TaxTMI 
TaxTMI 
2021 (3) TMI 1479
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has erred in law and in facts in confirming the disallowance of loss of Rs. 3,19,35,031/- on account of share trading transactions without appreciating that - a. The income from money market transactions of Rs. 2,55,23,515/- were eligible and hence ought to have been set off against the share trading loss of Rs. 3,19,35,031/-. b. The money market transactions were speculative in nature. 4. The Ld. CIT (A) has erred in law and in facts in confirming the disallowance of loss on trading in Unit 64 amounting to Rs. 1,10,12,500/-. 5. The Ld. CIT (A) has erred in law and in facts in confirming the addition on account of profit from money market transactions to the extent of Rs. 64,60,000/- out of the total addition of Rs. 2,67,83,373/-. 6. The Ld. CIT (A) has erred in law and in facts in confirming the disallowance on account of short term capital loss amounting to Rs. 4,63,608/- u/s, 94(4) of the Act. 7. The Ld. CIT (A) has erred in law and in facts in confirming the disallowance on account of the short term capital loss amounting to Rs. 6,20,544/- treating the same as speculative loss. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax, no interest can be computed u/s. 234A, 234B and 234C of the Act. 19. The Ld. CIT (A) has erred in making addition of Rs. 5,50,04,109/- by enhancing the assessed income without appreciating that- a. The Ld. CIT (A) had exceeded the jurisdiction by invoking powers of enhancement. b. The enhancement was made without granting sufficient opportunity of hearing to the appellant and without considering submissions filed before him. c. The enhancement of income by Rs. 5,50,04,109/- based on alleged difference in the balances in cross accounts between the books of the appellant and books of Late Shri Harshad S. Mehta / M/s. Harshad S. Mehta was incorrect and unjustified. 20. The assessee craves leave to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal." 3. The issue raised in 1st ground of appeal is against the order of Ld. CIT (A) upholding the reopening of assessment under section 147 of the Act by the AO. 4. The facts in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....est that the assessee in the first round of proceedings had objected to the reopening of assessment and/or had sought copy of the reasons recorded. In the instant case, the statutory return of income was not filed within the due date and it has not even been filed till date. It is also noted that the assessee insists that the AO should have followed the due procedure threadbare, however, it seems these rules do not apply to it and it blatantly neither files its statutory return of income even till date nor complies to the statutory notices issued by the AO. Accordingly, the additional ground No 1 of the appeal of the assessee filed vide letter dated 19.11.2018 challenging the issue of notice u/s 148 is dismissed." 6. The Ld. A.R. submitted before the Bench that the notice issued under section 148 of the Act dated 20.05.1992 is an invalid notice. The Ld. A.R. submitted that failure on the part of the AO to issue notice under section 148 of the Act in consonance with the provisions of the Act is a jurisdictional defect which goes to the root and therefore can not be cured at this stage. The Ld. A.R. submits that notice issued under section 148 of the Act was invalid as the time li....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me is invalid and the said circular nowhere mentions that amendment will apply to assessment orders passed before such date. The Ld. A.R. in defence of his arguments relied on a series of decisions in the related entities 's cases and submits that the issue is squarely covered in favour of the assessee by the various decisions of the co-ordinate Bench of the Tribunal as under: 1. Ashwin S. Mehta vs. ACIT, CC 23 [ITA No. 8704/M/2011] dated 30.11.2018 2. Ashok Rao & Co. v. ACIT TA No. 5595 & 5596/Bom/19 dated 29.05.2002 3. Shri Lalit Sheth v. ACIT and vice versa [ITA No. 7394/Mum/1996] dated 28.11.2003 4. CIT vs. Sudhir S. Mehta 9265 ITR 548] 5. CIT v. Ekbal and Co. [13 ITR 154(Bom)] 6. Deepika A. Mehta v. ACIT [57 TTJ 104(Mum)j 7. Chandi Ram v. ITO and Ors [225 ITR 611 (Raj.)] 8. N. Jayaprakash, Package India Tin Fabricators v. CIT [285 ITR 369 (Ker)] The Ld. A.R. prays before the Bench that in view of the facts of the case and the ratio laid down by the various judicial forums including Hon'ble Bombay High Court the notice issued under section 148 of the Act as well as consequent reassessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and consequently the same is invalid and void ab-initio. The Ld. A.R. relied on the following decisions: 1. Rina S. Mehta v. DCIT [ITA No. 3120/Mum/2015] dated 17.07. 2. ITO v. Pallavi Vijen Jhaveri& vice-versa [ITA No. 5998/Mum/2017 & CO No. 225/Mum/2018] dated 17.12.2019 3. CIT v. Videsh Sanchar Nigam Ltd [340 ITR 66 (Bom.)]. 4. CIT v. IDBI Ltd [76 taxann.com 227 (Bom.)] 5. PCIT v. V. Ramaiah [103 taxmann.com 202 (SC)]. 7. The Ld. D.R., on the other hand, relied on the order of authorities below. So far as the 1st and 2nd contentions of the assessee are concerned, the ld. DR relied on the orders of authorities below. On the third without prejudice plea of not supplying the reasons recorded u/s 148(2) of the Act to the assessee, the Ld. D.R. submits that the Revenue is not liable to supply the reasons to the assessee recorded under section 148(2), since the assessee has not filed any return of income, therefore this argument of the Ld. A.R. deserved to be dismissed. 8. Having heard the rival submissions and perusing the material on record including the order of Ld. CIT (A) and also the averments made by both the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w. The Ld. CIT (A) took his view (para 6.2 of impugned order) that the assessee has not filed return of income neither has made any request for reasons recorded. 7. The provisions of Sec. 148 of the Act have been amended by Finance Act, 1996 with retrospective effect from 01.04.1989, whereby the expression "not being less than thirty days" has been omitted. As per the CIT(A), due to the amendment the contention of the assessee that A.O had given less than the prescribed time to file the return has no legs to stand. Thus the Ld. CIT (A) rejected the contention of assessee about providing less than 30 days time for filing of return in response to the notice under section 148. 8. For appreciation of facts, we may refer the language of Sec. 148 of the Act at the relevant time on the statue book: "Issue of notice where income has escaped assessment. 148(1). Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot been validated by any validating amendment and the mere validation of the notices cannot have the effect of validating the reassessments also. To further elaborate, what he says is that the assessee has obtained a vested right because of the validity of the reassessments and such vested right cannot be taken away? merely validating the notices pursuant to which they were made. There has to be, according to the Ld. Representative for the assessee an amendment expressly validating the reassessments also. 9. In support of the above contentions, the Ld. Representative for the assesses cited the following three judgments:- (1) Prithvi Cotton Mills v. Broach Burrough Municipality L & Ors [79 ITR 136 (Sc)]. (2) Jose Dacosts V. Bascora Sadashiv Sinal Narcomin AIR (1975) SC 1843. (3) Delhi Cloth & General Mills Co. Ltd. v Income Tax Commissioner, AIR 1927 (P7)242 In Delhi Cloth Mills case (supra), the following observations were made by the Privy Council. "The principle which their Lordship must apply in dealing with this matter has been authoritatively enunciated by the Board in the Colonial Sugar Refining Co v. Irving (1995) A. C. 3....