TaxTMI 
TaxTMI 
2025 (4) TMI 1874
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....count of dividend and interest income out of the aggregate addition of Rs. 45,85,800/- made by the Ld. A.O. 3. The Ld. CIT(A) has erred in law and in facts in not granting deduction on account of interest 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." ITA No. 1177/Mum/2023- Revenue 1 Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in restricting the addition to Rs. 3,82,018/- and granting relief of Rs. 2,13,89,367/-, on account of profit earned on unexplained sale of shares, whereas assessee had failed to explain the source of acquiring the shares satisfactorily and the books of account produced by the assessee are unreliable? 2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in granting relief of Rs. 8,78,864/- on 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 produce....
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....ssions made by the appellant and verification of records made available, I am of the view that the addition made by the AO in respect of 9 scrips for which submissions have now been received from the appellant require reconsideration to account for the factual errors / discrepancies / directions of Hon'ble ITAT in earlier years. No. Scrip Comments of CIT-A Relief Rs. 1 Colgate Palmolive The appellant has explained that it had purchased 200 shares on 5.11.1991 and that the bonus was declared on 16.12.1991 at the ratio of 3:5. Once this is considered the difference to the extent of Rs. 7,725/- stands reconciled. 7,725 2 Gujarat Ambuja Cement The appellant has submitted that the Opening Stock balance was taken wrongly. Notwithstanding the above it is the contention of the appellant that he had sold 78500 shares on 27.04.1992 and LTCG of Rs. 22811554/- was included as part of its letter dt. 28.03.1996 given before the AO during the course of original assessment proceedings. The AO has taxed Rs. 54108120/- as "Capital gains" as per letter dated 28.03.1996, which includes the above sum. Once this is considered the difference to the extent of Rs. 60,39....
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....The appellant has referred to letter dated 28.09.92 and annexure submitted before the AO during the original assessment proceedings, wherein it has confirmed to the AO that it continues to hold 3000 shares as on 31.03.1993. 12,500 Total 2,13,89,367 9.10. Pursuant to the above, out of the additions of Rs. 2,17,71,385/-, the appellant has been able to explain the differences to the extent of Rs 2,13,89,367/-. Thus, the appellant gets relief to the extent of Rs. 2,13.89,367/- while addition to the extent of Rs. 3,82,018/- stands confirmed. 9.11. One of the contention of the appellant is that the addition made by the AO in respect of unaccounted purchases and sales as above has direct nexus with the addition on account of unexplained investments made in the case of the appellant in the immediately preceding year i.e. AY 1992-93. In that year addition of Rs. 19,86,14,228/- was made on account of unexplained investments by the AO. This matter came to be heard by the Hon'ble ITAT vide ITA No. 1367/Mum/2016 and ITA No. 1455/Mum/2016 for AY 1992-93. Vide order dated 05.04.2021 the Hon'ble ITAT has deleted the entire addition in para 19.....
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....ied on the earlier year assessment order to make addition for the year under consideration. In this regard we notice that the Co-ordinate bench in the case of Smt. Pratima H Mehta (supra) has considered the issue of addition made on similar grounds and held that "19. The first grievance of the Revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 3,31,20,180/- made on account of profit on sale of shares. 20. The ld. CIT(A) has considered this issue at para 6(C) of his order. During the course of assessment proceedings, on the basis of several information obtained from RBI, Custodian, BSE companies and third parties about the share holding of the assessee, the data were analysed and the holding in share of the assessee was determined as on 31-3-1992. The same was taken as opening stock for the year under consideration. The closing stock of the assessee was determined for the year under consideration and on comparing the opening stock and closing stock, whenever there was a difference where 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 treate....
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....unal in ITA No. 5138/Mum/2003 but this issue was not raised before the Tribunal. The facts and circumstances are being similar, we do not find any reason to interfere with the findings of the ld. CIT(A). Ground No. is accordingly dismissed." 8. In assessee's case, from the perusal of the Table annexed to AO's order as extracted herein above, we notice that the AO has not specified the value adopted for each of the scrip but has given only the total value of all scrip put together. Therefore there is merit in the contention that the AO has made the addition in an adhoc manner. Further it is relevant to notice that the coordinate bench in assessee's own case for AY 1992-93 has deleted the addition made towards unexplained investments. Therefore the opening stock of shares as considered by the AO for the year under consideration is not a valid and accordingly the discrepancies recorded also cannot be sustained. The coordinate bench in the above case has deleted addition on the ground that the AO has made the addition on the basis of information collected from various sources without making any enquiry. In assessee's case also we notice that the AO has collated the d....
