DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-4(3), CENTRAL RANGE-4, MUMBAI vs. M/S.GROWMORE RESEARCH & ASSET MANAGEMENT LIMITED, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “G”, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA No.1196/M/2019 Assessment Year: 1991-92 DCIT, M/s. Growmore Research Cent. Cir.-4(3), & Assets Management Central Range-4, Ltd., Room No.1921, 32, Madhuli Apartment, Vs. 19th Floor, 3rd Floor, Air India Bldg., Dr. Annie Besant Road, Nariman Point, Worli, Mumbai – 400 018 Mumbai - 400021 PAN: AAACG4936C (Appellant) (Respondent) ITA No.504/M/2019 Assessment Year: 1991-92 M/s. Growmore Research DCIT, & Assets Management Cent. Cir.-4(3), Ltd., Central Range-4, 32, Madhuli Apartment, Room No.1921, 3rd Floor, Vs. 19th Floor, Dr. Annie Besant Road, Air India Bldg., Worli, Mumbai – 400 018 Nariman Point, PAN: AAACG4936C Mumbai - 400021

(Appellant) (Respondent) Present for: Assessee by : Shri Dharmesh Shah, A.R. Shri Dhaval Shah, A.R. Revenue by : Dr. P. Daniel, D.R. Date of Hearing : 20.01.2021 Date of Pronouncement : 30.03.2021 O R D E R Per Rajesh Kumar, Accountant Member: The above titled cross appeals have been preferred against the order dated 31.12.2018 of the Commissioner of Income Tax

2 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 1991-92.

ITA No.504/M/2019 A.Y. 1991-92 (Assessee’s appeal) 2. The ground raised by the assessee are as under: “1. The Ld.CIT(A) has erred in law and in facts in not appreciating that the reopening of assessment u/s 147 of the Act was bad in law and invalid. 2. The Ld.CIT(A) has erred in law and in facts in passing the order in gross violation of the principles of natural justice. 3. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance of loss of Rs.3,19,35,031/- on account of share trading transactions without appreciating that - a. The income from money market transactions of Rs.2,55,23,515/- were eligible and hence ought to have been set off against the share trading loss of Rs.3,19,35,031/-. b. The money market transactions were speculative in nature. 4. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance of loss on trading in Unit 64 amounting to Rs. 1,10,12,500/-. 5. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of profit from money market transactions to the extent of Rs. 64,60,000/- out of the total addition of Rs. 2,67,83,373/-. 6. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance on account of short term capital loss amounting to Rs.4,63,608/- u/s, 94(4) of the Act. 7. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance on account of the short term capital loss amounting to Rs. 6,20,544/- treating the same as speculative loss. 8. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance on account of following expenses: Sr.No Nature of expense Amount i. Travelling expenses 1,62,366/- li. Telephone expenses 1,48,016/- lii. Meeting and conference expenses 1,41,774/- iv, Refreshment expenses and 2,48,720/- s miscellaneous sundry expenses

3 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 10. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of alleged unexplained investment in shares u/s. 69 of the Act on the basis of documents seized from madras office amounting to Rs.2,26,94,084/-. 11. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of alleged unexplained investment in shares pending deliveries u/s. 69 of the Act on the basis of documents seized from madras office amounting to Rs.29,23,350/-. 12. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of alleged unexplained investment in shares u/s. 69 of the Act transacted through broker namely, Auro mira on the basis of seized documents amounting to Rs. 42,39,125/-. 13. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of alleged unexplained purchase of share transfer stamps u/s. 69 of the Act on the basis of documents seized from madras office amounting to Rs. 37,50,000/-. 14. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of alleged unexplained investment in shares based on M/s Arjun K S lyer (AKSR) report u/s. 69 of the Act amounting to Rs. 74,09,265/-. 15. The Ld. CIT(A) has erred in law and in facts in confirming the addition on account of alleged unexplained investment in shares u/s. 69 of the Act on the basis of seized documents amounting to Rs. 6,24,76,526/-. 16. The Ld. CIT(A) has erred in law and in facts in confirming the disallowance on account of interest expenditure amounting to Rs.69,98,298/-. 17. The Ld. CIT(A) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 234B and 234C of the Act. 18. The Ld. CIT(A) 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. 19. The Ld. CIT(A) has erred in making addition of Rs. 5,50,04,109/- by enhancing the assessed income without appreciating that- a. The Ld.CIT(A) had exceeded the jurisdiction by invoking powers of enhancement. b. The enhancement was made without granting sufficient opportunity of hearing to the appellant and without considering submissions filed before him. c. The enhancement of income by Rs. 5,50,04,109/- based on alleged difference in the balances in cross accounts between the books of the appellant and books of Late Shri Harshad S. Mehta / M/s. Harshad S. Mehta was incorrect and unjustified. 20. The assessee craves leave to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal.” 3. The issue raised in 1st ground of appeal is against the order of Ld. CIT(A) upholding the reopening of assessment under section 147 of the Act by the AO.

4 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 4. The facts in brief are that the assessee has not filed any return of income under section 139(1) of the Act. The AO reopened the assessment under section 147 of the Act by issuing notice under section 148 of the Act on 20.05.1992. The assessee is a notified entity under Special Court (Trial of Offences relating to transactions in securities) Act, 1992 and part of Harshad Mehta Group which was linked to Stock Market Scam of 1992. A search in the case of the assessee group was conducted on 27.09.1990. Thereafter another search action was conducted on the assessee on 28.02.1992 and finally assessment was completed under 144 read with 147 of the Act vide order dated 30.03.1994 at an assessed income of Rs.58,43,64,832/-by relying on documents, floppies etc. seized in the search action. Thereafter, the assessee filed appeal before the Ld. CIT(A) and Ld. CIT(A) vide order dated 24.02.2000 partly allowed the appeal of the assessee. Against the said order of Ld. CIT(A) the assessee as well as the department filed appeals before the Tribunal. The assessee also filed books of accounts as additional evidence which were neither produced before AO nor before Ld. CIT(A). The co-ordinate Bench of the Tribunal set aside the matter back to the file of the AO with the direction to do the assessment denovo after considering the additional evidences submitted by the assessee in the form of books of accounts after allowing reasonable opportunity of being heard.

5 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. “5.1 As noted above, the return for the relevant year was due on 31.12.1991, however, the same was not filed by the due date. Even in response to notice issued u/s 142(1) and after several opportunities allowed by the AO, the same was not filed by the assessee. Therefore, the AO was left with no other option but to issue notice u/s 148. In this context, it is relevant to point out that as per Clause (a) to Explanation 2 to Sec. 47, in cases where no return of income has been furnished by the assessee, although his total income during the previous exceeds the maximum amount which is not chargeable to tax, it will be deemed to be a case where income chargeable to tax has escaped assessment. 5.2 It is further noted that there is no evidence to suggest that the assessee in the first round of proceedings had objected to the reopening of assessment and/or had sought copy of the reasons recorded. In the instant case, the statutory return of income was not filed within the due date and it has not even been filed till date. It is also noted that the assessee insists that the AO should have followed the due procedure threadbare, however, it seems these rules do not apply to it and it blatantly neither files its statutory return of income even till date nor complies to the statutory notices issued by the AO. Accordingly, the additional ground No 1 of the appeal of the assessee filed vide letter dated 19.11.2018 challenging the issue of notice u/s 148 is dismissed.” 6. The Ld. A.R. submitted before the Bench that the notice issued under section 148 of the Act dated 20.05.1992 is an invalid notice. The Ld. A.R. submitted that failure on the part of the AO to issue notice under section 148 of the Act in consonance with the provisions of the Act is a jurisdictional defect which goes to the root and therefore can not be cured at this stage. The Ld. A.R. submits that notice issued under section 148 of the Act was invalid as the time limit to file the return of income provided in the notice is less than what has been prescribed on the Act. The Ld. A.R. referred to the erstwhile provisions of section 148 of the Act prior to its amendment by Finance (No.2) Act of 1996. The Ld. A.R. submits that as per the pre-amended provisions of section 148 of the Act, the notice was to be issued on the assessee calling upon the assessee to file the return of income within a period being not less than 30 days. However, on perusal of the notice

6 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. issued under section 148 of the Act dated 20.05.1992, a copy of which is placed at page No.1 of the paper book, it is clear that AO had asked the assessee to file the return of income within 30 days from the date of its service of the notice which is contrary to the provisions of section 148 of the Act. The Ld. A.R., therefore, prayed that the said notice issued by the AO, being defective invalid and void ab-initio, the consequent reassessment order passed based on such invalid notice is also bad in law. The Ld. A.R. also submitted that subsequent to passing of the impugned assessment order, there was retrospective amendment in section 148 by Finance (No.2) Act of 1996 wherein the minimum time limit of 30 days for filing the return of income was removed with effect from 01.04.1989. The Ld. A.R. submits that the amendment in section 148 of the Act will not affect the order already passed prior to such amendment more so when there is no amendment validating the order passed pursuant to such invalid notices. The Ld. A.R. also refers to Section 6 of general clauses Act, 1987 which provides that unless a different intention appears, the repeal of a provision shall not affect the vested right available under any enactment so repealed. Thus the Ld. A.R. prayed that these provisions also support the above submissions of the assessee that orders already passed shall not be affected by the retrospective amendment. The Ld. A.R. submits that there is no intention to validate the reassessment orders already passed under section 147 of the Act as on the date of such enactment. The Ld. A.R. also refers to circular No.762 dated 18.02.1998 explaining the reasoning for making amendment in section 148 of the Act and submits that it was made because of the decision of Hon’ble

7 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. Bombay High Court and Hon’ble Mumbai Tribunal which has held that notice giving less than 30 days time is invalid and the said circular nowhere mentions that amendment will apply to assessment orders passed before such date. The Ld. A.R. in defence of his arguments relied on a series of decisions in the related entities ’s cases and submits that the issue is squarely covered in favour of the assessee by the various decisions of the co-ordinate Bench of the Tribunal as under: 1. Ashwin S. Mehta vs. ACIT, CC 23 [ITA No.8704/M/2011] dated 30.11.2018 2. Ashok Rao & Co. v. ACIT TA No. 5595 & 5596/Bom/19 dated 29.05.2002 3. Shri Lalit Sheth v. ACIT and vice versa [ITA No. 7394/Mum/1996] dated 28.11.2003 4. CIT vs. Sudhir S. Mehta 9265 ITR 548] 5. CIT v. Ekbal and Co. [13 ITR 154(Bom)] 6. Deepika A. Mehta v. ACIT [57 TTJ 104(Mum)j 7. Chandi Ram v. ITO and Ors [225 ITR 611 (Raj.)] 8. N. Jayaprakash, Package India Tin Fabricators v. CIT [285 ITR 369 (Ker)] The Ld. A.R. prays before the Bench that in view of the facts of the case and the ratio laid down by the various judicial forums including Hon’ble Bombay High Court the notice issued under section 148 of the Act as well as consequent reassessment framed may kindly be quashed.

6.1 The Ld. A.R. further makes without prejudice argument that a notice issued under section 148 of the Act before expiry of statutory time limit available for filing the return of income under section 139(4) of the Act is invalid. The Ld. A.R. submits that in this case the due date for filing the return of income under section 139(4) of the Act was 31.03.1993. The Ld. A.R. submits that since the AO has issued notice under section 148 of the Act on 20.05.1992 before the due date for filing the return under section 139(4) thereby depriving the assessee from filing

8 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the return within the statutory time limit available under the Act to disclose its income earned during the relevant assessment year. The Ld. A.R. submits that before allowing the assessee to file the return of income, it can not be presumed that some income has escaped assessment and the assumption of jurisdiction to reopen the assessment is contrary to the provisions of the Act and bad in law. The Ld. A.R. relies on explanation (2) to section 147 of the Act and also the following decisions: 1. PCIT vs. Mohd. Rizwan Prop M/s. M.R. Garments (ITA No.100 of 2015) 2. Kishore V. Soni v. DCIT [ITA No. 3933-3934/Mum2018] dated 26.06.2019. 1. U.P Housing & Development Board v. ACIT [50 Taxmann.com 214] The Ld. A.R. submits that on this count also the notice issued under section 148 of the Act is invalid and void ab-initio and so is the consequent reassessment order passed by the AO.

6.2. On the third without prejudice argument, the ld. AR submits that assessee was not supplied the copy of reasons recorded for reopening the assessment despite being specifically asked during the course of reassessment proceedings vide letter dated 19.06.1992. The Ld. A.R. submits that even after the passing of the assessment order, the assessee requested the AO on a number of occasions vide letter dated 15.12.1995, 02.12.1996 & 15.11.2018 to supply the reasons but were not supplied. Even during the proceedings before the Tribunal, the assessee has repeatedly requested the AO to provide the copies of reasons recorded, however, the same were not provided to the assessee at all. The Ld. A.R. submits that not providing a copy of the reasons recorded under section 148 of the Act is a

9 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. jurisdictional defect which goes to the root of the reassessment framed and consequently the same is invalid and void ab-initio. The Ld. A.R. relied on the following decisions: 1. Rina S. Mehta v. DCIT [ITA No. 3120/Mum/2015] dated 17.07. 2. ITO v. Pallavi Vijen Jhaveri& vice-versa [ITA No. 5998/Mum/2017 & CO No.225/Mum/2018] dated 17.12.2019 3. CIT v. Videsh Sanchar Nigam Ltd [340 ITR 66 (Bom.)]. 4. CIT v. IDBI Ltd [76 taxann.com 227 (Bom.)] 5. PCIT v. V. Ramaiah [103 taxmann.com 202 (SC)]. 7. The Ld. D.R., on the other hand, relied on the order of authorities below. So far as the 1st and 2nd contentions of the assessee are concerned, the ld DR relied on the orders of authorities below. On the third without prejudice plea of not supplying the reasons recorded u/s 148(2) of the Act to the assessee, the Ld. D.R. submits that the Revenue is not liable to supply the reasons to the assessee recorded under section 148(2), since the assessee has not filed any return of income, therefore this argument of the Ld. A.R. deserved to be dismissed.