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ethod is adopted It must be within the competence of the legislature and legal and adequate to attain the object of validation. If the legislature has the power over the subject- matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions, The validity of a validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether it making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax". These observations show that the defect which made the imposition of tax illegal must be removed effectively. The question before us Is whether this has been done in the present case by merely validating the notices. If the earlier law laid down by the courts was that the Invalid notices Invalidate the reassessment proceedings also, it would first appear that by merely validating the notices, the reassessments would also be validated automatically. However, we have to remember, as laid down by the Privy Council (sup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n a period 0130 days". The Bombay High Court in the case of CIT v. Ekbal and Co. [19451 13 ITR 154, decided a similar issue by laying down that the expressions within thirty days" and "not less than thirty days am two quite different things. In view of the aforesaid decisions of the Bombay High Court and also of the Income Tax Appellate Tribunal, the Finance (No.2) Act 1996, provides in section 148 that the Assessing Officer may require the assessee to furnish the return within the period specified in the notice. 48.3 The amendment will take effect retrospectively from April 1, 1989, and will, accordingly, apply in relation to notices issued under section 148 on or after that date (Section 43). There is nothing in the Circular to show that the amendment validating the notices issued after 01.04.1989 was also Intended to validate the reassessments already made pursuant to those defective notices. 10. There is one more reason why we are unable to spell out any intention on the part of the legislature to validate the reassessments themselves. Section 153(2) prescribes a time limit of two years from the end of the financial year in which the notice u/s. 148 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....use of an invalid reassessment cannot be taken away. 11. In this view of the matter, we hold that the retrospective amendment to section 148(1) made by the finance (NO2). Act, 1996 does not save the reassessments 1mm being declared null and void." 11. Further the Coordinate Bench of this Tribunal in the case of Shri Lalit Sheth Vs. ACIT and Vice Versa [ITA No. 7394/Mum/1996] wherein the similar facts of the case, held that in absence of any express indication in the amending Act, the mere validation of notice cannot validate the reassessment order passed before the date of such amendment in absence of any express or implied intention of the legislature. The decision of the Tribunal in the case of Shri Lalit Sheth Vs. ACIT (supra) has also been affirmed by the Hon'ble Bombay High Court in ITA No. 1570 of 2005 dated 29.09.2017. 12. We have also noticed that the jurisdictional High Court in assessee's group case (brother case) in CIT Vs Sudhir S. Mehta [265 ITR 548] held that the notice u/s 148 of the Act giving less than 30 days time is invalid. In this case the Tribunal held that there was no amendment in section 148 at the time of passing of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ntial assent. In the circumstances, the miscellaneous application filed by the Department was rightly rejected by the Tribunal as there was no mistake apparent from the record in the order of the Tribunal dated 26th June, 1996. 13. Hence, following the aforesaid legal position, it has to be held that the assessment order dated 24.03.1994 is invalid as it is based on a notice issued under section 148 dated 20.05.1992, which was invalid on account of the then existing law. The subsequent amendment in section 148 may validate the notice, but, it would not save the assessment order from being declared null and void, as it was passed prior to the amendment. 14. Considering our decision as we have allowed the legal ground and held the assessment as null and void as notice u/s 148 of the IT Act is invalid, therefore, the discussion on merit of the case has become academic and is not being rendered. 15. In the result, the appeal filed by the assessee is allowed." All the decisions relied upon by the assessee before us have been discussed in detail in the above decision, therefore, they are not being discussed. Even the decision of Hon'ble Bombay High Court in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the paper book No. 3 which contains the details of losses from money market transactions aggregating to Rs. 3,65,36,015/-. The Ld. A.R. also refers to the copies of contract notes in respect of money market transactions, copies whereof are filed at page No. 338 to 355 of the paper book No. 3. The Ld. A.R. submits that all these evidences proved that even the loss from money market transactions were also of speculative in nature since the transactions of purchase and sale of securities were squared off much prior to the date of delivery as reflected in the contract notes. The Ld. A.R. submitted that in view of the said facts and circumstances the loss of Rs. 3,19,35,031/- from share market transactions may kindly be allowed to be set off against the income from money market transactions by assuming that the loss from share market transactions are speculative in nature. The Ld. A.R. submits that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench of the Tribunal in assessee's own case in ITA No. 1785/M/2015 order dated 28.02.2017 wherein it has been held that profit from money market transactions was eligib....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....S. Transferred Suit No. 4018 of 1995) delivered on 17.4.2007, by the Special Court in the case of Canbank Financial Services Limited Vs. M/s. V.B. Desai The suit raised issues relating to the nature of legality of forward contract transactions in Government securities. Issues No. 4 and 5 framed by the Special Court are as follows:- "4. Whether the Suit transactions are prohibited by the Securities Contract (Regulation) Act, 1956 as alleged in para V of the Written Statement? 5. Whether the Suit is based on an illegality and is liable to be dismissed on that ground as alleged in para IV and VI of the Written Statement? 5.5 The finding of the Special Court on the above two issues are extracted as follows:- "In my opinion, therefore, the fact that units of Mutual Funds were 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 al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee were not illegal. Therefore, the loss cannot be disallowed on that ground." 3.8. Thus, from the above order it is clear that special court has held that the forward transactions in Government securities were not illegal. It was further held that these transactions were speculative transactions. As far as reliance placed by Ld. special counsel upon the judgment of Hon'ble Supreme Court in the case of M/s. Appollo Tyres Ltd. (supra) is concerned, it is noted that the said judgment merely analysed the scope of section 73 wherein expression used by the legislature was 'shares'. On the other hand, the expression used in section 43(5) is not only 'shares' but 'securities' as well'. This distinction has been very well analysed by the Delhi Bench of the Tribunal in the case of ANZ Grindlays Bank v. DCIT (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). Theref....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erein it has been held that loss from securities of the units of US 64 can not be said to be pertaining to the subsequent year merely on the basis of date of delivery when the transactions of purchase and sales were squared off within a financial year. The Ld. A.R., therefore, prayed that the ground may kindly be decided in favour of the assessee. 21. The Ld. D.R., on the other hand, relied on the order of authorities below and the ground of appeal. 