TaxTMI 
TaxTMI 
2025 (8) TMI 1361
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....ged in the business of purchase and sale of shares and securities. Due to the problems faced by the group on account of outburst of the scam, the assessee company could not file return of income for the year under consideration. Hence, the AO completed the assessment to the best of his judgement u/s 144 of the Act determining the total income at Rs. 165.50 crores. 3. The assessee challenged the same by filing appeal before the Ld. CIT(A). It is pertinent to note that the assessee submitted the books of accounts before the Ld.CIT(A) with the petition to admit them as additional evidence. He, however, did not admit it and disposed of the appeal grating partial relief to the assessee, vide his order dated 27-03-2003. Hence, both the assessee and revenue challenged the above said order of Ld.CIT(A) by filing appeals before the ITAT. The Tribunal, vide its order dated 28-04-2006 disposed of the appeal of the assessee, wherein it restored all the matters contested before it to the file of the Ld.CIT(A) with the direction to consider the books of accounts and take decision on merits afresh in accordance with law. Subsequently, the appeal filed by the revenue was also restored to the fi....
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..... Accordingly, the AO treated it as unexplained investment and assessed a sum of Rs. 1,23,13,150/-. Similarly, the AO had initially held that sources of 90,000 shares of M/s Grasim Industries Ltd were not explained and accordingly made addition towards unexplained investment. However, in the remand proceedings, the AO found that the corresponding purchases have been made and accordingly restricted the addition to the profit on sale of shares of M/s Grasim Industries Ltd amounting to Rs. 16,15,000/-. The Ld.CIT(A) also, accordingly, sustained the addition in respect of M/s Grasim Industries Ltd to that extent and the assessee has also accepted the same. 8.2. With regard to unexplained investment of 80,550 shares of RIL, the assessee submitted the ledger account containing quantity details of purchases and sales of shares of above said company before the Ld.CIT(A), who has also extracted the same at pages 21 and 22 of his order. The main contention of the assessee was that it was holding 1,35,100 shares of RIL as at the beginning of the year and the above cited 80,550 shares were sold out of the opening stock of shares. The Ld.CIT(A) also found the same to be correct and according....
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....nder the Special Courts Act after the break out of Scam. During the course of search operations, the revenue had seized contract notes relating to the assessee. On the basis of those Contract notes, the AO prepared the list of shares that should be available with the assessee. Then the AO compared the said list with the information received from various companies and the Custodian. On such comparison the AO noticed difference in the value of shares at Rs. 12,21,47,963/- and Rs. 76,21,700/- respectively. Accordingly, the AO assessed the aggregate amount of Rs. 12,97,69,663/- as unexplained investment. 9.2. The assessee explained the difference by producing contract notes that were not considered by the AO. Certain contract notes were filed before the AO and also before the Ld.CIT(A) along with the appeal forms filed before him. Upon examination of these details, the Ld CIT(A) granted partial relief as under:- (a) The Ld.CIT(A)accepted the contract notes filed before the AO only and accordingly granted relief to the extent of Rs. 27,45,000/-. He did not recognize the contract notes furnished before him along with appeal papers. (b) The Ld.CIT(A) further noticed t....
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....uld not controvert all these factual aspects considered by the Ld.CIT(A) for granting the relief. Unless the revenue could show any infirmity on the above said factual aspects, we are of the view that we may not be in a position to interfere with his decision to grant relief. Accordingly, we confirm the above said reliefs granted by the Ld.CIT(A). 9.4. The assessee is challenging the addition of Rs. 8,99,80,563/- confirmed by the Ld.CIT(A). We noticed earlier that the AO has determined the unexplained investment in the shares on the basis of letters received from the Companies and Custodian. The Ld A.R submitted that the assessing officer has not supplied the copy of documents/letters, which were the basis for making the addition. The following additions have been made on the basis of documents not confronted with the assessee:- Sr. No. Name of company Amount (Rs.) 1. JCT Limited 48,14,250 2. India Cements Ltd 4,80,500 3. J K Industries 1,08,000 4. ITC 4,91,96,300 TOTAL 5,45,99,050 The Ld A.R submitted that the AO has not supplied the materials on the basis of which above addition was made by him, even though it had....
