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2025 (2) TMI 1470
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....ered in light of Rule 18(6) of the ITAT Rules, 1963. 4. The grievance of the assessee read as under :- "1. The Ld. CIT(A) has erred in law and in facts in rejecting the books of accounts and holding that the same do not stand admitted. 2. The Ld. CIT(A) has erred in law and in facts in confirming the addition of Rs. 5,10,025/- on account of alleged unexplained investments of the appellant. 3. The Ld. CIT(A) has erred in law and in facts in confirming the addition of Rs. 40,385/- on account of alleged unexplained receipts. 4. The Ld. CIT(A) has erred in law and in facts in making addition of Rs. 77,451/- by enhancing the income to that extent on account of unexplained receipts in the bank account. The Ld. CIT(A) has not complied with the provisions of 251 of the Act while making the said enhancement. 5. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of profit from partnership firm, M/s. Sunrise Enterprises of Rs. 2,52,075/-. 6. The Ld. CIT(A) has erred in law and in facts in allowing the deduction of interest expense only to the extent of Rs. 14,92,800/- as against the aggregate amount of Rs....
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....erstood from the following chart :- Sr. No. Particulars/source of addition Amount of addition (Rs.) Additions deleted by Ld. CIT(A) (Rs.) Additions sustained by Ld. CIT(A) (Rs.) 1 Custodian Letter dated 29.10.1993 6,27,750 6,27,750 _ 2 Company letters received u/s 133(6) 63,67,586 59,36,861 4,30,725 3 Dividend details/ warrants 82,42,720 81,63,420 79,300 Total 1,52,38,056 1,47,28,031 5,10,025 7. On identical set of facts in one of the group cases, namely, Sudhir S. Mehta, Co-ordinate Bench in ITA No. 417/Mum/2023 & ITA No. 1179/Mum/2023 had considered the grievance in details and held as under :- "15. Considering the facts in totality, we are of the considered view that even in the third round of litigations, the AO could not provide the specific information/details collected from the companies on the basis of which the impugned additions have been made, are in complete violation of the principles of natural justice. 16. We find that the Co-ordinate Bench in the case of Hitesh S. Mehta vs. DCIT in ITA No. 538/Mum/2012, while setting aside the issues to the file of the AO, has spec....
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....e on the basis of company letters, the learned AR submitted that the enquiries were made by the AO during the course of original assessment proceedings with various companies seeking information in respect of the shareholding of the assessee. It was further submitted that although the said information so received was used to determine the shareholding in the various scrips and treated the same as unexplained, however, copies of these evidences were never provided to the assessee. In this regard, the learned AR referred to details of various letters requesting the AO/learned CIT(A) to provide the information received from the company on the basis of which addition was made. The learned AR further submitted that to the extent company letters were provided by the AO, in the third round of proceedings, assessee's explanation was accepted by the AO and the addition to an extent of Rs. 1,32,13,835, was deleted. It was further submitted that during the course of proceedings before the learned CIT(A), even though several letters were provided to the assessee, the copies of letters based on which the addition of Rs. 3,13,213, was sustained, were not provided to the assessee. 19....
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....e in our view the Assessing Officer should go through the books for determining the income on the basis of books accounts" The Assessing Officer has to bring on record specific evidence or defect to prove falsity of books of account as no falsity has been proved in the assessment order passed by the AO. Besides this the department has to provide all the details and material on which basis the addition have been made earlier. If such material is disputed by the assessee then in our view correctness of such material has to be examined as per provision of law, we are not convinced with the argument of Id. DR that assessee can collect information from parties from where Assessing Officer has obtained the copies on which basis the addition have been made, Therefore, Assessing Officer is directed to provide the copies of all information on which basis, the AO wanted to made additions in the hands of the assessee. If the AO does not provide the material then in our view addition cannot be made, In view of above facts and circumstances, we set aside order of the authorities below and restore the issues to the file of the Assessing Officer to pass assessment de novo after affording....
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....ade in violation of audi alteram partem. We, therefore, direct the AO to delete the impugned addition. 18. (II) - The second addition is based upon the letter received from the Custodian - Rs. 3,89,77,270/-. The letter received from the custodian, reads as under :- 19. A bare perusal of the aforementioned letter shows that there is not even a whisper of the impugned financial year or assessment year. It has also been clearly mentioned that the figures cannot be treated as firm and final figures. Moreover, when the office of the Custodian realised some glaring errors, it clarified the information already sent, as under :- Office of the Custodian The Special Court (TORTS) Act, 1992 Department of Financial Services, Ministry of Finance, Government of India, 10th Floor, Nariman Bhawan, 227, Vinay K. Shah Marg, Nariman Point, Mumbai 400 021. Phones: 22022251, 22856780, 22833007 Fax: 022-22810357 E-mail: [email protected] No. 2302-/CUS/BOM/HM/IT ASSESSMENT/ (2445) November 28, 2017 To The Deputy Commissioner of Income Tax Central Circle -4(1), Central Range -4 Room No. 1916, 19th Floo....
