Income Tax Appellate Tribunal - Mumbai
Ajay C. Mehta, Mumbai vs Assessee on 26 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G", MUMBAI
ौी आर.
आर. सी.
सी. षमा[, लेखा सदःय एवं ौी ǒववेक वमा[, Ûयाियक सदःय के सम¢ ।
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER
AND SHRI VIVEK VARMA, JUDICIAL MEMBER
ITA No. : 3767/Mum/2013, (Assessment year: 2010-11)
DCIT, Central Circle - 44, Vs Shri Chimanlal K Mehta,
Room no. 656, 93 & 94, Koregaon Park,
6th Floor, Aayakar Bhavan, Pune -411 001
M K Road, ःथयी लेखा सं.:PAN: AAFPM 0905 P
Mumbai -400 020
अपीलाथȸ (Appellant) ू×यथȸ (Respondent)
Appellant-assessee by : S/Shri H P Mahajani, S V Joshi,
Deepak Desai, Digant Mehta
Respondent-revenue by : Smt Abha Kala Chanda
Cross Objection (CO) 148/Mum/2014
Arising out of ITA No. : 3767/Mum/2013, AY 2010-11
Shri Chimanlal K Mehta, Vs ACIT, Central Circle - 44,
Koregaon Park, Pune -411 001 Room no. 656,
ःथयी लेखा सं.:PAN: AAFPM 0905 P Mumbai -400 020
ू×यथȸ (Respondent)
Cross Objector assessee by : S/Shri H P Mahajani, S V Joshi,
Deepak Desai, Digant Mehta
Respondent by : Smt Abha Kala Chanda
सुनवाई कȧ तारȣख /Date of Hearing : 10-11-2014
घोषणा कȧ तारȣख /Date of Pronouncement : 26-12-2014
Sr. ITA/Cross Objection No. & Name of Vs Appeal by A.Y. CIT(A)'s
No. the Assessee Assessee or Order
Department Date
1 3777/Mum/2013- M/s Yerrowada DCIT, Department 2010-11 11.02.2013
Investment Ltd, Deepak Comples Off Cir.44,
Golf Course Road, Shastrinagar, Mum
Yerwada, Pune -411006
2 CO 150/Mum/2014- M/s Yerrowada ACIT, Assessee 2010-11 11.02.2013
Investment Ltd, 10-b Bakhtawar, CC-44
Nariman Point, Mumbai -400 021 Mum
ःथयी लेखा सं.:PAN: AAACY 0186 C
3 3765/Mum/2013 - Shri Deepak C ACIT, Department 2010-11 11.02.2013
Mehta, 93 & 94 Koregaon Park, Pune CC.44,
-411 001 Mum
4 CO 149/Mum/2014- Shri Deepak C ACIT, Assessee 2010-11 11.02.2013
Mehta, Gr. Floor, Kejriwal House, 7-N, CC-44
Gamadia Road, Mumbai -400 026 Mum
ःथयी लेखा सं.:PAN: AAHPM 6688 F
5 3766/Mum/2013 - Shri Shailesh C ACIT, Department 2010-11 11.02.2013
Mehta, 93 & 94 Koregaon Park, Pune CC.44,
-411 001 Mum
6 CO 159/Mum/2014- Shri Shailesh C ACIT, Assessee 2010-11 11.02.2013
Mehta, 93 SUM, Southman Road, CC-44
Koregaon Park, Pune -411 001 Mum
ःथयी लेखा सं.:PAN: AAFPM 3448 R
7 3764/Mum/2013 - Shri Ajay C ACIT, Department 2010-11 25.02.2013
Mehta, 93 & 94 Koregaon Park, Pune CC.44,
2 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
-411 001 Mum
8 CO 146/Mum/2014- Shri Ajay C ACIT, Assessee 2010-11 25.02.2013
Mehta, Ground Floor, Kejriwal House, CC-44
7-N, Gamadia Road, Mumbai -400026 Mum
ःथयी लेखा सं.:PAN: AAFPM 3456 K
Appeals heard on 11.11.2014
Sr. ITA/Cross Objection No. & Name of Vs Appeal by A.Y. CIT(A)'s
No. the Assessee Assessee or Order
Department Date
1 3778/Mum/2013 - Shri Chimanlal K ACIT, Department 2009-10 11.02.2013
Mehta, 93 & 94, Koregaon Park, CC 44,
Pune -411 001 Mum
2 CO 147/Mum/2014- Shri Chimanlal ACIT, Assessee 2009-10 11.02.2013
K Mehta, Ground Floor, Kejriwal CC 44,
House, 7-N, Gamadia Road, Mum
Pune -411 026
ःथयी लेखा सं.:PAN: AAFPM 0905 P
3 3779/Mum/2013 - Shri Ajay C DCIT, Department 2009-10 11.02.2013
Mehta, 93 & 94, Koregaon Park, CC 44,
Pune -411 001 Mum
4 CO 145/Mum/2014- Shri Ajay C ACIT, Assessee 2009-10 11.02.2013
Mehta, Ground Floor, Kejriwal House, CC 44,
7-N, Gamadia Road, Mum
Pune -411 026
ःथयी लेखा सं.:PAN: AAFPM 3456 K
सुनवाई कȧ तारȣख /Date of Hearing : 11-11-2014
घोषणा कȧ तारȣख /Date of Pronouncement : 26-12-2014
आ दे श
ORDER
िौ ǒववेक वमा[, Ûया स:
स:
PER VIVEK VARMA, JM:
The appeals filed by the department & corresponding Cross Objections filed by the assessee, as captioned above, have been filed against the order of the CIT(A) 36, Mumbai, for assessment year 2009-10 against the different orders of [all dated 31.01.2012, except in the case of Shri Ajay C Mehta, which is dated 25.02.2013], Mumbai and another two appeals of the said Group & corresponding Cross Objections have been filed against different orders of the CIT(A)-36, Mumbai, commonly dated 11.02.2013 for assessment year 2009-10. As all the appeals in these group, wherein the grounds raised are common, therefore, they have been clubbed heard together and 3 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 are being disposed off by this consolidated order for the sake convenience & brevity. We shall take-up ITA No. 3767/Mum/2013, as a lead appeal in this group, wherein, the department has raised the following grounds:
ITA No. : 3767/Mum/2013 : Department Appeal :
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the ground of limitation by holding that the C.D. was created on 28.3.2003, falling beyond six years limitation period prescribed in section 153A(1) without verifying the authenticity and alleged date of CD through forensic expert.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the basis of surmises and presumptions without verifying the facts as available on record.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 35,47,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 37,63,00,000/- on account of unaccounted payments due to family arrangement ignoring the presumptions with regard to the entries found in seized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the assessment and deleting the additions by relying on the additional evidence in the form of family agreements dated March 2000 and 01.01.2003 but ignoring that these agreements indicated financial transactions during the years covered u/s 153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary".
2. The facts are that there was a search action u/s 132(1) on Deepak Group on 21.07.2009 and the instant assessment is a consequence of the search.
3. Assessment proceedings, consequent to search were initiated by the AO and the AO raised certain queries with regard 4 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 to certain loose papers, marked as Annexure-A-5, Loose Paper bundle no. 9.
4. This paper had certain notings, which are as the following abbreviations, used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand Mehta CKM
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments Ltd YIL
Page Query
No.