10 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the return of income prior to and post amendment. We also note that this amendment has been brought only to overcome the situation created by the decision of Hon’ble Bombay High Court in the case of CIT vs. Ekbal & Co. 13 ITR 154 and also the various other decisions of the co-ordinate Bench of Bombay Tribunal. Certainly the notice has been issued directing the assessee to file the return within 30 days which is different from the language provided in the section of not being less than 30 days. Therefore, we find merit in the contentions of the Ld. A.R. that notice issued is invalid and void ab-initio and so is the assessment proceedings and the consequent assessment framed by the AO. The issue is covered by the various decisions of the co-ordinate Benches of the Tribunal and the jurisdictional High Court deciding this issue in favour of the assessee. In the case of Shri Ashwin S. Mehta vs. ACIT (supra) it has held that notice issued under section 148 directing the assessee to file the return of income within 30 days is invalid. The operative part is reproduced as under: “6. We have considered the submissions of both the parties and perused the material available on record. We have also gone through the orders of the authorities below. The assessment was reopened by issuing notice u/s 147 of the Act dated 20.05.1992. The assessee has filed his return of income on 11.11.1993 declaring total income of Rs. 93,80,000/-. The return was treated as invalid return. Perusal of the assessment order does not reveal that the reasons recorded were not supply to the assessee. Before the Ld. CIT(A) the assessee objected that the assessee is not provided reasons recorded and that the assessee was asked to file the return of income within 30 days which is invalid and bad in law. The Ld. CIT(A) took his view (para 6.2 of impugned order) that the assessee has not filed return of income neither has made any request for reasons recorded. 7. The provisions of Sec. 148 of the Act have been amended by Finance Act, 1996 with retrospective effect from 01.04.1989, whereby the expression “not being less than thirty days” has been omitted. As per the CIT(A), due to the amendment the contention of the assessee that A.O had given less than the prescribed time to file the return has no legs to stand. Thus the Ld. CIT(A) rejected the contention of

11 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. assessee about providing less than 30 days time for filing of return in response to the notice under section 148. 8. For appreciation of facts, we may refer the language of Sec. 148 of the Act at the relevant time on the statue book: “Issue of notice where income has escaped assessment. 148(1). Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139] (2) The Assessing Officer shall, before issuing any notice under this Section, record his reasons for doing so.] 9. Our attention has been drawn to notice issued under section 148 of the Act dated 20.05.1992, interalia calling upon the assessee to file return ‘within 30 days’. This according to the appellant is not the same thing as “not being less than thirty days”. No doubt the expression “not being less than thirty days has been removed w.e.f. 01.04.1989 retrospectively by Finance Act, 1996. The assessment under section 143(3) rws 147 of the Act in this case has been completed on 24/03/1994. The contention of the assessee is that the amendment in section 148 will not save the order already passed prior to such amendment as there is no amendment validating the order passed in pursuance to such invalid notices even if it is taken the amendment saves the notice. 10. On this aspect, there is direct decision of our Coordinate Bench in Ashok Rao & Co. Vs ACIT (supra). The relevant part of the order is extracted below: 8. But, the position has become a little different because of the amendment made to section 148(1) by the Finance No.2 Act, 1995 with retrospective effect from 1.4.1989. By this amendment the words 'not being less than 30 days have been omitted from the sub section with retrospective effect. Apparently, the attempt of the legislature is to validate the notices issued u/s. 148(1) where the assessee were given time of less than 30days to file the returns. The contention of the Ld. Representative for the assessee however is that the amendment may validate the notices which pave less than 30 days time to the assesses to file the returns, but cannot validate the reassessments made In the meantime pursuant to the defective notices. In other words, his contention is that the reassessments made on 2.11.1993 for both the4sessment years under appeal are null and void because of the defective notices and have not been validated by any validating amendment

12 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. and the mere validation of the notices cannot have the effect of validating the reassessments also. To further elaborate, what he says is that the assessee has obtained a vested right because of the validity of the reassessments and such vested right cannot be taken away? merely validating the notices pursuant to which they were made. There has to be, according to the Ld. Representative for the assessee an amendment expressly validating the reassessments also. 9. In support of the above contentions, the Ld. Representative for the assesses cited the following three judgments:- (1) Prithvi Cotton Mills v. Broach Burrough Municipality L & Ors [79 ITR 136 (Sc)]. (2) Jose Dacosts V. Bascora Sadashiv SinalNarcomin AIR (1975) SC 1843. (3) Delhi Cloth & General Mills Co. Ltd. v Income Tax Commissioner, AIR 1927 (P7)242 In Delhi Cloth Mills case (supra), the following observations were made by the Privy Council. “The principle which their Lordship must apply in dealing with this matter has been authoritatively enunciated by the Board in the Colonial Sugar Refining Co v. Irving (1995) A. C. 369=74 Lj.P.C. 77=21 T.L.R. 513 = 92 L. T 738]. where in effect it is laid down that while provisions of a statute dealing merely with matters of procedure may properly, unless that construction to be textually inadmissible, have retrospective effect attributed to them provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the, would deprive of their existing finality orders, which when the statue came into force, were final are provisions which touch existing rights. Accordingly, if the section now in question is to apply to orders final at the date when it came into force, it must be clearly so provided. Their Lordships cannot find in the section even an indication to the effect (underlining ours) These observations were quoted with approval by the Supreme Court in the case of Jose Dacosta (supra). In Prithvi Cotton Mills case (supra) a Five Judge Bench headed by Hon’ble Chief Justice M. Hidayatullah, made certain general observations about validating tax statues. The first condition laid down was that the legislature must possess the Power to impose the tax. The second condition was that granted legislative competence, it is not sufficient to declare merely that the decision of the court shall not bind, for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise The Supreme Court proceeded to observe that validation of a tax can be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. The Supreme Court recognized the various methods by which this can be done, It observed thus.“Sometime this is done by providing for jurisdiction where jurisdiction had not been properly invested before. Sometimes this is done by reenacting

13 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law. Sometimes the legislature gives its own meaning and interpretation of the law under which the tax was collected and by legislative flat makes the new meaning binding upon courts. The legislature may follow any one method or all of them and while it does so it may neutralize the effect of the earlier decision of the court which becomes ineffective after the change of the law. Whichever method is adopted It must be within the competence of the legislature and legal and adequate to attain the object of validation. If the legislature has the power over the subject- matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions, The validity of a validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether it making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax". These observations show that the defect which made the imposition of tax illegal must be removed effectively. The question before us Is whether this has been done in the present case by merely validating the notices. If the earlier law laid down by the courts was that the Invalid notices Invalidate the reassessment proceedings also, it would first appear that by merely validating the notices, the reassessments would also be validated automatically. However, we have to remember, as laid down by the Privy Council (supra), that it must be clearly provided that the amending law would disturb or take away the finality attained by the orders or the vested rights of the assessee. When the reassessments in the present case made on 2.11.93 became null and void for want of proper notices, the assessee acquired a vested right that no tax would be collected pursuant to them. If the legislature wants to effectuate those reassessment orders by injecting life to them, there must be a clear provision to that effect in the amending law or necessary intendment, It is common ground that there is no c/ear provision in the amending law to the effect that the reassessments made pursuant to defective notices shall not be considered to be null and void and the assessee 's in whose cases such reassessments had been made would nevertheless be liable to pay tax pursuant thereto. Thus, there are no express words in the amendment taking away the vested right of the assessee that no tax will be collected from him pursuant to those reassessments. The question however would be whether there is necessary intendment - an intendment to the effect that since the notices am being validated, the intention is also to validate the reassessments. We are unable to spell out any necessary intendment, It may be that the legislature did not want to disturb the reassessments already made pursuant to the defective notices and wanted to save them from Challenge only where the reassessment proceedings were pending. The Circular No 752 dated 182.1998 (reported at page 5228 of Volume lit) of the 5 Edition of Chaturvedi & Pithisaria’s income-tax law is as under:

14 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd.

"Modifications of provisions of section 148 - 481. under the existing provisions of the Income-tax Act, in cases where the Assessing Officer has reason to be//eve that income has escaped assessment, a notice can be issued to an assessee for filing a return of his income within a specified period, not being less than thirty days. In the notice u/s. 148, the assessee was required to furnish a return of his income within thirty days. The above position in law was in effect from April 1, 1989. 48.2 Notices issued under section 148 have been held to be invalid by the income Tax Appellate Tribunal on the ground that whereas the statute allows the tax payer a time, "not being less than 30 days the notice gives the direction to file a return "within a period 0130 days". The Bombay High Court in the case of CIT v. Ekbal and Co. [19451 13 ITR 154, decided a similar issue by laying down that the expressions within thirty days" and "not less than thirty days am two quite different things. In view of the aforesaid decisions of the Bombay High Court and also of the Income Tax Appellate Tribunal, the Finance (No.2) Act 1996, provides in section 148 that the Assessing Officer may require the assessee to furnish the return within the period specified in the notice. 48.3 The amendment will take effect retrospectively from April 1, 1989, and will, accordingly, apply in relation to notices issued under section 148 on or after that date (Section 43). There is nothing in the Circular to show that the amendment validating the notices issued after 01.04.1989 was also Intended to validate the reassessments already made pursuant to those defective notices. 10. There is one more reason why we are unable to spell out any intention on the part of the legislature to validate the reassessments themselves. Section 153(2) prescribes a time limit of two years from the end of the financial year in which the notice u/s. 148 was served as the limitation for a reassessment u/s. 147. The amendment to section 148(1) was made in1996 with retrospective effect from 1.4.1989. Many Assessing Officers would have issued notices u/s. 148 after this date containing the defect (giving a period of less than 30 days for tiling the return). It would appear that the new time limit given in section 148(1) as introduced wet 1.4.1989 was overlooked by the Assessing Officers who were apparently guided by the time limit prescribed by section 139(2), which was incorporated in the original section 148(1). Therefore, it would be a reasonable inference that many notices would have been issued on or after 14.1989 directing the assessee to file returns within 30days. In many such cases, the reassessment would have also been completed long before the retrospective amendment brought by the Finance (no.2) Act, 1996. In many cases, appeals might have been pending against such reassessments challenging them on the ground that they were made pursuant to defective notices. The legislature must be taken to be aware of this position and that is why they brought the

15 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. amendment. Nevertheless the amendment was confined only to the validation of the notices issued without validating the reassessments also. It is quite usual and common for any such validating Act to provide that no reassessment made pursuant to the defective notices shall be called in question by way of appeal to any income-tax authority or Tribunal or in any wilt proceedings before the High Court. It is also usual to provide that the tax collected pursuant to such reassessments must be deemed to have been validly assessed, imposed or recovered. These are the usual forms by which the assessments to tax are validated and this is not unknown to the legislature. Therefore, it would appear to us, that the legislature did not want to inject life or validate those reassessments which have already been made pursuant to the defective notices and wanted to save only the pending reassessment proceedings from challenge. There was nothing to prevent the legislature from expressly enacting, together with the retrospective amendment to section 148(1), that all the reassessment proceedings, whether pending or completed shall be deemed to have been validly initiated and completed. In the absence of such express intendment. the vested right accruing to the assessee because of an invalid reassessment cannot be taken away. 11. In this view of the matter, we hold that the retrospective amendment to section 148(1) made by the finance (NO2). Act, 1996 does not save the reassessments 1mm being declared null and void." 11. Further the Coordinate Bench of this Tribunal in the case of Shri Lalit Sheth Vs. ACIT and Vice Versa [ITA No. 7394/Mum/1996] wherein the similar facts of the case, held that in absence of any express indication in the amending Act, the mere validation of notice cannot validate the reassessment order passed before the date of such amendment in absence of any express or implied intention of the legislature. The decision of the Tribunal in the case of Shri Lalit Sheth Vs. ACIT (supra) has also been affirmed by the Hon’ble Bombay High Court in ITA No. 1570 of 2005 dated 29.09.2017. 12. We have also noticed that the jurisdictional High Court in assessee’s group case (brother case) in CIT Vs Sudhir S. Mehta [265 ITR 548] held that the notice u/s 148 of the Act giving less than 30 days time is invalid. In this case the Tribunal held that there was no amendment in section 148 at the time of passing of the order dated 26.06.1996 and dismissed the application of the department. Against that order the revenue filed appeal before Hon’ble Bombay High Court raising the following question of low; “Whether the Taxation Laws (Amendment) Act, 1996, applied only to pending proceedings or whether it applied even to proceedings which stood completed three months prior to the law being enacted?” The Hon’ble High Court passed the following order; 4. In the present case, the short point which arises for consideration is whether miscellaneous application filed by the Department was

16 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. maintainable under section 254(2) of the IT Act which states that mistake apparent from the record can be rectified by the Tribunal within four years from the date of its order. In this case, the reassessment proceedings were initiated vide notice dated 7th Nov., 1990. Under the provisions which existed on that date, it was provided under section 148(1) that in cases where the Assessing Officer had reason to believe that income had escaped assessment a notice had to be issued to an assessee for filing return of income within a specified period, not being less than thirty days. The (italicised in portion) became subject-matter of dispute in proceedings pending before various High Courts. In certain cases these notices were held to be invalid on the ground that where the Act allows the assessee time to file revised returns within a stipulated period under the Act, it was not open to the Assessing Officer to call upon the assessee to file the returns within thirty days - CIT v. Ekbal & Co. [1945] 13 ITR 154 (Bom.). In view of these conflicting decisions, the Legislature by virtue of Taxation Laws (Amendment) Act, 1996, deleted the above expression "not being less than thirty days". However, the Taxation Law (Amendment) Act of 1996 got the Presidential assent on 28th Sept., 1996. No doubt, the Amending Act operated w.e.f. 1st April, 1989. However, the Amending Act got the Presidential assent only on 28th Sept., 1996, by which time the entire, gamut of reassessment proceedings, in this case, got concluded before the Tribunal when it allowed the appeal of the assessee striking down initiation of reassessment proceedings under the then existing law. That decision of the Tribunal was delivered on 26th June, 1996, i.e., three months prior to the amending law receiving the Presidential assent. In the circumstances, the miscellaneous application filed by the Department was rightly rejected by the Tribunal as there was no mistake apparent from the record in the order of the Tribunal dated 26th June, 1996. 13. Hence, following the aforesaid legal position, it has to be held that the assessment order dated 24.03.1994is invalid as it is based on a notice isuued under section 148 dated 20.05.1992, which was invalid on account of the then existing law. The subsequent amendment in section 148 may validate the notice, but, it would not save the assessment order from being declared null and void, as it was passed prior to the amendment. 14. Considering our decision as we have allowed the legal ground and held the assessment as null and void as notice u/s 148 of the IT Act is invalid, therefore, the discussion on merit of the case has become academic and is not being rendered. 15. In the result, the appeal filed by the assessee is allowed.” All the decisions relied upon by the assessee before us have been discussed in detail in the above decision, therefore, they are not being discussed. Even the decision of Hon’ble Bombay High Court in the case of CIT vs. Sudhir S. Mehta (supra) has

17 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. been dealt with by the co-ordinate Bench of the Tribunal in para 12. We, therefore, respectfully following the decision of the co- ordinate Bench of the Tribunal and also the jurisdictional High Court as stated hereinabove hold that the notice issued under section 148 of the Act is invalid and accordingly the assessment framed under section 144 read with section 148 of the Act is also invalid. Since we have decided the issue in favour of the assessee on the principal arguments, we are not deciding the other, without prejudice, submissions made before us during the course of hearing. Ground No.1 is therefore allowed.

