TaxTMI 
TaxTMI 
2023 (10) TMI 1474
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.... said Act. Pursuant to the order dated 30/06/2014, passed by the coordinate bench of the Tribunal in ITA No. 2694/Mum./2012, the Assessing Officer ("AO") issued a notice under section 142(1) of the Act asking the assessee to furnish various details in support of the entries in her books of accounts. Since the assessee filed a general reply and did not produce the details called for, the AO again issued notice requesting the assessee to cooperate in the assessment proceedings. During the assessment proceedings, the assessee requested the AO to provide certain documents on the basis of which the addition was made. In response thereto, some company letters, etc. were provided to the assessee. The assessee in respect of directions of the Tribunal regarding verification of books of account submitted that the same were already available on record and the books are correct and complete. The AO vide order dated 30/03/2016, passed under section 144 read with section 254 of the Act did not agree with the submissions of the assessee and held that the books of accounts produced by the assessee cannot be accepted as regular books of accounts since the same has not been maintained during th....
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....her on the facts and in the circumstances of the case, the Ld.CIT (A) was justified in deleting the addition of Rs. 9,39,76,663/-, made on account of unexplained investment and trading in shares, wherein the assessee has failed to explain the source of acquiring the shares satisfactorily. 2. Whether on the facts and in the circumstances of the case, the Ld.CIT (A) was justified in directing the A.O to ascertain the stock-in-trade and allow such expenditure on a proportional basis, made on account of interest expense which was claimed by the assessee disregarding the fact that the assessee failed to show that the respective entities have charged interest on the amounts paid by the respective parties? 3. Whether on the facts and in the circumstances of the case, the Ld.CIT (A) was justified in directing the A.O to ascertain the stock-in-trade and allow such expenditure on a proportional basis, made on account of interest expense which was claimed by the assessee disregarding the fact that the assessee has claimed the deduction u/s 57 of the Income Tax Act, 1961 and in that case, the assessee must prove that the interest expenditure was incurred wholly and exclusively fo....
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...../2012, restored this issue to the file of AO for de novo assessment. The coordinate bench directed the AO to bring on record specific evidence/defect to prove the falsity of books of accounts and further directed the Revenue to provide all the details and materials on the basis of which additions have been made in assessee's hand. 11. It is only pursuant to the aforesaid directions of the coordinate bench of the Tribunal that the AO passed the assessment order dated 30/03/2016, under section 144 read with section 254 of the Act, in the third round of proceedings making an addition of Rs. 10,87,49,014, on account of unexplained investment in shares, which resulted in the present appeal. The learned CIT(A), vide impugned order, inter-alia upheld the addition to an extent of Rs. 1,47,77,303, on account of unexplained investment in shares and granted partial relief to an extent of Rs. 9,29,76,663, by considering the submissions of the assessee and the information available on record. The relevant findings of the learned CIT(A), vide impugned order, are reproduced as under:- "6.5. In the light of the above a detailed exercise has again been conducted during t....
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.... he has holding of 1000 shares whereas it is 1250 shares as per AO; Addition stands partly confirmed 20,563 FORBES GOKAK 1,950 78,000 78,000 As per the appellant, he has holding of 2,100 shares which is more than 1,950 shares as per AO; Hence, addition stands deleted - GUJARAT AMBUJA CEMENTS 26,350 - - The company letter shows holding of 1,45,450 shares as on 31/3/92 as per letter dated 19.06.1992; The difference has not been reconciled 93,54,250 GUJARAT HEAVY CHEMICALS 100 4,575 4,575 As per the appellant, he has holding of 4,100 shares which is more than 200 shares as per AO; Hence, addition stands deleted - HINDUSTAN LEVER LTD. 6,012 19,53,916 19,53,916 As per the appellant, he has holding of 6050 shares which is more than 6012 shares as per AO; Hence, addition stands deleted - INDO GULF FERTILISERS 27,200 18,97,200 18,97,200 As per the appellant, he has holding of 38600 shares which is more than 37700 shares as per AO; Hence, addition stands deleted - JCT LTD. 34,977 22,04,320 22,04,320 As per the appellant, he has holding of 36200 shares whereas it is 49977 shares as per....