22. Having perused the decision of the co-ordinate Bench of the Tribunal in ITA No. 924/M/2000 A.Y. 1990-91 (supra), we observe that an identical issue arose in the above appeal in assessee's own case and the co-ordinate Bench of the Tribunal has decided the issue in favour of the assessee by observing and holding as under: "5.9 Another reason pointed out by the Assessing Authority is that if at all there was any loss, the loss pertains to the succeeding assessment year and not the impugned assessment. The basis of the above finding is that the loss would be ascertained only on the final settlement of the securities in a future date. The contention of the assessee is that once the assessee has entered into the contra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts are already known to the assessee and the transactions are already concluded. The exact nature of the forward transaction is not sale, but only agreement to sell. The income earned by the assessee / loss suffered by the assessee in the differential amount reflected in the agreement to sell and nothing more. Therefore, there is no force in the argument of the Assessing Authority in holding that the loss of Rs. 1,07,75,000 would pertain to the succeeding assessment year and not the impugned assessment year. 5.11 In short, we find that the reasons pointed out by the Assessing Authority to disallow the claim of loss of Rs. l,07,75,000 made by the assessee-company are not justified. As already stated, the income has already been brought to tax by the Assessing Authority. In these circumstances, we direct the Assessing Authority to allow the deduction for the loss of Rs. 1,07,75,000 by setting it of the corresponding speculation income." 23. Since the facts before us are identical to ones as involved in the ground as decided by the co-ordinate Bench of the Tribunal, we are, therefore, inclined to set aside the order of Ld. CIT (A) and direct the AO to allo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dditions have already been made in the hands of M/s Harshad S Mehta. Accordingly, ground No 7 of the appeal is partly allowed." 27. The Ld. A.R. submits before us that the addition was rightly deleted by the Ld. CIT (A) to the tune of Rs. 2,03,23,373/- as same represented the opening balance in the ledger account of the assessee in the books of accounts of M/s. Harshad S. Mehta. The Ld. A.R. submits that since the amount represented the opening balance same can not be added in the current year. The second plea of the assessee was that in the first round of appeal, the Ld. CIT (A) allowed the appeal of the assessee to this extent vide order dated 24.02.2000. The Ld. A.R. further submits that both the parties i.e. Revenue as well as assessee challenged the order of Ld. CIT (A) before the Tribunal disputing the various confirmations and deletion of additions, however, the deletion of Rs. 2,03,23,373/- was not contested by the Revenue before the Tribunal. The Ld. A.R. also refers to the order of the co-ordinate bench of the Tribunal to corroborate his averments, a copy of which is filed at page No. 603 to 624. The Ld. A.R. therefore, submits that the AO should not hav....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idences. The DR prays for the confirmation of the addition by dismissing the ground raised by the assessee. 30. We have heard the rival submissions of both the parties and perused the material on record. We find that in this case the addition has been deleted in the first round of litigation by the Ld. CIT (A) and the Revenue has not challenged the said addition before the Tribunal. In the appellate proceedings before the tribunal, which culminated in setting aside the appeal to the file of the AO. Therefore, we find merit in the contentions of the assessee that the said addition could not have been made as the same had attained finality in the first round of litigation. Besides, the said balance is in fact an opening balance in the account of assessee as found in the books of accounts of M/s. Harshad S. Mehta and therefore, it can not be taxed during the current year. Therefore, we uphold the order of Ld. CIT (A) on the issue of deletion of addition of Rs. 2,03,23,373/-. We have also examined the breakup of the money market transactions for assessment year 1990-91, contract notes and copy of trading account and note that Rs. 64,60,000/- was related to the assessment y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t term capital loss. Therefore, these transactions are not carried out under the head "Business Income". Thus we find merit in the contentions of the assessee that provisions of section 94(4) of the Act are applicable where the sales and purchase transactions are carried out as business transactions. Besides, we note that the issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in the case of a related entity of the assessee in M/s. Growmore Leasing and Investment Ltd. vs. DCIT in ITA No. 2192/M/2015 A.Y. 1992-93 & ors. vide order dated 17.11.2017 wherein it has been held that disallowance can not be made unless the effect of provisions of section 94(1) is given in the hands of M/s. Harshad S. Mehta who transferred the security. The operative part of the decision is reproduced as under: "6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that that the assessee purchased 9% tax free IRFC bonds for the value of Rs. 50 crores from Harshad S Mehta for a total consideration of Rs. 50,31,95,205/- on 26-09-1991 and sells the same within a short period of 15 days on 11-10-1991 for a total....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., if the result of the transaction is that any interest becoming payable in respect of securities is receivable otherwise then by the owner, the interest payable thereof shall be deemed to be the income of the owner for the purposes of chargeable to income tax under this Act. It means that, in the present case before us, the IRFC bonds was owned by Harshad S Mehta and assessee purchase the same for a total consideration of Rs. 50,31,95,205/- on 26-09-1991 and sells the same back to Harshad S Mehta within a short period of 15 days on 11-10-1991 for a total consideration of Rs. 47,87,32,877/-. In this process the assessee claimed loss of Rs. 2,44,62,328/- and also received tax free interest from these IRFC bonds at Rs. 1,84,50,000/-. By virtue of sub section (1) of section 94 of the Act, this interest will be income of Harshad S Mehta and not of the assessee. Similarly, in respect to loss sustained on account of this transaction has been clarified by sub section of section 94 of the Act, which states that any person carrying on a business consists wholly or partly in dealing in securities, buys or acquires any securities and sell back or retransfer the securities then, if the re....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... then repurchasing the some after the interest was received by the other persons. Therefore, it was necessary for the AO to prove that the assessee had attempted to avoid payment of tax. Since the interest income on 9% IREC Bonds was exempt from tax, there was no question of the assessee or Harshad S. Mehta adopting any such methods to avoid tax on the income. Further, we are of the view that the provisions of Sec. 94(4) of the Act would apply only in cases where the assessee had carried on the transactions of purchase and sale of securities during the course of business and since the purchase and sale of the bonds in question was not a business activity, the provisions of Sec. 94(4) of the Act was not applicable to the transaction. Accordingly, We direct the AO to allow the claim of set off of loss of Rs. 2,44,62,328/- suffered from 9% IRFC Bonds, against profit from sale of shares." 35. Since facts of the present issue before us are materially same, we, therefore, respectfully following the decision of the coordinate bench of the Tribunal set aside the order of Ld. CIT (A) and direct the AO to allow the set off of loss of Rs. 4,63,608/- to the assessee as suffered by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d no 7 is allowed. 