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Income Tax Appellate Tribunal, MUMBAI ‘D’ BENCH, MUMBAI.
Before: Shri B.R. Baskaran (AM) & Smt. Kavitha Rajagopal (JM)
It is noticed that these appeals have been filed in the years 2014 & 2017 and the assessee has been seeking adjournment every time citing one or other reason. On the last date of hearing i.e. on 21.2.2023, the Bench adjourned the appeals to 14.3.2023 specifically passing order that no further adjournment application shall be entertained. Despite the orders so passed by the Bench, the assessee has moved applications seeking adjournment again stating that its regular counsel has refused to appear for the hearing due to non-payment of their fees. However, it is pertinent to note that nobody appeared before the Bench on behalf of the assessee to plead the cases. This show us that the assessee has not only ignored the orders passed by the bench on 21.2.2023, but also lethargic and not appearing before the Tribunal.
The Learned Special Counsel appearing for the revenue also strongly objected to the adjournment applications filed by the assessee and submitted that the Bench, on the earlier occasion has specifically mentioned that no further adjournment shall be granted. He further submitted that the assessee has been seeking adjournment since 2016 onwards under one pretext or other. Accordingly he pleaded that the adjournment request of the assessee should be rejected.
The Learned Special counsel for the Revenue further submitted that he has furnished the gist of various issues urged by the assessee in all the appeals. He submitted that the assessee has got substantial relief before the learned CIT(A) and whatever additions sustained by the learned CIT(A) was in accordance with the law. Accordingly, he submitted that various orders passed by the learned CIT(A) in all these appeals do not call for any interference.
3 Dhanraj Mills Pvt. Limited
The facts relating to the cases are stated in brief. The assessee herein is a one of the parties notified under Special Court (TORTS) Act 1922 relating to the Security Scam 1991. The assessee herein belongs to Killick Nixon/Ruia group of concerns.
We shall first take up the appeals filed by the assessee for A.Y. 2001-02 to 2009-10 (ITA 4841/Mum/2014 to 4849/Mum/2014). We notice that main income of the assessee in these years is interest income received on loans/advances given to various parties. Since it was involved in Security Scam of 1991 and all the assets/bank accounts have been attached by the Special Court, the assessee declared interest income for these years on cash basis, apparently on the reasoning that the realization of interest income would be doubtful. It is pertinent to note that the assessee has been following mercantile system of accounting earlier.
6.1 The Assessing Officer noticed that the Special Court has directed payment of interest at certain percentage on the amounts advanced by the assessee. Accordingly, the Assessing Officer took the view that the interest income in the hands of the assessee should be assessed on mercantile basis in all the above said years. The AO also rejected the books of account of the assessee in all these years and proceeded to compute interest income on various advances given by the assessee on mercantile basis. Accordingly, he made addition towards differential interest income.
6.2 The Assessing Officer further noticed that the assessee has given interest free loan to CIFCO group. He noticed that the Special Court had ordered the payment of interest on the above said loans. Accordingly, the Assessing Officer computed the interest income on the loan given to Cifco group and added the same.
4 Dhanraj Mills Pvt. Limited 6.3 The Assessing Officer also noticed that that the assessee had made advances to Vksa Investment/Rashmini Investment. The assessee claimed that it has written off the above said investment and accordingly did not offer any interest income. The Assessing Officer noticed that the interest income from the above said concerns has been assessed in A.Y. 1995-96. Accordingly, following the same, the Assessing Officer also computed the interest income on the amount given to the above said two concerns also and assessed the same.
The assessee filed the appeals before Ld CIT(A) challenging the above said additions made by the Assessing Officer. The learned CIT(A) upheld the rejection of the books of account of the assessee. It is stated by Ld CIT(A) that the assessee has also accepted rejection of books of accounts. The Ld CIT(A) also concurred with the view of the AO that the interest income should be computed under mercantile system of account.
7.1 Before the learned CIT(A), it was contended that there were mistakes in the computation of accrued interest made by the AO under mercantile system of accounting. Hence the Ld CIT(A) asked the assessee to furnish correct computation of interest income under mercantile basis, which was also furnished by the assessee. It was also contended by the assessee that the additions made by the Assessing Officer has resulted in double assessment of the same income. The learned CIT(A) considered the contentions of the assessee and granted partial relief to the assessee on the basis of workings furnished by the assessee. He also directed the AO to delete double assessment. The learned CIT(A) also assessed the income on the amount advanced to a concern named M/s Excel & Company.
5 Dhanraj Mills Pvt. Limited
Still aggrieved by the order passed by the learned CIT(A), the assessee has filed the appeals for A.Y. 2001-02 to 2009-10.
The Learned DR submitted that the learned CIT(A) has already granted relief to the assessee, wherever it was possible to give relief. He submitted that the additions sustained by the learned CIT(A) was on the basis of workings given by the assessee. He submitted that the only grievance of the assessee is that the interest income should be assessed on cash basis. He submitted that the interest income is liable to be computed under mercantile system, since the Special Court has passed orders for payment of interest by the debtors. Accordingly he submitted that interest income was rightly assessed under mercantile system of accounting. With regard to the interest income computed on the amount advanced to the Excel & Company, learned Special counsel submitted that there is no enhancement of income as alleged by the assessee and the same was also rightly assessed.
