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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI AMARJIT SINGH
Per Rajesh Kumar, Accountant Member:
The present cross appeals have been preferred against the order dated 31.12.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 1992-93.
2 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta ITA No.1455/M/2016 2. The appellant has raised 8 grounds in its appeal originally. Subsequently, revised grounds were filed by the appellant vide letter dated 04.01.2021 as original grounds had some typographical errors. The said revised grounds raised by the appellant are as under: “1. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in not appreciating that the Assessing Officer has not complied with the principles of natural justice either during the course of the assessment proceedings or during the course of the remand proceedings. 2. The Learned Commissioner of Income-tax (Appeals) has erred in law and in facts in not determining the income based on the final books of account thereby confirming the manner of determination of income by the Assessing Officer. The Learned CIT(A) ought to have accepted book results shown by the appellant. 3. The Learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in upholding the working of unexplained investments relying on the various sources of information. 4. The Learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in upholding the determination of unaccounted investments as per Annexure 1 of the assessment order amounting to Rs.19,86,14,228/- on the basis of the information collected from various sources allegedly showing the shareholding of the appellant without appreciating that the copies of the said letters/information was neither provided to the appellant during assessment proceedings nor during remand proceedings. 5. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the addition of Rs.11,63,200/- on account of unexplained deposits in the bank account. 6. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in not granting deduction on account of interest of Rs.2, 04,00, 000/- on fund borrowed for the purpose of investments and business. 7. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 234B and 234C of the Act. 8. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s. 234A, 234B and 234C of the Act. 9. The appellant craves leave of Your Honour to add to, alter, amend and7 or delete all or any of the foregoing grounds of appeal.”
Ground No.1 is general in nature and not being adjudicated separately.
3 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta 4. Ground No.2 raised by the assessee is against the confirmation of rejection of books of accounts by Ld. CIT(A) thereby upholding the order of AO.
The facts in brief are that the assessee is an individual and doing the business of trading and investments in shares. During the year the assessee did not file any return of income under section 139(1) of the Act. Thereafter, the assessee was issued notice under section 142(1) of the Act on 04.01.1993, however, the same was not complied with. The original assessment in this case was completed under section 144 of the Act on 28.02.1995 assessing the total income at Rs.20,29,21,230/- by making various additions. It is pertinent to mention that the assessee did not furnish any books of accounts before the AO and AO accordingly completed assessment on the basis of available information and incomplete books found at the time of search by making additions under section 69 in respect of unexplained investments of Rs19,86,14,228/-. The matter reached the Tribunal and the Tribunal vide order dated 13.06.2008 restored the matter to the file of Ld. CIT(A) with the direction to admit the books of accounts as evidence and decide the appeal after giving a reasonable opportunity to the assessee. In the second round, the ld CIT(A) partly allowed the appeal of the assessee vide order dated 31.12.2015 and therefore the assessee as well as the Revenue are in appeal before us. The assessee could not produce the books of accounts during the assessment proceedings because they were not complete due to several unforeseen and uncontrollable reasons beyond the control of the assessee and consequently the assessment was framed on the
4 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta basis of information/details and material gathered by the AO and the information supplied by the assessee. The AO made several additions on account of dividend and interest of Rs.31,43,803/-, unexplained receipts Rs.11.63,200/- and unexplained investments Rs.19,86,14,220/-. Although the Tribunal had directed Ld. CIT(A) to admit and consider the books of accounts, the Ld. CIT(A) did not examine the books and passed the appellate order without considering the books of accounts. The reason cited by the Ld. CIT(A) was that the assessee was directed to produce the books before the AO and the AO was directed to submit the remand report but inspite of that no such remand report was furnished despite several opportunities given to the AO.
The Ld. A.R. submitted before the Bench that the books of accounts are important piece of evidence for the purpose of determination of income. The Ld. A.R. submitted that since the AO has accepted the primary evidences filed before him comprising contract notes, dividend warrants and bank statement etc., then there was no reason for rejecting the books of accounts as entries made therein were on the basis of above primary evidences and records which were before the AO. The Ld. A.R. submitted that income from investments in the form of dividend and interest etc. have been determined and accepted as shown in the books of accounts which incidentally is more than the income assessed by the AO in the assessment order. The Ld. A.R. also submitted that the books of accounts are verifiable with the supporting evidences such as bank statements, contract notes and income warrants etc and since substantial transactions of investments were with brokerage firms within
5 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta the family, the assessment records of these brokerage firms in the family of the assessee who were assessed with same AO, could have been examined. Thus the accuracy and reliability of the books of accounts could be determined with various evidences and documents. The Ld. A.R. also referred to the observations of the co-ordinate Benches in several cases of related entities that books of accounts which were prepared under great difficulties should not be rejected on flimsy grounds , yet the books of accounts of the assessee have been rejected without any justification and cogent reasons. The Ld. A.R. therefore requested that the books of accounts ought to have been accepted. The Ld. A.R. further submitted that the books of accounts were rejected by the AO not only in the case of the assessee but also in the cases of all the family members where the assessments were framed under similar circumstances. The Ld. A.R. also referred to the decision of the co-ordinate Bench in the case of Hitesh S. Mehta. Vs. ACIT ITA No.5190/M/2017 A.Y. 1992-93 order dated 31.08.2020 wherein the co-ordinate Bench has held the rejection of books of accounts to be incorrect and decided the issue in favour of the assessee. The Ld. A.R. finally prayed that the books of accounts of the assessee deserved to be accepted in view of the facts and circumstances as narrated above and also the decision of the co-ordinate Bench as cited (supra).