40. The issue raised in ground No. 8 is against the confirmation of disallowance by Ld. CIT (A) in respect of various expenses which have been made by the AO in the assessment proceedings. 41. The facts in brief are that the assessee has claimed expenses under the heads "Travelling, telephone, meeting, conference and refreshment expenses etc." According to the AO these expenses were not verifiable and AO made an adhoc disallowance of Rs. 1,63,366/- in respect of travelling expenses being 25% Rs. 1,48,016/- in respect of telephone expenses being 10% Rs. 1,41,774/- in respect of meeting and conference expenses being 25% and Rs. 2,48,720/- on account of refreshment expenses, miscellaneous and sundry expenses being 50% on adhoc basis. 42. In the appellate proceedings, the Ld. CIT (A) dismissed the appeal of the assessee by holding the disallowance is fair and reasonable in view of the facts and circumstances of the case. 43. We find that the various expenses have been disallowed on adhoc basis by the AO which have been affirmed by the Ld. CIT (A) on the ground that the expenses under these head were not fully verifiable. On the ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned by the assessee. The Ld. A.R. submitted that the disallowance may be restricted to 1% by following the said order of the co-ordinate bench of the Tribunal. 47. The Ld. D.R., on the other hand, relied on the grounds of appeal and order of authorities below. 48. After hearing both the parties and perusing the material on record including the decision of the co-ordinate bench of the Tribunal as cited supra, we observe that the similar issue has been decided in favour of the assessee by the co-ordinate bench of the Tribunal in the case of related concern M/s. Growmore Leasing Investment vs. ACIT (Supra) directing the AO to disallow 1% of the exempt income under section 14A of the Act. We, therefore, respectfully following the decision of the co-ordinate bench of the Tribunal, set aside the order of Ld. CIT (A) and direct the AO to restrict the disallowance to 1% of the exempt income of Rs. 26,42,265/-. The ground is partly allowed. 49. The issue raised in 10th ground of appeal is against the confirmation of Rs. 2,26,94,084/- as made by the AO towards unexplained investment in shares under section 69 of the Act on the basis of seized material from Madras office of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er to any contract notes etc, which is clearly an afterthought. There were numerous transactions by the group concerns of the appellant and in the absence of complete tally regarding dates and numbers, it is difficult to link the holdings given in annexure-6 with the contract notes. The appellant filed a statement together with the contract notes before my predecessor but there are a number of assumptions behind the statement. As regards the claim of the appellant regarding double addition, the same no longer survives because the addition of Rs. 35.52 crores has already been deleted by me. The fact that the assessing officer has not given any comments on the arguments of the appellant on this point does not prove anything. The very fact that the appellant did not give a clear explanation before the assessing officer proves that the acquisitions listed in annexure-6 were unexplained. For reasons already given elsewhere in this appellate order, I do not admit confirmation letters of M/s. HSM, M/s. ASM and M/s. JHM as additional evidences either under Rule 46A(1) or under Rule 46A(4). After considering the entire facts of the case, I am of the view that the addition made by the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew to bring to tax the investments made in cash by the assessee and as such these provisions are not applicable to the assessee at all as the ingredients of section 69 are not satisfied. In defence of his argument the assessee relied on the following decisions: 1. Ushakant N. Patel vs. CIT (2006) 282 ITR 553 (Guj) 2. CIT vs. Mrugesh Jaykrishna (2000) 245 ITR 638 (Guj) 3. Dy.CIT vs. Singla Enclave developers (P.) Ltd. (2013) 40 taxmann.com 127 (Chandigarh-Trib.) 53. The Ld. A.R. also submits that AO is duty bound to prove that documents/information relied upon by him in which unrecorded investments were mentioned. Then the AO has to satisfy himself that these investments made by the assessee during the year are not recorded in the books of accounts. The Ld. A.R. submitted that since the AO has not made any enquiry and has not examined the seized material in its entirety which, if properly examined, would have proved otherwise than what has been presumed by the AO. The Ld. A.R. submitted that the theory of presumption and conjuncture can not be applied while invoking the provisions of section 69 of the Act. The AO has also failed to apply his mind and ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T. Act. In fact, the page very clearly points out that these are the shares held for HSM. Further, during the course of the proceedings before the Assessing Officer, it was clarified and established that these are the shares purchased by HSM, as a broker for and on behalf of its clients being various entities, in most cases being the family members for shares purchased through Madras stock exchange. Since HSM was operating from Bombay, the shares purchased at Madras stock exchange were kept with the assessee at its office under an understanding of the assessee acting as a Custodian to hold shares on behalf of others who are associated with the assessee. In terms of the arrangement between the assessee and the associate entities of the assessee, the appellant was undertaking the task of registration of shares and rendering other related services and was also required to keep the custody of stocks for and on behalf of 3 brokerage firms of M/s. Harshad S. Mehta, M/s. Ashwin Mehta and M/s. J.H. Mehta as also on behalf of the family members and corporate entities who were clients of the said 3 brokerage firms. 55. The ld AR further stresses that the notwithstanding the foregoing, tho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e books of M/s. Harshad S. Mehta for A.Y. 1991-92 reflecting the aforesaid transactions carried out by HSM[Page 1617-1661 of PB No. 7] vii. Ledger account of HSM in the books of various family members for A.Y. 1991-92 reflecting in the aforesaid transactions carried out by HSM for them [Page 1662-1724 of PB No. 7] 56. The ld AR submits that the aforesaid evidences clearly establish that the transactions reflected in the seized page pertaining to the portfolio valuation of certain shares represented purchases made by HSM on behalf of its clients and does not represent the investments made by the appellant. In fact, on an identical basis and as explained earlier, the addition was made in the original assessment order passed u/s. 147 r.w.s. 144 of the Act dated 30.03.1994 [Page 40-62 of PB No. 1] for an amount of Rs. 35,52,82,900/-based on seized page reflecting the notings of various transactions of similar nature[Page 206-208 of PB No. 3]. The said addition was deleted after making detailed discussion by the Ld. CIT (A) in the 1st round of appeal vide his order dated 24.02.2000 [Page 229-325 of PB No. 3] at Paras 78-79. 