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....than 20740 shares as per AO; Hence, addition stands deleted 11,813 REVATHI CP EQUIPMENT LTD. 300 71,625 - No reconciliation given; addition is confirmed 71,625 STEEL TUBES OF INDIA LTD. 1,000 46,000 - No reconciliation given; addition is confirmed 46,000 TATA METALS AND STRIPS LTD. 200 78,750 - No reconciliation given; addition is confirmed 78,750 TATA POWER 490 8,95,475 - No reconciliation given; addition is confirmed 8,65,475 TISCO 34,245 1,29,91,697 1,29,91,697 The appellant has extracted various letters addressed by the company to AO in response to S.133(6) notices and pointed out that Mrs. Pratima Mehta is only second holder. Addition stands deleted. - TRANS FRIGHT 100 1,61,500 - No reconciliation given; addition is confirmed 1,61,500 TRANSPEK INDUSTRIES 50 27,500 27,500 As per the appellant, he has holding of 70 shares whereas it is 100 shares as per AO; Addition stands partly confirmed - UNITED PHOSPHORUS LTD. 150 8,588 - No reconciliation given; addition is confirmed 8,588 WARREN TEA LTD. 150 35,625 - No reconcilia....
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....ubmitted that the shareholding of the assessee as determined by the Custodian in its letter was different than the shareholding confirmed by the respective companies. The details of variation in shareholding of the assessee as per the information received from various companies and Custodian letter is as under:- Sl. No. Name of the company Shareholding as per custodian letter (on page 180 of the paper book) Shareholding as per Company's letter (on page 186-203 of the paper book) 1. ACC Ltd 47,858 32,132 2. Colgate-Palmolive (India) Ltd 140 100 3. Gujarat Ambuja Cements Ltd 76,150 1,48,150 4. Mysore Cements Ltd 16,950 13,450 15. Therefore on the basis of the aforesaid variation, it was submitted that the figures of shareholding of the assessee provided by the Custodian are not reliable. In support of this submission, reference was also made to the letter of the Custodian dated 28/11/2017, wherein the Custodian clarified that column no.6, of its statement vide letter dated 29/10/1993, is meant for the owner of the shares, which was shown as owner 2 and column no.7, is meant for the second holder of the shares, who was sho....
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....r and she was not the owner of the shares as has been considered till date for determining the shareholding in the hands of the assessee. 17. During the hearing, the learned AR placed reliance upon the decisions of the coordinate bench of the Tribunal in Growmore Leasing and Investment Ltd v/s DCIT, in ITA No. 2192/Mum/2015, dated 17/11/2017 and in Hitesh S. Mehta v/s ACIT, in ITA No. 5190/Mum./2017, dated 31/08/2020, wherein the addition made on the basis of Custodian Letter was directed to be deleted. We are of the view that even if addition made on the basis of Custodian Letter, in the present case, is deleted following the aforesaid decisions of the coordinate bench of the Tribunal, the actual shareholding of the assessee still has to be determined. We further find that the aforesaid clarification dated 28/11/2017, issued by the Custodian was not brought to the notice of the coordinate bench in the decisions relied upon by the learned AR in the Harshad Mehta group cases. It is also undisputed that the said clarification dated 28/11/2017, as was sought in the case of one of the assessee of the Harshad Mehta Group, was neither considered by any of the lower authoriti....
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....s based on which the addition of Rs. 3,13,213, was sustained, were not provided to the assessee. 19. We find that the coordinate bench of the Tribunal vide its order, in the second round of proceedings, in ITA No. 2694/Mum./2012, vide order dated 30/06/2014, specifically directed the AO to provide copies of all information on the basis of which additions were made in the hands of the assessee. The coordinate bench further held that if the AO does not provide the material then the addition cannot be made. The relevant findings of the coordinate bench in the aforesaid decision, are reproduced as under:- "5. After considering the impugned order, various Tribunal orders in the group cases of the assessee and also the grounds raised before us, we find that in the case of Smt. Rasila S. Mehta (supra) and in other cases also, similar grounds were raised. In these cases, the Tribunal has set aside the entire matter to the file of the Assessing Officer for making fresh assessment denovo. Since the facts of the assessee's case are similar to other cases viz. Hitesh S. Mehta, Rasila S. Mehta, Jyoti H. Mehta and Pratima H. Mehta, cited above, therefore, for the sake of re....
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....d restore the issues to the file of the Assessing Officer to pass assessment de novo after affording reasonable opportunity of being heard to the assessee and as per observations of ours made in the order as above. We order accordingly. 4 Since the facts and circumstances are identical and the nature of issue raised in the case of the assessee as well as in the case of Shri Hitesh S Mehta (supra) are also similar; therefore, to maintain the rule of consistency, we set aside the matter to the record of the Assessing Officer with the similar directions and terms as in the case of Shri Hitesh S Mehta (above)." 6. Thus, consistent with the view taken by the Tribunal in all these cases, wherein identical facts and issues are involved, therefore, we also set aside the impugned order passed by the learned Commissioner (Appeals) and restore back the entire issue to the file of the Assessing Officer for denovo assessment with similar directions. The Assessing Officer shall provide due and effective opportunity of hearing to the assessee. We order accordingly." 20. We further find that the Revenue's appeal against the aforesaid decision was dismissed by the Hon'ble juris....
