TaxTMI 
TaxTMI 
2023 (10) TMI 1513
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....on to the tune of Rs. 26,65,106/- out of the aggregate addition of Rs. 1,40,55,678/- on account of alleged share market oversold position. 4. The Ld. CIT (A) has erred in law and in facts in confirming the addition of Rs. 2, 89,250/on account of alleged profit on sale of shares in shortage. 5. The Ld. CIT (A) has erred in law and in facts in confirming the addition of Rs. 2, 08,453/on account of alleged income from Badla transactions. 6. The Ld. CIT(A) has erred in law and in facts in not allowing interest expenditure only to the tune of Rs. 11,49,540/- out of the aggregate interest expense claimed by the appellant at Rs. 1,02,00,000/-. 7. The Ld. CIT (A) has erred in law and in facts in allowing deduction of various expenses claimed by the appellant and record in the books of accounts. 8. The Ld. CIT(A) has erred in law and in facts in making enhancement of income to the tune of Rs. 7,97,23,030/- on account of the alleged difference in the balance of the Late Mr. Harshad S. Mehta in the books of the appellant and the balance of the appellant in the books of Late Mr. Harshad S. Mehta. 9. The Ld. CIT (A) has erred in law and in f....
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.... CIT (A) passed order after considering the contentions, submissions, additional evidences filed by the assessee and remand report submitted by the A.O. 4. While disposing the appeal, the Ld. CIT (A) after taking into account the material available on record and evaluating the judicial precedents granted partial relief and sustained the following additions made by the A.O. a) Addition to the tune of Rs. 88, 78,044/- on account of dividend/debenture interest. b) Addition of Rs 6, 83, 95,324/- on account of share market trading profit. c) Addition of Rs. 26,65,106/- on account of share market oversold position d) Addition of Rs. 2,89,250/- on account of profit on sale of shares in shortage e) Addition of Rs. 2, 08,453/- on account of income from Badla Transactions. f) Partial allowance of interest expenditure to the extent of Rs. 11, 49,540/- as against total interest expenditure of Rs. 1, 02, 00,000/- claimed by the assessee. g) Other expenses claimed in books but disallowed. 5. The Ld. CIT (A) also enhanced income of the assessee by issuing notice u/s. 251(1A) dated 24.01.2013. After considering the reply filed by....
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....he file of the Ld. CIT (A). Thereafter, the Ld. CIT (A) disposed of the matter before him vide impugned order dated 09.01.2023 and granted relief to the assessee as discussed in para 3 above. 8. In cross appeals filed before us, plethora of submissions and documents were filed by assessees who have been considered while disposing the appeals. We have also considered important factor that the issues brought before us are related to matters happened about three decades ago and parties to the appeal are still struggling to bring related evidence in support of their respective claims. The events and circumstances related to appeal basically evolve around following the well settled principles of natural justice and both parties have rival claims in support of their arguments. Needless to say that principles of natural justice have to be followed but it is equally imperative that the exchequer should not be put to loss in realizing its revenue without loss of time and for that it is high time to put an end to disputes by exercising powers vested under the law and gain the finality of the demand taken into account peculiar facts and circumstances of the case instead of keeping alive th....
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.... to the tune of Rs. 7,97,23,030/- on account of the alleged difference in the balance of the Late Mr. Harshad S. Mehta in the books of the appellant and the balance of the appellant in the books of Late Mr. Harshad S. Mehta. 9. "The Ld. CIT (A) has erred in law and in facts in not appreciating that the interest u/s. 234A and 234B of the Act was not computed in accordance with law. 10. the appellant craves leave to add to, amend, alters or deletes all or any of the foregoing grounds of appeal." 14. Ground no. 1 filed by the assessee deals with the confirmation of the addition by the CIT (A) of Rs. 88, 78,044/-. 15. The A.O., based on shares/debenture holdings determined by him, worked out the dividend/interest income of the assessee at Rs. 88,78,044/- as stated in para 4.1 at page 29 of the assessment order. However, while computing total income of the Appellant, the A.O. added Rs. 3, 21, 29,960/- as dividend /interest income of the assessee. This factual discrepancy was brought to the notice of the Ld CIT (A) in appeal filed. This being genuine error apparent from record, the Ld. CIT(A) confirmed the addition only to the extent of Rs. 88,78,044/- considering....
