TaxTMI 
TaxTMI 
2025 (3) TMI 1945
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.... in law and in facts in confirming the addition to the tune of Rs. 16,36,407/- on account of unexplained credits in the bank account. 4. The Ld. CIT(A) has erred in law and in facts in not granting deduction on account of interest expense payable by the appellant. 5. 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. 6. The Ld. CIT(A) has erred in law and in facts in enhancing the income by Rs. 48,69,375/- on account of short term capital gains. 7. The Ld. CIT(A) has erred in law and in facts in enhancing the income by Rs. 2,58,263/- on account of miscellaneous income allegedly based on the books of account which have not been considered by the ld. A.O. while determining the assessed income. 8. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal." 3. At the very outset, the ld. Counsel for the assessee stated the he is not pressing Ground Nos. 3, 5, 6 & 7. Therefore, all these grounds are dismissed as not pressed. 4. Ground No. 1 relates to the addition of Rs. 8,10,87,777/- on....
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....e the material then in our view addition can not be made." This specific direction has been upheld by the Hon'ble High Court of Bombay in ITA No. 2490 of 2013, vide order dated 07/06/2016, wherein the Hon'ble High court, held as under:- "(d) We find that the impugned order of the Tribunal on the above issue is unimpeachable The basic principles of natural justice require that before any addition is made by the Assessing Officer on information obtained from third parties/own source, he must confront the assessee with the material so obtained. This above would enable the assessee to explain the correctness/incorrectness or unreliability of the evidence so obtained. In the absence of the necessary evidence sought to be used being given by the Assessing Officer to the Assessee, it would amount to condemning a person without a proper hearing." 16.1. Similar view was taken by the Co-ordinate Bench in ITA No. 6026/Mum/2017 and ITA No. 5190/Mum/2017. The relevant findings read as under:- "So far as, the second amount of 7,28,925/- representing the addition made on the basis of letters filed by four companies as mentioned at serial no. 9 to 12 in para no. 9 above,....
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....on on the basis of which additions were made in the hands of the assessee. The coordinate bench further held that if the AO does not provide the material then the addition cannot be made. The relevant findings of the coordinate bench in the aforesaid decision, are reproduced as under:- "5. After considering the impugned order, various Tribunal orders in the group cases of the assessee and also the grounds raised before us, we find that in the case of Smt. Rasila S. Mehta (supra) and in other cases also, similar grounds were raised. In these cases, the Tribunal has set aside the entire matter to the file of the Assessing Officer for making fresh assessment denovo. Since the facts of the assessee's case are similar to other cases viz. Hitesh S. Mehta, Rasila S. Mehta, Jyoti H. Mehta and Pratima H. Mehta, cited above, therefore, for the sake of ready reference, the relevant findings, as given in the decision of Rasila S. Mehta, is reproduced herein below:- "3.2 Having considered the rival submissions and careful perusal of the relevant material on record, we note that the CIT(A) while deciding the matter has relied upon the order in the case of Shri Hitesh 5 Meht....
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....d in the case of the assessee as well as in the case of Shri Hitesh S Mehta (supra) are also similar; therefore, to maintain the rule of consistency, we set aside the matter to the record of the Assessing Officer with the similar directions and terms as in the case of Shri Hitesh S Mehta (above)." 6. Thus, consistent with the view taken by the Tribunal in all these cases, wherein identical facts and issues are involved, therefore, we also set aside the impugned order passed by the learned Commissioner (Appeals) and restore back the entire issue to the file of the Assessing Officer for denovo assessment with similar directions. The Assessing Officer shall provide due and effective opportunity of hearing to the assessee. We order accordingly." 20. We further find that the Revenue's appeal against the aforesaid decision was dismissed by the Hon'ble jurisdictional High Court in CIT v/s Smt. Pratima H. Mehta, ITA No.258 of 2015, vide order dated 26/09/2017. Therefore, from the above, it is evident that the addition of Rs. 3,13,213, is based on the evidence which was not furnished to the assessee. In view of the specific directions of the coordinate bench of the....
