TaxTMI 
TaxTMI 
2021 (5) TMI 538
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....sh. In the second round of litigation, the additions and disallowances were substantially confirmed by Ld. CIT(A) vide his impugned order dated 31.12.2018 and the aggrieved assessee is in appeal before us. The various grounds raised by the assessee are as under: "1) On the facts and the circumstances of the case, the Hon'ble CIT(A) erred in rejecting the Appellant's contention that the learned AO legally erred in invoking Section 144 of the Act and making best judgement assessment while assessing the income of the Appellant. 2) On the facts and the circumstances of the case, the Hon'ble CIT(A) erred in holding that there is no bar on the AO in resorting to the presumptions provided under section 292C or 132(4A) while completing the assessment and rejecting the Appellant's contention that presumptions raised under section 132(4A) of the Act cannot be used for making routine assessment. 3) On the facts and the circumstances of the case, the Hon'ble CIT(A) erred in rejecting the Appellant's contention that the learned AO erred in making the additions on the material and / information received from third parties without furnishing copi....
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.... decide this appeal according to the law." 3. Ground Nos.1, 2 & 3 are general in nature and need no adjudication. 4. The issue raised in ground No.4 is against the order of Ld. CIT(A) upholding the addition of Rs. 81,15,850/- made by the AO towards profit in money market operations. 5. The assessee has also filed an additional ground vide letter dated 03.03.2020 a part whereof is connected to ground no. 4 and is required to be adjudicated together. The additional ground is reproduced as under: "1. The learned CIT(A) has erred in not accepting audited books of accounts and also in not considering security trading loss of Rs. 76,76,455/- and depreciation of Rs. 4,72,678/-." 6. The said additional ground is being taken up at this stage because the security trading loss of Rs. 76,76,455/- has a bearing on ground No.4 as the assessee has submitted before the Bench that this loss may kindly be allowed to be set off against the addition made of Rs. 81,15,850/-. The assessee has also raised the issue of depreciation of Rs. 4,72,678/- with the prayers that the same may kindly be allowed as the same has been provided in the assets used in the business of the assessee.....
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....lined to admit the additional ground for adjudication before us. 9. The facts in brief are that the AO, on the basis of contract notes related to money market transactions issued by M/s. Harshad S. Mehta to the assessee, observed that assessee has earned an aggregate of Rs. 81,15,850/- from seven money market transactions and accordingly added the same to the income of the assessee. In the first round of litigation, the Ld. CIT(A) noted that assessee has entered into money market transactions resulting into a profit of Rs. 81,15,850/- which even the assessee has not disputed. The Ld. CIT(A) also noted in the first round that only grievance of the assessee was that it had also entered into similar transactions resulting into losses which have not been allowed to be set off against the profit from money market transactions. 10. In the second round of litigation, the assessee submitted before the Ld. CIT(A) that it has earned a net income of Rs. 4,39,395/- after claiming a set off of trading losses of Rs. 76,76,455/- and offered the same as income from speculation business in its books of accounts. It was submitted that the said books of accounts have been duly audited by the au....
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.... Therefore, no infirmity is found in the action of the AO of taxing the said entire amount of Rs. 81,15,850/- related to money market transactions. Accordingly, ground No 4 of the appeal is dismissed." 11. The Ld. A.R. submitted before the Bench that Ld. CIT(A) has failed to appreciate the facts as available on record. The Ld. A.R. submitted that profit from money market transactions of Rs. 81,15,850/- is a speculative profit and eligible to be set off against the loss from share transactions which were of speculative in nature on which the assessee has incurred an aggregate loss of Rs. 76,76,455/-. The Ld. A.R. referred to the page No.70 of the paper book which is a share trading account and contains entries in respect of the aforesaid money market transactions and submitted that in the said account only the difference is credited as profit without taking total value of transactions of purchase and sale for the reason that assessee has not taken delivery of securities as the same was not intended. The Ld. A.R. submitted that these transactions were in fact settled without taking and giving any delivery and therefore assessee was entitled to only the difference between purcha....
