TaxTMI 
TaxTMI 
2025 (2) TMI 1165
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....s appeal in ITA No. 417/Mum/2023. 5. Briefly stated the facts of the case are that this is the third round of litigation. The original assessment order was framed u/s 144 of the Act on 20/03/1995. The assessee is a member of Harshad Mehta Group, in which a search and seizure operation was carried out on 27/09/1990. The second search and seizure operation was carried out on 28/02/1992 and thereafter there was also a search on various premises of this group by C.B.I. on 04/06/1992. The assessment was framed at Rs. 54,75,47,566/ -. The quarrel travelled up to the Tribunal and the Tribunal vide order dated 28/04/2006, set aside the matter for fresh decision on merits after considering the books of accounts. 5.1. The matter came up for fresh adjudication and the AO vide order dated 17/12/2007, assessed the total income at Rs. 56,59,80,814/- by repeating the unexplained investment of Rs. 51,95,38,091/ -. The ld. CIT(A) vide order dated 11/03/2014, gave part relief to the assessee but at the same time enhanced the income of the assessee by Rs. 33,61,390/- on account of unreconciled balances with the books of Shri Harshad Mehta. Thereafter, vide order dated 17/04/2015, the AO framed ....
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..... Revise assessed income accordingly. Give credit of prepaid taxes as directed above. Charge interest u/s. 234A and 234B as directed above. Charge interest u/s.220(2) of the I. T. Act, 1961. Issue separate notice u/s. 271(1)(c) for enhanced amount of Rs. 33,61,390/- as per direction of the CIT(A). Issue DN/challan, as applicable. R [RAMANAND K. NAIR] Assistant Commissioner of Income-Tax Central Circle -4(1), Mumbai. Copy to: The assessee ACIT, Central Circle - 4(1), MUMBAI. 6. It is very pertinent to mention that against the aforementioned order of the ld. CIT(A), the revenue did not prefer any appeal. Therefore, to the extent of relief given by the ld. CIT(A), the issue has attained finality. 7. Our view is fortified by the decision of the Co-ordinate Bench in the case of Sheraton International Inc. vs. Deputy Director of Income-tax [2007] 293 ITR (AT) 68 (Delhi). The relevant facts and findings read as under :- "In the assessments originally completed for the assessment years 1996-97 and 1997- 98 in the assessee's case, the entire amounts received by it from the Indian hotels under the agreements at 3 per cent. on room sales ....
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....l to this effect. The additions of this remaining portion of 25 per cent. made by the Assessing Officer in the assessments completed for the assessment years 1996-97 and 1997-98 were clearly outside the scope of remand and the Commissioner (Appeals) was not justified in confirming the same. These additions for the assessment years 1997-98 and 1998-99 were therefore to be deleted." 8. In the present appeal, the assessee has raised the following grounds of appeal :- "1. The Ld. CIT(A) has erred in law and in facts in rejecting the books of accounts and holding that the same do not stand admitted. 2. The Ld. CIT(A) has erred in law and in facts in partly confirming the addition on account of unexplained investments without appreciating that- a. In the case of the Appellant and taking into account the provisions of Sec.69 of the Income Tax Act, no addition is liable to be made under the head of 'Unexplained Investments'. b. The addition has been made without providing the copies of the evidences used by him against the appellant, as directed by the Hon'ble Tribunal. c. The addition has been made without considering the aggrega....
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.... He has also directed the AO to reconcile the discrepancies as regards bonus, rights subscription, etc. Subsequently, vide order giving effect dt. 17.04.2015, the AO had given a relief of Rs. 25,46,98,471/- on account of explanation given through contract notes and bonus shares and the relief of Rs. 52,08,375/- on account of explanation given though rights issue. 7.3. Coming to the order under question, the AO has not given any reasoning as to why, these relief need to be withdrawn from the appellant. While deciding ground No. 3, I have held that even while the books of accounts rejected the same could be used wherever relevant, being an important source of information in the context of section 144 proceedings. Hence, this addition of Rs. 25,46,98,471/- and Rs. 52,08,375/- cannot be sustained without valid reasons. These additions aggregating Rs. 25,99,66,848/- stands deleted." 10. Thus, it can be seen from the above that the relief given by the ld. CIT(A) in the second round of litigation has been repeated by the ld. CIT(A) as the AO has not given any reason as to why this relief needs to be withdrawn. We have already mentioned that to this extent, the order of the ld.....