37 & Capital A/c. of all family members & their Groups shows amounts in
38 Lakhs mentioning Capital, Loans taken, current liabilities, Deficits,
Immovable Assets, Assets, Loans given & the Balance & further mentions the cash received & cash paid. The amount shown in these Capital Accounts appears to be in Lakhs. The Balance Sheets of the Group concerns are reproduced as under:
DCM & Group Capital 1000 Maryland 392 Other Liability 67 Gotri 17 (Tax on YIL) DNL 647 Other 4 Stock (Other) 6 Balance 1 1067 1067 Cash Recd. + 1,187 Cash paid - 1,186 1 ACM & Group Capital 2951 F.A. 82 Loan taken 411 Gotri 17 Current Liab. 416 Maryland 279 Loan to Oth 243 Curr. Assets 705 Balance 2452 3778 3778 Cash Recd. + 4,939 Cash paid - 2,499 2,440 +12 2,452 SCM & Group Capital 806 Gotri 17 Loan taken 84 Bunglow 396
5 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 Deficit DFPCL-Sh 2,153
-WCCL-2200
-Others 753 2953 YIL TDR Sh. 94 Loans to Others 10 Loan to Smart 430 3843 3843 Cash Recd. + 668 Cash paid - 3,621 Deficit 2,953 CKM & Group Capital 1,384 F.A. 77 Loan taken 2,924 Gotri 21 Curr. Liab. 2,924 YIL 2,682 Deficit 216 YIL (Stock) 325 Baroda 11 Inv. Shares-Oth. 305 3843 Stock - Others 856 Jewellery 21 Loan to others 164 Curr. Assets-Oth 370 4,832 4,832 Cash Recd. + 3,547 Cash paid - 3,763 Deficit 216 YIL Capital 2537 DFPCL Shares 597 Curr. Liab. 10 Loan to Others 35 Current Assets -Others 19 -CKM 216 -SCM 753 Cash & Bank 927 Bal.
2,547 2,547
Cash Recd. + 1,896
Cash paid 969
Loan to CKM/SCM
Surplus 927
WCCL
Capital 72 F.A. 1
Loan Others 2,200 Loan to SCM 2,200
Curr. Liab. 308 Loan to Others 118
Curr. Assets-Oth. 29
Cash & Bk. Bal. 232
2,580 2,580
Cash Recd. + 2,448
Cash paid - 2,216
Surplus 232
Pl. reconcile the same with your Capital A/c., Balance Sheet, & Wealth Tax Statements. In case of non 6 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 submission of details & explanation & reconciliation of these transactions, pl. explain why your Capital A/c. should not be taken as per these papers & the Cash payments & Cash receipts should not be considered outside the Books of A/c. & your income be deduced accordingly? Further, pl. prove the genuineness, creditworthiness & identity of the Loans taken & the Current Liabilities. In case of failure to submit the relevant details/evidences, the same would be treated as income of the respective persons u/s 68 of the IT Act, for the relevant year".
5. The AO sought explanation and decodification of the above notings.
6. The assessee vide letter dated 26.11.2011, submitted, "The paper contains Groupwise probable balance sheets. It seems that this statement is prepared somewhere in March 2003. This group balance sheet are prepared to ascertain the situation of assets and the abilities after giving effect to some transactions in line with family arrangement thought by Shri CKM at that time. Broadly speaking around 2003 Shri CKM had thought of giving control of DFPCL to Shri SCM, and control of Deepak Nitrite to Shri DCM, Shri ACM was to be given liquid fund in the form of capital is and Shri CKM had decided to keep all the real estate properties and liabilities related to the real estate.
Now go give effect to the above decided family arrangement, it was required to transfer/sell some of the assets from some family members to other family members at market rate. Following type of transactions would have a rise to take place among all the family members.
1) Shri DCM group to retain shares of DNL in his fold and Shri DCM group was required to transfer other assets such as shares of DFPCL to Shri SCM group and shares of YIL to Shri CKM group.
2) Shri ACM group was required to transfer all the shares of DFPCL in favour of Shri SCM group, all the shares of DNL in favour of Shri DCM group and all the shares of YIL to Shri CKM group.
3) Shri SCM group was required to retain all the shares of DFPCL group and transfer all the shares of DNL to Shri DCM group and all the shares of YIL to "Shri CKM group.
4) Shri CKM group was required to retain all the shares of YIL and was required to transfer all the shares of DFPCL to Shri SCM group and transfer of the shares of DNL to Shri DCM group.
Now we also wanted to know what will be the picture of assets and Liabilities of all the abovementioned groups after the above said family arrangement transaction will be executed. Accordingly we have prepared probable balance sheets of all the groups of Shri CKM and family assuming that the above said family transactions will happen.
Thus you will see that in the balance sheet of Shri DCM group DFPCL shares and YIL shares are removed and DNL shares are 7 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 retained. In Shri ACM group all shares of DFPCL and DNL and YIL are removed. In Shri SCM group all shares of DNL and YIL are removed but DFPCL shares (both fully paid and partly paid) are kept. In Shri CKM all the shares of DFPCL and DNL are remove and shares of YIL are kept or added/purchased from other group.
In this process of buying and selling various assets as per the family arrangement thinking, each group will be either required to take loan to purchase the shares/assets at market value or each group may have surplus funds, if no assets are to be purchased and only sale of assets to happen. These transactions will finally lead to surplus balances in some of the group and deficit in the bank balances in other group. On the basis of above expected transactions , we had drawn up probable balance sheet GroupWise after giving effect to the above set transactions to determine which group will remain with surplus funds and which group will need funds so that execution of the above set transaction takes place. Thus you will see that all the probable balance sheets are prepared accordingly.
We had decided the above said approach and to a large extent we have implemented also but timing of implementation were different for different assets/liabilities. Broadly all these entities continue to have the assets mentioned and some liabilities have been discharged. It will take time to consolidate the entities to show you the present status which will reflect similar picture among the family only but since these were protected balance sheets more for M I S and due to different parameters assessment at that time like market rate at which shares will be purchased or sold, market rate at which property will be sold, the timing of the discharging liability, etc. However we can bring the books of accounts for verification of the position as of 2009 or 2011.
We have filed all the income tax returns and wealth tax returns wherever required for all these years and the Department can verify the same.
It will be gross injustice if projections and its implementation planning papers of the entire family matching with each other's obligations and rights are construed as transactions outside books and treated as cash payment and cash receipt. Since projections have been made based on purchase and sale of probable value of assets and subsequently resulting in assets creation or daily ability creation cannot be proved from this papers. However as mentioned earlier the books of accounts based on above approach will slow the loan/Liabilities, etc. for your verification and need not be construed other way|.
7. The AO after considering the submissions of the assessee, came to the view that the notings of "cash paid" and "cash received" have to be read, as such, as there was actual cash transaction and he, therefore, added Rs. 35,47,00,000/- "cash received" u/s 68 and Rs. 37,63,00,000/- "cash paid" as unaccounted payment.