18 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. delivery based transactions and hence can not be set off against the speculative losses from share market transactions.

19 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. submits that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.1785/M/2015 order dated 28.02.2017 wherein it has been held that profit from money market transactions was eligible to be set off against the losses from share market transactions. The Ld. A.R. therefore prayed that the issue may kindly be decided in favour of the assessee following the said decision of the co-ordinate Bench of the Tribunal.

20 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. Thus, the admitted facts brought on record are that no deliveries were exchanged for carrying out money market transactions by the assessee. It is noted that in the identical circumstances ITAT in the case of Group companies of the assessee namely M/s. Growmore Leasing Investment held that such transactions would be speculated transactions by observing as under: “5.4 We have heard both sides in detail on this point. Shri Vijay Mehta, the learned Chartered Accountant appearing for the assessee, has placed before us a copy of the judgment in Suit No.1 of 2005 (O.S. Transferred Suit No.4018 of 1995) delivered on 17.4.2007, by the Special Court in the case of Canbank Financial Services Limited Vs. M/s.V.B.Desai The suit raised issues relating to the nature of legality of forward contract transactions in Government securities. Issues No.4 and 5 framed by the Special Court are as follows:- "4. Whether the Suit transactions are prohibited by the Securities Contract (Regulation) Act, 1956 as alleged in para V of the Written Statement? 5. Whether the Suit is based on an illegality and is liable to be dismissed on that ground as alleged in para IV and VI of the Written Statement? 5.5 The finding of the Special Court on the above two issues are extracted as follows:- "In my opinion, therefore, the fact that units of Mutual Funds were included in the definition of the term "securities" by amending Act clearly, shows that the units of the mutual funds were not included in that definition before the amendment. As observed by the Supreme court in its judgment in the case of R13! Vs. Peerless General Finance and Investment Co. Ltd AIR 1987 SC 1023 that the Legislatures resort to inclusive definitions also to bring under one nomenclature all transactions possessing certain similar features but going under different names. Depending on the context, in the process of enlarging, the definition may even become exhaustive. In my opinion, therefore; the word "include" is used in Section 2(h), in truth and substance, to give exhaustive definition of the term "securities" for the purpose of Securities Contract Act. Therefore, as on the relevant date the units of the Mutual Funds which was the subject matter of the ready forward transaction between the parties was not securities within the meaning of the Securities Contract Regulation Act, the transaction was not hit by the notification issued by the Central Government under Section 16 and therefore, the transaction cannot be said to be an illegal transaction as it was not prohibited by the Securities Contract Regulation Act. Issues Nos. 4 & 5 are, therefore, answered accordingly." 5.6 Thus, the Special Court has held that forward transactions in Government securities are not illegal.

21 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 5.7 The case of the assessee has to be considered in the light of the above judgment of the Special Court. The claim of loss made by the assessee was rejected by the Assessing Authority on the ground that the transactions entered into by the assessee were illegal, and therefore, expenses 'or losses relating to illegal business cannot be allowed as deductions. The assessee was in fact dealing in forward transactions of Government securities. The transactions were entered through brokers. The assessee enters into agreement for forward delivery of Government securities with one set of parties through the broker. Immediately, the assessee also enters into forward purchase of Government securities from other set parties through the broker. Delivery of the instruments is never taken place. The transactions are finally settled off by paying the differential amount. The transactions are speculative transactions. The assessee has also shown income out of same-set of transactions, which is more than the loss declared by the assessee. The Assessing officer has assessed the profit as income. But he declined to allow the loss as deduction on the ground of illegality. 5.8. In the light of the judgment of the Special Court, as mentioned above, it is to be held that the forward transactions entered into by the assessee were not illegal. Therefore, the loss cannot be disallowed on that ground.” 3.8. Thus, from the above order it is clear that special court has held that the forward transactions in Government securities were not illegal. It was further held that these transactions were speculative transactions. As far as reliance placed by Ld. special counsel upon the judgment of Hon’ble Supreme Court in the case of M/s. Appollo Tyres Ltd. (supra) is concerned, it is noted that the said judgment merely analysed the scope of section 73 wherein expression used by the legislature was ‘shares’. On the other hand, the expression used in section 43(5) is not only ‘shares’ but ‘securities’ as well’. This distinction has been very well analysed by the Delhi Bench of the Tribunal in the case of ANZ Grindlays Bank v. DCIT (supra) wherein it has been held after considering aforesaid judgment of Hon’ble Supreme Court in the case of Appollo Tyres Ltd. (supra) that transactions of sale and purchase of units and government securities by the assessee through a broker without exchange of actual delivery would fall within the scope of speculative transactions as defined in section 43(5). Therefore, loss/profit from shares market transactions can very well be set off/adjusted against loss/profit of money market transactions. This issue has already been decided in favour of the assessee by the Tribunal in the case of group company of the assessee namely M/s. Growmore Leasing Investment (supra) as discussed above also. No distinction has been pointed out on facts or legal position by the Ld. Special Counsel of the Revenue, therefore respectfully following the order of the Tribunal in the case of M/s. Growmore Leasing Investment (supra) as well as ANZ Grindlays Bank v. DCIT (supra), we find that the claim of the assessee is allowable. Therefore disallowance made by the AO is directed to be deleted. Thus, ground no.2 is allowed.”

22 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 16. Following the above decision of the coordinate bench, we hold that the loss of Rs.3,19,35,031/- from share market transactions is eligible to be set off against the income from money market transactions. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to allow the said loss from share trading against the income from money market transactions. Ground No.3 is allowed.

23 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. squarely covered in favour of the assessee in assessee’s own case in ITA No.924/M/2000 A.Y. 1990-91 & ors vide order dated 30.12.2007 wherein it has been held that loss from securities of the units of US 64 can not be said to be pertaining to the subsequent year merely on the basis of date of delivery when the transactions of purchase and sales were squared off within a financial year. The Ld. A.R., therefore, prayed that the ground may kindly be decided in favour of the assessee.

24 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. assessee and whatever consideration received by the assessee was the result of the contract notes, which could not be described as either sales or turnover. The Tribunal, accordingly, held that the assessee was not liable for audit u/s.44AB. The offshoot of the above decision is the finding on the exact nature of the transaction entered into by the assessee. The forward transactions entered into by the assessee are for purchase as well as sale of Government securities on the basis of contract notes. The delivery price in respect of purchase as well as sales are already determined. The essence of the contract is that instruments will be delivered only in future. This transaction goes on from person to person like a chain. As far as the assessee is concerned, when the assessee has entered into contract for the purchase and sale of Government securities in future, and through the broker, the assessee has already concluded its business for the simple reason that there was no question of delivery of the instruments. The assessee was bound to receive the consideration on sales at the predetermined rate and pay off the amount on purchase on the predetermined date. This is already known to the assessee before the close of the relevant previous year. Therefore, what is the loss and what is the profit arising out of these forward transactions or forward contracts are already known to the assessee and the transactions are already concluded. The exact nature of the forward transaction is not sale, but only agreement to sell. The income earned by the assessee / loss suffered by the assessee in the differential amount reflected in the agreement to sell and nothing more. Therefore, there is no force in the argument of the Assessing Authority in holding that the loss of Rs.1,07,75,000 would pertain to the succeeding assessment year and not the impugned assessment year. 5.11 In short, we find that the reasons pointed out by the Assessing Authority to disallow the claim of loss of Rs.l,07,75,000 made by the assessee-company are not justified. As already stated, the income has already been brought to tax by the Assessing Authority. In these circumstances, we direct the Assessing Authority to allow the deduction for the loss of Rs. 1,07,75,000 by setting it of the corresponding speculation income.” 23. Since the facts before us are identical to ones as involved in the ground as decided by the co-ordinate Bench of the Tribunal, we are, therefore, inclined to set aside the order of Ld. CIT(A) and direct the AO to allow the loss in the current year. Consequently ground No.4 is allowed.

25 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. made by the AO on account of profit form money market transactions.

26 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. that the assessee has failed to demonstrate that the said balance amount of Rs.64,60,000/- relates to the same transactions for which appropriate additions have already been made in the hands of M/s Harshad S Mehta. Accordingly, ground No 7 of the appeal is partly allowed.” 27. The Ld. A.R. submits before us that the addition was rightly deleted by the Ld. CIT(A) to the tune of Rs.2,03,23,373/- as same represented the opening balance in the ledger account of the assessee in the books of accounts of M/s. Harshad S. Mehta. The Ld. A.R. submits that since the amount represented the opening balance same can not be added in the current year. The second plea of the assessee was that in the first round of appeal, the Ld. CIT(A) allowed the appeal of the assessee to this extent vide order dated 24.02.2000. The Ld. A.R. further submits that both the parties i.e. Revenue as well as assessee challenged the order of Ld. CIT(A) before the Tribunal disputing the various confirmations and deletion of additions, however, the deletion of Rs.2,03,23,373/- was not contested by the Revenue before the Tribunal. The Ld. A.R. also refers to the order of the co-ordinate bench of the Tribunal to corroborate his averments, a copy of which is filed at page No.603 to 624. The Ld. A.R. therefore, submits that the AO should not have made the addition again as the same was not challenged by the Revenue before the Tribunal and thus issue was not set aside for re- adjudication and the said relief had already attained finality in favour of the assessee.

27 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. previous year and the assessee has already furnished evidences to this effect before the authorities below. The Ld. A.R. submits that the assessee was following mercantile system of accounting whereas the brokerage firm M/s. Harshad S. Mehta was following cash system of accounting. Therefore, some transactions in the money market which were carried out during the assessment year 1990-91 were recorded in assessment year 1990-91 in accordance with the system of accounting whereas the same were recorded by the brokerage firm M/s. Harshad S. Mehta in the next assessment year 1991-92. The Ld. A.R. submits that this was prime reason for difference found in the accounts of the assessee in the books of M/s. Harshad S. Mehta. The Ld. A.R., in order to substantiate his averment also refers to the evidences filed at page No.1536 of paper book No.7 which is a breakup of profit from money market transactions earned in the assessment year 1990-91 by the assessee and also the relevant contract notes supporting these transactions which were filed at page No.1537 to 1458 of paper book No.7. Besides, a reference was also made to trading account in the books of assessee for assessment year 1990-91 showing the details of transactions aggregating to Rs.64,60,000/-, details whereof are filed at page No.1581 to 1585 of paper book No.7. The Ld. A.R., therefore, prayed that in view of these facts and evidences, the addition as sustained by the Ld. CIT(A) to the tune of Rs.64,60,000/- deserved to be deleted as these transactions were carried out in assessment year 1990-91 and were accordingly accounted for.

28 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 29. The Ld. D.R., on the other hand, relies on the order of authorities below and submits that the assessee has not submitted the books of accounts in the first round of litigation and therefore, all these books of accounts could not be examined and so the evidences. The DR prays for the confirmation of the addition by dismissing the ground raised by the assessee.

29 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. addition of Rs.64,60,000/-. The ground no. raised by the revenue is dismissed whereas the ground no 5 raised by the assessee is allowed.

30 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 34. After hearing rival parties and perusing the material on record, we find that the said transactions were carried out in respect of the investments which have resulted in short term capital loss. Therefore, these transactions are not carried out under the head “Business Income”. Thus we find merit in the contentions of the assessee that provisions of section 94(4) of the Act are applicable where the sales and purchase transactions are carried out as business transactions. Besides, we note that the issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in the case of a related entity of the assessee in M/s. Growmore Leasing and Investment Ltd. vs. DCIT in ITA No.2192/M/2015 A.Y. 1992-93 & ors. vide order dated 17.11.2017 wherein it has been held that disallowance can not be made unless the effect of provisions of section 94(1) is given in the hands of M/s. Harshad S. Mehta who transferred the security. The operative part of the decision is reproduced as under: “6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that that the assessee purchased 9% tax free IRFC bonds for the value of Rs. 50 crores from Harshad S Mehta for a total consideration of Rs.50,31,95,205/- on 26-09-1991 and sells the same within a short period of 15 days on 11-10-1991 for a total consideration of Rs. 47,87,32,877/-. In this process the assessee claimed loss of Rs. 2,44,62,328/- and also received tax free interest from these IRFC bonds at Rs. 1,84,50,000/-. Whether in such circumstances, in view of the provisions of section of 94(1) & (4) of the Act, the loss claimed by the assessee is to be disallowed. We have gone through the provision of section and the same reads as under:- 94. Avoidance of tax by certain transactions in securities,- (1) Where the owner of any securities (in this sub- section and in subsection (2) referred to as" the owner") sells or transfers those securities, and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable otherwise than by the owner, the interest payable as aforesaid shall, whether it would or would not have been chargeable to income- tax apart