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....facts and opine that profit from money market transactions is a speculative profit and eligible to be set off against the losses incurred on the share transactions of speculative nature. The Ld. CIT(A) has given a finding that transaction of money market are always backed by bank receipts or actual bonds and thus profit or loss arising from money market transactions are non speculative in nature, however, after examining the records before us we find that in this case the physical delivery has not taken place and therefore the transactions of sale and purchase of securities are speculative transactions and so is the profit resulting from those transactions. The speculative transactions are defined under section 43(5) of the Act and are eligible to be set off against the loss of share transactions. Accordingly, we hold that the speculative loss from share market transactions of Rs. 76,76,455/- is eligible to be set off against the profit from trading in money market securities at Rs. 81,15,850/-. The case of the assessee is also covered by the decision of the co-ordinate bench of the Tribunal in the case of Growmore Research and Assets Management Ltd. vs. DCIT (supra) wherein the co....
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....ere included in the definition of the term "securities" by amending Act clearly, shows that the units of the mutual funds were not included in that definition before the amendment. As observed by the Supreme court in its judgment in the case of R13! Vs. Peerless General Finance and Investment Co. Ltd AIR 1987 SC 1023 that the Legislatures resort to inclusive definitions also to bring under one nomenclature all transactions possessing certain similar features but going under different names. Depending on the context, in the process of enlarging, the definition may even become exhaustive. In my opinion, therefore; the word "include" is used in Section 2(h), in truth and substance, to give exhaustive definition of the term "securities" for the purpose of Securities Contract Act. Therefore, as on the relevant date the units of the Mutual Funds which was the subject matter of the ready forward transaction between the parties was not securities within the meaning of the Securities Contract Regulation Act, the transaction was not hit by the notification issued by the Central Government under Section 16 and therefore, the transaction cannot be said to be an illegal transaction as it was no....
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....supra) wherein it has been held after considering aforesaid judgment of Hon'ble Supreme Court in the case of Appollo Tyres Ltd. (supra) that transactions of sale and purchase of units and government securities by the assessee through a broker without exchange of actual delivery would fall within the scope of speculative transactions as defined in section 43(5). Therefore, loss/profit from shares market transactions can very well be set off/adjusted against loss/profit of money market transactions. This issue has already been decided in favour of the assessee by the Tribunal in the case of group company of the assessee namely M/s. Growmore Leasing Investment (supra) as discussed above also. No distinction has been pointed out on facts or legal position by the Ld. Special Counsel of the Revenue, therefore respectfully following the order of the Tribunal in the case of M/s. Growmore Leasing Investment (supra) as well as ANZ Grindlays Bank v. DCIT (supra), we find that the claim of the assessee is allowable. Therefore disallowance made by the AO is directed to be deleted. Thus, ground no.2 is allowed." 13. In view of the above facts and circumstances and also the decision of the co-....
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....apers. The AO observed that the position of various scrips shown in the name of the assessee on various dates has either to result in delivery or has to be squared up by sale of shares. Since the detail pertaining to squaring up of position was not available on record, the same is considered as squared up on 31.03.1992 or wherever information of change in position is available on the day when the position is changed. Based on this conclusion, the AO calculated the profit on squaring up of positions by presuming that on each day subsequent to the date of the sheet the position originally held in the name of the assessee was squared off calculation whereof are as under: Particulars Amount (in Rs.) Position between 24.01.1992 and 12.02.1992 4,53,42,998 Position between 12.02.1992 and 18.02.1992 (-)25,08,750 Position between 18.02.1992 and 21.02.1992 20,02,40,875/- Position between 27.02.1992 and 31.03.1992 71,99,04,250 TOTAL 97,29,79,373 17. Accordingly, the AO made the addition of Rs. 97,29,79,373/- on account of speculative income by squaring up of positions in various scrips. 18. In the first round of litigation before Ld. CIT(A) these addi....