8 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
8. Against this order of the AO, the assessee approached the CIT(A), before whom, the assessee reiterated his submissions made on the addition made before the AO. He further submitted "On the issue of limitation the Authorized Representative submitted that the addition has been made in the context and with reference to the 'family Arrangements'. He submitted that the first deed was in March, 2000 and the second one on January, 2003. Thus, the assessment years relevant would be A.Y, 2000-01 and / or A.Y. 2003-04. Both these years fall beyond the period of six years i.e. from A.Y.2004-05 to 2009- 10 for which the assessments u/s.153A could have been made & have actually been made by the AO. He submitted that copies of both the family agreements are part of the seized material. He submitted that the AO has circumvented this difficulty and made the addition in A.Y.2010-11 by observing that "Since the year or date has not been specified in the seized document, it would be construed as if the document & the entries there-on pertain to the year incidental to the Search, viz.A.Y.2010-11".
The Authorized Representative submitted that there is no basis or factual background for such a step and in fact no such addition was warranted either in A.Y. 2010-11 or in any other year. He further submitted that the workings of redistribution of assets as per page Nos.37 & 38 which are the basis for the assessment have also been drawn up prior to 31 March, 2003 as is apparent from the seized CD 19.
He further submitted that CD No.2, on being opened showed another five pages pertaining to group balance sheets. These five pages are the basis for preparation of two pages Nos.37 & 38, the cause of addition in the A.Y. 2010-11. These five pages have very clear headings as "BALANCE SHEET AS ON 13/03/2003".
He submitted that information contained in the two pages i.e. 37 & 38 pertain to the period before 31/03/2003 and hence additions made based on these two pages are time barred. To deal with the question of limitation and, incidental thereto the merits of the case, the entire factual conspectus of the matter has been examined by me. For this purpose the submissions made by the Authorized Representative on the merits of the matter are summarized below:
a. The Appellant is the father of, among others, Deepak (DCM) (eldest son), Sailesh (SCM) and Ajay (ACM). He is the founder of the Deepak Group of companies which include two listed companies Deepak Fertilizers and Petrochemicals Corporation Ltd. (DFPCL) and Deepak Nitrite Ltd. (DNL). The Group owns various assets and properties and has been carrying on various businesses over the last several decades. b. There were disputes within the family. The Appellant, who is presently into his eighties, wanted to evolve a succession plan the aim of which was peace and harmony in the family. He along with his wife Mrs. Kanta Mehta desired to relinquish in favor of their sons, their interests in the two listed companies DFPCL and DNL. c. In order to preserve peace and harmony in the family and, with a view to put an end to/prevent financial disputes and differences between the Appellant-father and his aforesaid three sons, in March, 2000 or so the Appellant, his wife and three Sons entered into a family agreement drafted by M/s. Udwadia, Udeshi and Bergis, Solicitors and Advocates. The Authorized Representative submitted that 2000 Family Agreement forms part of the seized material (Pages 13 to 26 of the Paper Book).
9 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 d. The first Family agreement was entered into in March, 2000, This agreement also forms part of the seized material. e. Despite this Agreement the disputes did not die down whereupon a fresh Family Agreement was drawn up by M/s. Udwadia, Udeshi and Bergis, Solicitors, in January, 2003. This agreement also forms part of the seized material (Pages 1 to 12 of the Paper book). f. In terms of the 2003 Family agreement the Family shares in DFPCL and DNL, which were notionally valued for this limited purpose, were to be again divided equally among the three Sons in such a way that each son was to receive assets of the value of Rs.53 crores. This Agreement also envisaged inter se transfer of shares of DFPCL and DNL and other family assets and liabilities to be retained by the Appellant and his wife.
g. The 2003 Agreement also provided for further inter se redistribution of other assets and liabilities between the family members. h. The Authorized Representative explained that equal distribution of the family assets among the four Groups meant redistribution of assets involving various family members and their corporate entities. This basically involved ensuring that control, assets, and liabilities of specific entities were allotted to specific Group in the process ensuring that there was financial equality.
i The Authorized Representative submitted towards this end, around 12th March, 2003 i.e. soon after the Family agreement was entered into on 1st January, 2003, an exercise was undertaken where under probable /required redistribution of financial assets was plotted. Since this exercise involved as many as about 33 entities and financial assets of large number and value and diverse nature, it was thought expedient to plot in a separate accounting software used by appellant's office, the probable /required redistribution in the form of memorandum ledger accounts by recording memorandum journal entries etc. The idea was to ensure that all proposed effects are properly captured and equitable and culminate in desired results.
j. He submitted that accordingly, the proposed redistribution was plotted on the Computer in Excel Format in great detail and the post-proposed redistribution financials were drawn up. k. A summary of the gross and net effect of this redistribution was also noted at the end of the memorandum financials (Pages G - ito G -11 of the box file).
l. This exercise showed that CKM Group would receive assets from within group worth Rs. 3,547/- and would in turn have to give up assets from within group worth Rs.3,763/. The net result of the redistribution was to be deficit of Rs. 216/- payable by CKM Group. (Pages G-10 of Box File No.1).
DCM Group would receive assets from within group worth Rs. 1,187/- and would in turn have to give up assets from within group worth Rs. 1,186/-. The net result of the redistribution was to be surplus of Rs.1 receivable by DCM Group (Page G-7 of Box File No. 1). Similarly, SCM Group would receive assets from within group worth Rs. 668/- and would in turn have to give up assets from within group worth Rs. 3,621/-. The net result of the redistribution was to be deficit of Rs. 2,953/- payable by SCM Group (Page G-9 of Box File No. 1). Similarly ACM Group would receive assets from within group worth Rs. 4,939/- and would in turn have to give up assets from within group worth Rs. 2,499/-. The net result of the redistribution was to be surplus of Rs. 2,440/- receivable by ACM Group (Page G-8 of Box File No. 1). Similarly YIL would receive assets from within group worth Rs.1896 and would in turn have to give up assets from within group worth Rs.969/-.
10 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 The net result of the redistribution was to be deficit of Rs. 927/- payable by YIL(Page G-11 of Box File No. 1) m. He took me through the Paper Book containing all the basic documents starting from trial balance as on 13/03/2003, probable transactions in detail to give effect to the 'Family Arrangement' & probable balance sheets group wise on the basis of which additions have been made. The AR clarifies that these are all part of the seized material available with the AO.
He further clarified that the trial balance as on 13.03 .2003 on Tally finally leads up to the audited accounts for the F.Y.20022003 for all members of the Deepak Group which are available along with the returns of income filed by all of them for A.Y.2003-04. He explained that "Group wise probable Balance sheets as on 13/03/2003" which gives complete breakup & details of Liabilities and Assets constituent wise have ultimately got converted & reduced into the said two pages (37 & 38). He submitted that a comparison of extracts from the said two pages (37 & 38) and Balance sheet as on 13/03/2003 (as available in CD No. 2".
9. Thus to prove his point on facts, the assessee, during the appeal proceedings before the CIT(A), opened the two CDs, i.e. 2 & 19 and following the path arrived at the two pages, i.e. 37 & 38 and it was pointed out that the last date of creation of pages on the CDs whose printouts were found from the loose papers as well, was dated 28.03.2003.
10. The assessee also pointed out to the CIT(A), that the very basis for addition, being the papers to be undated, lost its credence. The assessee also submitted before the CIT(A) that the use of the word 'cash' was in fact loose assets, which were transferred in and out of various entities, resulting and consequent to the family arrangement.
11. The CIT(A), after considering the detailed submissions and also, after taking into account inconsequential remand report submitted by the AO, held, "I have considered the facts of the case and perused the material on record including the CD2 and CD 19 submitted during the course of the hearing and opened by the representatives of the Appellant in my presence.