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....egistered shareholders. Mr. Rasilal Shantilal Mehta, holding 11900 shares which had been added by the AO in the hands of the assessee. Thus, an example of wrong information and in some cases, the request for allotment of shares have been returned. One such company is TISCO, whose letter is place at page 403 in Paper Book volume-II. 21. On identical situation and facts, the Co-ordinate Bench in the case of CIT vs. Hitesh S. Mehta ITA No. 6026/Mum/2017 and ITA No. 5190/Mum/2017, had the occasion to consider a similar issue and held as under :- "13. The second amount of addition of Rs. 24,24,385/- as stated in para 8 above represented the addition made on the basis of Custodian letter. We observed that Rs. 24,24,385/- was made on the basis of Custodian letter dated 29.10.1993. The information provided in the said letter were incomplete. For example the date of determination of the share holdings was not mentioned, constant change of the figure of holding due to reasons like non-consideration of sale of shares by notified parties, and the holding provided by the Custodian not matching with the companies letters. Therefore, the addition made by relying on the ....
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.... opening balance of the assessee were only 200 shares with bonus of 400 shares at the end of the impugned financial year. The holding of Golden Proteins at 15,300 shares have been wrongly taken from the opening balance of Gujarat Ambuja Proteins. The complete details of short-term capital gains and long- term capital gains on sale of shares during the impugned financial year have been given at pages 247 to 249 of the paper book with complete details of dividends received from shares during the financial year at pages 258 to 263 the paper book. It would be pertinent to mention here that the entire additions have been based on dividends declared by the companies of which the assessee may or may not have held the shares during the year under consideration as the same is not based on physical holding of shares and merely on the basis of information collected behind the back of the assessee for which we have already expressed our view elsewhere. Therefore, this addition also cannot be sustained. Accordingly, Ground No. 2 with all its sub- grounds is allowed." 8. On finding parity of facts, respectfully following the decision of the Co-ordinate Bench, we direct the AO to delete the im....
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....y contended that the alleged unexplained receipts are interest, dividend or investment related transactions which are already accounted for in the books. The ld. CIT(A) was convinced with the explanation of the assessee and deleted the addition except the addition to the tune of Rs. 40,385/- which was confirmed. The following chart will explain the alleged unexplained receipts confirmed by the ld. CIT(A). ASWHIN S. MEHTA (L/H OF LATE RASILA S. MEHTA) A.Y.1992-93 Chart showing details of unexplained receipts in various banks as per Ld. A.O. Date Amount received (Rs.) Bank details Particulars 22.05.1991 3,000 SBMDA-L Bank charges reversed 31.08.1991 4,597 SBMDA-L SB Interest 30.09.1991 4,592 BOABOM SB Interest 15.02.1992 600 ANZADY No such entry found 15.02.1992 350 ANZADY No such entry found 15.02.1992 2,460 ANZADY No such entry found 15.02.1992 1,364 ANZADY No such entry found 15.02.1992 2,542 ANZADY No such entry found 15.02.1992 1,766 ANZADY No such entry found . 15.02.1992 350 ANZADY No such entry found 15.02.1992 350 ANZADY No ....
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....by the assessee. (v) The provisions made on account of interest payable is a contingent liability and, therefore, cannot be allowed as a business expenditure. (vi) It is also seen that these broking firms have not charged any interest on the amounts receivable from the companies of this group where the books of accounts have been produced before the Assessing Officer. 17.1. Similar disallowance was made in the case of Sudhir S. Mehta, which has been considered by the Co-ordinate Bench in ITA No. 417/Mum/2023 & ITA No. 1179/Mum/2023, in its order dated 06/02/2025. The relevant findings read as under :- "27. Ground No. 4, relates to the claim of interest expenditure Rs. 2.04 Crores out of which the ld. CIT(A) allowed only Rs. 12,93,360/-. 27.1. Similar issue came up for consideration before the Coordinate Bench in the case of Pratima H. Mehta (supra). The relevant findings read as under :- "27. Since the issue arising in ground no.3, raised in assessee's appeal, and grounds no.2 and 3, raised in Revenue's appeal, pertains to the deduction of interest expenditure, therefore the aforesaid grounds are dealt with together. ....