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....n Section 132(4A) can be relied upon in any proceedings under this Act. This contention has also been duly addressed and rejected while adjudicating ground No 2 of the appeal of the assessee. 14.12 The assessee in the present appellate proceedings has contended that M/s J H Mehta, its broker was using the dummy name "CASCADE HOLDINGS /CASCADE" in respect of the shares purchased / sold on behalf of its various clients till the sauda book was validated / corrected and only thereafter the said transactions of the clients were posted in their respective ledgers and contract notes issued. It was submitted that the initial entries were being made by the junior staff of M/s. J.H. Mehta and therefore were prone to mistakes. The assessee contends that only few of the transactions as per the said seized documents relate to it and they have been duly recorded in its regular books and the bulk of the transactions relate to the other entities of its group namely M/s Growmore Leasing, M/s Growmore Research, M/s Harsh Estates, Jyoti H Mehta -investments, Jyoti H Mehta - trading, M/s Mazda Industries, Deepika Mehta, Harshad Mehta, Hitesh Mehta, Pratima Mehta, Rasila Mehta, Sudhir Mehta & ....
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....ng undertaken particularly for organizing networking of programs and the programs were needing certain test data. I say that the seized list i.e. 30 pages as enclosed with the assessment order is actually a print out of such test data. I say that the same is not the list of actual transactions undertaken by me on behalf of M/s. Cascade Holdings P. Ltd. as concluded by the Assessing Officer in the order. In support of the same, I state as follows:- (i) that the last column containing 'C. No.' represents 'Contract Number". It may be noted that for practically each and every transaction listed in this above material, no contract number is mentioned. In fact, this conclusively establishes that these are not the actual transactions but only a test list. ..................................................in the alternative, I am open to establish the same directly to the ACIT or CIT(Appeals) by producing the relevant records. 14.15 However, in the present appellate proceedings, it has been contended that the said transactions as per the seized documents have actually taken place but only some of them relate to the assessee and the balance relate to the other ....
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....y name "CASCADE HOLDINGS /CASCADE" for noting the transactions undertaken for its clients prior to correction/validation, is rejected. 14.17 To ascertain the genuineness of the claim of the assessee that the said transactions as per the seized documents are in respect of the other entities of the Harshad Mehta Group, the ledger accounts of the said other entities in the books of M/s J H Mehta were examined. From the ledger accounts, it was observed that there is no actual payment / receipt by way of cash / cheque and there are only adjustments by way of Journal entries. Therefore, the assessee vide order sheet noting dated 08,10.2018 was asked to submit details of actual payments made other than the adjustments made by way of journal entry in respect of the shares purchased by the said other entities of the Harshad Mehta Group and details of actual receipts other than adjustments by way of journal entry for the shares sold by the said other entities. Moreover, the assessee was also asked to submit the proof of delivery with distinctive numbers since it was the claim of the assessee that the conclusion of the AO that the said transactions are forward transactions without de....
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....f proof of delivery with distinctive numbers for transfer of the said alleged shares by the said 4 brokers of Calcutta Stock Exchange to M/s. J.H. Mehta and thereafter to the said other notified entities of Harshad Mehta Group. It is pertinent to mention that most of the shares subsequently registered by the Custodian in the hands of the various entities of Harshad Mehta Group are tainted/benami shares seized by the various investigative agencies for which even Shri Harshad Mehta himself could not identify the owners for a substantial period of time and even now a large number of such tainted/benami shares are lying in a common pool created by the Custodian since, the owners have still not been identified. It is also noted that even while informing the Custodian about the ownership of the said tainted/benami shares, no proof of delivery was provided. Thus, the action of the AO of presuming that the said stock of shares as per the seized documents belong to the assessee which was carried forward and squared up on or before 31.03.1992, cannot be faulted. 14.19 The assessee has further contended that the total quantum of forward transactions undertaken by M/s J H Meh....