On an examination of the material furnished by the Appellant during the course of the hearing and on perusing the two CD I am of the opinion that no new evidence is sought to be placed before me by the Appellant. The entire material including that on the two CD forms part of the seized material and was therefore with the AO when he passed the order.
11 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 In the Remand Report the AO has not off ered any comments in respect of assessment orders for A.Y.2010-11 without assigning any reason thereby suggesting that he had nothing to say in the matter.
Beyond doubt CD 19 file having path name as 'copy 19\suresh\ohd\MyDocuments\data\MSODATA\EXCEL\INDBS .XLS' contains same two pages as 37 & 38 copies of which have been appended to the assessment order and which constitute the basis for the impugned assessment.
CD No. 2, when opened showed another five pages pertaining to group balance sheets. These five pages are the basis for preparation of two pages No. 37 & 38. Relevant figures on pages 37 & 38 perfectly match with the figures on 5 pages on CD 2.
It is seen that these five pages have very clear headings as "BALANCE SHEET AS ON 13/03/2003".
It is thus clear that two pages i.e. 37 & 38 are the summarized version of five pages available on CD 2 and further that the entire data contained therein pertains to the period before 31/03/2003 The AR has clarified that pages 37 & 38 represent probable balance sheets drawn up in the context of Family agreement of 01/01/2003.
On an examination of the material on record it is quite clear that there have been long standing disputes within the Mehta family genesis of which goes beyond the year 2000. A series of letters have been exchanged between the Appellant and his son Sailesh wherein various claims and counter claims have been raised.
The Appellant, who is into his eighties, as the head of the family wanted to evolve a succession plan the aim of which was peace and harmony in the family. He along with his wife Mrs. Kanta Mehta desired to relinquish in favor of their sons, their interests in the two listed companies DFPCL and DNL. Since the 2000 Agreement did not result in settlement of disputes a fresh Family Agreement was drawn up by M/s. Udwadia, Udeshi and Bergis, Solicitors, in January, 2003. Under this family agreement DCM would own and manage DNL, SCM would own and manage DFPCL and ACM was to be paid Cash of Rs. 53 crores being his share in the value of the Family shares. For this purpose shares in DFPCL and DNL, which were notionally valued and divided equally among the three sons in such a way that each son was to receive assets of the value of Rs 53 crores. The 2003 agreement provided for various things including payment of specified amounts and inter se redistribution of other assets and liabilities between the family members as explained in detail by the AR in his submissions.
As explained by the AR equal distribution of the family assets among the four Groups meant redistribution of assets involving various family members and their corporate entities. This involved ensuring that control, assets, and liabilities of specific entities were allotted to specific Group in the process ensuring that there was financial equality. An exercise of plotting probable /required redistribution of financial assets as appearing on said pages 37 & 38 was undertaken around 12th March, 2003 i.e. soon after the Family agreement was entered into on 1st January 2003. Since 12 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 this exercise involved as many as about 33 entities and financial assets of large number and value and diverse nature, the office of the Appellant thought expedient to plot in separate accounting software. An elementary exercise of preparing memorandum ledger accounts by recording memorandum journal entries etc was utilized for this purpose. The CDs on record also clearly establish the fact that the starting point of this entire exercise was Balance sheets as on 13.03.2003 as appearing in the books of account maintained by various group entities.
The further fact which distinctly emerges from the seized material/CD is that the components of the figures of CASH PAID and CASH RECD as appearing at the end of these probable balance sheets are in fact liquid assets in the form of loans, liabilities, cash and bank balances etc. The probable Balance sheet in the case of CKM Group as appearing on page 37 & 38 reads as under:s CKM & Group Capital 1,384 F.A. 77 Loan taken 2,924 Gotri 21 Current Liab. 306 YIL 2,682 Deficit 216 YIL (Stock) 325 Baroda 11 Inv. Shares-Others 305 Stock - Others 856 Jewellery 21 Loan to others 164 Current Assets-Other 370 4,832 4,832 Cash Recd. + 3,547 Cash paid - 3,763 Deficit 216 The AO has brought to tax Rs. 35.47 crores and Rs. 37.63 crores as unexplained cash received and cash paid.
The breakup of the said two figures as available on CD2 is as under:
CKM & Group Particulars CD No.2 (Groupwise Bala- Two Pages 37 & 38 nce sheets as on 13.3.2003 (also in CD No. 19) LIABILITIES:
Capital Account 1,384 1,384 1,384 Loan taken from Others 2,924 2,924 2,924 Current Liabilities 308 308 Loans taken From Group 745 - Whitehall 637 - Current Liabilities Group 2259 - Calls payable 122 - (Treated as Cash paid in 3763 3,763 3,763 Pages 37 & 38) 8379 8,379 ASSETS" Fixed Assets Fixed Assets 77 77 Gotri Bunglow 21 21 YIL Shares 2682 2682 YIL Shares (Stock) 325 325 Baroda Plot 11 11 13 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14 Investments in Shares Others 305 305 Stock - Others 856 856 Jewellery 21 21 Loan to Others 164 164 Current Assets - Other 370 370 Loan given To Group 960 --
Current Assets Group 875 --
Cash and Bank Balance 1712 --
3547 3547 3547
8379 8379
It is thus clear that the so called CASH PAID in fact is the total of the following Loans taken From Group 745 Whitehall 637 Current Liabilities Group 2259 Calls payable 122 (Treated as Cash paid in Pages 37 & 38) TOTAL 3763 637 Similarly the so called CASH RECD is in fact the total of the following:
Loans taken From Group 745 Whitehall 637 Current Liabilities Group 2259 Calls payable 122 (Treated as Cash paid in Pages 37 & 38) TOTAL 3763 637 In my opinion, it is beyond doubt that the words CASH PAID and CASH RECD have been in fact used to refer to identified liquid assets by way of loans taken, loans given, current liabilities, and cash/bank balances which were proposed to be redistributed pursuant to the Family Agreement. These words do not represent hard cash received or hard cash paid as ordinarily -conveyed by these words. That the figures appearing on pages 37 and 38 are probable balance sheets is obvious.
The purpose of entire balance sheets has also been satisfactorily explained by the appellant; it has its genesis in the long standing family disputes which are in fact still not settled. The fact that these probable balance sheets have been drawn up from the accounted balance sheets as on 13.03.2003 is also clearly reflected in CD 2 (G-6 to G-1 1 of the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that though by passing similar orders in the case of 5 group assessees, the AO has brought to tax Rs.242,75,00,000/- as unaccounted CASH, during search on 21.07.2009 no unaccounted cash was found at any place - office or 14 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 residence - across the Group. Similarly no accounted investment or unaccounted expenditure was also found. This lends further support to the contention of the appellant that these are only probable or projected figures and not figures of hard cash.
Another noteworthy fact which emerges on viewing CD 19 containing pages 37 & 38 is that the content there of was created on 28.03.2003. The properties of this CD/file as recorded in the computer at the time of its creation, which was also demonstrated before me, appear as under:
There is therefore merit in the contention of the AR that this CD was created on 28.03.2003 a date falling beyond six year limitation period prescribed in section 153A(l) of the Act. In my opinion the appeal merits being allowed both on grounds of limitation and the ground that the figures are in any event only probable balance sheets and do not reflect actual transactions of CASH PAID AND CASH RECD. These probable balance sheets were themselves based on balance sheets as on
13.03.2003 drawn up from the regular books of account maintained by the appellant Moreover the words CASH PAID AND CASH RECD do not in fact reflect hard cash but identified and accounted liquid assets. For all the reasons discussed hereinabove, the assessment is annulled and ex consequential the sum of Rs. 73,10,00,000/- added to the total income of the Appellant does not survive and gets deleted".