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....dend income. It is also undisputed that the records pertain to the events that transpired almost thirty years ago and even if attempt is made to cause enquiries with companies and other related agencies, it is humanly not possible to complete the task of verification with necessary evidences. Even under the provisions of the Act, a person is not obliged to preserve the accounting data beyond period of eight years. Therefore, we are not hopeful that even if the enquiries are caused with related parties, such related parties would be able to furnish any details called for verification. Hence, restoring the matter only for the purpose of gathering further evidence for verification would not yield any practical results. This is apparent from the fact that although the case had been restored to the file of the Ld. CIT (A) in the year 2008, the Ld. CIT (A) has finally disposed the appeal in the year 2023 and no material additional evidences have been gathered/ brought on record by either party to the appeal. There is substance in the argument of the assessee that dividend/interest income having earned through banking channels and reflected in the bank accounts, the primary entries reflec....
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.... granted by the Ld. CIT (A) as the assessee has not given source of acquisition of shares. 24. We notice that the assessee in the second round of litigation has been able to produce the books of account wherein direct evidences in support of such transaction are adduced for majority of transactions. However, the Revenue had been insisting on complete evidences and even as of today after lapse of about 30 years such insistence is maintained. This aspect has been considered in various orders by the Tribunal and in first round, in all fairness, the matters have been restored to the files of lower authorities but even in second round of litigation, these issues remain unsolved. However, taking into consideration that the considerable time has lapsed (i.e. almost 30 years) but finality is not being achieved at lower authorities, the righteous approach is to conclude the issues without causing loss and being reasonable to the parties to the dispute. The recent orders passed by the co-ordinate benches reflect this approach. It is brought to our notice there are some errors that have been crept in while preparing annexure S-1 in identical circumstances in A.Y. 1992-93 in assessee's own ....
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.... has given different treatment to the transactions resulting into loss. The Ld. CIT(A) has thereby ignored the transactions giving rise to loss of Rs. 1,28,74,523/-. We are of the view that what is taxable under the Act is net profit /income i.e. profit/income should be arrived at after taking into consideration by treating the loss and profit alike. Therefore, the Ld. CIT (A) has erred in arriving at figures without setting off the loss against the income determined. The assessee has incurred loss of Rs. 1,28,74,523/- details of which are on record and hence, what is taxable is net figure of Rs. 5,76,73,104/- (i.e. Rs. 6,83,95,324/- minus Rs. 1,28,74,523/-). 28. It is also required to appreciated that in the A.Y. 1992-93, the Tribunal had applied 50% yardstick on the gross amount because in that year the assessee had not filed any details related to share market trading profit but in the year under consideration, the assessee has provided details to the tune of Rs. 51, 15, 39,122/- Therefore, this figure of Rs. 51, 15, 39,122/- needs to be reduced from the figure determined by the A.O. in the assessment. The ratio of 50% should be applied in respect of those transactions for wh....
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....has not brought any order or other material to our kind consideration to show that the facts in the year under consideration are different and distinguishable. Therefore, respectfully following the order of the co-ordinate bench, we hold that the addition made by the A.O. does not deserve to be sustained in the facts and circumstances of the case and hence, delete the same. In the result, ground no. 3 filed by the assessee is allowed. 34. Ground no. 4 pertains to addition of Rs. 2, 89,250/- on account of profit on sale of shares in shortage. The assessee has sought relief in respect of this ground by relying on order passed by the Tribunal in her own case for A.Y. 1992-93. The DR has submitted that factual issues of any earlier year order of the group cannot be considered as covered issue during the year. The DR has admitted that the Ld. CIT (A) has declined to grant relief on the ground that the assessee had not brought out any factual evidences. 35. We note that the A.O. has assessed the income of the assessee for A.Y. 1993-94 in the like manner and the DR has not pointed out any distinguishable facts in the appeal under consideration. Therefore, respectfully following the ....
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....in annexure no. S-5." 40. From the above, it is apparent that the A.O. has followed similar process of determining Badla Income as was done in earlier year and the annexure number remains same for both years. The DR has not dwell upon any distinguishing feature. In the facts and circumstances of the case, and also considering the materiality of the addition by respectfully following the order passed by the Tribunal in earlier year in assessee's own case we delete the impugned addition. In the result, ground no. 5 raised by the assessee is allowed. 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. 42. During the course of the hearing, it was argued by the AR that the issue under consideration had been argued at length before the co-ordinate bench C of the Tribunal in the case of related entity i.e. Smt. Pratima Mehta on 16.08.2023 and its order was awaited. It was submitted that the view taken by the coordinate bench in that ....