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....noticed earlier that the Ld CIT(A) has extracted the details of purchase and sale of shares of RIL in pages 21 and 22 of his order, as per which the assessee was having 12,25,150 shares as on 31-03-1992. We noticed that the quantity of shares available with the assessee as at the year end was more than the quantity of 10,09,295/- considered by the AO for making this addition. 9.8. We heard the parties on this addition. We noticed earlier that the Ld. CIT(A) had deleted the addition towards unexplained investment of 80,550 shares accepting the Quantity ledger account of RIL, which was extracted by him in pages 21 and 22 of his order. We have also upheld the same. The Ld.CIT(A) himself has noted down the opening quantity of 1,35,100 shares therein. Further, as per the said quantity details, the assessee was having 12,25,150 shares as on 31-03-1992, which was more than that considered by the AO for making this addition. Under these set of facts, we are of the view that the question of unexplained investment in the shares of RIL does not arise and accordingly, the AO was not correct in computing unexplained investment in shares of RIL. Accordingly, we set aside the order passed by L....
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....rchase. 9.12. We heard the parties on this issue and perused the record. It is the contention of the assessee that there is no company exists in the name of NBS Industries. In that case, it is not discernible as to how the AO determined the value of investments that too, on the basis of market price as on 31-03-1992. Hence, we are of the view that there may be error in mentioning the name of the company. Since no detail was produced by the revenue also, we deem it proper to restore this addition to the file of the AO with the direction to furnish the material relating to the addition of NBS Industries Ltd to the assessee. After getting explanation from the assessee, the AO may take appropriate decision in accordance with law. 9.13. The order passed by the Ld.CIT(A) on this issue would stand modified according to our decision rendered in the earlier paragraphs. 10. The Ground No.3 urged by the revenue relates to the relief granted by the Ld.CIT(A) in respect of capital gain arising on sale of shares of TISCO Ltd. 10.1. The AO noticed that the assessee has sold 56000 shares of TISCO Ltd on 08-08-1991 for a consideration of Rs. 1,30,48,000/-. When questioned about the purc....
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....pted the plea of the assessee and accordingly the above said bonds were registered in the name of the assessee. It was also paid interest from 22-01-1992 onwards. Accordingly, the AO computed accrued interest from 22-01-1992 to 31-03-1992 at Rs. 2,64,08,219/- and assessed the same. 11.2. Before the Ld.CIT(A), the assessee relied upon the decision rendered by the ITAT in the assessee's own case in ITA No.259/M/2019 dated 09-04-2021 relating to AY 1996-97. It was submitted that the AO had made identical addition in that year also in respect of interest accrued on NTPC bonds. However, as per subsequent developments that took place, the assessee lost its ownership rights. It was explained that State Bank of India filed a petition before Hon'ble Supreme Court of India with the prayer that the securities handed over to NHB be declared as the property of State Bank of India. The said prayer was accepted by the Hon'ble Supreme Court. The Tribunal also noticed the fact that the custodian has repaid the interest received on the above said bonds on behalf of the assessee to State Bank of India. On the basis of these facts, the ITAT held that the assessee cannot be considered to be owner of....
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....cannot be interfered with. However, it is the contention of the assessee that the adhoc percentage of disallowance adopted by Ld CIT(A) against certain expenses is not in accordance with the decision rendered by ITAT in 1991-92. Since it is a matter of verification, we modify the order passed by the Ld.CIT(A) and restore the same to the file of the AO with the direction to compute the disallowances of various expenses as per the adhoc percentage determined in the decision rendered by ITAT in the assessee's own case in AY 1991-92 (referred supra). 13. We shall now take up the appeal filed by the assessee. In the original grounds of appeal filed by the assessee, it has raised 19 grounds. Thereafter, the assessee, vide its letter dated June 17, 2024 has modified grounds no.11 and 13. The assessee has also raised an additional ground, vide its letter filed on 23-02-2024. The Ld A.R did not press ground Nos. 1, 3, 4, 7. Accordingly, these grounds are dismissed as not pressed. Ground No.19 is general in nature. We shall proceed to adjudicate the remaining grounds. 14. The ground No. 2 urged by the assessee has already been disposed of along with the grounds contested by the revenue....