12. The CIT(A), thus deleted the entire addition of Rs. 73,10,00,000/- made in the hands of the assessee, Mr. Chimanlal Khimchand Mehta.
15 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
13. Against this order of the CIT(A), the department has filed appeal before the ITAT.
14. Before us, the DR submitted that the order of the CIT(A) suffered from the basic foundation of truth that the papers, as relied upon by the AO were undated and that there was an evidenced movement of actual cash between the family members and entities.
15. The DR also submitted that the CIT(A)'s reliance has been on the run of CDs, which depicted a certain date. The DR submitted that the factual aspect of the actual notings of the CDs has not been verified. The DR, on these submissions pleaded that the case should be restored to the file of the AO for re-examining and readjudication after examining the authenticity of the CDs.
16. On the other hand, the AR submitted that the entire basis of additions made, as per facts and figures reproduced above in the order, are certain looser papers, which as per hard copy were undated, but when examined from the source, would result in, in the notings made in the CDs, as made on 23.03.2003 and 28.03.2003. This was done and on examined and rerun of the CDs by the CIT(A) himself, which were found and seized by the search party on 21.07.2009. The AR pointed out that seizure of CDs can be seen from the panchnamas as prepared on 21.07.2009.
17. The AR further submitted that characterization of the word 'cash' used in the notings was nothing but loans taken and given, current liabilities and bank balances to be distributed, as a result of on family settlement. It is proved from the fact that actual movement of assets and liabilities was done immediately and wherever any liability arose in the form of capital gains, taxes were paid in accordance with law, on those assets.
16 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
18. The AR also submitted that even in the remand report, the AO accepted the fact that this family distribution was done in the period prior to the 153A period and that is why no comments were made.
19. The AR submitted that in the light of the above and complete facts taken into consideration by the CIT(A), no infirmity can be seen. The AR, therefore, submitted that the appeal as filed by the department must be rejected.
20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand Mehta CKM
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments Ltd YIL
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, period prior to the 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs 17 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition cannot be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, due taxes had been paid.
25. Before us though the AR placed reliance on the decisions of P R Metrani vs CIT- 287 ITR 209 (SC) and Surendra M Khandhar vs ACIT 321 ITR 254 (Bom). In our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition is not occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have 18 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 held pertained to period prior to the search period assessments under section 153A and, therefore cannot be sustained.
26. After perusing the entire material placed before us, we are of the opinion that for tentative family settlement, the entire working was done. In the process of working out the family settlement, the assessee picked up the actual books figures as on 13.03.2003 of various entities to arrive at reasonable distribution. Neither any income was received nor accrued in favour of the assessee. The argument of the AO/DR that there was actual movement of cash could not be substantiated by the AO/DR, as not one currency note was found, which could be held to be unaccounted. Even the fact that the figures taken by the assessee for family distribution were from the actual books also could not be negated by the AO or by the DR before us. The fact, that on actual and final distribution of movable assets, as worked out, all legitimate taxes had been paid by the various persons/entities has also not been controverted by the DR/AO. This goes to prove that the AO treaded on the path of suspicion and based his findings on assumption.
27. We therefore sustain the findings of the CIT(A), wherein he has demolished the entire case of the AO, both on merits and legality, accepting the fact that the assessment framed by the AO is erroneous, as the figures are based on the CDs seized by the department, which clearly shows creation of the same on 28.03.2003, which is beyond the limitation period, as prescribed in section 153A.
28. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any evidence, which was not before the AO or was not in the seized material. Even in the 19 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 course of hearing before us, the DR could not bring out or point out any document, which could be said to be taken into consideration by the CIT(A) and not considered by the AO.
29. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
30. In the result, Departmental appeal, as filed by the revenue stands dismissed.
31. Now, we shall deal with remaining appeals, by following our lead appeal in ITA No.3767/Mum/2013 as decided by us hereinabove of this order filed by the department.
ITA No. : 3777/Mum/2013 : Department Appeal :
32. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the ground of limitation by holding that the C.D. was created on 28.3.2003, falling beyond six years limitation period prescribed in section 153A(1) without verifying the authenticity and alleged date of CD through forensic expert.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the basis of surmises and presumptions without verifying the facts as available on record.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 18,96,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 9,69,00,000/- on account of unaccounted payments due to family arrangement ignoring the presumptions with regard to the entries found in seized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the assessment and deleting the additions by relying on the additional evidence in the form of family agreements dated March 2000 and 01.01.2003 but ignoring that these agreements indicated financial transactions during the years covered u/s 153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in 20 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary. A copy of the order of the CIT(A), Mumbai was received in this office on 15.3.2013. The limitation date for filing of appeal u/s 253(2) is 13.5.2013. However, the appeal should be filed immediately".
33. The CIT(A) on consideration of the submissions as made by the assessee along with the documents found seized, has observed:
"I have considered the facts of the case and perused the material on record including the CD2 and CD19 submitted during the course of the hearing and opened by the representatives of the Appellant in my presence.
On an examination of the material furnished by the Appellant during the course of the hearing and on perusing the two CL) I am of the opinion that no new evidence is sought to be placed before me by the Appellant. The entire material including that on the two CD forms part of the seized material and was therefore with the AG when he passed the order.
In the Remand Report the AO has not off ered any comments in respect of assessment orders for A.Y.2010-11 without assigning any reason thereby suggesting that he had nothing to say in the matter. B e y o n d d o u b t C D 1 9 f il e h av i n g p a th n a m e as ' c o p y l 9 \ s u r e s h \ o h d \ My Documents\data\MSGDATA\EX CEL\INDBS.XLS' contains same two pages as 37 & 38 copies of which have been appended to the assessment order and which constitute the basis for the impugned assessment.
CD No. 2, when opened showed another five pages pertaining to group balance sheets. These five pages are the basis for preparation of two pages No. 37 & 38. Relevant figures on pages 37 & 38 perfectly match with the figures on 5 pages on CD 2.
It is seen that these five pages have very clear headings as "BALANCE SHEET AS.
It is thus clear that two pages i.e. 37 & 38 are the summarized version of five pages available on CD 2 and further that the entire data contained therein pertains to the period before 31/03/2003 The AR has clarified that pages 37 & 38 represent probable balance sheets drawn up in the context of Family agreement of 01/01/2003.
On an examination of the material on record it is quite clear that there have been long standing disputes within the Mehta family genesis of which goes beyond the year 2000. A series of letters have been exchanged between the Mr. CKM and his son Sailesh wherein various claims and counter claims have been 21 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 raised.
Mr. CKM, who is into his eighties, as the head of the family wanted to evolve a succession plan the aim of which was peace and harmony in the family. He along with his wife Mrs. Kanta Mehta desired to relinquish in favor of their sons, their interests in the two listed companies DFPCL and DNL.