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....with supporting evidences of delivery to verify whether the said transactions are of the nature of "speculative" or "non-speculative". However, this information was not submitted despite several reminders. Even in the present appellate proceedings, no evidences have been placed of delivery of the said shares. Therefore, the action of the AO of presuming that the said shares were transacted on carry forward basis and sold on 31.03.1992, cannot be faulted. 14.21 Further, the assessee contends that in Calcutta Stock Exchange, carry over was not allowed and therefore the conclusion drawn by the AO and the resultant additions after presuming sale on squaring up, is not correct. Moreover, the assessee also contended that if it had actually earned such huge profits, it would have received payments from the said 4 broker firms of Calcutta. On these contentions, it is observed that it is not the case of the AO that the said purchase/sale transactions in respect of the stock noted in the said seized documents were carried out at Calcutta Stock Exchange. The notings on the said seized documents suggested purchases at various stock exchanges and also outside the floor of Stock Exchang....
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.... owners, such shares may be registered in the name of 'The Custodian, Special Court'. As may be noted, the Hon'ble Special Court while giving this direction has not given any finding that the shares in Question do not belong to the appellant. Subsequently, the Custodian had the occasion to made an application dated 23.07.2003 made by the Custodian in paras 11 and 12 of the application, before the Hon'ble Special Court seeking directions/order for transfer of shares belonging to the Harshad Mehta Group of Entities in the name of the Custodian. While making this application, attention of the Special Court was invited to the fact that the Custodian had convened a meeting of the Harshad Mehta Group Entities on 18.01.2003 for ascertaining the names of the entities to whom the shares belong. This meeting did not take place and was again reconvened on 23.01.2003. In this respect, following particular observations were made by the Custodian. "Para 11- However, even after detailed discussions and enquiry, it could not be ascertained as to which particular notified entities the said shares belonged. The notified entities expressed their inability to identify the enti....
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..... 97.3 crores, should also be deleted. In the instant case, it is noticed that the said documents seized had notings of the scrip-wise position of the shares held by the assessee on various dates. The assessee in course of the assessment proceedings was specifically asked by the AO to furnish the necessary details including the ultimate fate of the said shares along with evidences of delivery, etc. In the show cause notice issued, the assessee was specifically informed that on failure to furnish the requisite information along with evidences, it will be presumed that the said shares have been carried forward and squared up on 31.03.1992. However, there was no compliance by the assessee. Even in the present appellate proceedings, the assessee has neither furnished the requisite details of the ultimate fate of the said shares nor the proof of delivery of shares with details of distinctive numbers. Therefore, the action of the AO of presuming that the said shares were sold on 31.03,1992, cannot be faulted. Further, this issue has also been adjudicated by my Ld predecessor in the case of Harshad Mehta for AY 1992-93 in order dated 24.03.2010 in IT. 59/95-96 and the sa....
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....appellant's case, as discussed, is unique and different being based on the facts and findings peculiar to it. Accordingly, it is clearly distinguishable and stand on a completely different footing on account of the unique facts and sheer scale and magnitude of the findings. 14.24 As regards the contention of the assessee that the necessary inspection of the seized documents was not allowed, the same has already been addressed in Paras 5.3 to 5.5 of this appellate order and rejected." 19. The Ld. A.R. submitted before us that the addition made by the AO as well as its subsequent confirmation by Ld. CIT(A) even in the second round of litigation is factually and legally incorrect. The Ld. A.R. submitted that admittedly the some loose sheets were found and seized at the time of search action which showed rough notings and contained some references to dates like 27.1.1992, 12.02.1992, 18.02.1992 & 27.02.1992, however, no other evidence was found during the course of search which either confirms or corroborates any of these rough notings or the purchase of shares by the assessee. The Ld. A.R. submitted that the said rough sheets seized from the office of brokerage firm M/....