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....ver, allowed the interest expenditure only to the tune of Rs. 15,73,548 which is the share trading profit. Being aggrieved, both assessee and Revenue are in appeal before us. 30. We have considered the submissions of both sides and perused the material available on record. From the perusal of the computation of total income, forming part of the paper book on pages 464-466, we find that the assessee claimed interest on bank loans of Rs. 2,46,33,261 against the income under the head "income from other sources". It is evident from the record that the learned CIT(A) placed reliance upon the decision of the Hon'ble jurisdictional High Court in CIT v/s Jagmohandas 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 sole....
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....al is dismissed." 27.2. Similarly in the case of Jyoti H. Mehta vs. ACIT in ITA No. 436/Mum/2023 and ITA No. 1186/Mum/2023, the Tribunal has considered similar grievance, which reads as under :- "41. Ground no 6 pertains to sustaining the addition on account of interest disallowed. The Ld. CIT (A) has granted partial relief, by allowing on proportionate basis, the interest expenditure only to the extent of Rs. 11,49,540/- as against the total claim of Rs. 1,02,00,000/- made by the assessee." 27.2.1. And the Co-ordinate Bench following the order of the case of Pratima H. Mehta (supra), held as under :- "44. It is apparent that the reasons given for not allowing the interest expenditure claimed by the assessee u/s 57 of the Act are not tenable in view of the decision of the Apex Court in the case of Seth R. Dalmia (supra) which is duly followed by the co-ordinate bench of the Tribunal in the case of Smt. Pratima Mehta (supra). Respectfully following these judicial precedents, we allow this ground of appeal in favour of the assessee and direct the A.O. to allow interest expenditure claimed by the assessee while computing the taxable income. In the r....
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.... RASILA S. MEHTA) A.Y. 1992-93 Chart showing Reconciliation of difference in the balances in the books of Late Shri Harshad S. Mehta and Late Smt. Rasila S. Mehta Sr No. Particulars Rs. Difference in opening Balances (Chart A) 6,08,640 Difference on account of one mismatch in transaction & excess brokerage charged by M/s. Harshad S. Mehta (Chart B) 9,77,652 Miscellaneous Difference on account of Postage @20/- excess charged by M/s. Harshad S. Mehta (Chart C) -2,381 Total 15,83,911 22. We find that certain entries which have been passed by the assessee in her books of accounts have not been passed in the books of Late Shri Harshad S. Mehta, which can be understood from the following chart :- ASHWIN S. MEHTA (L/H OF LATE RASILA S. MEHTA) A.Y. 1992-93 (A): Chart showing Reconciliation of Entries Forming part of Opening Balances of Books of Accounts of Late Rasila S. Mehta and Late Shri Harshad S. Mehta for Alleged Difference of Rs. 6,08,640/- Rasila S. Mehta Harshad S. Mehta Difference Amount Remarks Sr. No. Date Amounts Dr/Cr In the Books of Account No. A/....
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....,420 Dr RSM 4011 M/S. HSM 29.11.91 26,22,788 Cr M/S. HSM 13072 MEHTA RASILA S -2,632 0.10% Brok.Diff shown more by M/s.HSM 7 18.12.91 -5,86,09,359 Dr RSM 4011 M/S. HSM 02.01.92 5,85,50,603 Cr M/S. HSM 13072 MEHTA RASILA S -58,756 |0.10% Brok.Diff shown more by M/s.HSM 8 19.02.92 -60,02,955 Dr RSM 4011 M/S. HSM 19.02.92 59,96,937 Cr M/S. HSM 13072 MEHTA RASILA S -6,018 0.10% Brok.Diff shown more by M/s.HSM 9 24.03.92 11,14,344 Cr RSM 4011 M/S. HSM 11,14,344 Purchase of 30000 Nagarjuna Fert. By Mrs.RSM Thru M/s.HSM 10 24.03.92 -42,84,761 Dr RSM 4011 M/S. HSM 27.03.92 42,80,466 Cr M/S. HSM 13072 MEHTA RASILA S -4,295 0.10% Brok.Diff shown more by M/s.HSM 11 31.03.92 3,27,60,000 Cr RSM 4011 M/S. HSM 31.03-92 -3,27,92,500 Dr M/S. HSM 13072 MEHTA RASILA S -32,500 0.10% Brok.Diff shown more by M/s.HSM -5,81,75,585 5,91,53,237 9,77,652  ....
