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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAJESH KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA no.5205/Mum./2013 (Assessment Year : 2008–09) Rina S. Mehta 32, Madhuli, Dr. A.B. Road ……………. Appellant Worli, Mumbai 400 018 ABNPM8222C v/s Asstt. Commissioner of Income Tax Central Circle–23, Aayakar Bhawan ……………. Respondent 101, M.K. Road, Mumbai 400 020 ITA no.2287/Mum./2014 (Assessment Year : 2008–09) Rina S. Mehta 32, Madhuli, Dr. A.B. Road ……………. Appellant Worli, Mumbai 400 018 ABNPM8222C v/s Asstt. Commissioner of Income Tax Central Circle–23, Aayakar Bhawan ……………. Respondent 101, M.K. Road, Mumbai 400 020 Assessee by : Shri Dharmesh Shah Revenue by : Dr. P. Daniel
Date of Hearing – 25.04.2016 Date of Order – 29.04.2016
O R D E R PER SAKTIJIT DEY, J.M.
Aforesaid two appeals filed by the assessee are directed against separate orders of the learned Commissioner (Appeals)–40, Mumbai, for the assessment year 2008–09.
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ITA no.2287/Mum./2014
In this appeal, the assessee has raised six grounds. 2. Ground no.6, being general in nature, hence, needs no adjudication.
Insofar as ground no.1 is concerned, the learned Authorised Representative did not wish to press this ground. Consequently, ground no.1, is dismissed as “not pressed”.
In ground no.2, assessee has challenged disallowance of interest expenditure of ` 5,37,99,858.
Brief facts are, the assessee is an individual. For the assessment year under dispute, the assessee filed her return of income on 18th March 2009, declaring nil income. As alleged by the Assessing Officer, in spite of several statutory notices being issued, the assessee did not appear. Hence, the Assessing Officer proceeded to complete the assessment under section 144 of the Act on the basis of material on record. During the assessment proceedings, he found that the assessee had claimed expenditure of ` 5,37,99,858, on account of interest payment. Alleging that assessee has failed to furnish any evidence justifying the expenditure claimed, he disallowed the same and added back to the income of the assessee.
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Though, before the first appellate authority, the assessee challenging the disallowance of interest made elaborate submissions on the issue, but the learned Commissioner (Appeals) relying upon the decision of his predecessor–in–office in case of Shri Hitesh S. Mehta, held that the assessee is not entitled for deduction of interest expenditure till the Special Court decides the issue. Accordingly, he upheld the disallowance of ` 5,37,99,858.
Learned Authorised Representative submitted, in case of another assessee of the same group viz. in ITA no.350/Mum./2013 dated 11th May 2015, the Tribunal while deciding identical issue, has restored the matter back to the file of the learned Commissioner (Appeals) on the basis of submissions made by the assessee that the Special Court has already decided the issue.
Shri P. Daniel, learned Special Counsel for the Revenue agreed that as the Tribunal has restored back the issue to the file of the learned Commissioner (Appeals) in case of an assessee from the same group, this issue may be restored back to the learned Commissioner (Appeals).
We have considered the submissions of the parties and perused the material available on record. As could be seen, the learned Commissioner (Appeals) has disallowed the interest expenditure on
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the ground that assessee’s entitlement can only be decided after the decision of the Special Court on the issue. However, it is observed in case of Pratima H. Mehta (supra), the co–ordinate bench while deciding similar issue has held as under:–
“2. Ground No.1 & 2were not pressed. Ground No.3 was stated to be covered by the earlier decision of the Tribunal in group case. Reference was made to the decision dated 5/3/2015 passed in ITA No. 5135& 5136/Mum/2012 & ITA Nos.2151/Mum/2013 in the case of Growmore Leasing & Inv. Ltd. and reference was made to the following observations: “3. Ground No. 4 relates to the disallowance of interest expense. The Ld. Counsel for the assessee brought to our notice that the decision relied upon by the Ld. CIT(A) while disposing this ground has been set aside by the Tribunal to the file of the Ld. CIT(A). 4. The Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue. 5. We have carefully perused the orders of the authorities below. While disposing the ground relating to the 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 Nos. 2139, 2140 and 2141/Mum/2013 have followed the decision of the Tribunal given in common group case of Hitesh S. 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 files of the Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee. 6. 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 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 this fact while deciding the issue afresh. The 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 and as per the provisions of the law. Ground No. 4 is treated as allowed for statistical purpose.”
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Ld. Special Counsel did not controvert to such contention of Ld. AR that the issue is covered by the aforementioned decision. 4. In view of the situation, after hearing both the parties, we pass similar order and this ground is considered to be allowed for statistical purposes in the manner aforesaid.”
