLOWANCE U/S 14A IN THIS CASE WO RKS OUT TO RS.2,63,877/- WHICH SHALL BE DISALLOWED WHILE COMPU TING THE APPELLANTS TOTAL INCOME. THEREFORE, THE DISALLOWANCE U/S. 14A IN THIS CASE W ORKS OUT TO RS.2,63,877/- WHICH WAS DISALLOWED WHILE COMPUTING THE APPELLANT S TOTAL INCOME. AGGRIEVED, ASSESSEE PREFERRED SECOND APPEAL BEFORE US. SHRI RAVI TULSIYAN, LD. AUTHORIZED REPRESENTATIVE A PPEARING ON BEHALF OF ASSESSEE AND SHRI NIRAJ KUMAR, LD. DEPARTMENTAL REP RESENTATIVE APPEARING ON BEHALF OF REVENUE. 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. BEFORE US LD. AR FIL ED PAPER BOOK CONTAINING PAGES 1 TO 43 AND SUBMITTED THAT AO WHILE COMPUTING THE DISALLOWANCE U/S. 14A R.W.T. RULE 8D OF THE IT RULES CONSIDERED ALL T HE INVESTMENTS OF ASSESSEE INCLUDING THOSE ON WHICH NO DIVIDEND INCOME WAS EAR NED BY ASSESSEE DURING THE YEAR AND PRAYED TO WORK OUT THE DISALLOWANCE IN THE FOLLOWING MANNER:- (I) PROPORTIONATE INTEREST (76,45,348 X 31,50,000/69,25,63,261) RS.34,773 (II) 0.5% OF 31,50,000 RS.15,750 RS.50,523 IN THE LIGHT OF THE ABOVE, IT IS PRAYED THAT BALANC E DISALLOWANCE OF RS.2,13,354/-(2,63,877/- - 50,523) BE DELETED. LD. AR IN SUPPORT OF ABOVE WORKING HAS ALSO CITED T HE DECISION OF THIS TRIBUNAL IN THE CASE OF REI AGRO LTD. V. DCIT (2014) 160 TTJ 107 (KOL) AND GA NO. 3581 OF 2013 DATED 25.04.2014 IN THE CASE OF CIT V. M/S REI AGRO LTD. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDERS OF AUTHORITIES BELOW. 7. FROM THE AFORESAID DISCUSSION, WE FIND THAT AO H AS WORKED OUT THE DISALLOWANCE OF INTEREST BY TAKING THE AVERAGE VALU E OF TOTAL INVESTMENT AS NUMERATOR, HOWEVER, LD AR SUBMITTED THAT THE INVEST MENT WHICH IS YIELDING THE DIVIDEND INCOME DURING THE RELEVANT YEAR UNDER CONSIDERATION SHOULD BE IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 6 TAKEN AS NUMERATOR IN WORKING OUT THE DISALLOWANCE AS PER RULE 8D OF THE IT RULES. WE ARE ALSO FINDING THE ORDER OF THIS TRIBUN AL IN THE CASE OF REI AGRO LTD. (SUPRA) WHEREIN IT WAS HELD AS UNDER:- 7. COMING TO THE MERITS OF THE ISSUE. A PERUSAL O F THE PROVISION OF SECTION 14A(1) CLEARLY SHOWS THE WORDINGS, IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT IS THE DIVIDEND INCOME OF RS.1,32,638/-. THEREFORE, IF ANY DISALLOWANCE IS TO BE MADE IN RESPECT OF EXPENDITURE INCURRED, IT SHOU LD BE IN RELATION TO THIS DIVIDEND INCOME OF RS.1,32,638/-. IF AN ASSESS EE HAS INVESTED IN SHARES, WHICH COULD GET DIVIDEND OR THERE IS INVEST MENT WHICH GENERATES DIVIDEND INCOME OR EXEMPT INCOME AS ALSO INVESTMENT WHICH DOES NOT GENERATE EXEMPT INCOME, IT IS ONLY SUCH INVESTMENTS IN RESPECT OF WHICH THE DIVIDEND INCOME OR EXEMPTED INCOME HAS BEEN EAR NED WHICH CAN BE CONSIDERED WHEN