We heard learned Special Counsel and perused the record. We noticed that the main grievance of the assessee is that the interest income should be assessed on cash basis. However, we find merit in the contentions of Ld Special counsel, i.e., when the Special Court has directed various debtors to pay interest at specific rates, there is a binding order of the Court, which is required to be complied with by the debtors. In that case, it is appropriate to account for interest income under mercantile system of accounting. Accordingly we do not find any merit in the prayer of the assessee to adopt cash system for accounting interest income. We notice that the learned CIT(A) has sustained the addition to the extent of interest income computed by the assessee under mercantile system of accounting. We also noticed that the learned CIT(A) has directed deletion of addition of interest income, resulting in double addition. With regard to the interest income computed on the amount given to Excel & Company, it is the submission of learned special
6 Dhanraj Mills Pvt. Limited counsel that there is no enhancement of income as alleged by the assessee. Even though the assessee is contending that the same has resulted in enhancement of income, yet no material was placed before us in support of the above said contention. Under these set of facts, we are of the view that the orders passed by the learned CIT(A) in A.Y. 2001-12 to 2009-10 do not call for any interference.
We shall now take up the appeals filed for AYs 1989-90 & 1990-91 (ITA No. 2175 & 2174/Mum/2017). In both these years, the assessee is contesting the addition of Rs.16.75 crores and Rs.27.08 lakhs made u/s 68 of the Act.
11.1 This is third round of proceeding. In the first round, the AO made addition of above said amounts u/s 68 of the Act, which was shown as “A.D Narottam Loan a/c” in the books of accounts. In the first round, the Tribunal restored the matter back to the file of AO in both the years. The AO made the very same addition in the second round and the Ld CIT(A) deleted the additions in both the years. Hence the revenue preferred appeals before ITAT, which again sent back the issues in both the years to the file of AO. In the third round, the assessee did not furnish evidences to prove the cash credits. Hence the AO again repeated the very same additions in both the years. The Ld CIT(A) confirmed the same in both the years and hence the assessee has filed these appeals.
11.2 We heard Ld Special Counsel and perused the record. He submitted that the assessee has not given proper explanations with regard to the cash credits standing in the name of A.D Narottam and thus, did not discharge the burden of proof placed upon its shoulders u/s 68 of the Act. Accordingly, he submitted that the Ld CIT(A) has rightly upheld the addition in both the years. We notice that, in all the three rounds, the assessee were 7 Dhanraj Mills Pvt. Limited offering certain explanations, which were not convincing to the assessing officer. When the assessee did not discharge the burden placed upon its shoulders, the cash credit is liable to be added u/s 68 of the Act. Accordingly, we uphold the orders passed by Ld CIT(A) in both these years.
We shall now take up the penalty appeals filed for AY 2004-05 and 2007-08 (ITA 918/M/2016 & 919/M/2016).
12.1 In assessment year 2004-05, the AO has levied penalty u/s 271(1)(c) of the Act on the addition of Rs.1.00 crores relating to Capital gains on sale of shares. The facts are that the AO noticed that there were credits amounting to Rs.1,35,266/- and Rs.1,31,64,158/- in the bank accounts of the assessee. It was noticed that these credits represented sale proceeds of shares of M/s Snowcem Indian Ltd. Since the assessee did not furnish proper particulars, the AO estimated capital gain at Rs.1.00 crore and assessed the same. The AO also levied penalty u/s 271(1)(c) of the Act and the same was confirmed by Ld CIT(A). We notice that the assessee has concealed the particulars of sale of shares and further did not furnish relevant details before the AO. Hence the AO has estimated the capital gains at Rs.1.00 crore. Accordingly, we are of the view that the AO was justified in levying penalty u/s 271(1)(c) of the Act on the above said amount. Accordingly, we uphold the order passed by Ld CIT(A) in AY 2004-05 confirming the penalty levied u/s 271(1)(c) of the Act on the capital gain of Rs.1.00 crore.
In AY 2007-08, the AO has levied penalty u/s 271(1)(c) of the Act on the addition relating to interest received from bank deposits amounting to Rs.3,59,20,768/-. Before the AO, it was contended that the above said amount has already been included in the interest income declared in the Profit and Loss Account. However, the same could not be substantiated by the assessee. Hence the AO made the addition of Rs.3,59,20,768/- and also 8 Dhanraj Mills Pvt. Limited levied penalty u/s 271(1)(c) of the Act thereon. The Ld CIT(A) also held that the above said interest income from bank deposits has already been credited to the bank account of the assessee and hence, by not offering the same, the assessee has concealed particulars of income. Accordingly, he confirmed the penalty levied u/s 271(1)(c) of the Act. Before us, no material was placed to contradict the finding of facts given by Ld CIT(A) on this issue. Accordingly, we uphold the order of Ld CIT(A) in confirming the penalty levied u/s 271(1)(c) of the Act on the interest income of Rs.3,59,20,768/-.
In the result, all the appeals of the assessee are dismissed. Pronounced in the open court on 17.3.2023.