TaxTMI 
TaxTMI 
2024 (4) TMI 1300
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....t of un-explained receipts - Rs. 29,343/- 5. Disallowance of interest expense. As against interest expenditure of Rs. 2.05,00,000/-, interest expenditure to the extent of Rs. 9,08,273/- was allowed. 6. Addition on account of difference in balances in books of account of Mr. Harshad S. Mehta - Rs. 42,49,266/-. 7. Levy of interest u/s. 234D of the Act. Additional grounds of appeal 1. Addition of profit from partnership firm M/s. Sunrise Enterprises - Rs. 3,12,253/- 2. Levy of interest u/s. 234A and 234B of the Act. 3. Shri Dharmesh Shah on the behalf of the Assessee submitted at the outset that this is the 3rd round of litigation before the Tribunal. The Assessment Order dated 29.12.2017 u/s. 144 r.w.s. 254 of the Act was passed in pursuance to the direction of Tribunal vide order dated 15.9.2016 in ITA No. 1189/Mum/2012 and ITA No. 6164/Mum/2012, for AY 1992-93. The Learned Authorised Representative (in short 'ld. AR') submits that the Assessing Officer (in short 'AO') has rejected the Books of account of the Assessee and has passed the order u/s. 144 of the Act. The reasons for rejecting the books....
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....nt proceedings, AO could not have made addition in respect of the issues that had attained finality. The ld. AR submitted that in original Assessment Order, the AO had collected information from three sources viz. Custodian appointed under the Special Court (TORTS) Act, Companies issuing shares, dividend account provided by Assessee and the shares registered in the name of Assessee and seized from various premises of the group. The letter from Custodian dated 29.10.2023 is at page 242 of the paper books. The list of investments is at page 266 of the paper books. The Assessee made repeated requests to the AO to provide the documents on the basis of which addition has been made on account of un-explained investments. Despite repeated requests and reminders from time to time, the Assessee was not provided with the documents. The ld. AR pointed that the Assessee had written 13 letters to AO/CIT(A). The details of letters requesting for evidences and cross examination of the evidences used for making the addition on un-explained investments is placed at page 1582 of the paper books. He pointed that out of addition of Rs. 14.90 lakhs, addition of Rs. 9 lakhs are based on the in....
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....he paper books. He pointed that similar issue was decided in the case of Hitesh S. Mehta in ITA No. 2623/Mum/2022 for AY 1994-95 on 23.3.2022. 3.6 In respect of ground no. 7 of the appeal, the ld. AR submitted that the AO has levied interest u/s 234D of the Act. He pointed that no interest should be charged as the original assessment was completed on 28.2.1995. The provisions of Section 234D were introduced w.e.f. 1/6/2003. Since, section was not in existence when the assessment was completed, no interest can be charged under the said section in de-novo assessment proceedings. In support of his contentions, he placed reliance on the decision in the case of DIT Vs. Delta Airlines Inc. 358 ITR 367 and CIT Vs. Reliance Energy 358 ITR 371 SC. 3.7 In respect of additional ground no. 1 of appeal, the ld. AR submits that the issue can be sent back to the AO for verification. As regards additional ground no. 2 of appeal the ld. AR made a short prayer that interest u/s 234 A and 234 B can only be charged upto the date of regular assessment. To support his submissions, he placed reliance on DCIT Vs. Harshad S Mehta in ITA No. 6227/Mum/2018 decided on 17/10/2019. 4. Per con....
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....9.12.2017 is passed in consequence to the directions of the Tribunal in Assessee's appeal in ITA No. 1889/Mum/2012(supra). The AO has rejected books of account in the third round inter-alia for the reason that, books are not audited u/s. 44AB; Assessee has not been able to submit certified copies of bank accounts which according to the AO are primary source of ascertaining validity of books of account and the Assessee has not been able to answer substantive issues which are primary material in verifying books. The power to reject books stem from the provisions of Section 145(3) of the Act. The relevant extract of the provisions of section 145(3) is reproduced herein below: 145(3) "Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144." A bare perusal of above provisions would show that non audit of accounts u/s. 44AB c....
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.... books of accounts for more than six years." The above reasons cited by the AO for rejecting books does not fall within the ambit of sub section (3) of section 145 of the Act. For rejection of books of account, the AO has to record (dis) satisfaction about the correctness or completeness of the accounts of Assessee. The reasons given by the AO with instances does not express AO's opinion regarding the correctness and completeness of the accounts. For instances, if in the opinion of AO drawings shown in the books for personal use are uniform every month and the AO is of the opinion that such withdrawals should be higher, the AO could have made addition accordingly, but that cannot be the reason for rejection of books. Similarly trading transaction with the closely related persons cannot be a reason for rejection of books unless, some deceitful element is shown in the transaction. In light of above observations, we hold that the AO has erred in rejecting books of account. Thus, the Assessee succeeds on ground no. 1 of appeal. 6. In ground no. 2, the Assessee has assailed addition u/s. 69 of the Act on account of unexplained investments. The Tribunal in second round in ITA No.&n....