The Ld. D.R., on the other hand, relied heavily on the order of authorities below and submitted that the books of accounts ,which were not filed before the AO and nor Ld. CIT(A) in the first round of litigation but filed before the Tribunal for the first
6 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta time, can not be relied upon and was rightly rejected by the authorities below.
After hearing both the parties and perusing the material on record, we find that dividend and interest income was determined by the AO on the basis of bank statements and dividend warrants filed by the assessee and the said income was duly accounted for by the assessee in the books of accounts. We also note that in view of such massive search on the assessee the books of accounts could not be produced before the AO in the first round of litigation because these could not be computed and only computed in the later series on the basis of information on record available with the assessee. We note that these books were filed as additional evidences for the first time before the Tribunal in the first round and Tribunal after admitting the same restored the matter to the file of the Ld. CIT(A) with the direction to decide the appeal of the assessee after considering the said books of accounts. However, we note that Ld. CIT(A) has again disregarded the books of accounts filed by the assessee without even pointing a single defect for the said rejection. In our opinion, the rejection of books of accounts by the Revenue authorities is not correct in view of the fact that all the relating evidences such as contract notes, dividend warrants and the bank statements and other evidences available on record were accepted which was used to complete the books of accounts. In our opinion the books of accounts constitute an important piece of evidence and therefore we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue that too without pointing out any defects and deficiency in the books of accounts. We also note that the books of accounts
7 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta were also rejected in the case of all the related entities. We note that in one of the related entities M/s. Hitesh S. Mehta vs. ACIT (supra) the co-ordinate bench of the Tribunal under similar circumstances has held the rejection of books of accounts as invalid and incorrect and accordingly decided the issue in favour of the assessee. Accordingly, following the said decision of the co-ordinate bench of the Tribunal we also hold that there is no reason and justification for rejecting the books of accounts as both the authorities below have failed to give the reasons or point out any defects in the books of account for rejection of books of accounts. Accordingly, we allow this ground in favour of the assessee. Ground no. 2 is allowed.
9.In ground No. 3 and 4, the appellant has challenged the addition on account of unexplained investments as sustained by the Ld. CIT(A).
The brief facts are that the assessment was originally completed u/s. 144 of the Act on 28.02.1995 making an addition on account of unexplained investment at Rs. 19,86,14,228/-. The said addition was made on account of alleged unexplained purchase of shares. During the course of assessment proceedings, information pertaining to the investments in shares by the appellant were collected by the AO from the following sources: a. Details of shareholding provided by various companies. b. Custodian’s letter dated 29.10.1993 giving details of shareholding in various companies. c. Dividend account provided by the assessee.
8 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta d. Details of seized shares.
On the basis of the above information, a detailed list of the investments in various shares was prepared by the AO and in respect of each scrip, the highest holding from the various sources was treated as the investments of the appellant made during the year. The said list was marked as Annexure 1 to the assessment order. The assessee was called upon by the AO to furnish the evidences in respect of the investments as listed in Annexure 1 and made by her during the year. Accordingly, the assessee filed Investment in Share Account and contract notes in support of purchase of shares to substantiate and explain the investments made by her. The AO, however, concluded that the evidences filed by the assessee till 20.02.1995 are considered as explained though no such notice was given and the assessment order which could have been passed by 31.03.1995 was suddenly passed on 28.02.1995 after seeing the compliance being made by the assessee. In fact, a list of the investments made and supported by evidences filed vide and upto letter dated 20.02.1995 is prepared and marked as Annexure 2. It was explained that for the reasons best known to AO, he ignored the evidences filed vide letter dated 21.02.1995, 28.02.1995 and 01.03.1995. He accordingly passed the order on 28.02.1995, treating the difference between the investment, as per Annexure 1 and the investments as per Annexure 2 as the unexplained investments of the assessee. On the basis of the fact that the shares stood registered in the name of the assessee, the AO made the presumptions that the appellant has actually made the investment (i.e. that she has actually paid for the purchase
9 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta of the shares) and that the said investments were made during the relevant year. The aforesaid material collected by the AO was never disclosed or confronted to the assessee and repeated requests made by the assessee to allow inspection and supply copies of the materials as also to grant cross-examination of the person supplying such material was not granted to the assessee which is duly confirmed in the assessment order itself passed on 28.02.1995. The submissions made by the assessee explaining that she had funded the investments by availing interest-bearing loans from the 3 brokerage firms was also rejected resulting into a huge addition being made to the income of the assessee as unexplained investments.