Since the 2000 Agreement did not result in settlement of disputes a fresh Family Agreement was drawn up by M/s. Udwadia, Udeshi and Bergis, Solicitors, in January, 2003. Under this family agreement DCM would own and manage DNL, SCM would own and manage DFPCL and ACM was to be paid Cash of Rs. 53 crores being his share in the value of the Family shares. For this purpose shares in DFPCL and DNL, which were notionally valued and divided equally among the three sons in such a way that each son was to receive assets of the value of Rs.53 crores. The 2003 agreement provided for various things including payment of specified amounts and inter se redistribution of other assets and liabilities between the family members as explained in detail by the AR in his submissions.
As explained by the AR equal distribution of the family assets among the four Groups meant redistribution of assets involving various family members and their corporate entities. This involved ensuring that control, assets, and liabilities of specific entities were allotted to specific Group in the process ensuring that there was financial equality.
An exercise of plotting probable /required redistribution of financial assets as appearing on said pages 37 & 38 was undertaken around 12th March, 2003 i.e. soon after the Family agreement was entered into on 1st January, 2003. Since this exercise involved as many as about 33 entities and financial assets of large number and value and diverse nature, the office of the Appellant thought expedient to plot in separate accounting software. An elementary exercise of preparing memorandum ledger accounts by recording memorandum journal entries etc was utilized for this purpose. The CDs on record also clearly establish the fact that the starting point of this entire exercise was Balance sheets as on 13.03.2003 as appearing in the books of account maintained by various group entities. The further fact which distinctly emerges from the seized material/CD is that the components of the figures of CASH PAID and CASH RECD as appearing at the end of these probable balance sheets are in fact liquid assets in the form of loans, liabilities, cash and bank balances etc. The probable Balance sheet in the case of YIL as appearing on page 37 & 38 reads as under:
YIL Capital 2537 DFPCL Shares 597 Curr. Liab. 10 Loan to Others 35 Current Assets -Others 19 22 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 -CKM 216 -SCM 753 Cash & Bank 927 Bal.
2,547 2,547
Cash Recd. + 1,896
Cash paid 969
Loan to CKM/SCM
Surplus 927
The AO has brought to tax Rs. 18.96 crores and Rs. 9.69 crores as unexplained Cash received and cash paid.
The break up of the said two f igures as available on CD 2 is under:
YIL Particulars CD No.2 (Groupwise Bala- Two Pages 37 & 38 nce sheets as on 13.3.2003 (also in CD No. 19) LIABILITIES:
Capital Account 2,537 2,537 Current Liabilities 10 10 TOTAL 2,547 2,547 ASSETS : Fixed Assets - - Investments in Shares 597 597 DFPCL 35 35 Loan to Others 19 19 Current Assets - Other 1,678 Loan given To Group 170 Current Assets Group 48 Cash and Bank Balance (Treated as Cash Received in Pages 37 & 38) 1896 1896 1896 TOTAL 2,547 2,547
It is thus clear that the so called CASH PAID in fact is the total of the following:Loans given to CKM 216 Loans given to SCM 753
(Treated as Cash paid in Pages 37 & 38) TOTAL 969 Similarly the so called CASH RECD is in fact the total of the following:
ASSETS:
Loan given
To Group 1678
Current Assets
23 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14 Group 170 Cash and Bank Balance 48 (Treated as Cash received In Pages 37 &
38) TOTAL 1896 The difference between Cash Received of 1896 and Cash Paid of 969 is 927 which is shown as Deficit (Cash & Bank Balance) in Pages 37 & 38.
In my opinion, it is beyond doubt that the words CASH PAID and CASH RECD have been in fact used to refer to identified liquid assets by way of loans taken, loans given, current liabilities, and cash/bank balances which were proposed to be redistributed pursuant to the Family Agreement. These words do not represent hard cash received or hard cash paid as ordinarily conveyed by these words.
That the figures appearing on pages 37 and 38 are probable balance sheets is obvious.
The purpose of the entire exercise of preparing memorandum probable balance sheets has also been satisfactorily explained by the appellant; it has its genesis in the long standing family disputes which are in fact still not settled.
The fact that these probable balance sheets have been drawn up from the accounted balance sheets as on 13.03.2003 is also clearly reflected in CD 2 (G-6 to G-11 of the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that though by passing similar orders in the case of 5 group assessees, the AO has brought to tax Rs.242,75,00,000/- as unaccounted CASH, during search on 21.07.2009 no unaccounted cash was found at any place - office or residence - across the Group. Similarly no accounted investment or unaccounted expenditure was also found. This lends further support to the contention of the appellant that these are only probable or projected figures and not figures of hard cash.
Another noteworthy fact which emerges on viewing CD 19 containing pages 37 & 38 is that the content there of was created on 28.03.2003. The properties of this CD/file as recorded in the computer at the time of its creation, which was also demonstrated before me, appear as under:
24 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 There is therefore merit in the contention of the AR that this CD was created on 28.03.2003 a date falling beyond six year limitation period prescribed in section 153A(1) of the Act.
In my opinion the appeal merits being allowed both on grounds of limitation and the ground that the figures are in any event only probable balance sheets and do not reflect actual transactions of CASH PAID AND CASH RECD. These probable balance sheet were themselves based on balance sheets as on 13.03.2003 drawn up from the regular books of account maintained by the appellant. Moreover the words CASH PAID AND CASH RECD do not in fact reflect hard cash but identified and accounted liquid assets. For a ll the reasons discussed hereinabove, the assessment is annulled and ex consequentia the sum of Rs.28,65,00,000/- added to the total income of the Appellant does n o t s u r v i v e a n d g e ts d e l e te d " .
34. As the issues involved in the impugned appeal are common as deliberated and decided by us hereinabove, in our order while adjudicating the Department appeal in ITA No. 3767/Mum/2013 at length. The relevant conclusive paras of our order read as under:
20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal CKM
Khimchand Mehta
2 Mr. Deepak Chimanlal DCM
Mehta
25 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14 3 Mr. Sailesh Chimanlal SCM Mehta 4 Mr. Ajay Chimanlal ACM Mehta 5 M/s. Deepak Fertilizers DFPCL & Petrochemicals Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL 7 M/s. Yerrowada YIL Investments Ltd
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, prior period to the period for 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition can be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, capital gains had been paid.
26 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
25. Before us though the AR placed reliance on the decisions of In the case of P R Metrani vs CIT- 287 ITR 209 (SC) In the case of Surendra M Khandhar vs ACIT 321 ITR 254 (Bom) in our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition has not been occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have held cannot be sustained.
26. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any evidence, which was not before the AO or was not in the seized material.
27. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
28. In the result, Departmental appeal, as filed by the revenue stands dismissed.
35. Following the above said paras, we dismiss the grounds involved in department ITA No. 3777/Mum/2013. Accordingly, Department's appeal stands dismissed.
ITA No. : 3765/Mum/2013 : Department Appeal :
36. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the ground of limitation by holding that the C.D. was created on 28.3.2003, falling beyond six years limitation period prescribed in section 153A(1) without verifying the authenticity and alleged date of CD through forensic expert.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the basis of surmises and presumptions without verifying the facts as available on record.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 11,87,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 11,86,00,000/- on account of unaccounted payments due to family arrangement ignoring the presumptions with regard to 27 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 the entries found in seized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the assessment and deleting the additions by relying on the additional evidence in the form of family agreements dated March 2000 and 01.01.2003 but ignoring that these agreements indicated financial transactions during the years covered u/s 153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary".