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....ion u/s 69 of the Act, on the basis of loose documents found during the course of search without brining any other credible material to show that these are unaccounted investments belong to the assessee. The Ld.AR reiterated that these documents only depicted portfolio valuation of shares held by others. He submitted that an identical addition was made in the immediately preceding assessment year, namely, AY. 1991-92 on the basis of similar documents and the said addition has been deleted by the Tribunal vide its order dt. 30-03-2021 passed in ITA No. 1196 & 504/Mum/2019. 15.4. The Ld.AR submitted that the Ld.CIT(A) has followed the decision rendered by the predecessor in the first round, wherein he had tried to distinguish the decision rendered by the Ld.CIT(A) in AY.1991-92. However, he submitted that the said distinction is not factually correct. The contentions made by the assessee in its written submission in this regard are extracted below: "It has been erroneously observed that the heading of the seized paper is 'shares sent from Bombay to Madras'. It can be seen from the heading of the seized paper, relevant to A.Y. 1991- 92, at page No. 492 of PB No. 3 ....
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....He submitted that the above said shares belong to Smt. Deepika A. Mehta and they have been sold by her through M/s.HSM in Madras Stock Exchange through another Madras broker named, M/s. Auro Mira. He submitted that the relevant contract notes are available at pg. Nos.388 and 389 of Paper Book No.3. The Ld.AR submitted that this information supports the stand of the assessee that the shares mentioned in the portfolio valuation do not belong to the assessee. The Ld.AR further submitted that the assessee has been preparing this kind of portfolio valuation regularly, but the AO has picked up one of such documents prepared on 06-12-1991 and has made the impugned addition. He submitted that the assessee group is having many companies with the name starting with "Growmore". Further, mere use of word "GRAM" on the head of the document would not automatically mean that the shares mentioned in the document belong to the assessee. It only shows that the document was prepared by the assessee. Accordingly, he submitted that the AO should not have made this addition without bringing any other credible material to prove that the shares mentioned in the document not only physically exists in the h....
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....brokerage firms of the group have confirmed that the shares listed in the seized papers either belonged to them or to their clients, as the case may be. However, the same has not been disproved by the AO. 15.8. The Ld.AR summarized his arguments as under: * the books of account of the assessee have not been rejected. * the A.O. has not been able to bring on record any corroborative evidence. * the assessee has established by leading a positive evidence that the shares belong to other entities. * The A.O. himself has considered some of the shares as belonging to other associate entities who have accounted thesame. * presumption of the A.O. that the assessee had entered into such huge number of transactions on regular basis outside the books of account is improbable and wild, to say the least. 15.9 The Ld D.R, on the contrary, submitted that even though the assessee has claimed that the shares noted down in the seized document did not belong to it, but the assessee has not identified the real owners or beneficiaries for all the shares. All these details were found from the office of the assessee located in Madras. Further, the minute....
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....w that the assessee has made investments. When the assessee denies making of any investment, then the onus will be placed upon the AO to show that the assessee has made investments outside the books. We notice that the AO did not bring any material on record to show that the assessee has made unaccounted investments, except a loose document found during the course of search. We noticed that the stock market scam unearthed at that point of time has shook the Country and all the assets of the assessee's group have been taken over by the custodian, meaning thereby, all the details of investments are now available with the Custodian. We notice that the AO had also collected the details of investments from the custodian and has also made additions in respect of unexplained investments on the basis of information received so received. However, the AO did not establish on the basis of said information that the investments found in the seized documents were in fact available in the name of the assessee and they were not unaccounted. On the contrary, we notice that the assessee has furnished various instances to show that the said investments did belong to others. 15.12 We notice that th....
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.... 51.0650 Crores The AO assessed the above said amount of Rs. 51.06 cores as unexplained investment. We notice that there is contradiction between the claims of both the parties. The assessee has claimed that it has furnished debit and credit advices and/or contract notes relating to the above said purchases before the AO and also before Ld CIT(A) in the first round of proceedings. However, the AO has observed that the assessee has not submitted those details. 16.1 The Ld CIT(A), in the first round, had also confirmed the addition by observing that the assessee has not produced any details even though it is claimed that the details of debit/credit advice and/or contract notes were submitted. The assessee had also claimed that some of the bonds might have been sold and they would remain in its name till it is transferred to the name of the buyer, but these explanations were rejected in the absence of any proof. 16.2 In the present second round of proceeding before Ld CIT(A), the assessee reiterated its submissions that the evidences were furnished before the AO as well as to the predecessor CIT(A). Alternatively, it was prayed that those evidences may be admitted as additio....