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....urther that the same is of the appellant. It is submitted that the brokerage firms, including M/s. J. H Mehta, follow a practice of issuing, the Contract Notes only after ascertaining all the facts of the orders and execution of transactions based on the final and correct transactions carried out for various clients at numerous Stock Exchanges. It is submitted that the said "modus operandi" followed by M/s J.H Mehta was also explained much prior to the date of search on 28,02.1992 in the present case. The ld AR invited the attention of the bench to the letter dated 21.01.1991 [Enclosed with letter dated 07.09.2020 filed before Your Honour which was filed before the DDIT (Inv.) pursuant to the earlier search carried carried out on 27.09.1990. In the said letter, Mr Harshad Mehta had explained the source of payments made for various investments made by this family members and corporate entities, including the appellant. In the said letter, Mr. Harshad Mehta, as well as the other brokers of the family had explained the manner in which the transactions carried out by them for the clients were recorded in the loose sheets. It was duly explained that the notings on such loose sheets cann....
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....subject to checking hence not correct or reliable. In fact, in some of the sheets, the remarks column also reflects '?', 'Check', etc., which conclusively establishes that the notings in respect of these rows were either not known or had to be rechecked and the sheet represented only rough and unverified record subject to checking and re-checking. The ld AR therefore submits that the said sheets cannot be considered to reflect actual transactions and hence should be regarded as a dumb document consisting of rough notings and jottings about trading transactions carried out or yet to be carried out by the broker, M/s. J H. Mehta. Such sheets containing rough notings cannot be considered for the purpose of making additions without any corroborative evidences found as a result of search. The ld AR submits that no cognizance can be taken in respect of the notings on such documents not reflecting true, correct and final position of the transactions undertaken by the brokerage firm of M/s j H Mehta much less they can be used to make numerous presumptions as made by AO to fasten any liability to pay tax on the appellant. The AR of the assessee submits that in order to make ....
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....the AO is pertaining to the period February, 1992 to March, 1992 and the search was carried out on 28.02.1992. 19.3. The ld AR further contends that in spite of the seized material containing crucial transactions allegedly carried out by M/s J H Mehta, no statement was recorded thereon of any of the employees or officials either through the officers / employees of M/s J H Mehta at the time of search or by the AO causing any enquiries during the course of assessment proceedings and therefore the facts have not been ascertained. Even no declaration was sought by the Department from M/s J H Mehta or the assessee in respect of the income arising from the alleged transactions. This itself proves that the notings on these pages do not reflect the actual transactions earned out by M/s J H Mehta for the appellant and the same are merely rough jottings and notings made by the staff of the broker M/s J H Mehta. In fact, looking at the size of the appellant company with the share capital of just Rs. 200, it cannot be said that the appellant company was capable of earning income of such magnitude. The presumption of sale of such huge quantity of shares on one day is also not tenable as it i....
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.... making detailed inquiry in respect of the transactions carried out by the assessee. In this regard the ld AR refers to the letter dated 14.12.1994 issued by the AO a copy of which is filed at page 45-46 of PB wherein he has noted that certain enquiries were carried out by him with certain brokers to ascertain the details of purchases made by the assessee during the year. The Annexure to the said letter also reflects the details of the brokers, shares purchased, quantity and rate at which the shares were purchased by the assessee etc. Similarly, vide letter dated 25,01,1995 copy of which is filed at Page no. 47-54 of PB, the appellant was also informed that enquiries were conducted by the AC, with other brokers pertaining to the share transactions of the assessee. The details of the share transactions are also reflected in the said notice issued to the appellant. The Annexure attached to the said notice gives complete details of the transactions carried out by the appellant in the shares of several companies through various brokers. The extensive enquiries conducted by the AO clearly prove that all efforts were made by him to ascertain complete details of purchase and sale of share....
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....sence of any evidences being brought on record by the AO to disprove the facts stated in the said affidavit. Under these circumstances, the ld AR submits that the addition made on account of speculative profits amounting to Rs. 1,92,05,630 and Rs. 97,29,79,373/- are unjustified and incorrect and may kindly be deleted. 20. The Ld. D.R., on the other hand, relied heavily on the orders of authorities below and submits that the addition made by the AO is based upon the materials/papers seized during the course of search from the premises of share brokerage firm M/s. J.H. Mehta. The said papers contain the outstanding share position and have the assessee's name mentioned in front of various scrips. The Ld. D.R. submits that the assessee has been given various opportunities to explain the said entries, however, assessee, despite several opportunities, fails to furnish any evidences to negate the notings in the said documents. The Ld. D.R. submits that since the additions were made on the basis of incriminating documents seized during the course of search and there was no way than to presume that assessee might have squared off these position at the year end. The Ld. D.R., therefore, p....