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....harani 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 Act on the basis that the expenditure was not incurred wholly for the purpose of earning income as the taxpayer was engaged in selling shares in the stock market and the dividend income had accrued as a by-product, the Hon'ble jurisdictional High Court by placing reliance upon the aforesaid decision of the Hon'ble Supreme Court in Seth R. Dalmia (supra), upheld the allowance of finance expenditure as deduction under section 57(iii) of the Act against the income by way of dividends, finance charges and interest which were shown as income from other sources by the taxpayer. Therefore, respectfully following the aforesaid decision of the Hon'ble Supreme Court in Seth R. Dalmia (supra), we are of the considered view that the as....
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.... stock broker and Harshad S. Mehta had entered into transactions through the assessee. It is the case of the assessee that this transaction has no impact on her income whereas Harshad S. Mehta is supposed to account for the income in his books of account. It has been pointed out to us that the appellate proceedings are pending in the case of Harshad S. Mehta before the Ld. CIT(A) and this issue can be decided after due verification of accounts of counterpart i.e. Harshad S. Mehta. 48. The DR has objected to raising of this ground and the contentions made by the assessee for the reason that no arguments related to such inadvertent error were ever pleaded before the Ld. CIT (A). But at the same time, the DR has not dealt with the alternate submission of taking decision after due verification during pending appellate proceedings. 49. Taking into account the facts and circumstances of the case and the materiality of issue involved, in our opinion the facts are unclear. It is undisputed that the assessee carried on transactions on behalf of her client. But the contention of the assessee that it had not claimed deduction for interest payable to Harshad S. Mehta in her P & L account....
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....e 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 for the purpose of earning of interest income. 4 "Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in treating the speculative loss incurred by the assessee of Rs. 2,47,59,074/- as normal business loss to be adjusted against other heads of income of the assessee. 5. "Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was correct in directing the AO to verify and grant relief of Rs. 1,13,90,573/- on account of oversold position in the capital market." 6. the appellant craves to leave, to add, to amend and/or to alter any of the ground of appeal, if need be." 55. Ground no. 1 filed by the Revenue pertains to restricting the addition to Rs.6.83,95,324/- and granting relief of Rs. 49, 86, 64,659/- in respect of the addition made on account of profit earned on unexplained....
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....e Tribunal in assessee's own case for A.Y. 1992-93 wherein it has been held that the addition cannot be made merely on the working made by the A.O. and as such, there is no question of establishing any source of acquisition of shares. 59. Thus, the main objection of the Revenue is that the assessee should not be granted relief as she had not furnished source of the investment. We notice that Revenue has not disputed the fact that the assessee acted as share broker and carried out most of the transactions with other related broker firms of the family at the relevant point of time. Similarly there is nothing brought to our attention that the transactions done by the assessee were not carried out on floors of the stock exchange. As such, it is obvious that the assessee has carried out transactions on the floors of the exchange. We find that the facts and figures brought on record by the assessee before the appellate authority have to be disproved by Revenue by bringing any cogent material or evidence to the contrary. ITAT being final fact finding authority is more concerned about the facts to be established on record based on which a fair adjudication can be carried out. It is undi....
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.... of loss against other income in ground no. 5 filed before the Ld. CIT (A). We notice that the Ld. CIT (A) has followed the findings given by his predecessor while disposing appeal for A.Y. 1992-93 holding that proviso (c) to section 45(5) was applicable in the case of the assessee as she was stock broker. This finding of the predecessor Ld. CIT (A) has been upheld by the Tribunal in its order dated 14.01.2019 in ITA no. 4310/Mum/2017. It is the case of the Revenue that the appeal filed by it should be allowed as the A.O. in para 1.4 at page 30 of the assessment order has brought out that the loss is speculative. The relevant portion of the submissions filed before us by the DR on this issue read as under : "The Ld. CIT (A) at page 27 & 28 at para 8 has detailed discussion of the above grounds of appeal. It is submitted that the Ld. CIT (A) followed his predecessor's order. It is submitted that this relief may kindly be withdrawn and the Departments appeal be allowed on this issue as the learned A.O has brought out at page 30 para 1.4 that the transaction carried out here is speculative transaction. It is therefore prayed that this GOA of the Deptt be allowed." 65. In t....