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.... 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 Custodian letter can not be confirmed. The case of the assessee is supported by the decision of the coordinate bench in Growmore Leasing & Investments Ltd. Vs. DCIT in ITA. No.2192/M/2015 A.Y.1992-93 wherein it was held that where there was no evidence of the holdings of shares and securities as alleged by the revenue, the addition has to be deleted. Considering these facts and circumstances and the coordinate bench decision, we set aside the addition of Rs. 24,24,385/- sustained by CIT(A) and direct the AO to delete the same. 22. Considering the facts of the case in totality in light of the letter of the custodian menti....
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....idends 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." 7. On finding parity of facts, respectfully following the decision of the Co-ordinate Bench, we direct the AO to delete the impugned addition. Ground No. 1 is accordingly allowed. 8. Ground No. 2 relates to the addition of Rs. 48,95,729/- out of the total addition of Rs. 78,35,878/- on account of dividend and interest income. 9. During the course of scrutiny assessment proceedings, taking a leaf out of the figures arrived at by the AO in AY 1992-93, the AO was of the opinion that the closing stock figures included both registered and unregistered shares and debentures. On such observations, the AO asked the assessee as to why the dividend/interest should not be calculated based on the holding of the debentures/shares as per the departmental record....
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.... all the Debentures were converted into Shares except 12 Deb. as on Notification Date, i.e.08.06.1992, Interest was paid by the company only on 12 debentures. 3 Reliance Industries Ltd. H' Series 24,55,725 Nil Since all the Debentures were Partly Paid-up and the Call Money/Balance Payment was made in July - 1995 vide Special Court order dt.03.07.1995 in M.A.No.255 of 1995 (PBP-386,396) Company has made payment of Interest on the said Debentures in August - 1995 and the same was assessed in A.Y.1996-97 by Assessing Officer vide order dt.22.03.2002 (PBP-399). 4 Reliance Industries Ltd. "T' Series 7,97.100 Nil Since all the Debentures were Partly Paid-up and the Call Money/Balance Payment was made in May - 1995 vide Special Court order dt.30.04.1994 in M.A.No.173 of 1994 (PBP-408,415) Company has made payment of Interest on the said Debentures in August - 1995 and the same was assessed in A.Y.1996-97 by Assessing Officer vide order dt.22.03.2002 (PBP-399). 5 Other Companies 29,33,147 2,94,127 This interest of Rs. 2,94,127/- on remaining Debentures received by the assessee during previous year is already offered by the assessee and a....
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....terest of Rs. 2,46,33,261 are shown as payable to family run broking firms such as M/s HSM, M/s ASM and M/s JHM. The AO vide order passed under section 144 read with section 254 of the Act did not agree with the submissions of the assessee and disallowed the deduction of interest claimed for the following reasons:- (i) The liabilities were not crystallise during the year. (ii) The interest payable is tentative and provisional. (iii) There is no basis as per which the assessee has a right to pay and the creditors has are right to receive. (iv) There is no basis of computation of interest payable which has been provided 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 amount receivable from the companies of this group with the books of accounts have been produced before the Assessing Officer. 29. The AO following the approach adopted in earlier round of litigation rejected the assessee's claim of deduction on account of interest ....
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....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 Morvi [1975] 100 ITR 67 (Bom), wherein it was held that the connection between the expenditure and the earning of income need not be direct, and even an indirect connection could prove the nexus between the expenditure incurred and the income. We further find that in CIT v/s Smt. Sushila Devi Khadaria, [2009] 319 ITR 413 (Bom.), in a similar factual matrix, i.e. wherein the AO denied the deduction claimed under section 57(iii) of the Act on the basis that the expenditure was not incurred wholly for the purpose of earning income as the taxpayer was engaged in selling shares in the stock market and the dividend income had accrued as a by-product, the Hon'ble jurisdictional High Court by placing reliance upon the aforesaid decision of the Hon'ble Supreme Court in Seth R. Dalmia (supra), upheld the allowance of finance expenditure as deduction under section 57(iii) of the Act against the income by w....