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....s of FV Rs. 25 Crores. The said purchase of Bonds of FV Rs. 50 Crores is supported by the following documents. a. Debit Note with Cost Memo dated 26.09.1991 issued by M/s. Harshad S. Mehta reflecting purchase of Bonds of F.V. Rs. 50 Crores by the assessee. (page No. 561, 562 of PB) b. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page No. 563, 574 of PB) c. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page no. 585 of PB) d. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page no. 586, 587 of PB). e. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) M/s. Harshad S. Mehta in turn had in turn purchased Bonds of FV Rs. 100 Crores from M/s. V. B. Desai on the same day, ie. 26.09.1991, out of which the aforesaid Bonds of FV Rs. 50 Crores were purchased on behalf of the assessee. This is supported by the following documents: a. Contract Note dated 26.09.1991 issued by M/s. Harshad S. Mehta to M/s. V. B. Desai in respect of purchase of 9% IRFC Bonds of FV Rs. 100 Crores. (page no. 605 of PB) b. Relevant Deal Slip extracted from the seized compu....
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....Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 649, 652, 653 of PB) d. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A) along with the relevant extract of Deal File reflecting the above transaction. (page No. 665 of PB) Acquisition of 9% NHPC Bonds of FV Rs. 50 lakhs The assessee has purchased NHPC Bonds of FV Rs. 50 Lakhs through M/s. Harshad S. Mehta on 25.09.1991. The said purchase of Bonds of FV Rs. 50 Lakhs is supported by the following documents: a. Debit Note with Cost Memo dated 25.09.1991 issued by M/s. Harshad S. Mehta reflecting purchase of Bonds of F.V. Rs. 50 Lakhs by the assessee. (page No. 669, 670 of PB) b. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page no. 563, 574 of PB) c. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page No. 585 of PB) d. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page no. 586 of PB) e. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) Shri ....
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....rted by the following documents: a. Contract Note dated 27.05.1991 issued by M/s. Harshad S. Mehta to M/s. SBI Capital Markets Ltd. in respect of purchase of 9% IRFC Bonds of FV Rs. 10 crores for delivery on 26.06.1991. (page no. 675 of PB) b. Relevant Deal Slips extracted from the seized computer data pertaining to the above transactions. (page no. 676-678 of PB) c. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A) along with the relevant extract of Deal File reflecting the above transactions. (page no. 679 of PB) d. Ledger of M/s. SBI Capital markets Ltd. in the books of M/s. Harshad S. Mehta (relevant pages) reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 683, 685 of PB) e. Ledger of M/s. Banque Indosuez in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 688 of PB) f. Ledger of M/s. Hindalco Industries Ltd. in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. ....
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....e issue afresh by considering the books of accounts of the assessee. However, it appears that the Ld CIT(A) did not refer the books and also did not reject it also. Hence, he should have accepted the entries made in the books of accounts. 16.6 The Ld.DR, on the contrary, submitted that the assessee did not furnish the books of account before the AO during the course of assessment proceedings. He submitted that the assessee is placing reliance on the running account maintained with M/s HSM, but the books of accounts of Mr Harshad Mehta has been rejected by the Tribunal in AY 1992-93. He further submitted that the assessee has claimed that it has submitted evidences before the AO and the Ld.CIT(A) in the first round, but both the authorities have observed that the assessee has not furnished the evidences. 16.7 Having heard rival contentions, we notice that the assessee has repeatedly claimed that the above said PSU bonds were purchased by it from the brokerage firm M/s HSM on credit, i.e., the assessee was having a running account, wherein the purchases and sales made by the assessee are recorded. Thus, it is the claim of the assessee that no separate payment has been made spec....
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.... in the books of accounts and the claim of credit purchases was proved by submitting the ledger extract of M/s HSM. When the investments have been made on credit, the question of cash outflow will not arise. Hence the question of making any addition u/s 69 of the Act does not arise, in the absence of any cash outflow. We notice that the books of accounts were not produced before the AO during the course of assessment proceedings, but they were produced before Ld CIT(A). We noticed that the ITAT had directed the Ld CIT(A) to decide the issues after examining the books of accounts of the assessee. We notice that the Ld CIT(A) does not appear to have referred to the books of accounts of the assessee at all. Accordingly, we are of the view that the conditions prescribed in sec.69 of the Act for invoking that provision have not satisfied in the instant case and hence the tax authorities are not justified in making addition u/s 69 of the Act. Accordingly, we modify the order passed by Ld CIT(A) on this issue and direct the AO to delete the entire addition of Rs. 51.06 crores. 17. The Ground no.8 urged by the assessee relates to the disallowance of depreciation of Rs. 1.27 crores on le....