Before the Ld. CIT(A) in the 1st round as well as in the 2nd round, the assessee submitted that the evidences filed by the assessee vide letters dated 21.02.1995, 28.02.1995 and 01.03.1995 which ought to have been considered by the AO were not considered and if the same were taken into account, large part of the additions was liable to be deleted on that ground alone. It was submitted that there is no distinction between the evidences filed by the assessee prior to 20.02.1995 and those filed subsequently before the passing of the assessment order through letters dated 21.02.1995, 28.02.1995 and 01.03.1995, all before receipt of the assessment order. The Ld. CIT(A) in the impugned order after considering the submissions of the appellant directed the AO to consider the investments reflected in the aforesaid 3 letters and delete the additions. He also directed the AO to restrict the additions by giving due credit in respect of the shares received as bonus shares or on account of conversion of debentures as explained
10 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta by the appellant and that such investments cannot be treated as unexplained since there was no fresh investments made but the shares were received through bonus issue or on account of conversion of debentures on the existing investments. The Ld. CIT(A) upheld the addition on account of unexplained investments only in respect of the residual investments after granting the aforesaid reliefs. The Ld. CIT(A) also directed the Assessing Officer that the amount of addition so sustained should be determined by adopting the purchase rate of the shares so treated as unexplained on the basis of the date of purchase found in the various correspondences and the information gathered by the AO and also after considering the submissions of the assessee. Thus, even the challenge to valuation adopted by the AO was granted in favour of the assessee.
12.The ld. AR submitted that such residual additions sustained by the Ld. CIT(A) were incorrect and unjustified for several reasons. It is stated that the additions sustained by the Ld. CIT(A) are summarised at Page 1 of PB. The ld AR submitted that investments treated as unexplained are liable to be deleted as they were duly recorded in the aforesaid books of accounts and can also be proved with the help of contemporary evidences which are available on record that these were accounted for investments of the assessee. In this regard, reliance is placed by the ld AR on the following evidences which conclusively prove that these investments were made by the assessee and that the same does not represent unrecorded investments of the assessee. These evidences are as follows:
11 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta e. Ledger account of investments in the books of the appellant reflecting the purchases made by the appellant through the credit given by above 3 brokerage firms. [Page 33-50 of PB No. 1]
f. Ledger account of the above brokerage firms through whom these shares were purchased by the appellant [Page 51-80 of PB No. 1].These brokerage firms have also filed their books of accountbefore the same AO in their assessment and appellate proceedings.
g. Extract of the bank bookin the books of the appellant reflecting payments made to the brokers to the extent the appellant had the resources.[Page 81-85 of PB No. 1]
h. Affidavit of the broker, Shri Ashwin Mehta on behalf of his brokerage firm, M/s. Ashwin Mehta, confirming the purchase of shares from the stock exchanges on behalf of the appellant (alongwith the list of such investments made during A.Y. 1992-93 on behalf of the appellant) [Page 86-91 of PB No. 1]. The list of purchases made- attached to the affidavit clearly reflects the investments treated as unexplained by the AO though the same was not unexplained.
i. Affidavit of the broker, Smt Jyoti H. Mehta on behalf of her brokerage firm M/s. J.H. Mehta, confirming the purchase of shares from the stock exchange on behalf of the appellant (along with the list of such investments
12 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta made during A.Y. 1992-93 on behalf of the appellant) [Page 92-99 of PB No. 1]. - The list of purchases made are attached to the affidavit clearly reflects the investments treated as unexplained by the AO.
j. Affidavit of the broker, Shri Harshad Mehta on behalf of his brokerage firm M/s. Harshad S. Mehta, confirming the purchase of shares from the stock exchange on behalf of the appellant (along with the list of such investments made during A.Y. 1992-93 on behalf of the appellant) [Page 100-108 of PB No. 1]. - The list of purchases made are attached to the affidavit clearly reflects the investments treated as unexplained by the AO.
k. Sample copy of the contract notes issued by the brokers, in respect of those shares which are allegedly treated as unexplained by the AO. [Page 113-118 of PB No. 1].
l. Statement of Shri Ashwin Mehta recorded u/s. 131 of the Act before the AO during the course of survey proceedings conducted on 22.02.1996 wherein, vide Q. No. 6 and 8 of the statement, he accepted that the contract notes were issued by him to various clients which includes the appellant. [Page No. 109-112 of PB No. 1].