31 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. from the provisions of this sub- section, be deemed, for all the purposes of this Act, to be the income of the owner and not to be the income of any other person. Explanation.- The references in this subsection to buying back or reacquiring the securities shall be deemed to include references to buying or acquiring similar securities, so however, that where similar securities are bought or acquired, the owner shall be under no greater liability to income- tax than he would have been under if the original securities had been bought back or reacquired. (2) ----------------------------------- (3) ----------------------------------- (4) Where any person carrying on a business which consists wholly or partly in dealing in securities, buys or acquires any securities and sells back or retransfers the securities, then, if the result of the transaction is that interest becoming payable in respect of the securities is receivable by him but is not deemed to be his income by reason of the provisions contained in sub- section (1), no account shall be taken of the transaction in computing for any of the purposes of this Act the profits arising from or loss sustained in the business. (5)------------------------------------------- 7. From the above provision, it is clear that where the honour of any securities sales or transfers those securities and buys back or reacquire the securities, then, if the result of the transaction is that any interest becoming payable in respect of securities is receivable otherwise then by the owner, the interest payable thereof shall be deemed to be the income of the owner for the purposes of chargeable to income tax under this Act. It means that, in the present case before us, the IRFC bonds was owned by Harshad S Mehta and assessee purchase the same for a total consideration of Rs.50,31,95,205/- on 26-09-1991 and sells the same back to Harshad S Mehta within a short period of 15 days on 11-10-1991 for a total consideration of Rs. 47,87,32,877/-. In this process the assessee claimed loss of Rs. 2,44,62,328/- and also received tax free interest from these IRFC bonds at Rs. 1,84,50,000/-. By virtue of sub section (1) of section 94 of the Act, this interest will be income of Harshad S Mehta and not of the assessee. Similarly, in respect to loss sustained on account of this transaction has been clarified by sub section of section 94 of the Act, which states that any person carrying on a business consists wholly or partly in dealing in securities, buys or acquires any securities and sell back or re- transfer the securities then, if the result of the transaction is that, interest become payable in respect of securities is receivable by him but is not deemed to be his income in view of the provisions of sub section (1). Further, no account shall be taken of the transaction in computing for any of the purposes of this act, the profit arises from or loss sustained in the business. 7. We are of the view that the provisions of section 94(4) can be invoked only in case the provision of section 94(1) was applicable to the counter party. The loss on sale of securities can be disallowed only if the assessee in the course of business,

32 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. bought and sold any securities and as a result of the transaction, interest was receivable by him which was not deemed to be his income by reason of Sec. 94(1) of the Act. The provisions of Sec. 94(4) would come into operation only if:- (i) Where any person is carrying on a business which consists wholly or partly in dealing in securities; (ii) Buys or acquires any securities and sells back or retransfers the securities; (iii) The result of the transaction is that interest becoming payable in respect of the securities is receivable by him; and (iv) Such interest is not deemed to be his income by reason of the provisions contained in sub-section (1) According to us, it is a pre-requisite that the provisions of Sec.94(1) of the Act ought to be applied in the case of the actual owner of the securities from whom the same were bought by the assessee. However, the AO had failed to examine as to whether the provisions of Sec.94(1) of the Act had been applied in the case of the party from whom the shares in question were purchased and to whom the same were sold by the assessee. The bonds in question were purchased and re-sold to Harshad S. Mehta, but the provisions of Sec.94(1) of the Act had not been invoked in the said case, and, therefore, the provisions of Sec.94(4) of the Act could not be invoked in the case of the assessee. Going by the intent, we are of the view that the provisions of Sec.94(4) of the Act had been introduced with a view to levy tax on the interest income, which was being sought to be avoided by certain persons by carrying on transactions in shares and securities. The intention of the Legislature was to tax the interest income in the right hands, which had been avoided by transferring the shares and then repurchasing the some after the interest was received by the other persons. Therefore, it was necessary for the AO to prove that the assessee had attempted to avoid payment of tax. Since the interest income on 9% IREC Bonds was exempt from tax, there was no question of the assessee or Harshad S. Mehta adopting any such methods to avoid tax on the income. Further, we are of the view that the provisions of Sec.94(4) of the Act would apply only in cases where the assessee had carried on the transactions of purchase and sale of securities during the course of business and since the purchase and sale of the bonds in question was not a business activity, the provisions of Sec.94(4) of the Act was not applicable to the transaction. Accordingly, We direct the AO to allow the claim of set off of loss of Rs.2,44,62,328/- suffered from 9% IRFC Bonds, against profit from sale of shares.” 35. Since facts of the present issue before us are materially same, we, therefore, respectfully following the decision of the co- ordinate bench of the Tribunal set aside the order of Ld. CIT(A) and direct the AO to allow the set off of loss of Rs.4,63,608/- to

33 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the assessee as suffered by it from 9% of NHTC bonds against the profit on sale of shares. The ground no. 6 is allowed.

34 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. and therefore this ground raised by the assessee fails on this count also.

35 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. refreshment expenses, miscellaneous and sundry expenses being 50% on adhoc basis.

36 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. disallowance to 15% of the expenses claimed in respect of travelling, meeting and conference expenses while disallowance of telephone expenses is sustained. Ground no. 8 is partly allowed.

37 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd.

38 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. “16.2 The contentions of the assessee have been duly considered. It is observed that this issue has been adjudicated by my Ld predecessor. The relevant portion of the order of my Ld predecessor is reproduced as under: "I have carefully considered the reasonings of the assessing officer, the arguments of the appellant and the facts of the case. As already mentioned above the assessing officer produced proof before me during the appeal hearing for the A. Y. 1992-93 that computer floppy seized from Madras office had been given to the appellant. This is clear as per Mahzer dated 15.02.1995 which shows that floppies numbering 17 were handed over to Shri 8. Joshi (Representative of Shri Harshad S Mehta). Xerox copy of this handing over report was filed before me by the assessing officer during the course of appeal hearing for the A.Y. 1992-93. I also find that the appellant's contention that all the shares were held for M/s. HSM is incorrect. In Annexure 6 the words "shares held for Mr. Harshad Mehta" appear at the end of the paper and thereafter there is only an entry of ACC shares numbering 3715 which means only ACC shares were held for M/s. HSM. The cost of holdings of the rest of the shares which apparently belonged to the appellant had been valued at Rs. 2,26,94,0847- and, therefore, I am of the view that the appellant is merely trying to confuse the issue by referring to several contract notes and certain words written in annexure. The assessing officer has not added value of ACC shares while making the addition of Rs. 2,26,94,0847-. The addition made by the assessing officer represented the cost of shares which were owned by the appellant only. It is strange that before the assessing officer the appellant did not refer to any contract notes etc, which is clearly an afterthought. There were numerous transactions by the group concerns of the appellant and in the absence of complete tally regarding dates and numbers, it is difficult to link the holdings given in annexure-6 with the contract notes. The appellant filed a statement together with the contract notes before my predecessor but there are a number of assumptions behind the statement. As regards the claim of the appellant regarding double addition, the same no longer survives because the addition of Rs. 35.52 crores has already been deleted by me. The fact that the assessing officer has not given any comments on the arguments of the appellant on this point does not prove anything. The very fact that the appellant did not give a clear explanation before the assessing officer proves that the acquisitions listed in annexure-6 were unexplained. For reasons already given elsewhere in this appellate order, I do not admit confirmation letters of M/s. HSM, M/s. ASM and M/s. JHM as additional evidences either under Rule 46A(1) or under Rule 46A(4). After considering the entire facts of the case, I am of the view that the addition made by the assessing officer was proper and is accordingly upheld. The ground is, therefore, rejected. 16.3 From, the above it can be observed that after a detailed analysis, the FAA in the 1st round of proceedings has upheld the said addition u/s 69 of Rs.2,26,94,084/-. It is also noted that the additional evidence submitted by the assessee before the FAA in the 1st round of proceedings which were in the form of confirmation letters of M/s HSM, M/s ASM and M/s JHM were clearly self-serving in

39 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. nature, considering that all these 3 notified broker entities are part of the Assessee Group itself. Further, as regards the contention of the assessee that the AO did not provide sufficient opportunity by way of a show cause, it is noted that the assessment has been completed u/s 144 rws 254 since there was little compliance from the assessee. The validity of the said assessment 144 rws 254 has been upheld in the preceding paras on the facts of the case and also as per law. Moreover, in course of the present appellate proceedings, the assessee has been allowed sufficient opportunity and therefore should not have any grievance on this count. Therefore, respectfully following the order of my Ld predecessor, the addition made by the AO u/s 69 of Rs.2,26,94, 084/- on account of the unexplained investments in shares as per the incriminating seized from the office of the assessee at Madras, is confirmed. Accordingly, ground No.17 of the appeal is dismissed.” 52. The Ld. A.R. vehemently submitted before us that the Ld. CIT(A) has upheld the order of AO on the ground that the assessee has furnished the evidences in the form of confirmations from the family members which are self serving documents. The Ld. A.R. submitted that both the authorities below have failed to understand the spirit of the provisions as envisaged under section 69 of the Act. The Ld. A.R. submitted that the provisions of section 69 of the Act can only be invoked where the assessee has made investments which are not recorded in the books of accounts maintained by him and the assessee also not able to offer any explanation or the explanation offered by the assessee is not satisfactory in the opinion of the AO, then the same could be treated as income under section 69 of the Act. The Ld. A.R. prayed that section 69 is a deeming provision and was introduced by the legislature primarily with a view to bring to tax the investments made in cash by the assessee and as such these provisions are not applicable to the assessee at all as the ingredients of section 69 are not satisfied. In defence of his argument the assessee relied on the following decisions:

40 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 1. Ushakant N. Patel vs. CIT (2006) 282 ITR 553 (Guj) 2. CIT vs. Mrugesh Jaykrishna (2000) 245 ITR 638 (Guj) 3. Dy.CIT vs. Singla Enclave developers (P.) Ltd. (2013) 40 taxmann.com 127 (Chandigarh-Trib.) 53. The Ld. A.R. also submits that AO is duty bound to prove that documents/information relied upon by him in which unrecorded investments were mentioned. Then the AO has to satisfy himself that these investments made by the assessee during the year are not recorded in the books of accounts. The Ld. A.R. submitted that since the AO has not made any enquiry and has not examined the seized material in its entirety which, if properly examined, would have proved otherwise than what has been presumed by the AO. The Ld. A.R. submitted that the theory of presumption and conjuncture can not be applied while invoking the provisions of section 69 of the Act. The AO has also failed to apply his mind and take into consideration the crucial fact that the business of stock broking and making investments in stock exchange is not only highly regulated but all the transactions take place through regular banking channels and clearing house and in the very scheme of things it is not possible to make any investments in shares and securities in cash or outside the books of accounts. The AO therefore has abused the discretionary powers available to him under S.69 of the IT Act to make large additions and a high-pitched assessment against the appellant. The AO also ought to have appreciated that the appellant was a notified entity under S.3(2) of the Torts Act and therefore the issue of ownership or existence of any investments particularly between the appellant and its associate entities was liable to be adjudicated upon and decided only by Hon'ble

41 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. Special Court in view of exclusive Civil jurisdiction conferred upon Hon'ble Special Court under S.9-A of the Torts Act and in view of the overriding nature of the provisions of the Torts Act due to S.13 of the said Act. The AO had no powers to hold that the investment was made by the appellant, a notified entity after the appellant tendered explanation that the subject shares belonged to the other notified entities associated with it as the same was violated of Sections 9A and 13 of the Torts Act. In the least the AO had the responsibility to act in tandem in a manner to help achieve the objects of the Torts Act.

42 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. these are the shares purchased by HSM, as a broker for and on behalf of its clients being various entities, in most cases being the family members for shares purchased through Madras stock exchange. Since HSM was operating from Bombay, the shares purchased at Madras stock exchange were kept with the assessee at its office under an understanding of the assessee acting as a Custodian to hold shares on behalf of others who are associated with the assessee. In terms of the arrangement between the assessee and the associate entities of the assessee, the appellant was undertaking the task of registration of shares and rendering other related services and was also required to keep the custody of stocks for and on behalf of 3 brokerage firms of M/s. Harshad S. Mehta, M/s. Ashwin Mehta and M/s. J.H. Mehta as also on behalf of the family members and corporate entities who were clients of the said 3 brokerage firms.

43 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. The view taken by FAA for the subject addition was completely contrary to the view taken by him for much larger addition as aforementioned of Rs.35,52,82,900/-. That in any case in the original assessment order dated 30.03.1994, the AO had made the addition, inter alia, on the ground that the assesses had not furnished the details to whom the subject shares belonged. However, at the time of framing of fresh assessment, complete particulars together with evidences were already available on the record of the AO but the same was not taken into consideration at all and even on that ground the appellant is entitled to the relief. In support of the said contentions that the shares do not belong to the appellant, the following evidences and information were filed in the course of assessment proceedings: i. Chart showing the details of investments made and the names of the buyers/owners of the shares [Page 365-366 of PB No. 3] ii. Confirmation letters from the brokers, M/s. Harshad S. Mehta and M/s. Ashwin S. Mehta [Page 367-372 of PB No. 3] iii. Confirmation letters from the owners and the family members accepting that these investments reflected in the seized page were belonging to them. [Page 373-380 of PB No. 3] iv. Confirmation letter from a senior employee, Mr R. Srinivasan was responsible for the entire process and the services rendered by the appellant company from the Madras Office [Page 381-385 of PB No. 3] v. Affidavit given by the director of the appellant company, Mrs. Deepika A. Mehta, the confirming the aforesaid facts [Page 386-390 of PB No. 3] vi. Ledger account of various family members in the books of M/s. Harshad S. Mehta for A.Y. 1991-92 reflecting the aforesaid transactions carried out by HSM[Page 1617-1661 of PB No. 7] vii. Ledger account of HSM in the books of various family members for A.Y. 1991-92 reflecting in the aforesaid transactions carried out by HSM for them [Page 1662-1724 of PB No. 7] 56. The ld AR submits that the aforesaid evidences clearly establish that the transactions reflected in the seized page pertaining to the portfolio valuation of certain shares represented purchases made by HSM on behalf of its clients and

44 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. does not represent the investments made by the appellant. In fact, on an identical basis and as explained earlier, the addition was made in the original assessment order passed u/s. 147 r.w.s. 144 of the Act dated 30.03.1994 [Page 40-62 of PB No. 1] for an amount of Rs. 35,52,82,900/-based on seized page reflecting the notings of various transactions of similar nature[Page 206-208 of PB No. 3]. The said addition was deleted after making detailed discussion by the Ld. CIT(A) in the 1st round of appeal vide his order dated 24.02.2000 [Page 229-325 of PB No. 3] at Paras 78-79.