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....995-96 and the depreciation claim has also been allowed in both the years. The Ld A.R also relied upon a letter dated 17-04-1996 written by advocate of the Custodian to the Court receiver of M/s Mazda Enterprises (earlier known as Mazda Packaging Ltd), wherein he has given the details of purchase of machinery and lease details. Further, he has also requested the Court Receiver not to deal with the said machinery, which was an attached property. Accordingly, the Ld A.R submitted that the tax authorities have disallowed depreciation claim on incorrect appreciation of facts relating to this issue. The Ld D.R, however, submitted that these lease transaction is a sham transaction and it does not fit into the human probabilities. 17.3 We thus notice that the tax authorities did not examine the lease agreement only partially and did not notice the enhancement of lease rent after acquiring of machinery. We notice that the actual transaction of sale of machinery by M/s Mazda Packaging Ltd to the assessee is not doubted. Similarly, the transaction of leasing of the same to M/s Mazda packaging Ltd is also not being doubted. The only suspicion was with regard to the lease rent of Rs. 5000/-....
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....ises, that too after assessing the corresponding rental income. Hence, it is not in accordance with law. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the depreciation claimed by the assessee in this year. 18. The Ground No.9 urged by the assessee relates to the addition of Rs. 1,01,23,655/- relating to the bank drafts found at the Madras Office of the assessee. 18.1 During the course of search conducted at the Madras office of the assessee, bank drafts having value of Rs. 1,01,23,655/- were seized. The demand drafts were in the name of M/s Investment Advisory P Ltd (IAPL). It was also noticed that these drafts were issued by four brokers viz., Shri R RMohata, Shri ChampaklalJamnadas, Shri Sagar Bihani and Shri Shrenik J Shah, who were also subjected to search or survey operations. The brokers have stated that the drafts represented sale proceeds of shares of M/s Karnataka Ball Bearing belonging to M/s IAPL. However, Shri R Srinivasan, the principal officer of M/s IAPL denied sale of any shares and submitted that these drafts were handed over to him by the employees of Bombay Office of the assessee with the request to hand ov....
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....ses between the assessee and IAPL. Hence Srinivasan also appears to be the employee of the assessee. 18.4 However, we notice that the AO did not enquire as to why the demand drafts are in the name of IAPL, when he assumes that they belong to the assessee. He also did not establish that the shares of Karnataka Ball Bearing Ltd were owned by the assessee only. In the absence of shares, it may not be possible to presume that the assessee has sold the shares of Karnataka ball bearing Ltd. It is true that it is the responsibility of the assessee to explain about the demand drafts, since they were seized from the premises of the assessee. However, we notice that the assessee has given explanations, but the same were rejected by the AO, mainly for the reason that one of the employees of IAPL had denied sale of shares. 18.5 In this regard, as contended by Ld A.R, we notice that the AO did not bring on record the statement, if any, given by the brokers implicating the assessee. It is a fact that the three associate broking firms of the group were also operating in the very same premises in Madras. Hence, it cannot be conclusively said that these demand drafts belong to the assessee. F....
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....ossible to ascertain the same from the very same brokers only on the basis of the broker notes issued by them. We notice that the AO did not discuss anything about the nature of enquiry conducted with the brokers. All these facts would show that the AO has selectively relied upon certain information and accordingly drawn adverse inferences against the assessee. In our view, the same is not legally sustainable. In the absence of any proof to link the demand drafts with the assessee, we are of the view that the AO was not justified in making this addition. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs. 1,01,23,655/-. 19. The Ground No.10 urged by the assessee relates to the addition of Rs. 15.76 crores relating to value of shares seized from the assessee's premises. 19.1. During the course of search proceedings conducted on 14-05-1992, shares worth Rs. 15.76 crores were seized and the inventory of the seized shares were prepared. As per the direction given by the Hon'ble Special Court, the copies of inventory sheets consisting of 330 pages were given to the assessee in the month of November, 1992. The AO ask....
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....mises and they were brought to the above said office for preparing final Panchanama. However, it has been presumed that they belong to the assessee only. It is further submitted that the said premises do not belong to the assessee nor the shares were found from the possession of the assessee. Hence, there cannot be any presumption that they belong to the assessee. b. The AO did not furnish a copy of seized documents in spite of repeated request. The assessee was given only inventory of shares and debentures prepared on different dates. The said inventory run into 330 pages and their value was arrived at Rs. 15.76 crores by the AO. c. A careful perusal of the inventory sheets would reveal that the last column is titled as "market value", but the same has been left blank. Hence, it is not clear as to how the value of Rs. 15.76 crores was arrived at by the AO, as the said amount was not mentioned anywhere in the inventory sheets. d. Further, contrary to what has been stated by the AO, most of the shares were registered shares and only few shares were un-registered shares. There is no indication as to whether the unregistered shares are available with transfe....