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....1,75,42,498 6. Income under the head capital gains: (a) Short term capital gains (b) Long term capital gains 11,74,673 29.16,296 40,90,969 7,31,93,137 Add : Enhancement of income as directed by Ld.CIT(A): Difference in books of Shri Harshad S. Mehta and Shri Sudhir S. Mehta 33.61,390 7,65,54,527 Less : Interest Expense allowed by Ld.CIT(A) 12,93.360 Total income: 7,52,61,167 11.2. The unexplained investment came down to Rs. 4,68,43,434/ - to which the correct figures are as under :- S. No. Basis of addition Amount of addition sustained (Rs.) 1 Company letters received u/s. 133(6) 27,91,101 2 Custodian letter dated 29.10.1993 3,89,77,270 3 Dividend details/Warrants 51,67,438 Total ... 4,69,35,809 12. The unexplained investment is divided into three parts :- (I) - The addition based upon Company letters received u/s 133(6) - Rs. 27,91,101/ -. The details of the investments on such information are as under :- S. No. Scrip Name Ho....
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....uest to grant inspection as well as furnish copies of documents as agreed to by A.O. 4 01.03.1995 ACIT Request to furnish the copies of all material relied upon by A.O. and grant opportunity to cross- examine every person and source of information. Also reqested for personal hearing in order to represent effectively and meet all the queries. 3 21.04.1995 ACIT and CIT Request to furnish the copies of material relied apon by A.O. or disclose completely the sources on which the A.O. has relied upon and to grant opportunity of cross-examining each and every source relied upon by A.O .. 5 31.05.1995 ACIT and CIT Request to furnish the copies of material which was gathered from the office of Custodian, clients, Banks, Institution, ect. by A.O. 6 26.07.1995 CIT Request to grant inspection of the original materials relied upon by the A.O. 7 21.11.1995 CIT & ACIT Request to furnish copies of a statement which reportedly contained Appelant's holding details as furnished by the office of the Custodian and the letter addressed by the office of the Custodian 18.01.1995 to the Income tax Department, Investigation Wing. 8 31.07....
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....s and letters based on which the addition was made by A.O. 14. A perusal of the documents filed before us show that there is discrepancy in the information collected. For example, there is an information from Oswal Agro Mills Ltd., that the assesses is holding 210 shares as per the AO and the balance quantity after giving relief to the assessee is 187 shares whereas as per the information given by the company Oswal Agro Mills Ltd., 210 shares were held by Ashwin S. Mehta and the number of shares held by Shri Sudhir S. Mehta i.e., the assessee, is Nil. 15. Considering the facts in totality, we are of the considered view that even in the third round of litigations, the AO could not provide the specific information/ details collected from the companies on the basis of which the impugned additions have been made, are in complete violation of the principles of natural justice. 16. We find that the Co-ordinate Bench in the case of Hitesh S. Mehta vs. DCIT in ITA No. 538/Mum/2012, while setting aside the issues to the file of the AO, has specifically mentioned that, "Therefore, the Assessing Officer is directed to provide copies of all information on which basis, the AO wanted to....
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....with various companies seeking information in respect of the shareholding of the assessee. It was further submitted that although the said information so received was used to determine the shareholding in the various scrips and treated the same as unexplained, however, copies of these evidences were never provided to the assessee. In this regard, the learned AR referred to details of various letters requesting the AO/learned CIT(A) to provide the information received from the company on the basis of which addition was made. The learned AR further submitted that to the extent company letters were provided by the AO, in the third round of proceedings, assessee's explanation was accepted by the AO and the addition to an extent of Rs. 1,32,13,835, was deleted. It was further submitted that during the course of proceedings before the learned CIT(A), even though several letters were provided to the assessee, the copies of letters 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, sp....
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....ring on record specific evidence or defect to prove falsity of books of account as no falsity has been proved in the assessment order passed by the AO. Besides this the department has to provide all the details and material on which basis the addition have been made earlier. If such material is disputed by the assessee then in our view correctness of such material has to be examined as per provision of law, we are not convinced with the argument of Id. DR that assessee can collect information from parties from where Assessing Officer has obtained the copies on which basis the addition have been made, Therefore, Assessing Officer is directed to provide the copies of all information on which basis, the AO wanted to made additions in the hands of the assessee. If the AO does not provide the material then in our view addition cannot be made, In view of above facts and circumstances, we set aside order of the authorities below and 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 fact....