13 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta m. Corresponding ledger account of the appellant in books of all the 3 brokerage firms reflecting these very transactions made by them on behalf of the appellant [Page No. 506-515 of PB No. 3]
n. Affidavit dated 11.10.2006 filed by the appellant before the Hon’ble Special Court in MA No. 337 of 2006 (Para 9, 12-15 of the Affidavit)confirming purchase of shares being made by brokers on credit on behalf of the assessee.[Page No. 627-645 of PB No. 4]
13.Further, the ld. AR also submitted that the fact that the shares were purchased by the assessee through the aforesaid 3 brokerage firms of the family was also accepted by the Hon’ble Special Court and Hon’ble Supreme Court. The appellant relied on the following orders in the cases of other family members wherein the averments have been made that the purchase of shares made by the appellant were sourced out of funds provided by the 3 brokerage firms and that these shares were acquired on credit extended by them and decided in favour of these entities: a. Rasila Mehta and Rina Mehta v. Custodian [(2011) 6 SCC 220] [Para 69-71 at Page No. 560-600, of PB No. 4] b. Ashwin S. Mehta and others v. Custodian [(2006) 2SCC 385][Para 48 at Page 601-626 of PB No. 4]
14.Further, it is submitted that the shares treated as unexplained by the AO have been sold in the subsequent years
14 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta under the orders of the Hon’ble Special Court and the assessee has claimed deduction on account of the cost of acquisition of the shares while computing capital gains in respective years. The ld AR argued that the AO has also accepted the cost of acquisition and the date of acquisition in respect of these shares as also the contract notes adduced in support thereof. In fact, the reference to this effect was also made by the Hon’ble Tribunal while adjudicating the issue relating to long-term capital gains assessed by the AO in case of Deepika A. Mehta v. DCIT [ITA No. 3177/Mum/2008]for A.Y. 2002-03 order dated 29.07.2011 (Para 11 and 20 of the order) [Page No. 646-657 of PB No. 4]
15.The ld AR argued that the assessee has also explained time and again that if the assessee has been depositing the dividends received on the investments made by her in her disclosed bank accounts, no inference can ever be drawn that the appellant has made any investments out of any unaccounted resources or has made any unexplained investments. The Hon’ble Special Court has also granted title in respect of unregistered shares as per the disclosures made by Shri Harshad Mehta in numerous proceedings before it on the basis of transactions of the 3 brokerage firms and on that basis issued directions to register the unregistered shares in the name of the family members as per the disclosure made by Shri Harshad Mehta. In essence, the evidences of contract notes and the averments and assertions made by the appellant and her family members were already accepted in each and every proceedings before Hon’ble Special Court and therefore the AO, who was bound by such orders,
15 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta could not have taken a completely contrary view that the appellant has made any unexplained investments, particularly when u/s 9-A of the Torts Act, only the Special Court has exclusive jurisdiction to determine the ownership of shares in respect of notified entities.
The ld AR submitted that all the above evidences clearly proved that the investments were duly recorded by the appellant in the books of accounts and that the investments were made out of the credit granted by the 3 brokerage firms in the family. Under these circumstances, these investments cannot be treated as unexplained u/s. 69 of the Act. This is because not only these investments have been proved to be recorded in the books of accounts, the nature and source of the said investments have also been explained by way of several evidences listed above.
The appellant further submitted that identical nature of addition was made in the case of Hitesh S. Mehta v. ACIT [ITA No. 5190/Mum/2017][Page 713-736 of PB No. 4]for A.Y. 1992- 93 wherein identical addition was made by the AO and the relief granted by the Ld. CIT(A) was also of the identical nature. In the said case, the Hon’ble Tribunal has deleted the said addition and decided the issue in favour of the assessee (Para 8-14, Page 9-14 of the order). In light of the above, the appellant humbly prayed that the addition made in the case of the appellant may kindly be deleted.
Per contra ld DR relied heavily on the order of authorities below and justified the additions made by AO on account of unexplained investments in shares and securities.
16 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta
We have heard the rival submissions of both the parties and perused the material on record. We find that in this case the AO has considered the evidences filed by the assessee in the form of contract notes which were filed by the assessee in support of purchase of shares to explain investments made by her. However, the AO considered these evidences filed by the assessee till 20.02.1995 and framed the assessment on 28.02.1995. Thus we note that AO has ignored the evidences filed by the assessee vide written submissions dated 21.02.1995, 28.02.1995 & 01.03.1995 which has resulted into difference of Rs.19,86,14,220/- which was added as unexplained investment. However, we find that Ld. CIT(A) had considered the submissions of the appellant and has granted relief in respect of the details on the evidences filed by her on the aforesaid 3 dates vide various submissions filed before the Assessing Officer. Accordingly, the Assessing Officer is directed to recompute the unexplained investment after giving credit on account of the details on the evidences furnished by the appellant vide her submissions dated 21.02.1995, 28.02.1995 and 01.03.1995. The Ld. CIT(A) has also granted relief on account of the bonus shares received by the appellant as well as the shares received on conversion of the existing investment and debentures. However, we fail to understand the reasons for which the balance investments have been sustained as unexplained. We note that the assessee has filed numerous evidences before the Assessing Officer as well as Ld. CIT(A) to prove that all the investments which have been treated as unexplained were duly recorded in the books of accounts and were supported by