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....It is the submission of the assessee that it was given only the inventory sheets and not the copies of Shares certificates and transfer deeds, if any, attached thereto. Though the AO has observed that these shares are un-registered shares. However, according to the assessee, most of the shares are registered shares and only few shares are un-registered shares. 19.6 Insofar as the registered shares are concerned, it was submitted that the name of the owner of shares could be found from the Share Certificate itself. In that case, the assessee cannot be considered as owner of the shares. According to the Ld.AR, the registered shares belong to various members of the group and they should have been accounted for in their respective Books of Account. 19.7 We find merit in the said submissions. We are also of the view that the assessee can be considered as owner only if the shares are registered in the name of the assessee. Accordingly, in respect of shares registered in the name of other persons, in our view, the addition could not be made in the hands of the assessee. 19.8 In respect of un-registered shares, it is the contention of the Ld.AR that the assessee would be in a posi....
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....l settled proposition of law that the Income tax authorities are entitled to assess any undisclosed income only on the basis of some credible materials, i.e., additions on the basis of presumption, surmises and conjectures are not permitted. Accordingly, if the AO is not able to furnish the evidences in support of this addition, the assessee would not be in a position to offer any explanation. In that case, we are of the view that no addition can be made on account of these investments. Further, the presumption about the ownership of the shares can be made only if it is proved that the shares have been found in the possession of the assessee and they do not belong to any other related entity. There should not be any dispute that the value of investment should be determined on the basis of actual purchase cost and not on the basis of market price on the date of seizure. We order accordingly. 20. The modified Ground no.11 urged by the assessee relates to the partial confirmation of addition of unexplained deposits made in bank accounts of the assessee. The AO noticed that the assessee is having 11 bank accounts in cities of Bombay, Delhi, Madras and Bangalore. Even though, the ass....
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....essee has maintained 11 bank accounts spread in various cities and through them only, it has transacted its business. Once the deposits made into those bank accounts are accepted as business transactions, it may not be right to assess the entire deposits as unexplained income of the assessee, since the law is settled that the AO can assess only income element involved in those transactions. However, in the instant case, the AO has assessed entire deposits aggregating to Rs. 29.12 crores as unexplained income of the assessee, even though he was aware that the assessee is involved in share and money market transactions. He has done so mainly for the reason that the assessee could not explain each and every deposits made into the bank accounts. Everyone was aware the difficulties faced by the assessee, group entities, family members etc after the outburst of the stock scam and hence assessee's explanation before the AO that it could not explain the details due to difficulties faced by it and in our view, it should have been appreciated. 20.5 As noticed earlier, the assessee has prepared books of accounts duly incorporating all the bank transactions therein. We notice that the Ld CI....
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....was paid by ANZ Grindlays bank to the assessee by crediting the bank account of the assessee. The Ld A.R submitted that the bank statement would show that the above said amount was credited in the bank account with the narration "SS purchase consideration". Further, the Ld A.R submitted that the copy of Contract note dated 15-01-1992 in respect of the purchase of security is placed at page 1047 of the paper book and the corresponding Deal slip is enclosed at page 1048. The ANZ Grindlays bank has also issued a Security deal slip and it is available at page 1087 of paper book. The Ld A.R submitted that the above said transactions are also available in the computer data seized by the revenue. 20.7 It can be noticed that the assessee received the above said amount of Rs. 10.18 crores from M/s ANZ Grindlays bank on the instruction of M/s Harshad S Mehta. Accordingly, the assessee has incorporated the transaction by debiting the bank account and making corresponding credit in the account of M/s Harshad S Mehta. We notice that the above said transaction was a commercial transaction entered between the bank and M/s Harshad S Mehta. The corresponding Contract notes and Deal slips are als....