57. The Ld. D.R., on the other hand, strongly ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ee was rendering various services like registration of shares and other services and also used to keep the custody of shares for and on behalf of three brokers from M/s. H.S.M, M/s. A.S.M. and M/s. J.H.M. and also on behalf of family members and corporate entities who were clients of the said three brokerage firms. We note that all these entities have given confirmations to the effect that shares were not belonging to the assessee but to these brokerage firms. We have also examined the explanation given by the assessee before the AO, a copy of which is filed at page No. 365 giving explanation of the purchases along with evidences in the form of contract notes giving various details which are extracted below for ready reference : Sr. No. Scrip Name Opening Position Toda y's Purchase Closing Position Value Assessee's Explanation Name of Buyers Date Qty. Remarks 1 A.C.C. 780 780 1627677.50 DAM HSM 13/03/91 14/03/91 13/03/91 350 35 455 Enclosed here with the contract notes evidencing purchases 2 ASHOK LEYLAND 500 500 66125.00 DAM 11/03/91 500 Enclosed here with the cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re filed along with their affidavits at page no.381 to 388. Thus we note that the investments reflected in the seized material were explained by the assessee to be belonging to the third parties and these third parties have confirmed the same before the AO. In view of these facts and circumstances, we are quite convinced that investments in these seized material were pertaining to portfolio valuation of certain shares purchased by M/s. Harshad S. Mehta on behalf of its clients and in no way represented the investment made by the assessee. We also note that an addition of Rs. 35,52,82,900/- was made on the basis of seized pages reflecting the similar nature transactions which are filed at page No. 206 to 208 in the paper book No. 3 in the original assessment framed under section 147 read with section 144 of the Act dated 30.03.1994 and the said addition was deleted by Ld. CIT (A) in the first round of appeal vide his order dated 24.02.2000 filed at page No. 229 to 325 of paper book No. 3 vide para 78 & 79 and it is note worthy to mention here that AO has not made any such addition in the set aside proceedings. Thus we find merit in the arguments of the Ld. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs 58,46,090/- is restricted to Rs 29,23,3507- Accordingly, ground No 18 of the appeal is partly allowed." 62. The Ld. A.R. submits that the said addition is not justified for several reasons namely: (i) the said sheet nowhere reflects that the investments were pertaining to the assessee. Since the primary condition of invoking s. 69 of the Act has not been satisfied by the Assessing Officer to prove that the investments were made by the appellant and were not recorded in the books of account, in light of the same, as explained and submitted in the foregoing Paras, the Assessing Officer was not justified in invoking s. 69 of the Act. (ii) In any case, during the course of assessment proceedings, the appellant had submitted following ample evidences to prove that the list of shares reflected on the said seized page pertained to other entities. (a) Chart showing the details of the securities purchased by the various broker entities for and on behalf of their family members [Page 393-395 of PB No. 3]. (b) Contract notes on sample basis issued by brokers in the name of the various entities reflecting the said securities transacted on behalf of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r M/s. Auro Mira and added the same to the income of the assessee as unexplained cash credit under section 69 reasoning that assessee could not explain the source of investments. 67. The appellate authority dismissed the appeal in the first round and in the second round too,the Ld. CIT (A) by following the order of the predecessor dismissed the appeal of the assessee by holding and observing as under: "18.1 The contentions of the assessee have been duly considered. It is observed that this issue has been adjudicated by my Ld predecessor. The relevant portion of the order of my Ld predecessor is reproduced as under: "I have carefully considered the reasoning of the assessing officer, the arguments of the appellant and the facts of the case. It is really unfortunate that the assessing officer having discussed the matter in the body of the assessment order, failed to make the addition in actual computation. However, it is clear that the paper had been seized from the Madras office of the appellant and the burden to explain the transactions was clearly on the appellant. The plea that M/s. Auro Mira was not examined is absolutely irrelevant. It was necessary to exam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e addition merely on the ground that the said documents contain the details of share purchase at Madras office of the assessee by ignoring the fact that the said details were easily verifiable from the share broker who was registered to be of the Madras Stock Exchange. The Ld. A.R. also emphasized that the said paper does not contain any reference to the assessee and therefore the AO has misconstrued the contents thereof that investments reflected in the documents belong to the assessee. The Ld. A.R. submits that in order to make addition under section 69 of the Act, the AO has to prove that these investments belong to the assessee which are not recorded in the books of accounts of the assessee and therefore without establishing the primary condition, the AO could not have made addition under section 69 of the Act. The Ld. A.R. also submits that the ample evidences were available on record which prove that the transactions, in the said seized document were pertaining to other entities, carried out by M/s. Harshad S. Mehta with counter brokers. The Ld. A.R. also refers to the details of securities purchased by the broker entities for and on behalf of their family members, the detail....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Moreover, since the addition has already been made in the assessment order to the tune of Rs. 58,46,090/- on the basis of seized materials which have the details of same transactions of shares and thus any further addition on this count would result in double addition which is not permissible under the Act. Accordingly, we are inclined to hold that the addition under section 69 of the Act has wrongly been sustained by Ld. CIT(A). Therefore, we set aside the order of Ld. CIT (A) and direct the AO to delete the addition. 71. The issue raised in ground No. 13 is against the confirmation of addition of Rs. 37,50,000/- by Ld. CIT (A) as made by the AO on account of unexplained investment in share transfer stamps on the basis of documents seized from Madras office. 72. The facts in brief are that the AO observed from the documents seized from Madras office of the assessee that assessee has sent share transfer stamps worth Rs. 12,50,000/- to its Bombay office on 10.11.1990 and further share transfer stamps worth Rs. 25,00,000/- were purchased on 11.12.1990 at Madras office. Accordingly, the AO asked the assessee to explain the source of said investments of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... MIS Reports being forwarded on a regular basis by the staff of Madras office to Bombay office. The ld AR submits that the stamps were purchased at Madras for and on behalf of the brokerage firm of M/s. Harshad S. Mehta since there was shortage of stamps in Bombay and therefore the transaction required to be accounted for by the concerned brokerage firm. The ld AR argues that such an addition cannot be made u/s 69 of the IT. Act as the purchase of stamps is duly accounted for in the books of account. 75. The Ld. D.R., on the other hand, relied on the order of authorities below. 76. We have heard the rival submissions of both the parties and perused the material on record including the impugned orders. After taking into account the totality of facts and arguments of both the sides, we observe that the assessee has been taking divergent stands so far as the quantum of stamps is concerned. Initially it was admitted these stamps were purchase but after wards the assessee claimed that stamps worth Rs. 25,00,000/- were purchased only and not of Rs. 37,50,000/-. It was also claimed before us that stamps worth Rs. 12,50,000/- were purchased on behalf of Harshad S Mehta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r documents which purport to be in handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular pers (iv) on, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. 