Consistent with the view taken by the co–ordinate bench as aforesaid, we restore the matter back to the file of the learned Commissioner (Appeals) for deciding afresh keeping in view the direction of the co–ordinate bench as referred to herein above. Thus, ground no.2 is allowed for statistical purposes.
In ground no.3, the issue relates to addition of an amount of ` 3,00,000 under section 69C of the Act.
Brief facts are, the Assessing Officer, on the basis of material on record, found that the assessee is belonging to Harshad Mehta Group. In view of the various litigations pending against the assessee in different Courts of law, the assessee is required to incur sizable amount of expenditure towards professional fee, travelling, etc. He observed, assessee is also staying at Worli, which is one of the posh locality in Mumbai. The Assessing Officer was of the view that considering the size of family and their standard of living, the assessee must be incurring sizable amount of expenditure to maintain the family. Alleging that the assessee did not furnish any details to explain
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the source of her expenditure, he estimated the monthly expenditure on personal account at ` 50,000 and addition of ` 6,00,000 was made under section 69C of the Act. Being aggrieved, assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) observed that in case of other assessees of the Group, his predecessor–in–office, out of the addition made by the Assessing Officer, has reduced 50% thereby sustaining the addition of the balance 50%. Following the said decision of his predecessor–in–office, in case of other assessees in the group, the learned Commissioner (Appeals) restricted the addition to ` 3,00,000 thereby granting partial relief to the assessee.
Learned Authorised Representative challenging the decision of the learned Commissioner (Appeals) submitted, income of the assessee during the previous year comprised of bank interest and dividend income which are under attachment due to Court order, hence, the assessee is not in a position to withdraw such income and utilise it for her purpose. It was submitted, apart from this income, the Department has not found any other source of income from which the assessee could have made withdrawal towards her personal expenditure. Learned Authorised Representative submitted, the assessee is a house wife and there is no other ostensible source of her
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income. Hence, when there is no income, there cannot be any inference that assessee has incurred expenditure out of any other undisclosed source of income. Further, it was submitted that the assessee stays in a joint family and all the expenses have already been accounted by other family members. Learned Authorised Representative submitted, for invoking the provisions of section 69C, the burden is on the Assessing Officer to prove existence of understatement of expenditure by assessee through cogent evidence to justify the addition. For such proposition, he relied upon the decision of the Tribunal, Mumbai Bench, in case of Pradeep C. Patel v/s DCIT, 58 TTJ 409 (Mum.). Thus, it was submitted, the addition made under section 69C of the Act should be deleted.
Learned Departmental Representative on the other hand submitted, before the Assessing Officer, assessee did not bring any evidence on record to show that she has not incurred any expenditure. Learned Departmental Representative submitted, when the assessee is earning substantial income running into crores, it is not expected that she is not incurring any personal expenses.
We have considered the submissions of the parties and perused the material available on record. It is evident that before the Assessing Officer, there was total non–compliance by the assessee, for whatever
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may the reason, which compelled the Assessing Officer to complete the assessment under section 144 of the Act, wherein, the Assessing Officer made the addition of ` 6,00,000 under section 69C, alleging non–furnishing of any details / evidence by the assessee. The learned Commissioner (Appeals) has sustained 50% of the addition by relying upon the decisions of his predecessor–in–office in case of some other assessees in the group including assessee’s husband Shri Sudhir Mehta for the assessment year 2008–09 whereas, addition of 50% of the amount was sustained. Though, the assessee has pleaded before us that the assessee has not incurred any expenditure on personal account, but in our view, such fact has to be proved through proper supporting evidence. Before us, the learned Authorised Representative has submitted a chart stating the figures of professional and other expenses incurred by other family members to impress upon the fact that nothing was expended by the assessee on account of personal expenditure. However, as it appears, these facts have not been brought to the notice of either learned Commissioner (Appeals) or the Assessing Officer. Even, assuming that such facts were brought to the notice of the learned Commissioner (Appeals), there is absolutely no discussion on this aspect by the learned Commissioner (Appeals). In the aforesaid view of the matter, on over all consideration of the fact and circumstances of the case, we are inclined to restore the matter
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back to the file of the learned Commissioner (Appeals) for deciding afresh after due opportunity of being heard to the assessee. Ground no.3, is allowed for statistical purposes.
In grounds no.4 and 5, assessee has challenged chargeability of interest under sections 234A, 234B and 234C of the Act.