COMPUTING THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D. A PERUSAL OF THE PROVISIONS OF R ULE 8D ALSO TALKS OF SATISFACTION IN SUB-RULE (1). RULE 8D(2) HAS THREE SUB-ARTS. THE FIRST SUB- ART I.E. (I) DEALS WITH THE AMOUNT OF EXPENDITURE DIRECTLY RELAT ING TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME . THAT ISSUE IS NOT IN DISPUTE HERE AND THEREFORE, WE DO NOT GO INTO IT IN THIS CASE. IN SECOND SUB-PART I.E. (II), IT IS A COMPUTATION PROVIDED IN RESPECT OF EXPENDIT URE INCURRED BY THE ASSESSEE BY WAY OF INTEREST DURING THE PREVIOUS YEAR WHICH IS NOT DIRECTLY ATTRIBUTABLE TO ANY PARTICULA R INCOME OR RECEIPT. THIS CLEARLY MEANS THAT IF THERE IS ANY INTEREST EXPENDI TURE, WHICH IS DIRECTLY RELATABLE TO ANY PARTICULAR INCOME OR RECEIPT, SUCH INTEREST EXPENDITURE IS NOT TO BE CONSIDERED UNDER RULE 8D(2)(II) . IN THE ASSESSEES CASE HERE THE INTEREST HAS BEEN PAID BY THE ASSESSEE ON THE L OANS TAKEN FROM THE BANKS FOR ITS BUSINESS PURPOSE. THERE IS NO ALLEGAT ION FROM THE BANKS NOR THE AO THAT THE LOAN FUNDS HAVE BEEN DIVERTED F OR MAKING THE INVESTMENT IN SHARES OR FOR NON-BUSINESS PURPOSES. FURTHER RULE 8D(2)(II) CLEARLY IS WORDED IN THE NEGATIVE WITH TH E WORDS NOT DIRECTLY ATTRIBUTABLE . THUS FOR BRINGING ANY INTEREST EXPENDITURE, CLAI MED BY THE ASSESSEE, UNDER THE AMBIT OF RULE 8D(2)(II) IT WILL HAVE TO BE SHOWN BY THE AO THAT THE SAID INTEREST IS NOT DIRECTLY ATTRI BUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. WHY WE SAY HERE THAT IT IS TO BE SHOWN BY THE AO IS ON ACCOUNT OF THE WORDS IN RULE 8D(1) BEING WHERE THE ASSESSING OFFICER , . IS NOT SATISFIED WITH. (A) .. IN RELATION TO INCOME .., HE SHALL DETERMINE THE A MOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME IN ACCORDANC E WITH THE PROVISIONS OF SUB-RULE (2). IN THE ASSESSEES CASE, ADMITTEDLY, THE ASSESSEE HA S SUBSTANTIAL CAPITAL. THE INCREASE IN THE CAPITAL ITSELF IS TO A N EXTENT OF RS.4 CRORES AND IN RESPECT OF RESERVES AND SURPLUS, THE INCREAS E IS RS.112 IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 7 CRORES. THE LOANS TAKEN DURING THE YEAR ADMITTEDLY ARE FOR THE LETTERS OF CREDIT AND THE ASSESSEE IS BOUND TO PROVIDE THE BANK STOCK STATEMENT AND OTHER DETAILS TO SHOW THE UTILIZATION OF THE LOANS. NO BANK WOULD PERMIT THE LOAN GIVEN FOR ONE PURPOSE TO BE USED FOR MAKING ANY INVESTMENT IN SHARES. THE LD. CIT(A), IT IS NOTICED THAT AFTER CONSIDERING THE FACTS THAT THE ASSESSEE HAD N OT USED ANY OF ITS BORROWINGS FOR PURCHASING THE SHARES, HAS DELETED T HE DISALLOWANCE. ON THIS GROUND ITSELF, THE DELETION AS MADE BY THE LD. CIT(A) IS LIABLE TO BE CONFIRMED AND WE DO SO. 7.1 IN ANY CASE, THE WORDING OF THE DISALLOWANCE UN DER