17 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta appropriate evidences. The investments have been reflected in the Ledger account of investments in the books. Further, the appellant has also filed the Ledger account of the brokerage firms in her books to show that the shares were purchased through the brokerage firm on credit from them. Further, the appellant has also filed the copies of the Ledger account of the appellant in the books of all the 3 brokerage firms reflecting therein the details of transactions of shares purchased by them on behalf of the appellant. Moreover, we find that these purchases have been duly supported by the affidavits of all the 3 brokerage firms, copies of which have been filed before us at Page 86-108 of PB No, 1. We have gone through these affidavits and find that the brokerage firms who have purchased shares on behalf of the appellant and duly confirmed these purchases. In fact, they have also provided the list of shares purchased by them on behalf of the appellant, which covers the investments treated by the Assessing Officer as unexplained. Our attention was also invited to the statement of Shri Ashwin Mehta recorded u/s. 131 of the Act on 22.06.1996, wherein he had accepted that shares were purchased by his brokers on behalf of the family members including the appellant. It is also noted that the custodian in its affidavit dated 01.03.2006 has accepted that the shares are purchased on behalf of the family members including the appellant by the brokerage firms of Harshad Mehta, Ashwin Mehta and Jyoti Mehta. As such, in our opinion, there are ample evidences submitted by the appellant to prove that the shares were acquired by her through the brokerage firms on credit, and that the shares are duly reflected in your books of accounts and that they are fully explained. We also note that this plea of the
18 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta assessee has been accepted by the Hon'ble Special Court and also the Hon’ble Supreme Court that shares were sourced out of three brokerage firms by taking interest bearing loan. We also note that similar issue also came up before the co-ordinate bench of the Tribunal in the case of related entities namely Rasila Mehta and Rina S. Mehta vs. Custodian (supra), Ashwin S. Mehta & ors. vs. Custodian (supra) and these were accepted as acquired out of credit extended by three brokerage firms. As such, the requirement of s. 69 of the Act to prove the nature and source of the investments made also stand satisfied, in asmuch as the appellant has proved with evidences that the shares have been purchased and sourced out of the credit given by the brokerage firms. In other words, the source of these investments are the credit granted by the brokerage firms which was also confirmed by way of their books of accounts as well as the affidavit confirming the transactions made by them on behalf of the appellant. Moreover, we find that all the investments made by the assessee including dividend and interest on debentures etc. were accounted for in the books of accounts and therefore the same can not be treated as unexplained investments. In our opinion, the investments made by the assessee have been explained with the source of funds arranged from three brokerage firms. In our considered view, the issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in the case of related entities M/s. Hitesh S. Mehta vs. ACIT (supra) wherein the addition made under similar circumstances have been deleted. The operative part is as under: “12. We observe that the said addition comprised of various amounts as have stated in para 8 above. The first amount of Rs.12,38,857/- comprised of two components one Rs.5,09,932/- in respect of which the assessee has not been provided the third party evidences relied upon by the AO i.e. companies letters and these companies
19 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta are stated on serial no 1 to 8 in para 9 above. Since the assessee has not been provided the copies of these letters at the time of assessment proceedings and the fact has been brought to the notice of the AO during assessment proceeding vide letter dated 27.03.2015, therefore, the addition of Rs.5,09,932/- cannot be sustained. This has been held by the Tribunal in the earlier round in ITA. No.538/M/2012 vide order dated 01.05.2013 in assessee’s own case. Pertinent to the mentioned that the order of the Tribunal was challenged of the revenue before the Hon’ble High Court and Hon’ble Bombay High Court vide order dated 07.06.2016 in ITA. No. 2490 of 2013 has upheld the views of Tribunal and dismissed the question of law raised by the revenue. The case of the assessee is also supported by the decision of the Tribunal in the case of assessee’s brother Late Shri Harshad S. Mehta in ITA. No.637/M/2007 dated 02.01.2008 wherein it was categorically observed that wherever additions were made on the basis of seized material or material collected from third parties and copies thereof were not provided to the assessee, in that case, the addition cannot be made. It was also held that if the assessee has requested for the cross examination, an opportunity must be provided to the assessee for such cross examination. 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, we find that in the said letters details provided were incomplete as it is not clear whether the same pertain to the year under consideration. For example, the details and information provided by these companies do not explain to which year these transaction relate to and there were several flaws in the said letters. Thus, the details provided by above 4 companies do not reflect the exact details to come to the conclusion the correct holding of the assessee and therefore, we find merits in the arguments of the Ld. AR that the addition on the basis of said letters is not justified and can not be sustained. Accordingly, we set aside the order of the CIT(A) on the issue and direct the AO to delete the addition.”
We therefore, respectfully following the decision of the co- ordinate bench of the Tribunal direct the AO to delete the disallowance. Consequently the ground no. 3 and 4 are allowed.
The issue raised in ground No.5 is against the confirmation of addition of Rs.11,63,200/- by Ld. CIT(A) as made by the AO on account of unexplained deposits.
21.The facts in brief are that there are certain deposits in the bank account of the assessee during the year which could not be explained by the assessee during the assessment proceedings. In the first round of litigation the Ld. CIT(A) remanded the matter back to the file of the AO. During the remand proceedings also, assessee could not explain and prove the
20 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta sources of these credits. Accordingly, these were confirmed by the Ld. CIT(A) in the first round vide order dated 13.03.2003. Based on the same, the Ld. CIT(A) in the second round also confirmed the additions in the impugned order of Ld. CIT(A) by observing that the Ld. A.R. of the assessee has not given any further explanation and accordingly the ground of appeal of the assessee was dismissed on this issue.