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....ved from the Custodian - Rs. 3,89,77,270/- The letter received from the custodian, reads as under:- 19. A bare perusal of the aforementioned letter shows that there is not even a whisper of the impugned financial year or assessment year. It has also been clearly mentioned that the figures cannot be treated as firm and final figures. Moreover, when the office of the Custodian realised some glaring errors, it clarified the information already sent, as under:- Assessment Year 1992-93, If required. In case of any clarification required you may approach the concerned Company for the same. Sr no Name of the Company Letter No. 7 ACC Ltd SHR CUS DIV 4622 dated 05.10.2000 2 Mazda Industries & Leasing MILL/FIN/97-98/1795 dated 20.04.1998 3 Castrol India Ltd CIL:SD:021:44768:99 dated 14.07.1999 4 Apollo Tyres Ltd CS/CL-209 dated 07.04.1999 5 Hindalco Ltd 9431/92 dated 11.11.1992 6 Swaraj Engine Ltd SEL/02 dated 30.12.1997 7 Tata Share Registry Ltd SH/TIS/58392 dated 21.08.1992 8 Bharat Seats Ltd BSL/FIN/2001/3686 dated 05.03.2001 9 Bombay Dyeing Manufacture Co. Ltd SHR/1545/200 dated 22.05.2000 ....
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....d information is as under :- SUDHIR S. MEHTA A.Y. 1992-93 Details of Unexplained Investment addition on the basis of Dividend information S. No. Scrip Name Holding as per A.O. Credit Given by A.O. In original order (Qty) Balance Quantity in dispute Further credit given pursuant to order of the CIT(A) Balance Quantity Value (Rs.) 1 DCM SHRIRAM 2,500 2,500 2,500 6,31,875 2 EICHER TRACTORS 4,300 4,700 4,700 11,73,825 3 GOLDEN PROTIENS 15,300 100 15,200 15,200 45,600 4 GRASIM 5,000 19 4,981 4,981 20,54,663 5 KERALA CHEM 450 450 - 450 2,35,125 6 MUNJAL SHOWA 600 - 600 - 600 76,350 7 TATA METALS & STRIPS 1,000 - 1,000 100 900 3,54,375 8 UNITECH 100 - 100 - 100 5,750 9 VAM ORGANIC 4,150 2,500 1,650 - 1,650 5,89,875 Total Total 51,67,438 24. The details of shareholding of the assessee are exhibited from pages 414 to 418 of the Paper Boo....
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.... 15.00 SAVING BANK INTEREST TOTAL 2,72,451.65 Note: No such entries have been reflected in the bank statement in respect of Balance amount of Rs. 22,975 (i.e.2,95,427-2,72,452) 26. We have carefully considered the orders of the authorities below. We do not find any specific reason given for making the impugned addition as interest received on savings bank account, dividend income have already been shown by the assessee on its income statement and there is no specific mention as to entry in which bank account has not been shown/declared by the assessee. The additions have been repeated from the first round of litigation without any demonstrative evidence, therefore, the same is directed to be deleted. Accordingly, Ground No. 3 is allowed. 27. Ground No. 4, relates to the claim of interest expenditure Rs. 2.04 Crores out of which the ld. CIT(A) allowed only Rs. 12,93,360/ -. 27.1. Similar issue came up for consideration before the Coordinate Bench in the case of Pratima H. Mehta (supra). The relevant findings read as under:- "27. Since the issue arising in ground no.3, raised in assessee's appeal, and grounds no.2 and 3, raised in ....
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....rning dividend income. Accordingly, the interest expenditure was held to be not allowable against dividend income. The learned CIT(A), however, allowed the interest expenditure only to the tune of Rs. 15,73,548 which is the share trading profit. Being aggrieved, both assessee and Revenue are in appeal before us. 30. We have considered the submissions of both sides and perused the material available on record. From the perusal of the computation of total income, forming part of the paper book on pages 464-466, we find that the assessee claimed interest on bank loans of Rs. 2,46,33,261 against the income under the head "income from other sources". It is evident from the record that the learned CIT(A) placed reliance upon the decision of the Hon'ble jurisdictional High Court in CIT v/s Jagmohandas L. Kapadia, [1966] 61 ITR 663 (Bom.), in order to support the conclusion that unless the interest expenditure was incurred solely for the purposes of making or earning dividend income, no deduction as possible under section 57 of the Act. The relevant findings of the Hon'ble jurisdictional High Court in the aforesaid decision, as relied upon in the impugned order, are as und....