SUB-PART (II) OF SUB-CLAUSE (2) OF RULE 8D AS MADE BY THE AO ALSO SU FFERS FROM A SUBSTANTIAL ERROR IN SO FAR AS IN THE SAID RULE IN REGARD TO THE NUMERATOR B, THE WORDS USED ARE THE AVERAGE VALUE O F THE INVESTMENT, INCOME FROM WHICH DOES NOT FORM OR SHAL L NOT FORM PART OF THE TOTAL INCOME AS APPEARING IN THE BALANCE-SHE ET AS ON THE FIRST DAY AND IN THE LAST DAY OF THE PREVIOUS YEAR. HERE THE AO HAS TAKEN INTO CONSIDERATION THE INVESTMENT OF RS.103 CRORES MADE THIS YEAR, WHICH HAS NOT EARNED ANY DIVIDEND OR EXEMPT INCOME. IT IS ONLY THE AVERAGE OF THE VALUE OF THE INVESTMENT FROM WHICH T HE INCOME HAS BEEN EARNED WHICH IS NOT FALLING WITHIN THE PART OF THE TOTAL INCOME THAT IS TO BE CONSIDERED. THIS IS WHY THE QUESTION OF SATISFACTION IS PROVIDE IN SECTION 14A AND RULE 8D(1), THAT RELATES TO THE ACCOUNTS OF THE ASSESSEE. THUS, IT IS NOT THE TOTAL INVESTMENT AT THE BEGINNING OF THE YEAR AND AT THE END OF THE YEAR, WHICH IS TO BE CONSIDERED BUT IT IS THE AVERAGE OF THE VALUE OF INVESTMENTS WHICH HAS G IVEN RISE TO THE INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME WHICH IS TO BE CONSIDERED. A QUESTION MAY ARISE AS TO WHY THE TERM AVERAGE OF THE VALUE OF INVESTMENT IS THEN USED. THE TERM AVERAGE OF THE VALUE OF INVESTMENT WOULD BE TO TAKE CARE OF CASE W HERE THERE IS THE ISSUE OF DIVIDEND STRIPING. IN ANY CASE, AS WE HAVE ALREADY HELD THAT THE ASSESSEE HAS NO INCURRED ANY EXPENDITURE BY WAY OF INTEREST DURING THE PREVIOUS YEAR, WHICH IS NOT DIRECTLY ATT RIBUTABLE TO ANY PARTICULAR INCOME, THE FINDINGS OF THE LD. CIT(A) O N THE ISSUE STAND CONFIRMED AND CONSEQUENTLY THE APPEAL FILED BY THE REVENUE STAND DISMISSED. 8. IN RESPECT OF PROVISIONS OF RULE 8D(2)(II), WHIC H IS THE SUBJECT- MATTER OF THE APPEAL IN THE ASSESSEES HAND, A PERU SAL OF THE SAID PROVISION SHOWS THAT WHAT IS DISALLOWABLE UNDER RUL E 8D(2)(II) IS THE AMOUNT EQUAL TO PERCENTAGE OF THE AVERAGE VALUE O F INVESTMENT THE INCOME FROM WHICH DOES NOT OR SHALL NOT FORM P ART OF THE TOTAL INCOME. THUS, UNDER SUB-CLAUSE (III), WHAT IS DISAL LOWED IS PERCENTAGE OF THE NUMERATOR B IN RULE 8D(2)(II). AG AIN THIS IS TO BE CALCULATED IN THE SAME LINE AS MENTIONED EARLIER IN RESPECT OF NUMERATOR B IN RULE 8D(2)(II) OF THE ACT. IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 8 8.1 THUS, NOT ALL INVESTMENTS BECOME THE SUBJECT-M ATTER OF CONSIDERATION WHEN COMPUTING DISALLOWANCE UNDER SEC TION 14A READ WITH RULE 8D. THE DISALLOWANCE UNDER SECTION 14A RE AD WITH RULE 8D IS TO BE IN RELATION TO THE INCOME WHICH DOES NOT F ORM PART OF THE TOTAL INCOME AND THIS CAN BE DONE ONLY BY TAKING INTO CON SIDERATION THE INVESTMENT WHICH HAS GIVEN RISE TO THIS INCOME WHIC H DOES NOT FORM PART OF THE TOTAL INCOME. UNDER THE CIRCUMSTANCES, THE COMPUTATION OF THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8 D(2)(II), WHICH IS ISSUE IN THE ASSESSEES APPEAL, IS RESTORED TO THE FILE OF THE AO FOR RECOMPUTATION IN LINE WITH THE DIRECTION GIVEN ABOV E. NO DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8D(2)(I) AND (II) CAN BE MADE IN THIS CASE. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED AND THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. FROM THE AFORESAID CASE WE FIND THAT THE DISALLOWAN CE CAN BE MADE UNDER SECTION 14A READ WITH RULE 8D OF THE INCOME TAX RUL E IN RESPECT OF SUCH INVESTMENT WHICH HAS GENERATED INCOME. IN THE INSTA NT CASE THE ASSESSEE HAS TAKEN ONLY SUCH INVESTMENT AS NUMERATOR WHILE WORKI NG THE DISALLOWANCE. AS REGARDS THE DISALLOWANCE SPECIFIED UNDER THE PRO VISION OF RULE 8D OF THE IT RULES, SUB-CLAUSE (III) .5% OF THE AVERAGE VALUE OF THE INVESTMENT WHICH IS GENERATING THE REVENUE IS TO BE TAKEN. HOWEVER, LD. CIT(A) HAS TAKEN .5% OF THE AVERAGE VALUE OF TOTAL INVESTMENT IN THIS CASE, WE ARE PUTTING OUR RELIANCE ONCE AGAIN IN THE AFORESAID CASE IN THE CASE OF REI AGRO LTD. (SUPRA) WHERE .5% OF THE AVERAGE INVESTMENT WHICH IS YIELDING TO DIVIDEND INCOME TO ASSESSEE SHOULD BE CONSIDERED. IN VIEW OF THE ABOVE , WE REVERSE THE ORDERS OF AUTHORITIES BELOW AND ALLOW THIS GROUND RAISED B Y ASSESSEE. 8. THIRD GROUND IS REGARDING THE ADDITION OF DUMPER MAINTENANCE CHARGES AT 12,84,166/- AND LOADING SUPPLY CHARGES AT 11,56,882/- CONFIRMING THE ORDER OF AO AS UNACCOUNTED EXPENDITURES OF ASSESSE E. 9. FACTS OF THE CASE ARE THAT DURING THE SEARCH CER TAIN DOCUMENTS WERE SEIZED. THE AO DURING THE COURSE OF ASSESSMENT PROC EEDINGS FOUND FROM THE IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 9 DOCUMENTS IMPOUNDED DURING THE COURSE OF SEARCH ON PAGE NO. 16 OF AVR-4 THAT THE EXPENSES OF RS. 11,56,882.00 TOWARDS LOADI NG SUPPLY CHARGES AND RS. 12,84,166.00 TOWARDS DUMPER MAINTENANCE CHARGES WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNTS. THE ASSESSEE EXPLAIN ED IN HIS REJOINDER THAT THE ABOVE EXPENSES RELATE TO THE RANCHI BRANCH OF T HE ASSESSEE AND DULY RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE ALS O SUBMITTED THAT ACTUAL FIGURES OF THESE EXPENSES HAVE SLIGHTLY CHANGED WIT H THOSE DOCUMENTS IMPOUNDED DURING SEARCH SUBSEQUENT TO THE AUDIT. HO WEVER THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE AND ADDED THE ABOVE AMOUNT TO THE INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- SINCE, THE AO HAS GIVEN A FINDING IN HIS REMAND RE PORT THAT THE AMOUNT OF DUMPER MAINTENANCE CHARGES OF RS.12,84,166/- AND OF LOADING SUPPLY CHARGES OF RS.11,56,882/- WERE NOT RECORDED IN THE REGULAR BOOKS OF ACCOUNT OF THE APPELLANT AND THE APPELLANT HAVING FAILED TO PROVE ITS CONTENTION THAT THESE FIGURES HAD UNDERGO NE CHANGE ON AUDIT OF ACCOUNTS, IT IS LOGICAL TO CONCLUDE THAT THE ABO VE MENTIONED TWO AMOUNTS WERE UNACCOUNTED EXPENDITURE OF THE APPELLA NT AND NEED TO BE ADDED TO THE APPELLANTS INCOME. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E PREFERRED SECOND APPEAL BEFORE US. 10. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PAR TIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. LD. AR DREW OUR ATTE NTION ON PAGE 24 OF THE PAPER BOOK WHERE THE TOTAL DUMPER CHARGES RELATING TO RANCHI BRANCH WAS RECORDED FOR AMOUNT OF 12,89,166/- AND THERE IS A DIFFERENCE OF 5,000/- APPROXIMATELY BETWEEN EXPENSE RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE AND THE DOCUMENTS IMPOUNDED AT THE TIME OF SEARCH AND THE REASON FOR THE DIFFERENCE WAS EXPLAINED THAT THE FIGURE WA S CHANGED AFTER THE AUDIT AND THE CHANGE AMOUNT WAS NEGLIGENT IN VALUE. SIMIL ARLY LD. AR FURTHER DREW OUR ATTENTION ON PAGE 23 OF THE PAPER BOOK WHERE TO TAL LOADING CHARGES WERE RECORDED FOR AN AMOUNT OF RS. 28002976.89 AND RELEV ANT EXPENSE FOR RANCHI IT(SS)A NO.13/KOL/2013 A.Y. 2008-09 M/S NARESH KR. & CO. PVT. LTD. V. JCIT(OSD),CC-X X, KOL. P AGE 10 BRANCH WAS RECORDED AT PAGES 29 & 32 OF THE PAPER B OOK FOR AN AMOUNT OF (861792.56+ 507492.00) 13,69,284/- FROM THE AFORESAID DISCUSSION, AND SUBMISSION MADE BEFORE US BY LD. AR, WE FIND THAT A LL THE EXPENSES WERE DULY RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE AND IT IS ALSO MATCHING WITH THE IMPOUNDED DOCUMENTS SUBJECT TO THE MINOR DIFFERENCE AND THE REASON FOR CHANGING THE FIGURES WAS DULY EXPLAINED BEFORE US A ND WE FIND FORCE IN THE ARGUMENTS OF LD. AR. ON THE OTHER HAND, LD. DR VEHE MENTLY RELIED ON THE ORDERS OF AUTHORITIES BELOW. IT IS ALSO IMPORTANT T O NOTE THAT ALMOST ALL THE ENTRIES RECORDED IN THE SEIZED DOCUMENTS WERE MATCH ED EXCEPT THE ABOVE ENTRIES. WE FIND THAT THESE ENTRIES ALSO GOT MATCHE D SUBJECT TO MINOR CHANGE WHICH IS NEGLIGIBLE IN VALUE. IN VIEW OF THE ABOVE, WE REVERSE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION MADE BY A SSESSING OFFICER AND SUSTAINED BY LD. CIT(A). 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 11/12 /2015 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 11 /1 2 /2015 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S NARESH KR. & CO. PVT. LTD., 9B, WOOD STREET, KOL-16 2. /RESPONDENT-JCIT(OSD), CC-XX,KOLKATA 3. * +, - - . / CONCERNED CIT KOLKATA 4. - - .- / CIT (A) KOLKATA 5. 012 33+,, - +, , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ - , /TRUE COPY/ / - +, ,