45 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 58. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that during the course of search certain incriminating material were found from the office of the assessee in Madras which contained some entries qua the purchase of shares. We note that the assessee has filed the additional evidences before the first appellate authority in the form of confirmation letters from M/s. H.S.M, M/s. A.S.M. and M/s. J.H.M. which according to the Ld. CIT(A) in the first round were self serving documents and thus the appeal was dismissed. In the second round also the AO made the same addition and the Ld. CIT(A) affirmed them on the same basis. We have examined the seized material which are filed at page No.363 and 364 of paper book No.3 and found that seized material does not indicate the fact of the securities being owned by the assessee or belonging to the assessee. We find that the assessee has explained that these investments and shares were the purchases made by Harshad S. Mehta as a broker for and on behalf of his clients being various entities including his family members. We note that the assessee has also submitted that M/s. H.S.M. was operating from Bombay and therefore the shares purchased from Madras stock Exchange were kept with the assessee at its office who were holding the shares on behalf of others also who were associated with the assessee. It was also submitted that the assessee was rendering various services like registration of shares and other services and also used to keep the custody of shares for and on behalf of three brokers from M/s. H.S.M, M/s. A.S.M. and M/s. J.H.M. and also on behalf of family members and corporate entities who were clients of the said three brokerage firms. We

46 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. note that all these entities have given confirmations to the effect that shares were not belonging to the assessee but to these brokerage firms. We have also examined the explanation given by the assessee before the AO, a copy of which is filed at page No.365 giving explanation of the purchases along with evidences in the form of contract notes giving various details which are extracted below for ready reference : Scrip Name Opening Toda Closing Value Assessee’s Explanation Position y’s Position Sr. Purc Name of Date Qty. Remarks No. hase Buyers 1 A.C.C. 780 780 1627677.50 DAM 13/03/91 350 Enclosed here with HSM 14/03/91 35 the contract notes 13/03/91 455 evidencing purchases 2 ASHOK 500 500 66125.00 DAM 11/03/91 500 Enclosed here with LEYLAND the contract notes evidencing purchases 3 BROOKE 500 500 74250.00 DAM 22/03/91 100 Enclosed here with BOND SSM 22/03/91 400 the contract notes evidencing purchases 4 EID PARRY 1400 1400 135800.00 SSM 22/08/90 7150 Out of which 1400 qty has been taken by Madras office. Enclosed here with the contract notes evidencing purchases 5 FULLER 8900 8900 1452045.00 List enclosed. Enclosed here with KCP the contract notes evidencing purchases 6 GRASIM 2200 2200 484600.00 DAM 11/03/91 200 Enclosed here with IND PHM 20/03/91 500 the contract notes PHM 22/03/91 1500 evidencing purchases 7 HARRISON 700 700 142400.00 HSM 22/03/91 700 Enclosed here with MALAYALA the contract notes M evidencing purchases 8 HIND. 200 200 35300.00 PHM 22/03/91 200 Enclosed here with LEVER the contract notes evidencing purchases 9 INDIA 44750 44750 5079575.00 List enclosed. Enclosed here with CEMENTS the contract notes LTD. evidencing purchases 10 ITC LTD 200 200 26650.00 SSM 19/03/91 200 Enclosed here with the contract notes evidencing purchases 11 KCP LTD 104100 104100 8346160.00 List enclosed. 12 LAKSHMI 845 845 1297761.65 SSM 22/08/90 860 Enclosed here with MILLS the contract notes evidencing purchases 13 LARSEN & 200 200 24050.00 HSM 11/03/91 200 Enclosed here with TOURBO the contract notes evidencing purchases

47 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. It is clear from the above statement that assessee has given the name of the buyer, date of purchase and quantity of shares purchased. The assessee has also filed before the AO the confirmations as stated hereinabove from M/s. H.S.M, M/s. A.S.M. and M/s. J.H.M., copies whereof are filed at page No.367 to 380 in which it has been confirmed that shares were not belonging to the assessee. It is apparent from the perusal of para 2, 5 & 6 of these confirmations that these shares were not belonging to assessee but belonging to the other entities/individual in the same group. We have also examined the confirmations issued by the employees of these brokers which are filed along with their affidavits at page no.381 to 388. Thus we note that the investments reflected in the seized material were explained by the assessee to be belonging to the third parties and these third parties have confirmed the same before the AO. In view of these facts and circumstances , we are quite convinced that investments in these seized material were pertaining to portfolio valuation of certain shares purchased by M/s. Harshad S. Mehta on behalf of its clients and in no way represented the investment made by the assessee. We also note that an addition of Rs.35,52,82,900/- was made on the basis of seized pages reflecting the similar nature transactions which are filed at page No.206 to 208 in the paper book No.3 in the original assessment framed under section 147 read with section 144 of the Act dated 30.03.1994 and the said addition was deleted by Ld. CIT(A) in the first round of appeal vide his order dated 24.02.2000 filed at page No.229 to 325 of paper book No.3 vide para 78 & 79 and it is note worthy to mention here that AO has not made any such addition in the set aside proceedings.

48 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. Thus we find merit in the arguments of the Ld. A.R. of the assessee that these investments do not belong to the assessee and thus addition under section 69 of the Act has wrongly been made and can not be sustained. In view of these facts and circumstances we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Ground no 10 is allowed.

49 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the contention of the assessee that the AO did not provide sufficient opportunity by way of a show cause, it is noted that the assessment has been completed u/s 144 rws 254 since there was little compliance from the assessee. The validity of the said assessment 144 rws 254 has been upheld in the preceding paras on the facts of the case and also as per law. Moreover, in course of the present appellate proceedings, the assessee has been allowed sufficient opportunity and therefore should not have any grievance on this count. Therefore, respectfully following the order of my Ld predecessor, addition made by the AO of Rs 58,46,090/- is restricted to Rs 29,23,3507- Accordingly, ground No 18 of the appeal is partly allowed.” 62. The Ld. A.R. submits that the said addition is not justified for several reasons namely: (i) the said sheet nowhere reflects that the investments were pertaining to the assessee. Since the primary condition of invoking s. 69 of the Act has not been satisfied by the Assessing Officer to prove that the investments were made by the appellant and were not recorded in the books of account, in light of the same, as explained and submitted in the foregoing Paras, the Assessing Officer was not justified in invoking s. 69 of the Act. (ii) In any case, during the course of assessment proceedings, the appellant had submitted following ample evidences to prove that the list of shares reflected on the said seized page pertained to other entities. (a)Chart showing the details of the securities purchased by the various broker entities for and on behalf of their family members [Page 393-395 of PB No. 3]. (b)Contract notes on sample basis issued by brokers in the name of the various entities reflecting the said securities transacted on behalf of them [Page 396 of PB No. 3]

50 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. (c)Ledger account of the counter brokers in the books of HSM reflecting these transactions carried out by HSM for them [Page 397-406 of PB No.3] (d)The contract notes issued by the counter brokers whose names are reflected on the seized page issued in the name of HSM confirming the transactions undertaken at Madras stock exchange. [Page 1586- 1616 of PB No. 7].

51 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. circumstances and various evidences placed before us. we are of the considered view that addition made by the AO and as sustained by Ld. CIT(A) can not be sustained as the assessee has explained the notings and entries in the seized material as not belonging to the assessee but to the other entities. Accordingly, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition.

52 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. assessment order, failed to make the addition in actual computation. However, it is clear that the paper had been seized from the Madras office of the appellant and the burden to explain the transactions was clearly on the appellant. The plea that M/s. Auro Mira was not examined is absolutely irrelevant. It was necessary to examine the concerned party only when the appellant denied the transaction. The appellant did not furnish any reply before the assessing officer and hence it is absolutely clear that the addition of Rs. 42,39,125/- was called for. The appellant's statement that the assessing officer, should have examined whether addition was included in the additions of Rs. 58,46,0907- or of Rs. 2,26,94,0847- is also not valid because it was for the appellant to show that the share holdings and the transactions were same. In view of this I hold that the addition of Rs. 42,39,125/- was clearly called for and accordingly I enhance the income of the appellant by the amount of Rs. 42,39,125/-. Since I have already given sufficient relief to the appellant in earlier paragraphs and this enhancement will not enhance the total income as assessed by the assessing officer, I have not given any specific notice of the same to the appellant However, the appellant was fully heard on the merits of addition of Rs. 42,39,125/-. The ground is accordingly rejected." 18.2 From, the above it can be observed that after a detailed analysis, the FAA in the 1st round of proceedings has made the said enhancement u/s 69 of Rs.42,39,125/-. Further, as regards the contention of the assessee that the AO did not provide sufficient opportunity by way of a show cause, it is noted that the assessment has been completed u/s 144 rws 254 since there was little compliance from the assessee. The validity of the said assessment 144 rws 254 has been upheld in the preceding paras on the facts of the case and also as per law. Moreover, in course of the present appellate proceedings, the assessee has been allowed sufficient opportunity and therefore should not have any grievance on this count. Therefore, respectfully following the order of my Ld predecessor, the action of the AO of making the said addition u/s 69 of Rs 42,39,125/- is confirmed. Accordingly, ground No 19 of the appeal is dismissed.” 68. The Ld. A.R. submits before the Bench that the addition was made on the basis of seized documents copy of which is filed at page No.407 and typed copy on 408of the paper book. The Ld. A.R. argues that the said document showed that it contains the position of shares purchased through broker M/s. Auro Mira as on 28.03.1991. The Ld. A.R. submits that the AO has made the addition merely on the ground that the said documents contain the details of share purchase at Madras office of the assessee by ignoring the fact that the said details

53 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. were easily verifiable from the share broker who was registered to be of the Madras Stock Exchange. The Ld. A.R. also emphasized that the said paper does not contain any reference to the assessee and therefore the AO has misconstrued the contents thereof that investments reflected in the documents belong to the assessee. The Ld. A.R. submits that in order to make addition under section 69 of the Act, the AO has to prove that these investments belong to the assessee which are not recorded in the books of accounts of the assessee and therefore without establishing the primary condition, the AO could not have made addition under section 69 of the Act. The Ld. A.R. also submits that the ample evidences were available on record which prove that the transactions, in the said seized document were pertaining to other entities, carried out by M/s. Harshad S. Mehta with counter brokers. The Ld. A.R. also refers to the details of securities purchased by the broker entities for and on behalf of their family members, the details whereof are filed at page No.393 to 395 of paper book no 3. The contract notes issued by the brokers in the names of various other entities reflecting with the said securities were transacted on behalf of them are filed at page No.396 of paper book No.3. In the contract notes issued by the counter brokers whose name is appearing on the seized document issued in the name of M/s. Harshad S. Mehta confirming the transactions undertaken at Madras Stock Exchange the copies of which are filed at page No.1597 to 1616 of the paper book No.7. The Ld. A.R. also refers to the ledger account of the counter brokers in the books of M/s. Harshad S. Mehta reflecting these transactions carried out by M/s. Harshad S. Mehta with them, the copies of which

54 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. are filed at page No.397 & 398 of paper book No.3. The Ld. A.R. submits that as is clear from the various documents, the said seized document consists of transactions carried out by broker M/s. Auro Mira on behalf of M/s. Harshad S. Mehta and also consists of transactions which are also reflected in other seized documents on which addition to the tune of Rs.58,46,090/- was made in the assessment order and hence to that extent there is a double addition made by the AO. The Ld. A.R. submits that the authorities below have failed to take a note of these evidences which are available on record and accordingly prayed before the Bench that addition made deserved to be deleted.

55 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. already been made in the assessment order to the tune of Rs.58,46,090/- on the basis of seized materials which have the details of same transactions of shares and thus any further addition on this count would result in double addition which is not permissible under the Act. Accordingly, we are inclined to hold that the addition under section 69 of the Act has wrongly been sustained by Ld. CIT(A). Therefore, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition.

56 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. M/s. Harshad S. Mehta as misleading, conflicting and fallacious and added the same to the income of the assessee and added the same to the income of the assessee as unexplained investments under section 69 of the Act. In the first round of litigation the said addition was confirmed by ld. CIT(A) on the ground that assessee vide letter dated 15.3.1994 filed the AO claimed that these stamps belongs to the assessee and duly accounted for in the books. In the set aside proceedings also the AO added the same amount under section 69 of the Act.

57 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. and unregistered and was also looking after the task of registration of shares, then the explanation of purchase of stamps required for registration was bound to be accepted. The ld AR submits that the seized material contains reference to such purchase of stamps by the Madras office for forwarding to Bombay office in the MIS Reports being forwarded on a regular basis by the staff of Madras office to Bombay office. The ld AR submits that the stamps were purchased at Madras for and on behalf of the brokerage firm of M/s. Harshad S. Mehta since there was shortage of stamps in Bombay and therefore the transaction required to be accounted for by the concerned brokerage firm. The ld AR argues that such an addition cannot be made u/s 69 of the IT. Act as the purchase of stamps is duly accounted for in the books of account.

58 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. these stamps were duly accounted for in the books of the assessee and therefore no addition under section 69 of the Act can be made. However we note that the assessee has been changing the its stand again and again and it is hard to believe the different theories of the assessee. Under these circumstances, we are inclined to dismiss the ground of the assessee by upholding the order of ld CIT(A). Accordingly the ground no. 13 is dismissed.

59 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. presumed that the contents of the said report which was seized, are true. The provisions of sec 132(4A) are reproduced as under for convenience:- Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed – (i) that such books of account, other documents, money, bullion, jewllery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular pers (iv) on, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. 20.4 The said report of M/s Arjun K S Ayer was seized from the premises of the Assessee Group and therefore in respect of the claim of the assessee that the figures of share holding of the various entities of its group as per this report are not correct, the onus was on the assessee to collect the requisite information from the said companies so as to demonstrate the position of actual shareholding of the various entities of the Assessee group. However, the assessee has failed to substantiate its claim that, the figures of share holding of the various entities of its group as per this report are not correct. As regards to the contention of the assessee that without prejudice to its contention that no addition should be made, if at all any addition is made, the same should have been by adopting the market price as on the date of acquisition and not the market price on the last day of the year, it is held that the onus was on the assessee to show when the said investments were made. However, since the assessee did not provide the necessary information about the date of acquisitions the said investments, the AO had no option but to reasonably adopt the market price on the last day of the year for determining the amount of unexplained investments of the assessee as per the report of M/s Arjun K S Ayer. Therefore, respectfully following the order of my Ld predecessor, no infirmity is found in the action of the AO of making the said addition u/s 69 of Rs 74.09.265/- on the basis of the report of M/s Arjun K S Ayer. Accordingly, ground No 21 of the appeal is dismissed.” 80. The Ld. A.R., at the outset, submitted that the issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in assessee’s own case in ITA No.3660/M/1994 & ors. A.Y. 1990-91 order dated 09.08.1996 a copy of which is filed at

60 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. page No.652 to 675 of paper book No.4 and also other related entities for A.Y. 1990-91 i.e. immediately preceding previous year in the case of Ms. Deepika Mehta Vs ACIT in ITA No.3554/M/1995 for A.Y. 1990-91 and Shri Sudhir Mehta Vs ACIT ITA No. 3557/M/1994 for A.Y. 1990-91 wherein the AO was directed to make the addition, if required on the basis of information collected from the companies as regards the share holdings of the assessee. The Ld. A.R. submits that the order passed by the Ld. CIT(A) is wrong and fallacious on the ground that Ld. CIT(A) has confirmed the addition reasoning that assessee has failed to prove the investment reflected in the report of Shri Arjun K.S Iyer whereas as a matter of fact the holdings did not belong to the assessee but to the other entities in the group. The Ld. A.R. submits that the said report of Shri Arjun K.S Iyer could not be considered as piece of evidence to make the addition without following the direction of the Bench as stated hereinabove. The Ld. A.R. also submits that despite the aforesaid decision by the Tribunal both the authorities have failed to follow the directions and made the addition without carrying out any further enquiry. The Ld. A.R. also submits that the tribunal ,in the case of Deepika A. Mehta vs. DCIT in ITA No.3269/M/2015 A.Y. 1989-90, has , on identical addition made in that year, categorically held that no inquiries have been made by the AO in spite of directions given in the earlier round of appeal and it was further held that the matter was of more than 25 years old and nothing fruitful will come out of even if the matter is again restored back to the file of the AO and accordingly on failure on the part of the department to make enquiries, addition was deleted by the Tribunal. The Ld. A.R.