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....ares (inclusive of bonus shares of 66 shares). Accordingly, we find no merits in the addition on the basis of the difference in shareholding in Brooke Bond Lipton India Ltd as per the dividend income account. Therefore, the same is directed to be deleted. 23. As regards the addition in respect of shareholding in Gujarat Ambuja Cements Ltd, as per the assessee, the dividend was received on 04/10/1991 and 10/10/1991 on 1,42,500 and 2950 shares respectively (aggregating to 1,45,500 shares). As per the assessee on the date of declaration of dividend, it had aggregate holding to the tune of 1,53,200 shares, and out of same the assessee sold a total of 42,500 shares during the year on 20/11/1991 and 29/03/1992 and offered to tax the capital gains. We find that the aforesaid submission is duly corroborated by the ledger account of dividend and share holing in Gujarat Ambuja Cements Ltd. in the books of the assessee, forming part of the paper book on pages 526, and 541- 543. We find that the opening balance in the shares of Gujarat Ambuja Cements Ltd. is Rs. 72,76,550, which as per the assessee is a value of 74,800 shares held in the previous financial year. We further find that in....
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.... by the Revenue. Further, the fact that the assessee received Rs. 4,656 as a dividend on 4000 shares in Kilburn Reprographics on 27/08/1991 and Rs. 1,689 as a dividend on 5000 shares in Kilburn Reprographics on 03/09/1991 also substantiates this claim. It is pertinent to note that the aforesaid sales transaction took place within a few months prior to the declaration of the dividend. Further, in the year under consideration, i.e. 1992-93, the share certificate and the share transaction used to be in physical/paper mode and the transfer of shares in the name of the purchaser in the record of the company used to take sufficient time, unlike the present digital mode. Further, the fact that the assessee received dividend on 9000 shares from Kilburn Reprographics also goes on to prove that the said company recognised the assessee as a shareholder in respect of the aforesaid shareholding on the date of declaration of dividend. Therefore, all the aforesaid facts lead to the conclusion in favour of the assessee that she had a shareholding of 9000 shares in Kilburn Reprographics and the same is much more than as accepted by the Revenue. Accordingly, the addition due to the differe....
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....ue's appeal, pertains to the deduction of interest expenditure, therefore the aforesaid grounds are dealt with together. 28. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee submitted that the transactions in the capital market have been made through three broking firms belonging to the family members of the assessee. As per the details submitted by the assessee, it was submitted that the amount of interest of Rs. 2,46,33,261 are shown as payable to family run broking firms such as M/s HSM, M/s ASM and M/s JHM. The AO vide order passed under section 144 read with section 254 of the Act did not agree with the submissions of the assessee and disallowed the deduction of interest claimed for the following reasons:- (i) The liabilities were not crystallise during the year. (ii) The interest payable is tentative and provisional. (iii) There is no basis as per which the assessee has a right to pay and the creditors has are right to receive. (iv) There is no basis of computation of interest payable which has been provided by the assessee. (v) The prov....
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....would be noticed that what is allowable as expenditure under the said subsection is only the expenditure incurred solely for the purpose of making or earning dividend income. Emphasis thus appears to be on the object or purpose of incurring of the expenditure. The exclusive object of incurring the expenditure has to be the making or earning of the dividend income. The mere fact that income by way of dividend has accrued and that the expenditure incurred is in some manner or other related to the accrual of the dividend income is not sufficient." 31. We find that the Hon'ble Supreme Court in Seth R. Dalmia v/s CIT, [1977] 110 ITR 644 (SC) agreed with the view taken by the Hon'ble jurisdictional High Court in CIT v/s H.H. Maharani Vijaykuverba Saheb of Morvi [1975] 100 ITR 67 (Bom), wherein it was held that the connection between the expenditure and the earning of income need not be direct, and even an indirect connection could prove the nexus between the expenditure incurred and the income. We further find that in CIT v/s Smt. Sushila Devi Khadaria, [2009] 319 ITR 413 (Bom.), in a similar factual matrix, i.e. wherein the AO denied the deduction claimed under section 57(iii) of the....