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....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 issue 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 hours made in the order is above. We order accordingly." The ld. AR of the Assessee pointed that the AO in assessment proceedings in the third round without providing the details and materials on the basis of which addition was made, again made the same addition, in violation of the directions of the Tribunal. It was further pointed that in the impugned Assessment Order, the AO has made addition in identical manner. We have examined the Assessment Order, dated 22.12.2006 that was quashed by the Tribunal in second round of litigation. We find that the AO in the Assessment Order dated 29.12.2017, i.e., passed in compliance of the Tribunal order has made addition on account of unexplained investments for identical reasons as was done in the past. Even the reasons given by the AO for making the additions are verbatim. A perusal of impugned Assessment Order reveals ....
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.... merit in the contentions and arguments of the Ld. A.R. that the disclosure was made at a stage when the complete books of accounts were not available and it was not possible for the group to determine its correct income from share trading profit, dividend and capital gain etc. and the disclosure was purely on estimation basis. But now since the books of accounts are before the Revenue Authorities and contains all the information qua the income of the assessee by way of profit on share trading, dividend and capital gain etc and the actual income of the assessee has been assessed by the Revenue Authorities based on the bank statements and other accounting records, therefore the income as offered by way of composite disclosure by Shri Harshad Mehta cannot be added to the income of the assessee. The case of the assessee also is squarely covered by the decision of the co- ordinate bench of the Tribunal in the related concern case of M/s. Orion Travels Pvt. Ltd. vs. ACIT (supra) wherein identical issue has been decided in favour of the assessee. We, therefore, respectfully, following the decision of the co-ordinate bench of the Tribunal, set aside the finding of the Ld. CIT (A) and dire....
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....IT v/s Jagmohandas J. 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 under:- "It would be noticed that what is allowable as expenditure under the said sub-section is only the expenditure incurred solely for the purpose of making or earning dividend income. Emphasis thus appears to be on the object or purpose of incurring of the expenditure. The exclusive object of incurring the expenditure has to be the making or earning of the dividend income. The mere fact that income by way of dividend has accrued and that the expenditure incurred is in some manner or other related to the accrual of the dividend income is not sufficient." 31. We find that the Hon'ble Supreme Court in Seth R. Dalmia v/s CIT, [1977] 110 ITR 644 (SC) agreed with the view taken by the Hon'ble jurisdictional High Court in CIT v/s H.H. Maharani Vijaykuverba Saheb of Morv....
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....ry reason for rejecting interest expenditure is, books of account of the Assessee are unreliable. We have in preceding paragraphs of the order reversed the findings of authorities below in rejecting books of account u/s 145(3) of the Act. Therefore, the said reason for making addition is no longer sustainable. In so far as other reasons given by the Assessing Officer, i.e., interest payable is tentative, no basis for charging interest and that the broking firms have not charged interest, etc., the reasons are recorded without reference to any material on record. The Assessing Officer has not given reasons/basis to reach such a conclusion. Thus, in view of the aforesaid decision of the Co-ordinate Bench and facts of the case, the addition in respect of interest expenditure is deleted. 10. In ground no. 6 of the appeal, the Assessee has assailed the addition made on account of mismatch in the balances of books of Harshad S. Mehta and the Assessee. The addition on account of difference of balances was not originally made by AO. It was during the first appellate proceedings that the CIT (A) made enhancement. The ld. AR pointed that similar addition was made in the case of Hitesh Meh....
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.... insertion of Section 234 D by the Finance Act, 2003, the interest under said section cannot be levied. In other words, the provisions of section 234 D cannot be applied retrospectively. Thus, in light of the aforesaid decision, the AO is directed not to charge interest u/s 234 D of the Act in the impugned Assessment Year. The ground no. 7 of the appeal is thus, allowed. 12. The Assessee in additional ground no. 1 of the appeal has assailed addition of profits from partnership firm M/s. Sunrise Enterprises. The short prayer of Assessee with respect to this ground is that the aforesaid ground was inadvertently left to be taken in the grounds of appeal hence is taken as additional ground of appeal. Except praying for restoring this issue back to the file of AO, no other submission was made by the ld. AR. A perusal of impugned order reveals that the ground emanates from the addition made in the assessment proceedings. The Assessee had assailed the addition in respect of profits from M/s. Sunrise Enterprises before the CIT (A) in ground no. 7. In proceedings before the CIT(A), the AO had agreed for the addition. Thus, in view of the concession given before the CIT(A), we find no mer....