61 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. prays that following the said decision of the co-ordinate bench of the Tribunal, the addition as sustained by the Ld. CIT(A) in which no inquiries were made by the AO despite the directions of the Tribunal, may kindly be deleted. The DR on the other hands relied heavily on the orders of authority below.

62 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. would be served. Accordingly, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition.

63 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. me mainly on the ground that S-11 which was in possession of the assessing officer clearly showed that the shares and debentures listed in Annexure 3 belonged to different entities and, therefore, no reasonable man could hold that the shares and debentures listed in Annexure 3 were owned by the appellant and were acquired by it in the F.Y. 1990-91. There is no corresponding paper to S-11 in respect of the addition of Rs. 6,24,76,526/-. On the contrary, Annexure 4(2) clearly states in respect of 4165 shares of Punjab Tractors that they were registered in the name of Mrs. Deep/Tea Ashwin Mehta. This according to me implies that the rest of the shares mentioned in Annexure 4(1) to 4(12) had actually been purchased by the appellant in its own name and were owned by it. The letters forwarding these shares to Bombay are dated between December 1990 to March 1991 and I hold that in the absence of any specific information coming forth from the appellant, any reasonable man would infer that these shares were purchased by the appellant during the period from December 1990 to March 1991. They were certainly not recorded in the books of accounts of the appellant which till date have not been completed, as no copy of the final profit and loss account has been filed even before me. The appellant did not explain the sources for acquiring these shares before the assessing officer and hence I hold that the assessing officer was right in holding that these shares remained unexplained in the hands of the appellant. The appellant's argument, based on the judgement of the Hon'ble Gujarat High Court that since the appellant was a trader in shares, section 69 could not apply, is not very material because if the appellant wants to treat these shares as its stock in trade, even then the burden was on the appellant to explain the acquisition of these shares. The shares in that situation were certainly "valuable articles" and, therefore, the addition made by the assessing officer can be said to have been made u/s. 69A of the IT Act. Therefore, I find no substance in the appellant's argument and in any case this argument would not make any material difference to the addition made by the assessing officer. I also find no merit in the appellant's argument that principles of natural justice were violated in the present case. Right from the beginning of assessment proceedings, the assessing officer had asked the appellant to give details of share holdings but the appellant never complied. The assessment order itself was passed on 30.03.1994 and before that time the appellant could have certainly stated whatever it wanted to state in the matter. I am, therefore, of the view that there was no violation of principles of natural justice and the assessing officer had given adequate opportunity of hearing to the appellant. For these very reasons, I do not find any justification to admit additional evidences on this point. I, therefore, do not admit the contract notes, an affidavit of Smt. Deepika A. Mehta and the letter of Shri R. Srinivasan as additional evidences. It is held by me that the matter has to be decided on the basis of materials on record before the assessing officer. The reasons for not admitting these documents as additional evidences are contained elsewhere in this order and have already been discussed above. I may also mention here that the evidences mentioned in the written submissions of the appellant dated 08.08.1995 regarding receipt of dividend/warrant in respect of certain shares by

64 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. different entities of the group are of no consequence because it is not established that the interest/dividend was received on the same shares which are mentioned in the letters appearing as Annexure 4(1) to 4(12) of the assessment order. Once the assessing officer had confronted the appellant with materials in his possession to show that prima facie the appellant was owner of certain shares, the burden had shifted to the appellant to show by concrete evidence as to how these shares were explained and as to when these shares were acquired. The appellant adopted a policy of stony silence before the assessing officer for the obvious reason of preventing investigation in its case and now it cannot argue that principles of natural justice were violated in its case. Since the appellant did not give the date of acquisition of shares, the assessing officer was right in taking an uniform date, i.e., 31.03.1991 for the purpose of calculating unexplained income of the appellant. Alt in all I am of the view that the present addition was rightly made except for the fact that no addition could be made in respect of the shares of Punjab Tractors which admittedly belonged to Mrs. Deepika A. Mehta. I find that Annexure 4(2) not only mentions shares of Punjab Tractors but also 350 shares of Escorts. The assessing officer has taken the value of the shares of Punjab Tractors and Escorts together at Rs. 8,42,7007-. I direct the assessing officer to deduct the value of 4165 shares of Punjab Tractors from the figure of Rs. 8,42,7007- and to substitute the resultant figure for the figure of Rs. 8,42,7007-. Subject to this direction the addition of Rs. 6,24,76,5267- is confirmed. The ground is thus partly allowed. It is clarified here that the cases cited by the appellant on principles of natural justice are all distinguishable and have been taken into consideration before deciding this matter. It is also clarified that the addition is sustained by me u/s. 69A of the IT Act." 21.3 From, the above it can be observed that after a detailed analysis, the FAA in the 1st round of proceedings has confirmed the said addition u/s 69 to the extent of Rs 6,24,76,526/-. It is also noted that the additional evidences submitted by the assessee before the FAA in the 1st round of proceedings in the form of contract notes of the related notified broker entities, affidavit of Deepika Mehta to support its claim are clearly self-serving, considering that the said notified broker entities and Deepika Mehta are part of the Assessee Group itself who have been found to be involved in the said stock market scam of 1992. Further, as regards the contention of the assessee that the AO did not provide sufficient opportunity by way of a show cause, it is noted that the assessment has been completed u/s 144 rws 254 since there was little compliance from the assessee. The validity of the said assessment 144 rws 254 has been upheld in the preceding paras on the facts of the case and also as per law. Moreover, in course of the present appellate proceedings, the assessee has been allowed sufficient opportunity and therefore should not have any grievance on this count. Therefore, respectfully following the order of my Ld predecessor, the addition made by the AO of Rs 6,24,76,526/- u/s 69 on the basis of the correspondences exchanged between the offices of the assessee at Mumbai and Madras, is confirmed. Accordingly, ground No 22 of the appeal is dismissed.”

65 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 85. The Ld. A.R. submits that the addition has been made without complying with the primary condition as required u/s. 69 of the Act to establish that the unaccounted investments were made by the assessee during the year under appeal. On this ground itself, the addition deserves to be deleted. That once the FAA accepted the explanation of the appellant in his order dated 24.02.2000 that the Madras office of the assessee was keeping custody of shares on behalf of other entities and also undertaking the task of registration of unregistered shares, the said explanation equally explains the forwarding of shares by Madras office back to Mumbai office after the owners of the shares sold them in the market. The ld AR submits that the explanation given by the appellant was comprehensive and duly corroborated by other independent evidences and by the owners of the subject shares and therefore such rejection of the explanation of the appellant was untenable. The ld AR also, without prejudice, submits that following evidences were filed before the Assessing Officer rebutting the addition made in the assessment order namely (i) Chart showing the details of the investments found listed in various seized letters [Page 422-423 of the PB No. 3] (ii) detailed breakup of the investments made as per the said letters, details of the broker by whom the transactions were carried out [Page 409-418 of the PB No. 3] (iii) relevant contract notes on sample basis supporting the transactions reflected in the seized documents [Page 424-473 of the PB No. 3]. Besides above, as explained earlier the CIT(A) in Paras 78 and 79 of his order dated 24.02.2000 accepted the contentions of the appellant and deleted the addition of Rs.35,52,82,900/- which explanation was equally applicable for

66 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the aforesaid addition but the Ld. CIT(A) sustained the addition for reasons which are contrary to the findings given by him in the aforesaid Paras 78 and 79 of his order and even on this ground the above addition is liable to be deleted. This addition is strictly inter-linked with the above addition of Rs.35,52,82,900/- and even therefore the same is bound to be deleted for the same reasons. In light of the above, it is amply clear that the investments reflected on the seized page aggregating to Rs. 6,24,27,471/- does not represents investments of the assessee, much less unexplained investments. The Ld. A.R. submitted before the Bench that the seized documents which were in the form of letter/correspondence between two offices of the assessee Madras and Mumbai did contain in about shares. The copies of the seized pages are filed in a paper book at page No.209 to 220 of paper book No.3. The Ld. A.R. submitted that the Madras office was rendering various services such as safe custody of shares on behalf of other entities and also rendering various other services such as registration of unregistered shares, transferring shares purchased on behalf of other entities to Mumbai office. The Ld. A.R. referred to page No.422 and 423 wherein the details of investments as found in the seized letters was tabulated and also to page 409 to 418 of paper book No.3 which contained the breakup of the investments made pursuant to the seized letter and also the detail of brokers by whom these transactions were carried out. The appellant therefore prays that the addition made in the present case deserves to be deleted.

67 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 86. We have examined the copies of credit notes filed on sample basis which are at page No.424 to 473 of paper book No.3. We observe on the basis of all these documents that in none of the letters indicated anything that these shares belong to the assessee. Contrary to this, on each of the letter the transferee name has clearly been mentioned. We also note that in the first round of litigation Ld. CIT(A) in para No.78 & 79 in his order dated 24.02.2000 accepted the contentions of the assessee and deleted the addition to the tune of Rs.35,52,82,900/- with the explanation which is also applicable to the present addition, however, we note that Ld. CIT(A) sustained the addition which is contrary to the findings given by him in par 78 & 79. Besides we have already adjudicated the similar issue in ground No.10 wherein we have set aside the order of Ld. CIT(A) and directed the AO to delete the addition on this very ground. Accordingly, in view of these facts and circumstances we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Ground No.15 is allowed.

68 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. claimed on the outstanding amount to notified broker entities is payable. The AO treated the interest expenditure as contingent liability and accordingly rejected the claim of the assessee.

69 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the case of M/s. Growmore Leasing & Investment Ltd. vs. DCIT ITA No.1219/Mum/2017 & ors for A.Y. 2012-13 is extracted below: “12. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. We have also gone through the case law as has been cited before us the relevant provisions of the Special Court Act which has been referred to before us during the course of hearing. This is an undisputed fact which we noted that the assessee is a notified person from 08.06.1992 under Section 3(2) of the Special Court Act. As per the provisions of the Special Court Act contract entered into by a notified person prior to notification made under Section 3(2) are not affected by the notification. Section 4(1) of the Special Court Act empowers the custodian to cancel any contract or agreement entered into between 01.04.1991 to 06.06.1992 if the custodian finds that these contracts have been entered into fraudulently or to defeat the provisions of the Special Court Act. In A.Y. 1990-91, the AO in the assessment order passed under Section 143(3) dated 26.03.1993 allowed the interest expenses to the assessee to the extent of `5,86,404/-. From page 75 of the paper book which contains the computation of income for A.Y. 1990-91, we noted that the assessee has disclosed the loan taken for the purchase of investment. The assessee is consistently following mercantile system of accounting which is apparent even from the assessment order of A.Y. 1990-91 as well as from the impugned assessment year. The order for A.Y. 1990-91 in fact has been passed by the AO after the date of notification and the enactment of the Special Court Act. We have gone through the order passed by the CIT(A) in the case of Shri Ashwin S. Mehta assessment years 2010-11 and 2011-12, where we noted that this issue of taxability of interest income of the assessee and other parties has specifically been dealt with by the CIT(A) and accordingly interest income of `10,68,83,732/- was brought to tax. In view of this fact it is apparent that the assessee is liable to pay interest on the amount outstanding. Therefore the liability towards interest got accrued. Under the mercantile system of accounting interest is deductible when it has accrued. This also proves that there was an agreement, may be oral, to pay the interest on the borrowed funds by the assessee to the other family members. We, therefore, reject the plea of the learned D.R. that no liability towards interest has accrued but it was merely a contingent liability. We noted that section 4 of the Special Court Act empowers the custodian and the court to cancel any contract or agreement in relation to the property of a person notified under that Act provided they have entered into fraudulently. In this case no cogent material or evidence has been brought to our knowledge or placed before us which may prove that the custodian under Section 4(1) of the Special Court Act has taken any action to cancel the terms relating to payment of interest. Rather we have noted from the affidavit of the custodian dated 01.03.2006 in M.P. No. 41 of 1999 that the custodian seeking to levy interest @ 15% to 18% per annum. Therefore the interest on outstanding credit balance of the brokerage firm has accrued as actual liability. The issue with regard to contract for payment of interest has been raised by the AO and the CIT(A) in the case of other notified entities duly approve the existence of liability. We noted that in the case of Growmore Leasing & Finance Ltd.