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.... 57 of the Act. As a result, ground No. 3 raised in assessee's appeal is allowed, while ground No. 2 and 3 raised in Revenue's appeal is dismissed." 27.2. Similarly in the case of Jyoti H. Mehta vs. ACIT in ITA No. 436/Mum/2023 and ITA No. 1186/Mum/2023, the Tribunal has considered similar grievance, which reads as under :- "41. Ground no 6 pertains to sustaining the addition on account of interest disallowed. The Ld. CIT (A) has granted partial relief, by allowing on proportionate basis, the interest expenditure only to the extent of Rs. 11, 49,540/- as against the total claim of Rs. 1, 02, 00,000/- made by the assessee." 27.2.1. And the Co-ordinate Bench following the order of the case of Pratima H. Mehta (supra), held as under :- "44. It is apparent that the reasons given for not allowing the interest expenditure claimed by the assessee u/s 57 of the Act are not tenable in view of the decision of the Apex Court in the case of Seth R. Dalmia (supra) which is duly followed by the co- ordinate bench of the Tribunal in the case of Smt. Pratima Mehta (supra). Respectfully following these judicial precedents, we allow this ground of appeal in favour of ....
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....d. This matter has been dealt with in the appellate order dated 24/3/2010 in the case of Shri Harshad Mehta for A.Y. 1992-93. Accordingly, a notice of enhancement of income u/s.251(1)(a) of the I.T. Act, 1961 was issued to the appellant on 24/6/2011. In response to the same, the appellant did not make any written submissions. However, the learned AR argued that these balances may not relate to the year itself, but may be brought forward from earlier years. However, he could not give any evidence of the same. 53. I have considered the facts of the case. From the perusal of the records, specifically the Audit Reports of the Auditors appointed by Hon'ble Special Court, it is clear that there is a difference of Rs. 33,61,390/- in the balances appearing in the name of the appellant in his own books of accounts (Rs.11,92,15,389/-), audited by the three firms of Chartered Accountants appointed by the Hon'ble Special Court, and in the books of accounts of late Shri Harshad Mehta (Rs. 12,25,76,779/-), which were audited by M/s. Vyas & Vyas, CAs. The Auditors have collected information from different sources, including Custodian, Banks and other parties, and have cross-verif....
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.... Rs. 17,836 (Cr.) 31.03.1992 - Interest transferred to Sudhir S. Mehta from Grindlays Bank Adyar Rs. 17,446 (Cr.) 31.03.1992 - Interest transferred to Sudhir S. Mehta from Grindlays Bank Adyar Rs. 17,852 (Cr.) Rs. 53,134 (Cr.) (iii). Following amounts received by Mr. Sudhir S. Mehta from Mr. Harshad S. Mehta not reflected in Mr. Harshad Mehta's Books 26.10.1991 - From Grindlays Bank - Transferred on loan account Rs. 10,00,000 (Dr.) 20.02.1991 - From Bank of America transferred Rs. 50,000 (Dr.) Rs. 10,50,000 (Dr.) Difference reconciled Rs. 10,02,204 (Dr.) For Sudhir S Mehta * (Ashwin S Mehta) Constituted Attorney 31. If the above re-conciliation is read with the annexure which explain the additions and the difference, we find that as on 31/03/1992, the balance in the books of Harshad Mehta in respect of the assessee was debit of Rs. 12,25,76,779.56/- and the balance in the books of Sudhir S. Mehta, was debit of Rs. 11,92,15,389.56/ -. Now, if we see these figures from the reconciliation statement hereinabove we find....
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....evenue is dismissed. Order pronounced in the Court on 6th February, 2025 at Mumbai. ============= Document 1 Annx-YY". Wirt. OFFICE OF THE CUSTODIAN 'विशेष नà¥à¤¯à¤¾à¤¯à¤¾à¤²à¤¯ (पà¥à¤°à¤¤à¤¿à¤®à¥‚रà¥à¤¤à¤¿, अपराध विचारण AT THE SPECIAL COURT (TALE of offences relating to. 12" transactions in Securities) Act, 792" : I. 3rd Floor, Bank of Baroda Bhawan, kz, 10. Parlament Street," 69 2 .Regd. · 001 NEW DELHI-110001 EUH19 : 3320830, jak:279 Phones : 3320836. 3327275 · 10:25/Jus/TT/1/72(18) frais Dated the 29.10 .- 1993 To . Shri C.P. Ramaswamy, Dy. Director ( Investigations) Office of the Director General Investigations Income Tax Bombay. Sir, 1 As requested by you we are enclosing the details of properties held by Harshad Mehta Group intimated to us.by various companies as registered in their books. In this connection, I would like to State that these figures are subject to constant changes due to the following: 1) A part of these holdings may have 'been sold by the notif....