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.... assessee has placed in the paper book, the bank accounts and ledger extract of assessee in the books of assessee M/s Jyoti H Mehta and also the bank accounts and ledger account of M/s Jyoti H Mehta in the books of the assessee. Thus, we notice that it was a business transaction between the assessee and M/s Jyoti H Mehta. The important point is that the funds have been received by the assessee from the above said brokerage firm, which, in turn, has received the same by way of bill discounting from UCO Bank. Accordingly, we are of the view that the deposit of Rs. 14.14 crores cannot be considered as unexplained deposit. 20.10 With regard to the remaining deposit of Rs. 3,78,154/-, we notice that the same represents 14 items of small deposits. All of them have been made available in the chart prepared by Ld CIT(A). We notice that these deposits consists of Rs. 1,130/- to Rs. 57,624/-. As noticed earlier, addition of all these deposits is not called for, when the assessee has accounted them in its books of accounts. 20.11 We notice that the Ld CIT(A) has directed the AO to assess interest income on certain deposits. We notice that the assessee has not contested the direction giv....
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....vided the funds. Despite knowing this fact, the AO has preferred to assess the said income in the hands of the assessee only for the reason that the deal was concluded in the name of the assessee. It is pertinent to note that the AO did not bring on record any material to show that the deal was indeed concluded in the name of the assessee. We notice that the AO did not supply the information collected by him from RCFTL to the assessee, even though the assessee had asked for the same. Thus, it is a case of making addition on the basis of material collected behind the back of the assessee. Hence, the observation of the AO that the deal was concluded in the name of the assessee is liable to be rejected, in the absence of any material to support the same. 21.3 On the contrary, the assessee has submitted that it was a commercial transaction between M/s HSM and M/s RCFTL. In support of the same, the assessee has furnished ledger account copies as available in the books of M/s HSM, wherein the transactions of lending were duly accounted for. The ld A.R also submitted that M/s HSM has issued the deal slips and they were part of seized material. Another important point brought to our not....
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.... and there was no delivery of securities also. He also observed that there is a high variation between purchase price and sale price of securities. He further observed that the trades have been reversed on the same day. He also observed that those prices did not match with Bhav copy of Bombay Stock Exchange. Accordingly, he took the view that the AO was justified in rejecting the loss declared by the assessee and accordingly, he confirmed the assessment of Rs. 3.16 crores noted in the ledger account seized at the time of search. It appears that both the tax authorities have taken the view that the losses incurred by the assessee in March, 1992 in money market operations may be bogus one. 22.3 We heard the parties and perused the record. It is the submission of Ld A.R that the ledger account relating to money market operations found at the time of search was an incomplete document and hence the AO should not have placed reliance entirely on that document. We notice that the regular books of accounts were submitted before Ld CIT(A), but he did not examine though the direction of ITAT to Ld CIT(A) in the first round of proceedings was to decide the issues after considering the book....
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....f record. He submitted that the transactions were undertaken at market rates and with unrelated third parties. The Ld A.R also brought to our notice the prices at which transaction had taken place and some of the prices are also mentioned in the table extracted in the subsequent paragraphs. A perusal of the same would show that the observations made Ld CIT(A) on this point is without appreciation of correct facts. Accordingly, we are of the view that various observations made by Ld CIT(A) do not justify the disallowance of loss declared by the assessee in the month of March, 1992. 22.5 We shall now advert to the loss incurred in the month of March, 1992. The assessee has incurred loss in the following money market transactions in the month of March, 1992. Sr. No. Date Amount (Rs.) 1. 21.03.1992 20,62,500/- 2. 21.03.1992 28,00,000/- 3. 21.03.1992 6,25,000/- 4. 21.03.1992 14,25,000/- 5. 26.03.1992 3,55,16,500/- 6. 31.03.1992 7,98,750 Total 4,32,27,750/- We notice that the tax authorities have taken the view that the assessee has transacted with its group concern M/s HSM and accordingly, the loss book....
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....Mehta with outside party where in they have kept a small margin as their profit/ brokerage. 6, Purchase of 11.50% Central Loan 2010 on 17.03.1992 @ Rs. 97.27 (Page 1286 of PB). Purchase of 11.50% Central Loan 2010 by M/s. P. R. Subramanyam & Sons on 17.03.1992 @ Rs. 97.25 (Page 1290 of PB). This is back-to-back transaction of M/s. Harshad S. Mehta with outside party where in they have kept a small margin as their profit/ brokerage. 7. Purchase of 9% IRFC Bonds on 24.03.1992 @ Rs. 88.55165 (Page 1291 of PB). Sale of 9% IRBC Bonds by M/s. V. B. Desai on 24.03.1992 @ Rs. 88.50 (Page 1294 of PB). This transaction establishes that the assessee has entered into transaction at a market rate. 8. Sale of 9% IRFC Bonds on 26.03.1992 @ Rs. 85 (Page 1292 of PB). Purchase of 9% IRBC Bonds by Standard Chartered on 26.03.1992 @ Rs. 85 (Page 1295 of PB). This transaction establishes that the assessee has entered into transaction at a market rate. 9. Sale of Units 1964 on 03.03.1992 @ Rs. 14.38 (Page 1296 of PB). Purchase of Units 1964 by Hero Honda Finlease on 03.03.1992 @ Rs. 14.385 (Page 1299 of PB). This is back-to-back transaction of M/s. Harshad....