20.4 The said report of M/s Arjun K S Ayer was seized from the premises of the Assessee Group and therefore in respect of the claim of the assessee that the figures of share holding of the various entities of its group as per this report are not correct, the onus was on the assessee to collect the requisite information from the said companies so as to demonstrate the position of actual shareholding of the various entities of the Assessee group. However, the assessee has failed to substantiate its claim that, the figures of share holding of the various entities of its group as per this report are not correct. As regards to the contention of the assessee that without prejudice to its contention that no addition should be made, if at all any addition is made, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 3269/M/2015 A.Y. 1989-90, has, on identical addition made in that year, categorically held that no inquiries have been made by the AO in spite of directions given in the earlier round of appeal and it was further held that the matter was of more than 25 years old and nothing fruitful will come out of even if the matter is again restored back to the file of the AO and accordingly on failure on the part of the department to make enquiries, addition was deleted by the Tribunal. The Ld. A.R. prays that following the said decision of the co-ordinate bench of the Tribunal, the addition as sustained by the Ld. CIT (A) in which no inquiries were made by the AO despite the directions of the Tribunal, may kindly be deleted. The DR on the other hands relied heavily on the orders of authority below. 81. In this case, we note that in the first round of litigation, the addition was made on the basis of report of Shri Arjun K.S Iyer which is also confirmed by Ld. CIT (A) but Tribunal restored the matter back to the file of the AO with a direction to make the addition, if required, after conducting inquiries from the companies about the share holdings of the assessee. However, we find th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... under: "I have carefully considered the reasonings of the assessing officer, the arguments of the appellant and the facts of the case. The appellant has largely relied upon its arguments made in connection with the addition of Rs. 35,52,82,900/- and the appellant's main thrust of argument was that both the additions were wrongly made. However, I find that there are significant differences between the evidences on record on which these two additions are based. The addition of Rs. 35,52,82,900/- has been deleted by me mainly on the ground that S-11 which was in possession of the assessing officer clearly showed that the shares and debentures listed in Annexure 3 belonged to different entities and, therefore, no reasonable man could hold that the shares and debentures listed in Annexure 3 were owned by the appellant and were acquired by it in the F.Y. 1990-91. There is no corresponding paper to S-11 in respect of the addition of Rs. 6,24,76,526/-. On the contrary, Annexure 4(2) clearly states in respect of 4165 shares of Punjab Tractors that they were registered in the name of Mrs. Deep/Tea Ashwin Mehta. This according to me implies that the rest of the sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Shri R. Srinivasan as additional evidences. It is held by me that the matter has to be decided on the basis of materials on record before the assessing officer. The reasons for not admitting these documents as additional evidences are contained elsewhere in this order and have already been discussed above. I may also mention here that the evidences mentioned in the written submissions of the appellant dated 08.08.1995 regarding receipt of dividend/warrant in respect of certain shares by different entities of the group are of no consequence because it is not established that the interest/dividend was received on the same shares which are mentioned in the letters appearing as Annexure 4(1) to 4(12) of the assessment order. Once the assessing officer had confronted the appellant with materials in his possession to show that prima facie the appellant was owner of certain shares, the burden had shifted to the appellant to show by concrete evidence as to how these shares were explained and as to when these shares were acquired. The appellant adopted a policy of stony silence before the assessing officer for the obvious reason of preventing investigation in its case and now it cannot ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en allowed sufficient opportunity and therefore should not have any grievance on this count. Therefore, respectfully following the order of my Ld predecessor, the addition made by the AO of Rs 6,24,76,526/- u/s 69 on the basis of the correspondences exchanged between the offices of the assessee at Mumbai and Madras, is confirmed. Accordingly, ground No 22 of the appeal is dismissed." 85. The Ld. A.R. submits that the addition has been made without complying with the primary condition as required u/s. 69 of the Act to establish that the unaccounted investments were made by the assessee during the year under appeal. On this ground itself, the addition deserves to be deleted. That once the FAA accepted the explanation of the appellant in his order dated 24.02.2000 that the Madras office of the assessee was keeping custody of shares on behalf of other entities and also undertaking the task of registration of unregistered shares, the said explanation equally explains the forwarding of shares by Madras office back to Mumbai office after the owners of the shares sold them in the market. The ld AR submits that the explanation given by the appellant was comprehensive and duly corroborate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;3 which contained the breakup of the investments made pursuant to the seized letter and also the detail of brokers by whom these transactions were carried out. The appellant therefore prays that the addition made in the present case deserves to be deleted. 86. We have examined the copies of credit notes filed on sample basis which are at page No. 424 to 473 of paper book No. 3. We observe on the basis of all these documents that in none of the letters indicated anything that these shares belong to the assessee. Contrary to this, on each of the letter the transferee name has clearly been mentioned. We also note that in the first round of litigation Ld. CIT (A) in para No. 78 & 79 in his order dated 24.02.2000 accepted the contentions of the assessee and deleted the addition to the tune of Rs. 35,52,82,900/- with the explanation which is also applicable to the present addition, however, we note that Ld. CIT (A) sustained the addition which is contrary to the findings given by him in par 78 & 79. Besides we have already adjudicated the similar issue in ground No. 10 wherein we have set aside the order of Ld. CIT (A) and directed the AO to delete the additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rowmore Leasing & Investment Ltd. vs. DCIT ITA No. 1219/Mum/2017 & ors for A.Y. 2012-13 is extracted below: "12. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. We have also gone through the case law as has been cited before us the relevant provisions of the Special Court Act which has been referred to before us during the course of hearing. This is an undisputed fact which we noted that the assessee is a notified person from 08.06.1992 under Section 3(2) of the Special Court Act. As per the provisions of the Special Court Act contract entered into by a notified person prior to notification made under Section 3(2) are not affected by the notification. Section 4(1) of the Special Court Act empowers the custodian to cancel any contract or agreement entered into between 01.04.1991 to 06.06.1992 if the custodian finds that these contracts have been entered into fraudulently or to defeat the provisions of the Special Court Act. In A.Y. 1990-91, the AO in the assessment order passed under Section 143(3) dated 26.03.1993 allowed the interest expenses to the assessee to the extent of Rs. 5,86,404/-. From pag....