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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI B.R.BASKARAN (AM) & SHRI RAM LAL NEGI (JM)
These appeals have been filed by the assessee and the revenue in respect of assessee Smt. Deepika A. Mehta for the Asst. years 2006-07 & 2008-09. The assessee has filed ITA 5487/M/2011 against order dated 27/05/2011 passed by the Ld. CIT (Appeals)-40, Mumbai for the Asst. year 2006-07 and the revenue has filed cross appeal ITA 5497/M/2011 against the same order. ITA 6335/M/2013 has been filed by the assessee against order dated 28/08/2013 passed by the Ld. CIT (Appeals)-40, Mumbai for the Asst. year 2008-09. Since all the three appeals pertain to the same assessee and the issues involved are common, all the three appeals were clubbed and heard together and are being disposed of by this common order for the sake of convenience. (A.Y- 2006-07)
Brief facts of the case are that the assessee is a notified person under the Special Court ( Trial of Offences relating to transactions in Securities) Act,1992 and all her assets including Bank Accounts had been attached and vested in the hands of the Custodian appointed under the said Act. Since the assessee had not filed return of income even after the due date, notice dated 29/12/2008, under section 148 of the Income Tax Act, 1961 (in short the Act) was served upon her. In response thereof, the assessee filed return of income declaring total income of Rs. 82,76,310/-. After hearing the assessee, the AO framed assessment order under section 143(3) read with section 147 of the Act and determined the total income of the assessee at Rs. 2,47,60,620/-.
2. The assessee challenged the assessment order by filing first appeal before the CIT(A). The Ld. CIT(A) partly allowed the appeal of the assessee, however, confirmed certain additions including addition of Rs. 3,00,000/- on account of personal drawings and Rs. 1,53,80,576/- on account of interest expenses, made by the AO.
3. Still aggrieved by the impugned order, the assessee is in appeal before the Tribunal. The assessee has raised the following effective grounds of appeal:- “1. The learned Commissioner of Income Tax (Appeals) has to fail to appreciate that the re-opening of assessment u/s 148 is invalid and bad in law.
2. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not appreciating that no income from attached assets can be assessed in the hands of the appellant.
3. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming addition on account of personal drawings amounting to Rs. 3,00,000/-.
4. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming disallowance on account of interest expense amounting to Rs. 1,53,80,576/-.
5. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in confirming disallowance on account of professional expense amounting to Rs. 14,877/-.”
Apart from the aforesaid grounds initially raised the assessee has taken the following additional ground of appeal vide her application dated 17.02.2014.
“The Ld. CIT(A) ought to have appreciated that as per the decision of Hon’ble Special Court dt. 30/04/2010 in MP No. 41 of 1999, the assets under consideration and the consequential income belongs to Shri. Harshad S. Mehta and hence the income assessed by the Assessing Officer ought to have been taxed in the hands of Shri Harshad S. Mehta and not in the hands of the appellant”
4. Before us, the Ld. Assessee’s Representative (AR) submitted that the assessee does not want to contest Ground Nos. 1, 2, 5 & additional ground. Accordingly, Ground No 1, 2, 5 and additional ground of the present appeal are dismissed as not pressed.
The Ld. AR further submitted that Ground No 3 and 4 are covered by the decision dated 21.10.2015 rendered by the Mumbai Tribunal in the case of Smt. Rasila Mehta vs DCIT Mumbai, and the identical issues have been considered in the said case. Hence, the issues involved in the present case are required to be decided accordingly. On the other hand the Ld. Departmental Representative (DR) relying on the concurrent findings of the authorities below submitted that the impugned order does not suffer from any legal infirmity to interfere with.
6. We have perused the material placed before us in the light of the respective submissions of the parties. Ground No 3 pertains to addition on account of personal drawings. We notice that the coordinate Bench has dealt with the identical issue in Smt. Rasila Mehta vs DCIT Mumbai (supra) and the Bench restricted the addition to 50% of the addition sustained by the CIT(A), holding as under:- “We have given thoughtful consideration to the facts brought on the record before us. We find that in the group cases, the addition on account of low withdrawals made by the AO amounting to Rs. 6o,60,000/-have been restricted by the Ld. CIT(A) at Rs. 37,80,000/-which also includes the present addition of Rs. 3,00,000/-. Considering the factual matrix of the entire family, in our considered opinion, an addition of Rs. 1,50,000/-should meet the ends of justice. We, modify the findings of the Ld. CIT(A) and direct
the AO to make disallowance of Rs. 1.50,000/-. This ground of assessee is partly allowed.”
Since the identical issue has been decided by the coordinate Bench, in the aforesaid case, we respectfully follow the same and restrict the addition sustained by the Ld.CIT(A) to 50% and direct the AO to make disallowance of Rs.1,50,000/-. Accordingly, this ground of appeal is partly allowed.
8. Ground No 4 pertains to addition on account of interest expense. An identical issue has been considered by the coordinate Bench in the case of M/s Growmore Research & Assets Mgt. Ltd., and ITA No. 2150/M/13. The relevant paras of the order read as under:- “We have carefully perused the orders of the authorities below. While disposing the ground relating to disallowance of interest, we find that the Ld. CIT(A) has followed the findings given in the case of Eminent Holdings Pvt.Ltd. We find that the Tribunal in the case of Eminent Holdings in ITA No. 2139,2140 and 2141/Mum/2013 have followed the decision of the Mumbai Tribunal given in common group cases of Hitesh Mehta at para 2.3 of the order and restored the matter to the file of the Ld. CIT(A) for fresh adjudication. Respectfully following the findings of the co-ordinate Bench, we restore this issue to the file of the Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee.