Brief facts are, the Assessing Officer, while completing the assessment, computed the interest under section 234B and 234C of the Act. The assessee challenged leviability of interest before the learned Commissioner (Appeals).
The first appellate authority, however, upheld the leviability of interest under section 234B and 234C observing that charging of interest under the said provision is mandatory.
Learned Authorised Representative submitted before us, the issue of chargeability of interest was decided by the Tribunal in case of other assessee in the group by reopening the matter back to the Assessing Officer for fresh adjudication.
Learned Departmental Representative submitted, the Tribunal has only restored the issue relating to calculation of interest to the Assessing Officer while upholding the applicability of provisions of section 234B and 234C.
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We have considered the submissions of the parties and perused the material available on record. It is observed, the Tribunal while deciding the issue in case of Pratima H. Mehta (supra), has held as under:–
“5. Apropos Ground No.4, it was stated to be covered by the decision of Tribunal dated 18/6/2014 in ITA Nos. 2139,2140 & 2141/Mum/2013 vide order dated 18/6/2014. Reference was invited to the following observations: “3. The next ground of appeal is about levy of interest u/s. 234 of the Act. Before us, AR stated that the assessee was a notified entity, that the provisions of s.234A,234B and 234C of the Act were deemed to have complied with, that the assets were already in attachment of the Custodian appointed under the provisions of the Special Courts Act, that the Tribunal in the case of the appellant and several other entities had held the view in favour of the appellant that the Hon’ble Bombay High Court in the case of Divine Holdings Pvt. Ltd. and Cascade Holdings Pvt. Ltd. had held the provisions of section sections 234A, 234B and 234C of the Act were mandatory and were applicable to the notified entities also, that the assessee was in the process of filing an appeal against thee said order before the Hon'ble Supreme Court, that the income earned in the year under consideration was subjected to provisions of TDS,that the changeability of the section 234A, 234B and 234C of the Act should be after considering the amount of tax deductible at source on the income assessed. The appellant relies in this regard on the following decisions. He relied upon the cases of Motorola inc. v. DCIT [95 lID 269 (Del.(SB)], Sedco Fores Drilling Co. Ltd. [264 ITR 320],NGC Network Asia LLC [313 ITR 187] ,Summit Bhatacharya [ 300 ITR (AI) 347 (Bom)(SB)], Vijal Gopal Jindal [ITA No. 4333/Del/2009] & Emillo Ruiz Berdejo [320 ITR 190 (Bom)].DR relied upon the cases of Devine Holdings Pvt. Ltd. 3.1.We have heard the rival submissions and perused the material before us.We find that in the case of Devine Holdings Pvt. Ltd. Hon'ble Bombay High Court has held
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that provisions of section 234A, 234B and 234C were applicable to the notified person also. Therefore, upholding the order of the FAA to that extent, we hold that provisions of section 234 of the Act are applicable. As far as calculation part is concerned. we find merits in the submission made by the assessee. Therefore, we are restoring back the issue to the file of the AO for fresh adjudication who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing to the assessee. Ground no.5 is allowed in part in favour of the" assessee. As a result, appeal filed by the assessee for the A.Y 2002-03 stands partly allowed.” 6. Ld. Special Counsel did not controvert such contention of Ld.AR that the issue is covered by the aforementioned observations. In this view of the situation, after hearing both the parties, we pass similar order and this ground is considered to be partly allowed."
Consistent with the view taken by the Tribunal as aforesaid, we direct the Assessing Officer to compute the interest under section 234B and 234C while giving effect to the order of the learned Commissioner (Appeals) in terms of our directions contained herein above. Grounds no.4 and 5 are allowed for statistical purposes.
In the result, Revenue’s appeal is partly allowed for statistical purposes.
ITA no.5205/Mum./2013
This appeal arises out of the order passed under section 154 of the Act. The issue raised in the aforesaid appeal, pertains to chargeability of interest under section 234A, 234B and 234C of the act. Similar issue raised by the assessee in ITA no.2287/Mum./2014,
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has been restored back to the Assessing Officer for calculating the interest. Moreover, calculation of interest under the aforesaid provisions being consequential to the decision to be taken by the learned Commissioner (Appeals) on the issue of additions is not required to be adjudicated at this stage. Therefore, this appeal having become infructuous is dismissed.
In the result, assessee’s appeal in ITA no.5205/Mum./2013 is allowed for statistical purposes and appeal in ITA no.2287/Mum./2014 is dismissed.
Order pronounced in the open Court on 29.04.2016
Sd/- Sd/- RAJESH KUMAR SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 29.04.2016 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary (Dy./Asstt. Registrar) ITAT, Mumbai