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 26.06.2014 the CIT (A) followed the finding in the case of other group concerns, i.e. Eminent Holding Pvt. Ltd. by observing as under: - "6.3 I have gone through the submissions of the Ld. AR. I find that though there is no express document evidencing payment of interest to the brokerage firms, the intentions of the parties were always so, this is evident from the fact that identical claim was also made during A.Y. 1990-91 and the same was allowed to the appellant and other concerns. The claim made in the affidavit of Custodian in MP No. 41 of 1999 also supports this claim. I also agree with the appellant that there need not be any written agreement and that the oral agreement coupled with the actions and intentions of the parties is sufficient to prove the existence of the liability." 13. Similar issue was involved in the case of other family member, i.e. Shri Hitesh S. Mehta for A.Y. 2005-06 where also the AO has disputed the very existence of liability towards interest to creditors. The CIT (A) vide his order dated 31.08.2010 confirmed and approved the claim of the assessee that there was no need for any written agreement and that the oral agreement coup....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed A.R. pointed out that the liability in the present case was accrued on account of purchases of shares and securities by the assessee which were sold in terms of the directions of the Hon'ble Special Court in subsequent years and the sale proceeds so received were invested in term deposits with the banks and accordingly the assessee has claimed interest expenditure against the interest earned on term deposits. No contrary evidences or material were brought to our knowledge to contradict this fact. In view of this fact we find that there is a nexus between borrowed funds and investments in term deposits. Therefore, the interest paid on the borrowed funds has to be allowed out of the interest earned by the assessee on term deposits. We noted that identical issue was raised in the case of M/s. Growmore Leasing & Investment Ltd. in A.Y. 2007-08. The CIT (A) in his order dated 26.02.2012 considered the issue of nexus of interest expenditure with interest income, following his own finding in the case of another notified entity, i.e. Eminent Holding Pvt. Ltd. for A.Y. 2007-08 which are reproduced as under: - "As regards the nexus of the interest expenditure with the interes....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the Plaintiff and traversable by the Defendant, has not been traversed. In that case also a Defendant is bound by the judgement, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." At pg 329 of the judgement, Their Lordships observed as under: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating though the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l of the assessee submitted that the issue is a recurring issue over the years and the coordinate bench of the Tribunal has consistently held that interest should be computed by the AO in consonance with the judicial precedents referred to in the respective orders. The Ld. A.R. submitted that the AO has not been following and abiding by the orders of the higher authorities and wrongly levying higher interest on all notified entities. The Ld. A.R. submitted that in this case also, the AO should be directed to compute the interest in terms of the following decisions: "a. Growmore Leasing & investments Ltd. v. DCIT [ITA No. 1219/Mum/2017 and others] for A.Y. 2012-13 and others dated 27.12.2017. b. Sudhir S. Mehta v. DCIT [ITA No. 7147/Mum/2018] for A.Y. 2014-15 dated 3.11.2020. c. Harsh Estates Pvt. Ltd. v. DCIT [ITA No. 6957/Mum/2018 and others] for A.Y. 2013-14 to A.Y. 2015-16 dated 15.09.2020." 95. Ld. D.R., on the other hand, relied on the orders of authorities below. 96. After hearing both the parties and perusing the material on record, we observe that the interest under section 234A, 234B, 234C is mandatory under the provisions of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ks of accounts was because of reasons that different methods of accounting were followed by the assessee and M/s. Harshad S. Mehta. Besides account No. 2095(84) in the books of accounts of M/s. Harshad S. Mehta which showed amount payable to the assessee of Rs. 6,29,77,921/- was deliberately ignored by the auditor. However, the Ld. CIT (A) dismissed the contention of the assessee and enhanced the income by observing and holding as under: "28.3 The contentions of the assessee have been duly considered. It is noted that the Hon'ble jurisdictional High Court in the case of M/s Jyoti H Mehta for AY 1991- 92 has held that it will have to be left to the AO to test the genuineness and authenticity of the entries in the books of accounts and thereafter, pass fresh assessment order. In view of such directions of the Hon'ble Jurisdictional High Court, the assessee is duty bound to reconcile the difference in the balances by explaining each and every entry in the ledger account of the assessee in the books of M/s Harshad S Mehta and each and every entry in the ledger account of M/s Harshad S Mehta in the books of the assessee. However, rather than giving a detailed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om the balances appearing in M/s. HSM books. We observed huge differences in those balances which were narrated separately in Annexure No. 6A. 8.2 M/s. HSM while recording the transactions in his books of accounts totally ignored those transactions with an intention to hide the correct picture of his state of affairs. We were surprised to note the huge differences in the outstanding balances within his own group. This would clearly show beyond doubt his fraudulent intentions and it was a clear case of manipulation and misappropriation of the books of accounts of M/s. HSM. Significantly, I also note that the findings of the differences in the balances were not given by M/s. Vyas & Vyas on their own but as part of their Scope of Work as laid down by the Hon'ble Special Court. Scrutinizing and investigating third party liabilities stand as item 1.3.2 of the scope of work. In view of this, the findings of the differences formed part of responsibility of M/s, Vyas & Vyas. The appellant has not brought out anything specific on this process of scrutiny and investigation done by Vyas & Vyas and has only made a general observation. It is thus, seen that working out of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reconciliation submitted by the appellant is not only between incompatible entities but also lacking in specific matching of transactions. To this end, I find that the appellant has not matched the debit and credit entries datewise in the different sets of books. In face of all the foregoing severe infirmities, the reconciliation by the appellant is not acceptable being not credible. Merely passing a journal entry of huge amounts in the books of individual entities without debiting the account of the individual entity in the books of business entities of the other related parties without proper supporting is highly flawed. This has also been noted by the three Chartered Accountants in their Report on Review of Unaudited Accounts of M/s. Jyoti H. Mehta. In this report, it has been clearly mentioned that journal entries affecting the accounts have been made without any supporting. In similar vein, in the Report on Review of Unaudited Accounts of Mrs. Jyoti H. Mehta, it has been mentioned that the differences between different accounts could not be explained despite asking for explanations. The observations are recorded in para 13.5 on page 37 of the Report. Similar observation has be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 1 M/s. S Ashwin Mehta 31/03A2 0.00 Dr. 1073459584.00 Cr. (1,073.459.584.00) 2 M/s. Jyoti Mehta H 31/03/9 2 --- --- - 0.00. - - Dr. 2654755055.00 Cr. (2,654,755,058.0 0) The difference of these balances arise on account of complete non-disclosure of the transactions in the appellant's books. The credit balance also does not stand reconciled. As