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....he name of the assessee appeared without any correlation to the figure. We find that these sheets are not signed by any employee of the brokerage firm and therefore in absence of any corroborative evidences, the addition made on the basis of these sheets can not be sustained. These are dumb documents consisting of rough notings about the trading transactions carried out or to be carried out by the broker. We also find merit in the arguments of the Ld. A.R. that search was conducted on the assessee which is part of Harshad Mehta Group on 28.02.1992 and how it could be possible that the assessee has sold the shares between February 1992 and March 1992 of such magnitude. We also note that despite seized material containing transactions carried out by share brokerage firm M/s. J.H. Mehta, no statement was recorded of any employee or official of M/s. J.H. Mehta at the time of search or during the course of assessment proceedings and therefore the AO has not taken any steps to bring on record any material to corroborate the rough bottings on these sheets and merely proceeded on the basis of surmises and conjuncture. The case of the assessee is also squarely covered by the decision of a r....
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....ality of addition made on the basis of incriminating seized material are finally deleted then the addition made of Rs. 33,60,000/- in the hands of the assessee on the basis of consolidated disclosure of Rs. 100 crores for the entire Harshad Mehta Group would survive. The Ld. CIT(A) also held that in case the addition made on the basis of incriminating material is of lesser amount of Rs. 33,60,000/- then the balance addition would survive. 25. The Ld. A.R. submits before the Bench that the observations of Ld. CIT(A) on this ground are contrary to facts on record. The Ld. A.R. submits that the disclosure letter dated 02.06.1992 before DDIT (Inv.) the assessee has made a disclosure of Rs. 100 crores because Shri Harshad Mehta was not in a position to determine the exact income earned from dividend, share trading, profit, capital gain etc. The Ld. A.R. submits that the said disclosure was made in absence of complete books of accounts and was purely passed on estimation basis but now the income has been assessed on the basis of entries in the books of accounts and there is no undisclosed income in the hands of the assessee as the income has been assessed on the basis of bank statemen....
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....ur of the assessee. We, therefore, respectfully, following the decision of the co-ordinate bench of the Tribunal, set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition. The ground no. 6 is allowed. 27. The issue raised in ground No.7 is against the confirmation of disallowance of Rs. 1,67,014/- by Ld. CIT(A) as made by the AO towards the various expenses provided by the assessee in respect of services not rendered till the year end. 28. The facts in brief are that the AO observed that assessee has claimed Rs. 3,49,042/- in the profit and loss account which includes expenses in the nature of provisions and also expenses which are not supported by any documentary evidences. Therefore, AO disallowed a sum of Rs. 1,67,014/- in respect of various items of expenses which was upheld by the Ld. CIT(A) in the first round of litigation.Again the AO disallowed the same amount added to the income of the assessee. 29. The Ld. CIT(A) in the second round again dismissed the appeal of the assessee on this issue by observing and holding as under: "16.1 In the present appellate proceedings, the assessee submitted that it has incorporated the entire exp....
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....f services availed by the assessee during the year whereas the admissibility of bonus and ex-gratia payment depends on the date of payment by the assessee before the due date of filing the return. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) that disallowance of Rs. 1,67,014/- is not allowable. In our considered view, the expenses incurred by the assessee on account of staff welfare expenses of Rs. 24,116/, audit fee of Rs. 30,000/-, professional fee of Rs. 35,000/- and preliminary expenses as claimed by the assessee are allowable expenses and AO is directed to allow the same. The remaining expenses in respect of bonus and ex-gratia need verification at the level of the AO and accordingly restored to the file of the AO with the direction verify the date of payment of bonus and exgratia payment and in case they are paid before due date of filing the return, needless to say that same are to be allowed. Otherwise the same may be allowed on payment basis in the subsequent years. The ground is partly allowed for statistical purposes. 33. Vide ground No.8 the assessee has challenged the confirmation of short term capital loss by Ld. CIT(A) on sale ....