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....y, after a query was raised on 25.11.2022 the appellant has furnished a list of scrip wise dividend income totalling at Rs. 1,99,259/-, vide letter dated 01.12.2022. Considering that this is a best judgment assessment and the multiple discrepancies in the claim of the appellant, it does become imperative that the appellant's computation of dividend income not be accepted. At the same time, there has to be a reasonable basis for such computation. The appellant herself has pointed out that Hon'ble Bombay High Court has held that dividend income offered by the group entities are reasonable on facts. In the instant case, I find the best comparable to be that of her husband i.e. Sh. Sudhir S. Mehta, against whom sample verification has been made in the preceding para. The dividend income of Sh. Sudhir S. Mehta is 1.88% (33,75,944 /18,00,05,274). Applying the same ratio, the dividend income of the appellant to the extent of Rs. 32,97,748/- is upheld." 10. The ld. AR submitted that the assessee during the year under consideration has offered the actual dividend income received from companies and the same would be substantiated by the bank statements of the assessee. The ld. AR ....
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....sequently no fault can be found with the orders of either ITAT or the Commissioner (Appeals). 4. To consider the contention, we shall first refer the provisions of Section 206 of the Indian Companies Act. The relevant portion of which reads as under :- "206. (1) No dividend shall be paid by a company in respect of any share therein, except- (a) to the registered holder of such share or to his order or to his bankers; or (b) in case a share warrant has been issued in respect of the share in pursuance of section 114, to the bearer of such warrant or to his bankers. " A perusal therefore, of the said section would mandate that the dividend must be paid to the registered holder of such share or to his order to his bankers. 5. Similarly, under Section 27 of the securities Contracts (Regulation) Act, 1956 (hereinafter referred to the Security Contract Act") the relevant provision is section 27(1), which reads as under :- 27(1) It shall be lawful for the holder of any security whose name appears on the books of the company issuing the said security to receive and retain any dividend declared by the company in respect of thereo....
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....o receive payment is established. Nothing has been brought to our attention to show that under the provisions of the Companies Act and the provisions of the Securities Contract Act that there is any other standard or statutory rules under the Income-tax Act by which such dividend can be taxed in the hands of the assessee. 7. The other aspect of the matter which needs to be considered is that the burden of proving that amount year of an was taxable because it was received in the account lies upon the department. This proposition has been reiterated in CIT V/s. Bikaner Trading Co.Ltd., reported in 78 ITR 12. Income of the assessee has to be received by the assessee an income tax is levied on income. For this purpose we may refer judgment of the Supreme Court in CIT V/s. M/s. 144 Shoorji Vallabhadas & Co. reported in 46 ITR which was reiterated in Godhra Electricity Co. Ltd., V/s. CIT reported in 225 ITR 746. Supreme Court summed up the law as under: "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz. the accrual of the income or its receipt; but the substance of....
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.... the assessee. We also notice that the CIT(A) has a step further by estimating the dividend income on the basis of a percentage computed basis the dividend income as compared to the shareholding in the case of assessee's husband. In our considered view dividend income cannot be brought to tax on the basis of estimation the dividend income as laid down by the Hon'ble High Court should be taxed on the basis of actual dividend declared on shares which are registered in the name of the assessee. Considering these facts, we are of the view that the addition made towards dividend income on estimate basis by the revenue cannot be sustained. Accordingly we direct the AO to delete the entire addition made in this regard. The ground raised by the assessee is allowed and the ground raised by the revenue is dismissed. Deduction on account of interest payable/paid - Ground No.3 in Assessee's appeal 13. The assessee before the AO submitted that interest has been allowed as deduction in the earlier years by the decision of the Co-ordinate Bench in assessee's own case. However, the AO did not accept the submissions of the assessee to disallow the interest claimed as a deducti....