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....ted the CIT(A) while holding that the interest u/s 220(2) is to be levied only from the due date of issuance of fresh notice of demand, considered these binding case laws as well as CBDT circular no 334 (F no 400/3/81-ITCC) dated 3-4-1982 issued by CBDT, which we perused and in our view the case of the assessee falls within paragraph 2 (i) of the said circular. In view of this legal position, we do not find any illegality or infirmity in the order of the CIT(A) directing the AO to charge interest u/s 220(2) from the date of default of the fresh demand notice issued after the fresh assessment made in consequence of the order of the appellate authorities. Thus, the ground no 8 to 12 of the Revenue stands dismissed, while ground no 32 to 35 of the assessee are allowed to the extent stated above." Thus in view of the above findings of the Tribunal, the ground raised by the Revenue in the present appeal does not require any further adjudication. The issues have already been considered and decided by the Co-ordinate Bench in an appeal arising from the assessment order passed under section 254 r.w.s. 143(3) of the Act. 7. The ld. Authorized Representative of the assessee....
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....Ld. CIT(A) has erred in law and in facts in not granting deduction on account of interest expense payable by the appellant. 4. The Ld. CIT(A) has erred in law and in facts in not appreciating that the interest u/s. 234A and 234B of the Act was not computed in accordance with law. 5. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal." 32. The underlying facts in the impugned addition of Rs. 1,20,79,176/- show that the closing stock position of the assessee in various shares as on 31/03/1992 is taken as opening stock of the assessee for the year under consideration. Though the assessee had raised objection that the figures arrived at for AY 1992-93 are incorrect and should not be relied upon, the AO did not accept this objection of the assessee and proceeded by adopting figures of AY 1992-93. The AO went on to estimate the unexplained purchases as per Annexure 1 of his order and estimated the same at Rs. 12,03,08,087/-. The AO further estimated the unaccounted sales and profits as per Annexure 2 of his order and arrived at sale receipts at Rs. 18,31,86,511/- and profit at Rs. 6,58,70,885/- and accordingly t....
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.... the course of present proceedings also, the things have not improved. The A.O. has still not been able to provide any break up or the details and information as to how the figure of profit on sale of shares have been derived by him in the assessment order. Thus, I find that the very basis details germane to the addition made by the A.O. are not available on record". Thereafter the Id. CIT(A) followed the findings given in the case of Shri Hitesh Mehta for A.Y. 1993-94 and deleted the addition. Aggrieved by this, the Revenue is in appeal before us. 21. The Id. D.R. strongly supported the findings of the A.O. Per contra, the Id. Counsel for the assessee reiterated what has been submitted before the lower authorities. 22. We have carefully perused the orders of the authorities below. We have also gone through the order of the first appellate authority in the case of Shri Hitesh Mehta dtd, 29-03-2012. We find that the entire addition has been made by the A.O. on the basis of information gathered from different sources. We find that the A.O. has merely picked up figure from the Annexure and arrived at the figure of addition without making enquiry or bringing any evide....
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....correctness of these entries can be verified from the sources referred above. 12. We are unable to agree with him for the simple reason that the closing stock of the assessee was determined for the year under consideration - Assessment Year 1993-94, and on comparing the opening and closing stocks, whenever there was a difference and the opening stock was higher than the closing stock, it was treated as sale and wherever the closing stock was higher than the opening stock, the difference was treated as unexplained purchase. The Assessing Officer went about in this manner and made the additions. The Commissioner was of the opinion that the information relied upon by the Assessing officer was either given to the assessee during the proceedings of the Assessment Year 1992-93 or during the proceedings for the Assessment Year 1993-94. The Assessing Officer has computed the holding of shares from the information collected from different sources. The argument before the Commissioner was that the working of opening stock is borrowed from the working given in the Assessment Year 1992-93, without any break-up and without any basis. That is how the Commissioner faulted the exercise of....
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....n account of dividend / interest income without appreciating the fact that A.O has made disallowance on the basis of data provided by Custodian and assessee failed to reconcile the same and the books of account produced by the assessee are unreliable? 3. The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be." 41. The first grievance relates to the restriction of the addition to Rs. 1,20,79,176/- on account of profit on unexplained sale of shares. This issue has been considered by us in assessee's appeal (supra) vide Ground No. 1. For our detailed discussion therein, this Ground is dismissed. 42. Ground No. 2, relates to the grating of relief of Rs. 33,85,597/- on account of dividend/ interest income. Similar grievance has been decided by us in AY 1992-93, vide ground No. 6 of that appeal. For our detailed discussion there, this Ground is dismissed. 43. In the result, appeals of the assessee are partly allowed and that of the revenue are dismissed. Order pronounced in the Court on 19th February, 2025 at Mumbai. ============= Document 1 Annx -Y.Y: ufig OFFICE OF THE COSTOOPRIN Frag urenwa (afau....