The Ld. A.R. submitted before us that these deposits were fully explained by the assessee before the Ld. CIT(A) in the first round. The Ld. A.R. also submitted that in the second round, the full details were given in the books of accounts produced which were remanded back to the AO by Ld. CIT(A). However, the authorities have failed to take cognizance of the books of accounts and the entries recorded therein. The Ld. A.R. referred to page No.119 of paper book No.1 which contained itemwise details of deposits and also referred to page No.12 to 125 which contained the copies of dividend income, miscellaneous income, saving bank interest, interest on bank loan, shares/debentures and submitted that all these items were shown in the respective income and other accounts respectively and prayed before the Bench that the addition may kindly be deleted as all the details of these credits are available in the books.
The Ld. D.R., on the other hand, relied heavily on the order of authorities below.
After hearing both the parties and perusing the material on record, we find that the assessee has furnished the details of these deposits at page No.119 which is reproduced as under:
21 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta Sr. No. Dates Particulars Amount
1 31.03.92 6,94,863 Refund of share application money and interest on shares 2 31.03.92 5,912 Saving Bank Interest 3 15.02.92 1,35,300 Suspense 4 06.07.91 1,100 Cash deposit-reversed 5 17.09.91 2,402 Dividend income 6 01.10.91 14,150 Interest Income 7 01.10.91 12,300 Miscellaneous Income 8 19.10.91 750 Dividend income 9 12.12.91 2,95,000 Refund of share application money and interest on shares 10 11.01.92 450 Dividend income 11 12.01.92 224 Dividend income 12 15.02.92 600 Dividend income 13 12.03.92 150 Dividend income 11,63,200 Total
We further note that all these entries were made in the respective accounts as attached on page No.120 to 125. Therefore, in our view, except for an entry of Rs.1,35,000/- dt.15.02.1992, the assessee has fully explained the nature of most of these deposits and shown them either income during the year such as dividend, interest, miscellaneous income or credited the refund of share application money in the respective accounts. The entries pertaining to the income are duly offered to tax by the appellant and hence adding the same as unexplained deposits would amount to double addition in the hands of the appellant.
22 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta In respect of the entry of Rs. 1,35,300/- recorded on 15.02.1992, the appellant has not explained the said deposit and has reflected the same as suspense entry in her books. Since the said entry remains to be explained, the same is rightly added by the Assessing Officer and to that extent the addition stands confirmed. Considering all these evidences, we are of the view that assessee has explained these deposit entries in the bank statement of the assessee to the tune of Rs.10,27,900/- for which no addition is called for. Moreover, the authorities below have failed to taken the cognizance of books of accounts which we have already allowed in favour of the assessee by holding that books of accounts were incorrectly rejected by the Ld. CIT(A). Consequently ground No.5 is partly allowed in favour of the assessee by directing the AO to delete addition to the tune of Rs.10,27,900/-. Whereas balance addition of Rs.1,35,300/- is confirmed. The ground no. 5 is partly allowed.
Issue raised in ground No.6 is against the confirmation of disallowance of interest expenses of Rs.2,04,00,000/- by Ld. CIT(A) as made by the AO by not granting deduction on account of funds borrowed for the purpose of investments and business.
26.At the outset, the Ld. Counsel of the assessee submitted that the issue is of recurring in nature arising in every year in the case of the assessee and also her family members for the past several years and has been decided in favour of the assessee and her family members under identical facts. The Ld. A.R. relied on the following decisions of the coordinate benches in support of his arguments:
23 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta a. Rina S. Mehta (appellant) v. DCIT [ITA No. 5804/Mum/2017 and others] for A.Y. 2010-11 and others dated 28.12.2017 (Para 32-333 of the order) [Page [Page 772 772-812 812 of PB No. 4] of PB No. 4]. [Page [Page 772 772 812 812 of PB No. 4] of PB No. 4] b. Hitesh S. Mehta v. DCIT [ITA No. 5190/Mum/2017] for A.Y. 1992-93 dated 31.08.2020 (Para 18-22 of the order) [Page 713 [Page 713 [Page 713- [Page 713 736 of PB No. 4]. 736 of PB No. 4] 736 of PB No. 4] 736 of PB No. 4] c. Growmore leasing and investments Ltd v. DCIT [ITA No. 6091-6093/Mum/2018] for A.Y. 2013-14 to A.Y. 2015-16 dated 16.12.2020 (Para 7-8 of the order) [Page [Page [Page 737 [Page 737 737-754 737 754 754 of PB 754 of PB of PB of PB No. 4]. No. 4] No. 4] No. 4] d. Harsh Estates Pvt. Ltd. v. DCIT [ITA No. 6957- 6959/Mum/2018] for A.Y. 2013-14 to A.Y. 2015-16 dated 15.09.2020 (Para 4-18 of the order) [Page [Page [Page 755 [Page 755 755-771 755 771 771 of PB No. 771 of PB No. of PB No. of PB No. 4]. 4] 4] 4] 27. The Ld. D.R. , however, relied on the grounds of appeal and order of authorities below.
We have heard the rival submissions of both the parties and perused the material on record. We find that the issue has been decided by the coordinate benches under identical facts in the assessee’s own case in ITA No.5804/M/2017 & others for A.Y. 2010-11 & ors. vide order dated 28.12.2017. We, therefore, respectfully following the decision of the co-ordinate bench of the Tribunal in assessee’s own case in A.Y. 2010-11 and also in the case of family members set aside the order of Ld. CIT(A) and direct the AO to allow the deduction of interest expenses on borrowed funds to the assessee as claimed. Accordingly the ground no. 6 is allowed.