Before closing this issue, the Ld.Counsel for the assessee pointed out that the Ld. CIT(A) has held that the issue of interest expenditure is pending before the Hon’ble Special Court. It is the say of the Ld. Counsel that the proceedings in which the the said issue of interest was issued by the custodian have been already concluded which fact has already been recorded by the Ld.CIT(A) in the impugned order. We, therefore, direct the Ld. CIT(A) to consider the facts while deciding the issue afresh. Ld. CIT(A) may also direct for the taxing of income in the hands of the recipient (family members) in accordance with the method of accounting followed by them as per the provisions of the law. Ground No. 4 is treated as allowed for statistical purpose”
The aforesaid findings were followed by the coordinate Bench in Smt. Rasila Mehta vs DCIT Mumbai (supra). Respectfully following the view taken by the coordinate Benches in the aforesaid cases, we restore this issue to the file of the Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee. Accordingly, this ground of appeal is treated as allowed for statistical purpose.
ITA No 5497/M/2011 (A.Y. 2006-07)
The Revenue has challenged the impugned order on the following effective grounds:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that legal sanctity of law, the interest chargeable under section 234A, 234B and 234C is not only consequential but is mandatory in nature.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Special Court Act 1992 has not ruled out the provisions of section 234A, 234B and 234C being not applicable to the notified persons or they are exempt from the liabilities of payment of interest under these section of the Income Tax Act, 1961.” 2. The sole grievance of the revenue is that the Ld. CIT(A) has erred in holding that no interest could be levied in the present case u/s 234A, 234B and 243C of the Act. The Ld. DR brought to our notice that this issue has been decided by the Hon’ble jurisdictional High Court in favour of the revenue and against the assessee to which the Ld. AR fairly conceded.
We further notice that this issue has also come up before the ITAT Mumbai in one of the group cases viz., M/s Harsh Estate Pvt. Ltd. in and 3464/M/2013 and the Tribunal allowed the issue in favour of the revenue, however, directed the Assessing Officer to re- compute the interest liability after reducing the amount of tax deductible at source and decide as per the provisions of law.
Respectfully following the findings of the coordinate Bench, in M/s Harsh Estate Pvt. Ltd.(supra) and followed in the DCIT vs. Smt. Rasila S. Mehta, we allow the appeal of the revenue for statistical purpose and direct the AO to re-compute the interest liability after reducing the amount of tax deductible at source and decide as per the provisions of law.
ITA No. 6335/M/2013 (A.Y. 2008-09)
The assessee has challenged the impugned order dated 28/08/2013 passed by the Ld. CIT (Appeals)-40, Mumbai for the Asst. year 2008-09 on the following effective grounds:-
The Ld Commissioner of Income-Tax (Appeals) has erred in law and facts in not appreciating that the notice issued u/s 148 of the Act is bad in law.
2. The Ld Commissioner of Income-tax (Appeals) ought to have appreciated that as per the decision of Hon’ble Special Court dt. 30/04/2010 in MP No. 41 of 1999, the assets under consideration and the consequential income belongs to Shri.
Harshad S. Mehta and hence the income assessed by the Assessing Officer ought to have been taxed in the hands of Shri Harshad S. Mehta and not in the hands of the appellant.
3. The Ld Commissioner of Income-tax (Appeals) has erred in law and in facts that in confirming the disallowance of interest expenditure amounting to Rs. 1,57,72,396/-.
4. The Ld Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the addition on account of personal household expenses of Rs. 3,00,000/-.
5. The Ld Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the levy of interest u/s. 234A 234B and 234C of the Act.
6. The Ld Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s 234B and 234C of the Act.
Ld. AR (AR) submitted that the assessee does not want to contest Ground Nos. 1, 2. Accordingly, we dismiss Ground No 1 and 2, of the present appeal as not pressed.
3. As regards Ground No 3, which pertains to confirmation of disallowance of interest expenditure amounting to Rs. 1,57,72,396/-. Following the findings of coordinate Benches, we have restored the identical issue to the file of the Ld. CIT(A) in assessee’s own case for the assessment year 2006-07 for fresh adjudication after giving reasonable opportunity of being heard to the assessee. Therefore, we decide this ground of aoppeal accordingly and issue the same direction to the CIT(A), Thus this ground of appeal is treated as allowed for statistical purpose.
4. Ground No 4 of this appeal pertains to confirmation of addition on account of personal household expense of Rs. 3,00,000/-. Following the consistent view taken by the coordinate Bench on this issue, we have restricted the addition sustained by the Ld. CIT(A) to 50% and directed the AO to make disallowance of Rs.1,50,000/- in assessee’s own case for the assessment year 2006-07. We, therefore, decide this issue accordingly. Hence, this ground of appeal is partly allowed.
5. Grounds No 5 and 6 pertain to confirmation of levy of interest under section234A, 234B and 234C of the Act. Following the decision rendered by the coordinate Bench in DCIT vs. Smt. Rasila S. Mehta, for the assessment year 2003-04, we have decide this issue against the assessee and in favour of the revenue in assessee’s own case ITA No 5497/M/2011 for the assessment year 2006-07. Accordingly, we decide this issue against the assessee and in favour of the revenue, however, we direct the AO to re-compute the interest liability after reducing the amount of tax deductible at source and decide as per the provisions of law.
In the result, the appeal filed by the assessee for the assessment year 2006-07 and 2008-09 and appeal filed by the revenue for the assessment year 2006-07 are partly allowed.
Order pronounced in the open court on 31st May, 2016