70 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. for A.Y. 2007-08 by order dated 26.06.2014 the CIT(A) followed the finding in the case of other group concerns, i.e. Eminent Holding Pvt. Ltd. by observing as under: - “6.3 I have gone through the submissions of the Ld. AR. I find that though there is no express document evidencing payment of interest to the brokerage firms, the intentions of the parties were always so, this is evident from the fact that identical claim was also made during A.Y. 1990-91 and the same was allowed to the appellant and other concerns. The claim made in the affidavit of Custodian in MP No. 41 of 1999 also supports this claim. I also agree with the appellant that there need not be any written agreement and that the oral agreement coupled with the actions and intentions of the parties is sufficient to prove the existence of the liability.” 13. Similar issue was involved in the case of other family member, i.e. Shri Hitesh S. Mehta for A.Y. 2005-06 where also the AO has disputed the very existence of liability towards interest to creditors. The CIT(A) vide his order dated 31.08.2010 confirmed and approved the claim of the assessee that there was no need for any written agreement and that the oral agreement coupled with action and intentions of the parties is sufficient to prove the existence of liability. This order of the CIT(A) was followed by him in the case of the assessee while adjudicating the ground relating to interest expenses for A.Y. 2006-07 vide order dated 27.09.2013 under para 6 which has been reproduced under para 18 of the order of the assessee. These finding and observation in the above orders of the CIT(A) has not been disputed by the Revenue by filing an appeal. In view of this finding becoming final, in our view, the existence of liability for payment of interest cannot be disputed. 14. Coming to the objection of the Revenue that interest cannot be allowed as deduction has not been shown by recipients in their income. As has been discussed by us in the preceding paragraphs the interest has been shown as income by Mr. Ashwin S. Mehta in assessment years 2010- 11 and 2011-12. We also noted that Late Shri Harshad Mehta has been offering his income on cash basis and the method of accounting has been duly upheld by the Tribunal in his case for A.Y. 1989-90. Even otherwise disallowance of interest claimed by the assessee cannot be made merely because in the opinion of the AO the corresponding interest income has not been offered by the recipients. The interest can be allowed on the basis of method of accounting followed by the assessee. We noted that similar issue when arose in the case of M/s. Growmore Leasing & Investment Ltd. vs. CIT in ITA No. 51354 & 5136/Mum/2012 wherein the Coordinate Bench of this Tribunal while setting aside the issue to the file of the CIT(A) directed him to tax the income in the hands of recipient family members in accordance with the method of accounting followed by them. We find force in the submission of the learned A.R. that since the assessee as well as the recipients are notified entities under the Special Court Act unless the Court directs for distribution of the assets towards existing liabilities under Section 11(2) of the Special Court Act, the assessee cannot make the payment to these creditors. Even otherwise since the existence of liability towards interest has accrued especially when the assessee is following the mercantile system of accounting the interest is to be allowed. During the course of hearing we raised a query about the nexus of interest expenses with the interest

71 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. income. The learned A.R. pointed out that the liability in the present case was accrued on account of purchases of shares and securities by the assessee which were sold in terms of the directions of the Hon'ble Special Court in subsequent years and the sale proceeds so received were invested in term deposits with the banks and accordingly the assessee has claimed interest expenditure against the interest earned on term deposits. No contrary evidences or material were brought to our knowledge to contradict this fact. In view of this fact we find that there is a nexus between borrowed funds and investments in term deposits. Therefore, the interest paid on the borrowed funds has to be allowed out of the interest earned by the assessee on term deposits. We noted that identical issue was raised in the case of M/s. Growmore Leasing & Investment Ltd. in A.Y. 2007-08. The CIT(A) in his order dated 26.02.2012 considered the issue of nexus of interest expenditure with interest income, following his own finding in the case of another notified entity, i.e. Eminent Holding Pvt. Ltd. for A.Y. 2007-08 which are reproduced as under: - "As regards the nexus of the interest expenditure with the interest income, I find that the Balance Sheet of the appellant and the affidavit filed by the custodian before the Hon'ble Special Court supports the fact that the funds borrowed from Shri Harshad S. Mehta were deployed by the appellant in various assets like shares and securities, properties, etc. These funds generated income in the form of dividend and interest income. After being notified, such shares and securities got converted into Fixed Deposits with various banks. These fixed deposits generated interest income which is offered to tax. Hence, a reasonable nexus can be said to exist between the interest liability incurred by the appellant, and the interest income earned from these assets. However, this matter being sub-judice before the Hon'ble Special Court, no finding can be given on these matters." 15. Similar issue has arisen in the case of Shri Hitesh S. Mehta for A.Y. 2005-06 wherein the CIT(A) vide his order dated 31.08.2010 approved the nexus between borrowed funds and the investment in term deposit which has been followed by the CIT(A) even in the case of the assessee for A.Y. 2006-07 dated 27.09.2013. We do not agree with the submission of the learned D.R. that interest expenses cannot be allowed till the Hon'ble Special Court decide the issue. The allowance or disallowance of the expenditure depends on the accrual of expenditure. Even no dispute has been raised in respect of interest on such credit balances before the Special Court. Even on this basis, following the principle of consistency, as the interest has been allowed as deduction in the A.Y. 2006-07 and there is no change in the facts, the deduction in respect of the interest expenditure has to be allowed. Our aforesaid view is supported by the following decisions: The Supreme Court in the case of Radhasoami Satsang Saomi Bagh vs. CIT 193 ITR 321 referred to the following passage from Hoystead v Commissioner of Taxation 1926 AC 155 (PC), wherein it was observed (page 328): “Parties are not permitted to begin fresh litigation because of new view they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result

72 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the Plaintiff and traversable by the Defendant, has not been traversed. In that case also a Defendant is bound by the judgement, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.” At pg 329 of the judgement, Their Lordships observed as under: “We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating though the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assesses – we do not think the question should have been reopened and contrary to what had been decided by the Commission of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act of 1961.” The aforesaid dictum of law was reiterated recently by the Supreme Court in CIT vs. Excel Industries Ltd. : 358 ITR 295. “It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the Assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather spend the tax payers money in pursuing litigation for the sake of it.” 16. In view of our aforesaid discussion we set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said interest accrued and calculated at 12% per annum amounting to `2,64,72,208/- after disallowing proportionate interest in respect of the investment in shares amounting to `3,51,176/- after verifying the calculation of the interest quantification.”

73 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd.

74 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 95. Ld. D.R., on the other hand, relied on the orders of authorities below.

75 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 99. The facts in brief are that in course of appellate proceedings in the second round, the Ld. CIT(A) observed that M/s. Vyas & Vyas auditors appointed by Special Court had noted discrepancies in the account of M/s. Harshad S. Mehta as per the books of accounts of the assessee vis-à-vis the account of assessee in the books of accounts of M/s. Harshad S. Mehta as on 31.03.1991 of Rs.5,50,04,109/-. Accordingly, a show cause notice dated 24.12.2018 was issued to the assessee by Ld. CIT(A) calling upon the assessee to explain as to why the enhancement should not be made in respect of the said difference of Rs. 5,50,04,109/- in the balances as stated supra. The assessee has submitted vide letter dated 31.12.2018 that the auditors were illegally appointed by the custodian without taking the permission from Hon’ble Special Court. The Ld. A.R. also stated that the report of M/s. Vyas & Vyas has been challenged by Smt. Jyoti S. Mehta by filing MA/70/2014 and Hon’ble Special Court vide its order dated 28.11.2014 has concluded that the said report is not an evidence but it is to be treated only as an opinion of the expert. The Ld. A.R. also submitted that difference between the two books of accounts was because of reasons that different methods of accounting were followed by the assessee and M/s. Harshad S. Mehta. Besides account No.2095(84) in the books of accounts of M/s. Harshad S. Mehta which showed amount payable to the assessee of Rs.6,29,77,921/- was deliberately ignored by the auditor. However, the Ld. CIT(A) dismissed the contention of the assessee and enhanced the income by observing and holding as under:

76 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. “28.3 The contentions of the assessee have been duly considered. It is noted that the Hon'ble jurisdictional High Court in the case of M/s Jyoti H Mehta for AY 1991- 92 has held that it will have to be left to the AO to test the genuineness and authenticity of the entries in the books of accounts and thereafter, pass fresh assessment order. In view of such directions of the Hon'ble Jurisdictional High Court, the assessee is duty bound to reconcile the difference in the balances by explaining each and every entry in the ledger account of the assessee in the books of M/s Harshad S Mehta and each and every entry in the ledger account of M/s Harshad S Mehta in the books of the assessee. However, rather than giving a detailed reconciliation along with evidences, the assessee has preferred to make frivolous allegations against the auditors, the Custodian, etc. Moreover, the assessee has given a very general explanation that the difference is on account of the difference in the method of accounting followed by the assessee and M/s Harshad S Mehta. 28.4 This issue has also been adjudicated at length by my Let Predecessor in the appellate order in the case of Shri Harshad S Mehta for AY 1992-93 in appeal No CIT(A)C-V/ACIT CC-23/59/95-96 dated 24.02.2010. In the said appeal, the assessee had raised identical contentions against the proposed enhancement which were considered by my Ld Predecessor and the issue decided. The operative portion of the decision of my Ld Predecessor on this issue is reproduced as under: "I have considered the issues on the differences as raised by the Assessing Officer, the facts of the case and the submissions of the appellant. As I see, one of the main plank of the appellant's defense is that M/s. Vyas & Vyas had not referred to the books of account and Audit Report of the three firms of Chartered Accountants of the notified parties correctly. This contention is totally misplaced. As I note, M/s. Vyas & Vyas have given their findings on the differences in the balances after collecting information from the appellant's computers, banks, financial institutions and other parties. In this direction, I find that M/s. Vyas & Vyas had written letters to banks, financial institutions and other parties to confirm the transactions of M/s. HSM recorded in his book. The observations of M/s. Vyas & Vyas in paras 8.1 and 8.2 of their report call for special attention in this context. In these paras, M/s. Vyas & Vyas have given the following observations. "8.1 We have studied the liability side of Balance Sheet of M/s. HSM, which was drawn by us from books of accounts and other infuriation available with is from the computers. We have also written letters to banks, financial institutions, and other parties to confirm the transactions of M/s. HSM recorded in his books. We found that there were large number of transactions not recorded by M/s. HSM but banks, financial institutions and other parties have recorded them. We have also compared the balances outstanding towards HSM group from the audited accounts available in the audit reports from the balances appearing in M/s. HSM books. We observed huge differences in those balances which were narrated separately in Annexure No. 6A. 8.2 M/s. HSM while recording the transactions in his books of accounts totally ignored those transactions with an intention to hide the correct picture of his state of affairs. We were surprised to note the huge differences in the outstanding

77 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. balances within his own group. This would clearly show beyond doubt his fraudulent intentions and it was a clear case of manipulation and misappropriation of the books of accounts of M/s. HSM. Significantly, I also note that the findings of the differences in the balances were not given by M/s. Vyas & Vyas on their own but as part of their Scope of Work as laid down by the Hon'ble Special Court. Scrutinizing and investigating third party liabilities stand as item 1.3.2 of the scope of work. In view of this, the findings of the differences formed part of responsibility of M/s, Vyas & Vyas. The appellant has not brought out anything specific on this process of scrutiny and investigation done by Vyas & Vyas and has only made a general observation. It is thus, seen that working out of the differences in the balances by M/s. Vyas & Vyas is premised on close scrutiny and very authentic documents: Another plank of appellant's defense is that M/s. Vyas & Vyas has erred by not referring to balances lying in all the accounts though under different nomenclature which has led to large differences. As I understand, by this, the appellant means to explain that if the accounts of the business and individual entities of the parties and the appellant are seen together, reconciliation is possible. This premise is patently wrong both from the point of view of accounting principles and income-tax proceedings. As may be noted, in normal prudence, a business entity and an individual entity are though the same, the accounting treatment of their transactions is different. This is natural as the implication of a transaction undertaken as an individual and transaction undertaken for business has to be different. It is precisely because of this that the entities in question are maintaining separate sets of books of account, one as an individual and the other as a business entity. This difference is also recognized by M/s. Vyas & Vyas and three Chartered Accountants while preparing the accounts of appellant and the other entities, respectively. As may be seen, it is because of this that M/s. Vyas & Vyas have prepared separate accounts of the appellant for his individual and business entities. Same is the case with the three Chartered Accountants and the other entities. In this backdrop, I find that the appellant has tried to reconcile the differences not by matching the balances between individual to individual and business entity to business entity but by matching with individual to business entity and vice versa. This is obviously incongruous and defies basic accounting principles. Very significantly, I note that reconciliation has not been given on homogenous matching between individual to individual and business entity to business entity. Further, adjustment of accounts from one set of accounts to another set of documents cannot be accepted unless reconciliation of accounts is made. The reconciliation on this count cannot also be accepted if the dates, amounts and the narrations of the transactions between two sets of accounts do not match. In the details and reconciliation submitted by the appellant, no such matching has been done. In view of this, the reconciliation submitted by the appellant is not only between incompatible entities but also lacking in specific matching of transactions. To this end, I find that the appellant has not matched the debit and credit entries datewise in the different sets of books. In face of all the foregoing severe infirmities, the reconciliation by the appellant is not acceptable being not credible. Merely passing a journal entry of huge amounts in the books of individual entities without debiting the account of the individual entity in the books of business entities of the other related parties without proper supporting is highly flawed. This has also been

78 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. noted by the three Chartered Accountants in their Report on Review of Unaudited Accounts of M/s. Jyoti H. Mehta. In this report, it has been clearly mentioned that journal entries affecting the accounts have been made without any supporting. In similar vein, in the Report on Review of Unaudited Accounts of Mrs. Jyoti H. Mehta, it has been mentioned that the differences between different accounts could not be explained despite asking for explanations. The observations are recorded in para 13.5 on page 37 of the Report. Similar observation has been made by the three Chartered Accountants in their Report on Review of Unaudited Accounts of Mr. Ashiwn S. Mehta. On page 32 of the report in para 14.3, it has been categorically stated that the transactions in the accounts mentioned in the para have been recorded merely by passing journal entries. In their report, in the case of M/s. Ashwin S. Mehta, on page 33, it has been categorically stated very few credit slips issued to / received by M/s. Ashwin S. Mehta were available for verification, the remaining being untraceable. Significantly, I also note that the source of passing the journal entry in the books of the appellant has not been explained. This again is a major flaw. In view of the foregoing major flaws, the concept of clarity is badly missing in the accounts of the appellant and other related parties. The differences further accentuate the flaws. As I find, the appellant has not been able to disclose how the journal entries were made in the books of account and any reconciliation based on such flawed accounting is unacceptable. Further, most importantly, I find that the reconciliation and the accounts submitted by the appellant through the several submissions only relate to the balances as on 8.6.1992 and accordingly, they relate only to the assessment year 1993-94. There is no reconciliation whatsoever of the balances as on 31.3.1992. As I note, the Assessing Officer has invited attention to the balances as on 31.3.1992 and 8.6.92 but, the appellant has not given any reconciliation on the balances as on 31.3.1992. In view of this, for the present year under consideration, no reconciliation of the balances has been given. So for the present assessment year under consideration, there being no reconciliation, the differences stands totally unexplained. In light of the foregoing, for the present year under consideration, following balances as on 31.3.1992 remain unexplained. From the perusal of the differences, I find that in the following instances, the appellant has not disclosed the transactions recorded in the books of other parties. DIFFERENCE BETWEEN BALANCES IN THE BOOKS OF HSM & RELATED PARTIES Sr. Particular As on Balances Balances m Differences No. s Name in the the books of of Party books of Party ( Three M/s. CAs) HSM (Vyas & Was) 1 M/s. 31/03A 0.00 Dr. 1073459584.0 Cr. (1,073.459.584.0 S Ashwin 2 0 0) Mehta