The issue raised in ground No.7 is against the confirmation of the action of the AO by Ld. CIT(A) in respect of levy of interest under section 234A, 234B, 234C of the Act.
24 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta
After hearing both the parties and perusing the material on record, we observe that the issue is decided against the assessee by following the decision of Hon’ble Supreme Court in the case of Anjum H. Ghaswalla (252 ITR 1) SC wherein it has been held that charging of interest under the above three sections is mandatory. We accordingly uphold the order of Ld. CIT(A) and the ground No.7 raised by the assessee is dismissed.
The issue raised in ground No.8 is against the confirmation of the action of the AO by Ld. CIT(A) in respect of calculation of interest under section 234A, 234B, 234C of the Act without allowing the deduction of TDS deductible on the income assessed which is subject to the provisions of TDS.
After hearing both the parties and perusing the relevant provisions of the Act and also the various decisions of the co- ordinate benches of the Tribunal, we hold that interest charged under section 234A, 234B & 234C needs to be recomputed by the AO in terms of the decision of the co-ordinate bench of the Tribunal in the case of related entities M/s. Growmore Research and Assets Management Ltd. ITA No.1807 & 2192/M/2015 A.Y. 1992-93. The operative part whereof is reproduced as under: “24. At the outset, the learned Counsel for the assessee stated that the identical issue has been dealt with by the Tribunal in assessee’s own group cases, in the case of Harshad S Mehta vs. ACIT in ITA No. 3271/Mum/2015 for AY 2009-10 vide order dated 20.03.2017, wherein Tribunal has considered the issue and remanded the matter back to the file of the AO to recompute the interest under section 234A, 234B, 234C and also under section 220 of the Act by observing as under: -
After hearing both the parties and on perusal of the record including the orders of authorities below and case law relied upon by the ld.AR, we find that the issue in hand has been decided by the Coordinate Bench of the Tribunal vide para 6 and 6.1 in favour of the assessee. For the sake of convenience, we reproduce the above referred paras as under :
25 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta
“6. The only other issue in this appeal is with regard to the chargeability of interest under section 234A, 234B & 234C of the Act. On this aspect, pleas of the assessee are two fold. First, the plea is to the effect that the provisions of section 234A, 234B and 234C are not applicable to notified entity. This aspect of the matter is required to be held against the assessee following the judgment of the Hon’ble Bombay High Court in the case of Divine Holdings Pvt. Ltd( ITA No.3334 of 2010 dated 7/3/2012), as decided by our Co-ordinate Bench in the case Eminent Holdings Pvt. Ltd. in ITA NO.2139/Mum/2013 dated 18/6/2014, which also was a case of notified entity under the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992. At the time of hearing this aspect of the matter was fairly conceded by the Ld. Representative of the assessee. 6.1 The second plea of the assessee is with regard to the quantum of interest chargeable under section 234A, 234B & 234C of the Act which is to the effect that the interest should be charged after considering the amount of tax deductible at source on the income assessed. Similar plea of the assessee was upheld by our Co-ordinate Bench in the case of Eminent Holdings Pvt. Ltd. (supra). Following the same, we deem it fit and proper to restore the matter back to the file of AO who shall recompute the interest chargeable under section 234A, 234B & 234C of the Act after considering the amount of tax deductible at source on the income assessed. Needless to mention, the AO shall allow the assessee a reasonable opportunity of being heard and thereafter, recompute the interest chargeable under section 234A, 234B & 234C of the Act, as per law. Thus, on this aspect, the assessee partly succeeds.”
Respectfully following the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case, we restore the issue to the file of the AO with a direction to recompute the interest u/s 234A, 234B and 234C after taking into account the tax deductible on total income of the assessee by affording fair and reasonable opportunity of being heard to the assessee.”
In view of the above, we direct the AO to recompute the interest under section 234A, 234B, 234C and 220 of the Act as held by Tribunal in the case of Harshad S Mehta (supra). This issue of assessee’s appeal is allowed for statistical purposes.”
Since the facts of the instant issue before us is identical to one as decided by the coordinate bench supra, we accordingly, direct the AO to recompute the interest in terms of the above decision after taking into account the amount of tax deductible at source on the assessed income. Ground no. 8 is allowed for statistical purposes.
26 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta
ITA No.1367/M/2016
The grounds taken by the Revenue is as under: “On the facts and circumstances of the case and in law, the Ld. CIT(A), Mumbai erred in giving relief to the assessee in respect of unexplained investments in shares. The Ld. CIT(A) failed to appreciate the fact that the assessee has not submitted details in the assessment proceedings and also in remand proceedings."