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.... relating to this case are that the AO noted that the assessee had purchased 13% NLC bonds having face value of Rs. 5.00 Crores from M/s Canfina on 22-02-1992 and they were registered in the name of the assessee by the order of Special Court. The AO calculated interest accrued on such bonds up to the end of the financial year i.e. for a period of 39 days from 22-02-1992 to 31.03.1992, which worked out to Rs. 6,94,520/-. The AO assessed the same as income of the assessee. 23.2 Before Ld CIT(A), the assessee did not press this ground and accordingly, he dismissed the same. 23.3 The Ld A.R submitted that the bonds were not delivered to the assessee and hence they were not registered in the name of the assessee as on 31.3.1992. Subsequent to search operations, there was no certainty that the assessee would get the bonds itself. When the receipt of security itself is in doubt, the AO was not justified in assessing the accrued interest. When it was pointed out that the assessee did not press this issue before Ld CIT(A), the Ld A.R submitted that there is no estoppels against the law. Hence the assessee could contest this addition. He submitted that the income cannot be said to accr....
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....owed the decision of Hon'ble Supreme Court in the case of Ashwin Mehta Vs. Custodian reported in (2007)(2SCC 385) and held that the claim of interest is allowable, yet the identical claim for deduction of interest expenditure in this case, needs to be examined as per the provisions of the law. (d) There is no detailed discussion on this issue in the order passed by ITAT as to whether the interest expenses can be allowed against (i) business income, (ii) Capital gains and (iii) dividends. Hence, the claim of the assessee is examined independently. (e) The interest expenditure cannot be allowed against income from capital gains. The interest expenditure cannot be allowed against dividend income, unless it is shown that it was incurred solely for earning dividend income. (f) Since the income of the assessee includes profit from share trading and share speculation, it would be entitled for deduction of some part of interest expenditure. However, the unaudited Balance sheet filed by the assessee shows the assessee was having investment of Rs. 69.43 crores and inventories (share trading stock) is shown at Rs. 44.60 crores as on 31.3.1992. Hence, the interest ex....
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....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 assessee is entitled to claim a deduction of interest expenditure under section 57 of the Act since receipt of dividend is merely due to the shareholding of the assessee and the interest expenditure has nexus with the income under the head "income from other sources" including dividend income even though not direct. Accordingly, the AO is directed to allow the interest expenditure claimed by the assessee under section 57 of the Act. As a result, ground No. 3 raised in assessee's appeal is allowed, while ground No. 2 and 3 raised in Revenue's appeal is dismissed." 25.5 The interest ....
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.... group entities. The assessing officer apportioned the above said amount of Rs. 100 crores between all the assessee's of the group for assessment years 1991-92 and 1992-93 in proportion to the Advance tax paid by them for each of the above said two assessment years and accordingly assessed the income so apportioned in the hands of all assessee's of the group in both the years mentioned above. During the year under consideration, the AO assessed a sum of Rs. 10.92 crores on this account. 26.2 However, the contention of the assessee is that the above said surrender of Rs. 100 crores was made by Shri Harshad S Mehta under peculiar and unique circumstances in order to buy peace from the department, i.e., the books of accounts of all the assessee's group were incomplete and hence he could not furnish break-up details of income of all the group members. Accordingly, it was contended that the above said amount of Rs. 100 crores included income declared on the basis of advance tax paid by all the assessee's. The Ld CIT(A) agreed with the above said submissions of the assessee and accordingly deleted the addition of Rs. 10.92 crores, but with a rider that the total income of the assessee....
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....thorities 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 direct the AO to delete the addition. The ground no. 6 is allowed." In the instant case, since, we have accepted the books of account of Assessee, the addition based on disclosure statement of Harshad S. Mahta is liable to be deleted for parity of reasons. Hence, ground no.3 of the appeal is allowed." 26.4 The facts prevailing in the instant case being identical with the above said....