79 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. 2 M/s. 31/03/9 0.00 Dr. 265475505S.O Cr. (2,654,755,058.0 Jyoti H 2 . — — O 0) Mehta ——— ——— ——— ._

The difference of these balances arise on account of complete non-disclosure of the transactions in the appellant's books. The credit balance also does not stand reconciled. As may be seen, whereas M/s. Ashwin S. Mehta and M/s. Jyoti H. Mehta have disclosed transactions of Rs. 107,34,59,584/- and Rs. 265,47,55,0587- respectively with M/s. Harshad S. Mehta, the latter has not shown these transactions in his books. In view of this, I find that a sum of Rs. 372,82,14,642/- is liable to be taxed in the hands of the appellant as income from undisclosed transactions and sources. Since,.this amount has not been brought to tax in the assessment, I enhance the appellant’s income by this amount. So far as the balance differences are concerned, I find that they are to be examined in the cases of the related parties to see whether or not the balances have been brought to tax in their hands. Accordingly, I direct the Assessing Officer to examine these cases and take appropriate actions in terms of the relevant provisions." 28.5 In the instant case, it is noted that whereas M/s Harshad Mehta has disclosed transactions of Rs 22.98 crores, the assessee has disclosed transactions of only Rs 17.48 crores. Therefore, the difference of Rs 5,50,04,109/- is liable to be taxed in the hands of the assessee as income arising for undisclosed transactions and sources. Since this amount has not been brought to tax in the assessment, the income of the assessee is enhanced by an amount of Rs 5,50,04,109/-.” 100. The Ld. A.R. submits that the said enhancement has been made by the Ld. CIT(A) without relevant jurisdiction and without appreciating the facts of the present case. The ld AR submits that the assessment in the present case has been made pursuant to the directions of the Hon'ble Tribunal in the 1st round of appeal and therefore the assessment proceedings in present case were to be limited to the issues set-aside by the Hon'ble Tribunal and could not be extended to the new issues not raised in the 1st round of appeal. The ld AR submits that the said issue of enhancement has not been raised in the 1st round of appeal. Under these circumstances, the Assessing Officer

80 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. never had any jurisdiction to examine and assess any new issue not dealt with in the 1st round of appeal. Since the Assessing Officer never had a power to examine the said issues, consequently, even the Appellate authority could not exercise the power of enhancement and make the addition what Assessing Officer could not have made as per law. The power of the Appellate authorities are restricted to only raise those issues which otherwise were within the power of the assessing authority. The ld AR submits prays that the Ld. CIT(A) has incorrectly raised the issue of enhancement of income without valid jurisdiction and deserves to be deleted. The ld AR relies on the following judicial decisions in defense of his arguments: a. Kellogg India Ltd. v, ACIT [ITA No. 6005/Mum/2010] dated 10.08.2012 for A.Y. 2002-03 b. ITO v. Jabbai Woodcrafts India Ltd. [ITA No. 803/D/2009 dated 24.09.2010 101. Without prejudice, the AR of the assessee argues that the addition made by the Ld. CIT(A) was factually and legally incorrect as the impugned addition has been made on account of the difference between the balance of HSM in the books of the assessee and the balance of the assessee in the books of HSM. While making the addition, the Ld. CIT(A) has relied upon the order of his predecessor in the case of HSM for A.Y. 1992-93 dated 24.02.2010. The ld AR submits that the assessee factually denies any such difference in the balances between books of account of the assessee and HSM. The AR also submits that above the said difference in the balances determined by the Ld. CIT(A) is unjustified as the details furnished by the assessee explaining the alleged difference and the reconciliation

81 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. statements given in that regard have been rejected. The ld AR contends that even that part of the difference was also duly explained to be on account of different accounting methods followed by both the parties. While the assessee follows Mercantile system of accounting and HSM follows cash system of accounting. Due to difference in the method of accounting, certain transactions which have been accounted for by the assessee in the year under appeal may have been accounted by HSM in the subsequent year.

82 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. are differences in the Ledger account between the 2 parties as the Hon'ble Special Court, in its order in MA No. 70 of 2014 dated 28.11.2014 [Page 531-533 of PB No. 3] has held that the said report cannot be considered as a reliable piece of evidence and that the report of the auditor is only an opinion expressed by an expert. Moreover, the auditors, M/s. Vyas and Vyas in its letter dated 06.12.2013 [Page No. 529-530 of PB No. 3] has also categorically observed that several records were not verified by them, and hence the audit has been carried out by them only on the basis of the documents which were presented to them. The Chartered Accountants, M/s. Vyas & Vyas had themselves heavily qualified the report and not owned up the accuracy of the findings given by them. The said report is prepared in the case of M/s. Harshad S. Mehta and the Chartered Accountants have even admitted before Custodian that they have not considered all the accounts In the books of account particularly where M/s. Harshad 6. Mehta had payables to other notified entitles. The Chartered Accountants wanted to exaggerate the payables by other notified entities being the family members and corporate entities to M/s. Harshad S. Mehta so as to create false justification for coercive steps being taken by the Custodian. It may be noted that this report itself came into existence in the year 2004 after almost 12 years from the time the original assessment was made. In any event and even assuming without admitting, if any such difference does exist the same does not represent the taxable income of the appellant.

83 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. vide his order dated 24.02.2010. The said order was later challenged in appeal before the Hon'ble Tribunal. The Hon'ble Tribunal vide its order in ITA No, 5702/Mum/2017 dated14.01.2019, has held that all the account have to be considered before coming to conclusion whether there is any difference in the balances and between the 2 parties. The Hon'ble Tribunal, therefore, held that the addition can be made only in case if all the accounts have been considered and the difference is not explained by the assessee. A copy of the relevant pages of the order the Hon'ble Tribunal in the case of Late Shri Harshad S. Mehta v. DCIT [ITA No. 5702/Mum/2017] for A.Y. 1992-93 dated 14.01.2019 is enclosed at Page 534-549 of PB No. 3. In light of the above, the appellant humbly prays that the addition made by the Ld. CIT(A) is devoid of merits.

84 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. merit, the Ld. D.R. submitted that the auditors M/s. Vyas & Vyas appointed by the custodian in order to bring out the truth as these books of accounts were very complicated and fallacious and thus auditors have only after carrying out the necessary exercises and examination of the records and books of accounts came to the conclusion that there is a difference between the books of the assessee and M/s. Harshad S. Mehta in the mirror account. The Ld. D.R. also brushed aside the contention of the Ld. A.R. that all the accounts were not considered while working out the difference. Lastly the Ld. D.R. brought before the Bench that the ground raised by the assessee may kindly be dismissed.

85 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. is ITAT in the present case and so is power of the ld. CIT(A). In no way the powers can not be exercised to enhance the income of the assessee in respect of those items of income which were not the subject matter before the Tribunal. The case of the assessee is supported by the decision of Kellog India Ltd. vs. ACIT (supra) and ITO v. Jabbai Woodcrafts India Ltd (supra). The facts and the facts and operative part of the decision in the case of Kellog India Ltd. vs. ACIT (supra) extracted below: “28. Facts, which are relevant for our adjudication, are that this is the second round of appeal and in the first round, the Assessing Officer has made 50% of disallowance out of these expenses on ad-hoc basis. This was further reduced to 25% by the Commissioner (Appeals). Against this disallowance, the assessee went in appeal before the Tribunal, wherein the Tribunal set aside this matter before the Assessing Officer to examine this issue afresh. 29. In the second round of appeal, the Assessing Officer, in pursuance of the directions given by the Tribunal, made 100% of disallowance at Rs.39,47,212, on the ground that these expenses are already a part of cost of raw material and processing of the said free food and is included in manufacturing cost and purchases. Such a disallowance of 100% has been confirmed by the Commissioner (Appeals) on the ground that it amounts to claim of double deduction. 30. Before us, the learned Counsel for the assessee submitted that once the matter has been set aside by the Tribunal, the assessee cannot be put into a worst situation than what it was at the time of original assessment. Since after giving effect to the order of the Tribunal, there cannot be any scope of enhancement of assessment and, therefore, the disallowance made in the original assessment should stand. In support of this contention, he relied on the judgment of Hon'ble Supreme Court in Mcorp Global (P) Ltd. v/s CIT, [2009] 309 ITR 434 (SC). 31. On the other hand, the learned Departmental Representative submitted that this is clearly a case of double deduction and does not amount to any kind of enhancement of assessment as the verdict of the Tribunal was to examine the issue afresh. 32. We have heard the rival contentions and perused the material available on record. It is now a settled proposition of law that the Appellate Tribunal under section 254(1) of the Act, had no power to take back the benefit conferred by the Assessing Officer or enhance the assessment. Once the matter has been restored by the Tribunal, the income cannot be enhanced from what was determined at the time of original assessment proceedings, which was the subject matter of dispute before the Tribunal. This proposition of law has been upheld by the Hon'ble Supreme Court in Hukumchand Mills Ltd. v/s CIT, [1966] 62 ITR 232 (SC), and had

86 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. now been reiterated in Mcorp Global (P) Ltd. (supra). Therefore, in view of this proposition of law, the enhancement of assessment by making 100% disallowance in respect of free food allowance cannot be sustained and the same is restricted to 50%, as was made by the Assessing Officer in the original round of proceedings. Consequently, this ground is allowed to this extent only.” 107. We, therefore, respectfully following the decision of the co- ordinate bench of the Tribunal, set aside the order of Ld. CIT(A) and the ground of appeal raised by the assessee is allowed. On merits also we find that addition is not sustainable. We note that while making the addition the ld. CIT(A) has not taken all the accounts of HSM in the books of accounts of the assessee and all accounts of the assessee in the books of HSM. The main argument of the Ld. A.R. was that all the accounts in the books of accounts of the assessee as well as HSM have not been considered. Upon perusal of page No.474 of paper book No.3 along with ledger accounts filed at page no.475 to 528 of paper book No.3, we observe that the said difference of Rs.5,50,04,509/- was calculated on the basis of a few ledger accounts only. We note that the Ld. CIT(A) has on pick and choose basis taken a few accounts for the purpose of ascertaining and making the addition. Besides, we note that the Ld. CIT(A) has taken the said difference on the basis of report of the auditor M/s. Vyas & Vays appointed by the special court in the case of HSM. We also note that the said auditors vide order dated 06.12.2012 addressed to the custodian appointed under Special Court Act stated that they have not perused all the records while carrying out the audit and the records which are not examined by them could contain information and details pertaining to the period under audit and therefore they have not vouched the accuracy of their report and finding given and

87 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. qualified the same. In view of these facts, we are not agreement with the conclusion drawn by the Ld. CIT(A) especially in view of the facts that only a few accounts were considered while ascertaining the addition and also the order of Special Court dated 28.11.2014 in MA 70 of 2014 wherein the Special Court has held that report issued by the Chartered Accountants M/s. Vyas & Vyas can not be treated as evidence and it is only an opinion expressed by the expert. Under these circumstances, the findings of the Ld. CIT(A) are incorrect and can not be sustained. We therefore are inclined to hold that even on merit the addition has wrongly been made by the Ld. CIT(A) and accordingly direct the AO to delete the addition. Accordingly, Ground No.19 is allowed both on legal as well as on merit.

88 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. No.5799/Mum/2014 for A.Ys. 2009-10 to AY. 2011-12 which ahs itself been challenged by the Department before the Hon’ble Bombay High Court.” 110. The issue in ground No.1 raised by the Revenue is discussed and decided in ground No.5 in the cross appeal of the assessee in ITA No.504/M/2019 wherein we have allowed the appeal of the assessee. Consequently, the ground raised by the Revenue becomes infructuous and is dismissed.

89 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. ground that stamp duty and registration fee have not been paid till the end of the relevant year which suggested that the possession of the premises has not been taken. 13.3 There is merit in the contention of the assessee that the only requirement for claiming depreciation is that the said premises should be in its occupation and should be in the state of ready to use. It is also a fact that the said office premises was covered in the search action which was carried out on 28.02.1992 and it was found to be operational. In the first round of appellate proceedings, the assessee's claim of depreciation in respect of the said office premises was rejected since the additional evidence submitted by the assessee was not allowed to be admitted. However, now since the books of accounts of the assessee have been directed to be admitted by the Hon'ble ITAT and the said office premise is duly reflected in the said books, the disallowance of depreciation by the AO mainly on the ground that stamp duty and registration fee have not been paid till the end of the relevant year, cannot be sustained. Also there is no evidence to suggest that the said office premises was not ready to use till the end of the relevant year. Accordingly, ground no. 14 of the appeal is allowed.” 114. After hearing both the parties and perusing the material on record, we observe that in this case the assessee has fully discharged the purchase consideration till 13.10.1990 and had taken the possession of the premises also. Even the search team found that premises were being used by the assessee for the business purpose. The only objection of the AO was that the office premises were not registered in the name of the assessee during the year and therefore depreciation was not allowable. In our opinion there is no requirement of the registered ownership of the property in order to claim the depreciation. The issue is settled by the Hon’ble Supreme Court in the case of Mysore Minerals Ltd. vs. CIT 239 ITR 775 (SC) wherein the Hon’ble Supreme Court held that assessee is using the assets for the purpose of business is entitled to depreciation even if the asset was used is not registered in the name of the assessee. We are, therefore, respectfully following the decision of the Hon’ble Apex Court, inclined to affirm the

90 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. order of Ld. CIT(A) by dismissing the ground No.2 raised by the Revenue.

91 ITA No.259/M/2019 & ors. M/s. Growmore Research & Assets Management Ltd. the direction to the AO to allow the capitalization of interest in the cost of share and securities after following the co-ordinate bench decision as stated hereinabove. Accordingly, the order of Ld. CIT(A) is affirmed on this ground. Ground No.3 is dismissed.

Order pronounced in the open court on 30.03.2021.

Sd/- Sd/- (Amarjit Singh) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated: 30.03.2021. * 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.