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.... be income of the owner, transferring the security to the appellant in terms of section 94(1) of the Act ,loss can not be disallowed in the hands of the appellant. In defence of his argument, the Ld. A.R. relied on the decision of the co-ordinate bench of the Tribunal in the case of related entity M/s. Growmore Leasing and Investment Ltd. vs. DCIT ITA No.2192/M/2015 A.Y. 1992-93 wherein the Hon'ble Tribunal vide its order dated 17.11.2017 has held that disallowance can not be made unless the effect of provisions of section 94(4) of the Act is given in the hands of Shri Harshad Mehta for A.Y. 1992-93. The Ld. A.R., therefore, prayed that since no disallowance has been made in the case of Harshad S. Mehta, hence the prerequisites of section 94(4) has not been satisfied and therefore prayed that disallowance made by the AO may kindly be deleted by setting aside the order of Ld. CIT(A). 37. The Ld. D.R., on the other hand, relied on the order of the AO and Ld. CIT(A). 38. We have heard the rival submissions of both the parties and perused the material on record. The short issue involved in the present ground is against the confirmation of disallowance by Ld. CIT(A) of Rs. 48,93,4....
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....he interest payable as aforesaid shall, whether it would or would not have been chargeable to income- tax apart from the provisions of this sub- section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person. Explanation.- The references in this subsection to buying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so however, that where similar securities are bought or acquired, the owner shall be under no greater liability to income- tax than he would have been under if the original securities had been bought back or reacquired. (2) ----------------------------------- (3) ----------------------------------- (4) Where any person carrying on a business which consists wholly or partly in dealing in securities, buys or acquires any securities and sells back or retransfers the securities, then, if the result of the transaction is that interest becoming payable in respect of the securities is receivable by him but is not deemed to be his income by reason of the provisions contained in sub- section (1), no account shall b....
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....f:- (i) Where any person is carrying on a business which consists wholly or partly in dealing in securities; (ii) Buys or acquires any securities and sells back or retransfers the securities; (iii) The result of the transaction is that interest becoming payable in respect of the securities is receivable by him; and (iv) Such interest is not deemed to be his income by reason of the provisions contained in sub-section (1) According to us, it is a pre-requisite that the provisions of Sec.94(1) of the Act ought to be applied in the case of the actual owner of the securities from whom the same were bought by the assessee. However, the AO had failed to examine as to whether the provisions of Sec.94(1) of the Act had been applied in the case of the party from whom the shares in question were purchased and to whom the same were sold by the assessee. The bonds in question were purchased and re-sold to Harshad S. Mehta, but the provisions of Sec.94(1) of the Act had not been invoked in the said case, and, therefore, the provisions of Sec.94(4) of the Act could not be invoked in the case of the assessee. Going by the intent, we are of the view that the prov....
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....he case of Harshad S Mehta vs. ACIT in ITA No. 3271/Mum/2015 for AY 2009-10 vide order dated 20.03.2017, wherein Tribunal has considered the issue and remanded the matter back to the file of the AO to recompute the interest under section 234A, 234B, 234C and also under section 220 of the Act by observing as under: - 4. After hearing both the parties and on perusal of the record including the orders of authorities below and case law relied upon by the ld.AR, we find that the issue in hand has been decided by the Coordinate Bench of the Tribunal vide para 6 and 6.1 in favour of the assessee. For the sake of convenience, we reproduce the above referred paras as under : "6. The only other issue in this appeal is with regard to the chargeability of interest under section 234A, 234B & 234C of the Act. On this aspect, pleas of the assessee are two fold. First, the plea is to the effect that the provisions of section 234A, 234B and 234C are not applicable to notified entity. This aspect of the matter is required to be held against the assessee following the judgment of the Hon'ble Bombay High Court in the case of Divine Holdings Pvt. Ltd( ITA No.3334 of 2010 date....