The facts of the case have already been discussed in the assessee’s appeal. We note that Ld. CIT(A) has allowed the relief to the assessee after taking into account the evidences filed by the assessee vide letter dated 21.02.1995, 28.02.1995 & 01.03.1995. We note that there is hardly any difference in the evidences filed up to 20.02.1995 and thereafter. We also note that Ld. CIT(A) has directed the AO to delete the addition in respect of shares which were received by the assessee as bonus issue received by the company and also shares received upon conversion of convertible debentures. We also note that a similar relief has been granted by Ld. CIT(A) in assessee’s husband’s case namely Shri Sudhir S. Mehta vide order dated 11.03.2014, a copy of which is filed at page No.338 to 374 of paper book No.1 and the said relief was not challenged by the Revenue before the Tribunal. The impugned order of the Tribunal in case of Shri Sudhir S. Mehta in ITA No.3917/M/2014 dated 16.12.2015 is filed at page No.377 to 383 of paper book No.1. During the course of hearing before us the Ld. A.R. also referred to the decision of the family member wherein similar reliefs were granted and all these orders of Ld. CIT(A) were accepted by the AO and no further appeal was preferred. The details of such orders are as under:
27 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta
a. Order of Ld. CIT(A) dated 20.01.2012 in the case of Smt. Deepika A. Mehta for A.Y. 1992-93.[Page 163- 199 of PB No. 1] b. Order dated 29.08.2012 giving effect to Ld. CIT(A)’s order in the case of Smt. Deepika A. Mehta for A.Y. 1992-93.[Page 200-202 of PB No. 1] c. Order of the Hon’ble Mumbai Tribunal in the case of Smt. Deepika A. Mehta v. DCIT [ITA No. 1889 & 6164/Mum/2012] dated 15.09.2016 for A.Y. 1992- 93.[Page 203-210 of PB No. 1] d. Order of Ld. CIT(A) dated 29.02.2012 in the case of Smt. Rasila S. Mehta for A.Y. 1992-93.[Page 211-243 of PB No. 1] e. Order dated 14.08.2012 giving effect to Ld. CIT(A)’s order in the case of Smt. Rasila A. Mehta for A.Y. 1992-93.[Page 244-246 of PB No. 1] f. Order of the Hon’ble Mumbai Tribunal in the case of Smt. Rasila S. Mehta v. DCIT [ITA No.6165/Mum/2012] dated 17.06.2014 for A.Y. 1992-93.[Page 247-249 of PB No. 1] g. Order of Ld. CIT(A) dated 30.12.2011 in the case of Shri Hitesh Mehta for A.Y. 1992-93.[Page 250-282 of PB No. 1] h. Order dated 03.09.2012 giving effect to Ld. CIT(A)’s order in the case of Shri Hitesh S. Mehta for A.Y. 1992-93.[Page 283-285 of PB No. 1] i. Order of the Hon’ble Mumbai Tribunal in the case of Shri Hitesh S. Mehta v. DCIT [ITA
28 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta No.538/Mum/2012] dated 01.05.2013 for A.Y. 1992- 93.[Page 286-291 of PB No. 1] j. Order of Ld. CIT(A) dated 29.02.2012 in the case of Smt. Pratima H. Mehta for A.Y. 1992-93.[Page 292- 327 of PB No. 1] k. Order dated 03.09.2012 giving effect to Ld. CIT(A)’s order in the case of Smt. Pratima H. Mehta for A.Y. 1992-93.[Page 328-330 of PB No. 1] l. Order of the Hon’ble Mumbai Tribunal in the case of Smt. Pratima H. Mehta v. ACIT [ITA No.2694/Mum/2012] dated 30.06.2014 for A.Y. 1992-93. [Page 331-337 of PB No. 1]
Therefore, in view of these facts it is apparent that revenue can not choose to dispute the issue on the identical facts which has not been challenged in other cases as the said issue has attained finality. Besides, we note that Ld. CIT(A) has followed the orders in respect of family members of the assessee where under identical facts the Ld. CIT(A) has decided the issue in favour of the family members and the same has not been challenged before the higher forum. This is a settled position of law as has been held in the following cases. a. Berger Paints India Ltd v. C1T [266 ITR 99, 104 (SC)]. [Page 538-554 of PB No. 4] b. UOI v. Satish Pannalal Shah [249 ITR 221, 222 (SC)]. [Page 555-556 of PB No. 4] c. CIT v. Greenfield Hotels and Estates Pvt Ltd [389 ITR 68, 69 (Bom.)]. [Page 557-559 of PB No. 4] 37. On perusal of the orders passed by the Ld. CIT(A) and Coordinate benches of Tribunal in case of the family members of the appellant, we are of the view that the relief has been rightly granted by the Ld. CIT(A). We ,therefore , respectfully following
29 ITA No.1367/M/2016 & ors Smt. Rina S. Mehta the findings of the Tribunal in cases of the family members and also considering the fact that the relief granted by Ld. CIT(A) in those cases have not been challenged, the findings of the Ld. CIT(A) deserved to be upheld. Accordingly the ground raised by the revenue is dismissed.
In the result the appeal of the assessee is partly allowed for statistical purpose and appeal of the revenue is dismissed.
Order pronounced in the open court on 05.04.2021.
Sd/- Sd/- (Amarjit Singh) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 05.04.2021. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order
Dy/Asstt. Registrar, ITAT, Mumbai.