may be seen, whereas M/s. Ashwin S. Mehta and M/s. Jyoti H. Mehta have disclosed transactions of Rs. 107,34,59,584/- and Rs. 265,47,55,0587- respectively with M/s. Harshad S. Mehta, the latter has not shown these transactions in his books. In view of this, I find that a sum of Rs. 372,82,14,642/- is liable to be taxed in the hands of the appellant as income from undisclosed transactions and sources. Since, this amount has not been brought to tax in the assessment, I enhance the appellant's income by this amount. So far as the balance differences are concerned, I find that they are to be examined in the cases of the related parties to see whether or n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lly incorrect as the impugned addition has been made on account of the difference between the balance of HSM in the books of the assessee and the balance of the assessee in the books of HSM. While making the addition, the Ld. CIT (A) has relied upon the order of his predecessor in the case of HSM for A.Y. 1992-93 dated 24.02.2010. The ld AR submits that the assessee factually denies any such difference in the balances between books of account of the assessee and HSM. The AR also submits that above the said difference in the balances determined by the Ld. CIT (A) is unjustified as the details furnished by the assessee explaining the alleged difference and the reconciliation statements given in that regard have been rejected. The ld AR contends that even that part of the difference was also duly explained to be on account of different accounting methods followed by both the parties. While the assessee follows Mercantile system of accounting and HSM follows cash system of accounting. Due to difference in the method of accounting, certain transactions which have been accounted for by the assessee in the year under appeal may have been accounted by HSM in the subsequent year. 102. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....being taken by the Custodian. It may be noted that this report itself came into existence in the year 2004 after almost 12 years from the time the original assessment was made. In any event and even assuming without admitting, if any such difference does exist the same does not represent the taxable income of the appellant. 104. Without prejudice, the ld. AR further submits that the identical issue was decided by the Ld. CIT (A) in the case of HSM vide his order dated 24.02.2010. The said order was later challenged in appeal before the Hon'ble Tribunal. The Hon'ble Tribunal vide its order in ITA No, 5702/Mum/2017 dated 14.01.2019, has held that all the account have to be considered before coming to conclusion whether there is any difference in the balances and between the 2 parties. The Hon'ble Tribunal, therefore, held that the addition can be made only in case if all the accounts have been considered and the difference is not explained by the assessee. A copy of the relevant pages of the order the Hon'ble Tribunal in the case of Late Shri Harshad S. Mehta v. DCIT [ITA No. 5702/Mum/2017] for A.Y. 1992-93 dated 14.01.2019 is enclosed at Page 534-549 of PB No. 3. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dispute in the first round as there was no addition made by the tax authorities. After considering the facts of the case and the rival contention including the case law cited by the Ld. A.R., we are of the considered opinion that the AO has power to examine only those issues which were restored by the higher authority which is ITAT in the present case and so is power of the ld. CIT(A). In no way the powers can not be exercised to enhance the income of the assessee in respect of those items of income which were not the subject matter before the Tribunal. The case of the assessee is supported by the decision of Kellog India Ltd. vs. ACIT (supra) and ITO v. Jabbai Woodcrafts India Ltd (supra). The facts and the facts and operative part of the decision in the case of Kellog India Ltd. vs. ACIT (supra) extracted below: "28. Facts, which are relevant for our adjudication, are that this is the second round of appeal and in the first round, the Assessing Officer has made 50% of disallowance out of these expenses on ad-hoc basis. This was further reduced to 25% by the Commissioner (Appeals). Against this disallowance, the assessee went in appeal before the Tribunal, wherein the Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xtent only." 107. We, therefore, respectfully following the decision of the coordinate bench of the Tribunal, set aside the order of Ld. CIT (A) and the ground of appeal raised by the assessee is allowed. On merits also we find that addition is not sustainable. We note that while making the addition the ld. CIT (A) has not taken all the accounts of HSM in the books of accounts of the assessee and all accounts of the assessee in the books of HSM. The main argument of the Ld. A.R. was that all the accounts in the books of accounts of the assessee as well as HSM have not been considered. Upon perusal of page No. 474 of paper book No. 3 along with ledger accounts filed at page no.475 to 528 of paper book No. 3, we observe that the said difference of Rs. 5,50,04,509/- was calculated on the basis of a few ledger accounts only. We note that the Ld. CIT (A) has on pick and choose basis taken a few accounts for the purpose of ascertaining and making the addition. Besides, we note that the Ld. CIT (A) has taken the said difference on the basis of report of the auditor M/s. Vyas & Vays appointed by the special court in the case of HSM. We also note that the said auditor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the decision of the Hon'ble ITAT in case of Shri. Sudhir S. Mehta in ITA No. 5799/Mum/2014 for A.Ys. 2009-10 to AY. 2011-12 which has itself been challenged by the Department before the Hon'ble Bombay High Court." 110. The issue in ground No. 1 raised by the Revenue is discussed and decided in ground No. 5 in the cross appeal of the assessee in ITA No. 504/M/2019 wherein we have allowed the appeal of the assessee. Consequently, the ground raised by the Revenue becomes infructuous and is dismissed. 111. The issue raised in ground No. 2 is against the order of Ld. CIT (A) allowing the depreciation on the office premises by ignoring the fact that the same is not registered in the claim of the assessee. 112. The facts in brief are that in the course of assessment proceedings, the AO noticed that assessee has claimed depreciation of Rs. 4,38,000/- on the office premises on the ground that the property is not registered in the name of the assessee. The assessee has purchased the said property by paying part consideration on 06.10.1990 and the balance consideration was discharged on 13.10.1990 and immediately the possession of the premises was also t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot allowable. In our opinion there is no requirement of the registered ownership of the property in order to claim the depreciation. The issue is settled by the Hon'ble Supreme Court in the case of Mysore Minerals Ltd. vs. CIT 239 ITR 775 (SC) wherein the Hon'ble Supreme Court held that assessee is using the assets for the purpose of business is entitled to depreciation even if the asset was used is not registered in the name of the assessee. We are, therefore, respectfully following the decision of the Hon'ble Apex Court, inclined to affirm the order of Ld. CIT (A) by dismissing the ground No. 2 raised by the Revenue. 115. The issue raised in 3rd ground of appeal is against the direction of Ld. CIT (A) to the AO for capitalization of interest in the cost of securities which was disallowed under section 14A of the Act. 116. The facts in brief are that the assessee has invested borrowed funds in the shares and securities which were held as investments. According to the assessee, the said interest payable on the loans has to be capitalized as the same was utilised for the purpose of investment in shares and securities. The Ld. A.R. submitted before us that interest to that....