37. The CIT(A) on consideration of the submissions as made by the assessee along with the documents found seized, has observed:
"I have considered the facts of the case and perused the material on record including the CD2 and Ct)19 submitted during the course of the hearing and opened by the representatives of the Appellant in my presence.
On an examination of the material furnished by the Appellant during the course of the hearing and on perusing the two CD I am of the opinion that no new evidence is sought to be placed before me by the Appellant. The entire material including that on the two CD forms part of the seized material and was therefore with the AO when he passed the order.
In the Remand Report the AO has not off ered any comments in respect of assessment orders for A.Y.2010-11 without assigning any reason thereby suggesting that he had nothing to say in the matter. B e y o n d d o u b t C D 1 9 f il e h av i n g p a t h n a m e as ' c o p y l 9 \ s u r e s h \ o h d \ M y Documents\data\MSODAT A\EXCEL\INDBS.XLS' contains same two pages as 37 &
38 copies of which have been appended to the assessment order and which constitute the basis for the impugned assessment.CD No. 2, when opened showed another five pages pertaining to group balance sheets. These five pages are the basis for preparation of two pages No. 37 & 38. Relevant figures on pages 37 & 38. The relevant figures on pages 37 & 38 perfectly match with the figures on 5 pages on CD 2 It is seen that these five pages have very clear headings as "BALANCE SHEET AS ON 13/03/2003". It is thus clear that two pages i.e. 37 & 38 are the summarized version of five pages available on CD 2 and further that the entire data contained therein pertains to the 28 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 period before 31/03/2003 The AR has clarified that pages 37 & 38 represent probable balance sheets drawn up in the context of Family agreement of 01/01/2003.
On an examination of the material on record it is quite clear that there have been long standing disputes within the Mehta family genesis of which goes beyond the year 2000. A series of letters have been exchanged between the Appellant and his son Sailesh wherein various claims and counter claims have been raised.
Mr. CKM, who is into his eighties, as the head of the f amily wanted to evolve a succession plan the aim of which was peace and harmony in the family. He along with his wife Mrs. Kanta Mehta desired to relinquish in favor of their sons, their interests in the two listed companies DFPCL and DNL.
Since the 2000 Agreement did not result in settlement of disputes a fresh Family Agreement was drawn up by M/s. Udwaclia, Udeshi and Bergis, Solicitors, in January, 2003. Under this family agreement DCM would own and manage DNL, SCM would own and manage DFPCL and ACM was to be paid Cash of Rs. 53 crores being his share in the value of the Family shares. For this purpose shares in DFPCL and DNL, which were notionally valued and divided equally among the three sons in such a way that each son was to receive assets of the value of Rs.53 crores. The 2003 agreement provided for various things including payment of specified amounts and inter se redistribution of other assets and liabilities between the family members as explained in detail by the AR in his submissions.
As explained by the AR equal distribution of the f amily assets among the f our Groups meant redistribution of assets involving various family members and their corporate entities. This involved ensuring that control, ass, and liabilities of specific entities were , allotted to specific Group in the process ensuring that there was financial equality. An exercise of plotting probable /required redistribution of financial assets as appearing on said pages 37 & 38 was undertaken around 12th March, 2003 i.e. soon after the Family agreement was entered into on 1st January, 2003. Since this exercise involved as many as about 33 entities and financial assets of large number and value and diverse nature, the office of the Appellant thought expedient to plot in separate accounting software. An elementary exercise of preparing memorandum ledger accounts by recording memorandum journal entries etc was utilized for this purpose. The CDs on record also clearly establish the fact that the starting point of this entire exercise was Balance sheets as on 13.03.2003 as appearing in the books of account maintained by various group entities. The further fact which distinctly emerges from the seized material/CD is that the components of the figures of 29 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 CASH PAID and CASH RECD as appearing at the end of these probable balance sheets are in fact liquid assets in the form of loans, liabilities, cash and bank balances etc. The probable Balance sheet in the case of DCM Group as appearing on page 37 & 38 reads as under:
CAPITAL 1000 MARYLAND 392 OTHER Gotri 17LIABILITY (Tax 67 DNL 647 on YIL) OTHER 4 STOCK OTHER 6 SH/.
1 BALANCE 1067 1067 Cash received + 1,187 Cash paid _ 1,186 1
The AO has brought to tax Rs.11.87 crores and Rs.11.86 crores as unexplained CASH RECD and CASH PAID".
30 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 Similarly the so called CASH RECD is in fact the total of the following:
ASSETS:
Loan given To Group 150 Current Assets Group 1011 Others 3
31 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 Cash and Bank Balance 23 (Treated as Cash Received In Pages 37 & 38) TOTAL 1187 In my opinion, it is beyond doubt that the words CASH PAID and CASH RECD have been in fact used to refer to identified liquid assets by way of loans taken, loans given, current liabilities, and cash/bank balances which were proposed to be redistributed pursuant to the Family Agreement. These words do not represent hard cash received or hard cash paid as ordinarily conveyed by these words.
That the figures appearing on pages 37 and 38 are probable balance sheets is obvious.
The purpose of the entire exercise of preparing memorandum probable balance sheets has also been satisfactorily explained by the appellant; it has its genesis in the long standing family disputes which are in fact still not settled.
The fact that these probable balance sheets have been drawn up from the accounted balance sheets as on 13.03.2003 is also clearly reflected in CD 2 (G-6 to G-ll of the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that though by passing similar orders in the case of 5 group assessees, the AO has brought to tax Rs.242,75,00,000/- as unaccounted CASH, during search on 21.07.2009 no unaccounted cash was found at any place - office or residence - across the Group. Similarly no accounted investment or unaccounted expenditure was also found. This lends further support to the contention of the appellant that these are only probable or projected figures and not figures of hard cash..
Another noteworthy fact which emerges on viewing CD 19 containing pages 37 & 38 is that the content there of was created on 28.03.2003. The properties of this CD/file as recorded in the computer at the time of its creation, which was also demonstrated before me, appear as under:
There is therefore merit in the contention of the AR that this CII) was created on 28.03.2003 a date falling beyond six year limitation period prescribed in section 53A(1) 32 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 the Act.
In my opinion the appeal merits being allowed both on grounds of limitation and the ground that the figures are in any event only probable balance sheets and do not reflect actual transactions of CASH PAID AND CASH RECD. These probable balance sheets were themselves based on balance sheets as on 13.03.2003 drawn up from the regular books of account maintained by the appellant.
Moreover the words CASH PAID AND CASH RECD do not in fact reflect hard cash but identified and accounted liquid assets.
For all the reasons discussed hereinabove, the assessment is annulled and ex consequentia the sum of Rs.23,73,00,000/- added to the total income of the Appellant does no t survive and ge ts del ete" .
38. As the issues involved in the impugned appeal are common as deliberated and decided by us hereinabove in our order while adjudicating the Department's ITA No. 3767/Mum/2013 at length and following the same decided another department's appeal in ITA 3777/Mum/2013. The relevant conclusive paras of our order read as under:
"20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, as used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand CKM
Mehta
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation
Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments YIL
Ltd
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, prior to the period for 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs 33 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition can be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, capital gains had been paid.
25. Before us though the AR placed reliance on the decisions of In the case of P R Metrani vs CIT- 287 ITR 209 (SC) In the case of Surendra M Khandhar vs ACIT 321 ITR 254 (Bom) in our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition has not been occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have held cannot be sustained.
26. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any evidence, which was not before the AO or was not in the seized material.
27. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
28. In the result, Departmental appeal, as filed by the revenue stands dismissed.
34 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
39. Following the above said paras, we dismiss the grounds involved in department ITA No. 3765/Mum/2013. Accordingly, Department's appeal stands dismissed.
ITA No. : 3766/Mum/2013 : Department Appeal :
40. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the ground of limitation by holding that the C.D. was created on 28.3.2003, falling beyond six years limitation period prescribed in section 153A(1) without verifying the authenticity and alleged date of CD through forensic expert.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the basis of surmises and presumptions without verifying the facts as available on record.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 6,68,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 36,21,00,000/- on account of unaccounted payments due to family arrangement ignoring the presumptions with regard to the entries found in seized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the assessment and deleting the additions by relying on the additional evidence in the form of family agreements dated March 2000 and 01.01.2003 but ignoring that these agreements indicated financial transactions during the years covered u/s 153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary".
41. The CIT(A) on consideration of the submissions as made by the assessee along with the documents found seized, has observed:
To further bolster his case the AR opened in my presence the said two CD 2 and 19.
On being accessed CD 19, and on o p e n i n g h a v i n g p a t h n a m e a s 'copy 1 9\suresh\ohd\MyDocuments\data\MSODATA\EX 35 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 CEL\INDBS .XLS', he showed me file containing same two pages as 37 & 38 which is the basis for the impugned assessment.
He also drew my attention to the fact that as per the computer record, this file having two pages similar to 37 & 38, was created on 28/03/2003. The copy of computer printout was also placed on record. He submitted that, in the circumstances, use of the words 'Cash paid' and Cash received' has to be seen in the facts and context of the case and not with reference to the English dictionary as has been done by the learned AO.
The AR submitted that the AO vide his letter dated 17.01.2012 had permitted the appellant to take copies of all the seized material (including soft material) which includes the material recorded on the said two CDs. He submitted that the appellant obtained such copies from the AO on 08.02.2012. Thus, no additional evidence is contained in these CDs.
I have considered the facts of the case and perused the material on record including the CD2 and CD19 submitted during the course of the hearing and opened by the representatives of the Appellant in my presence.
On an examination of the material furnished by the Appellant during the course of the hearing and on perusing the two CD I am of the opinion that no new evidence is sought to be placed before me by the Appellant. The entire material including that on the two CD forms part of the seized material and was therefore with the AO when he passed the order.
In the Remand Report the AO has not off ered any comments in respect of assessment orders for A.Y.2010-11 without assigning any reason thereby suggesting that he had nothing to say in the matter. Beyond doubt CD 19 file having path name as 'copy l9\suresh\ohd\MyDocuments\data\MSODATA\EXCEL \INDBS.XLS' contains same two pages as 37 & 38 copies of which have been appended to the assessment order and which constitute the basis for the impugned assessment.
CD No. 2, when opened showed another five pages pertaining to group balance sheets. These five pages are the basis for preparation of two pages No. 37 & 38. Relevant figures on pages 37 & 38 perfectly match with the figures on 5 pages on CD 2.
It is seen that these five pages have very clear headings as "BALANCE SHEET AS ON 13/03/2003". It is thus clear that two pages i.e. 37 & 38 are the summarized version of five pages available on CD 2 and further that the entire data contained therein pertains to the period before 31/03/2003 The AR has clarified that pages 37 & 38 represent probable balance sheets drawn up in the context of Family agreement of 01/01/2003.
36 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 On an examination of the material on record it is quite clear that there have been long standing disputes within the Mehta family genesis of which goes beyond the year 2000. A series of letters have been exchanged between the Appellant and his son Sailesh wherein various claims and counter claims have been raised.
Mr. CKM, who is into his eighties, as the head of the f amily wanted to evolve a succession plan the aim of which was peace and harmony in the family. He along with his wife Mrs. Kanta Mehta desired to relinquish in favor of their sons, their interests in the two listed companies DFPCL and DNL.
Since the 2000 Agreement did not result in settlement of disputes a fresh Family Agreement was drawn up by M/s. Udwaclia, Udeshi and Bergis, Solicitors, in January, 2003. Under this family agreement DCM would own and manage DNL, SCM would own and manage DFPCL and ACM was to be paid Cash of Rs. 53 crores being his share in the value of the Family shares. For this purpose shares in DFPCL and DNL, which were notionally valued and divided equally among the three sons in such a way that each son was to receive assets of the value of Rs.53 crores. The 2003 agreement provided for various things including payment of specified amounts and inter se redistribution of other assets and liabilities between the family members as explained in detail by the AR in his submissions.
As explained by the AR equal distribution of the f amily assets among the f our Groups meant redistribution of assets involving various family members and their corporate entities. This involved ensuring that control, ass, and liabilities of specific entities were , allotted to specific Group in the process ensuring that there was financial equality. An exercise of plotting probable /required redistribution of financial assets as appearing on said pages 37 & 38 was undertaken around 12th March, 2003 i.e. soon after the Family agreement was entered into on 1st January, 2003. Since this exercise involved as many as about 33 entities and financial assets of large number and value and diverse nature, the office of the Appellant thought expedient to plot in separate accounting software. An elementary exercise of preparing memorandum ledger accounts by recording memorandum journal entries etc was utilized for this purpose. The CDs on record also clearly establish the fact that the starting point of this entire exercise was Balance sheets as on 13.03.2003 as appearing in the books of account maintained by various group entities. The further fact which distinctly emerges from the seized material/CD is that the components of the figures of CASH PAID and CASH RECD as appearing at the end of these probable balance sheets are in fact liquid assets in the form of loans, liabilities, cash and bank balances etc. 37 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 SCM & Group Capital 806 Gotri 17 Loan taken 84 Bunglow 396 Deficit DFPCL-Sh 2,153
-WCCL-2200
-Others 753 2953 YIL TDR Sh. 94 Loans to Others 10 Loan to Smart 430 3843 3843 Cash Recd. + 668 Cash paid - 3,621 Deficit 2,953 The AO has brought to tax Rs.6.68 crores and Rs.36.21 crores as unexplained CASH RECD and CASH PAID".
The break up of the said two figures as available on CD 2 is as under:
38 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 39 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 In my opinion, it is beyond doubt that the words CASH PAID and CASH RECD have been in fact used to refer to identified liquid assets by way of loans taken, loans given, current liabilities, and cash/bank balances which were proposed to be redistributed pursuant to the Family Agreement. These words do not represent hard cash received or hard cash paid as ordinarily conveyed by these words.
That the figures appearing on pages 37 and 38 are probable balance sheets is obvious.
The purpose of the entire exercise of preparing memorandum probable balance sheets has also been satisfactorily explained by the appellant; it has its genesis in the long standing family disputes which are in fact still not settled.
The fact that these probable balance sheets have been drawn up from the accounted balance sheets as on 13.03.2003 is also clearly reflected in CD 2 (G-6 to G-ll of the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that though by passing similar orders in the case of 5 group assessees, the AO has brought to tax Rs.242,75,00,000/- as unaccounted CASH, during search on 21.07.2009 no unaccounted cash was found at any place - office or residence - across the Group. Similarly no accounted investment or unaccounted expenditure was also found. This lends further support to the contention of the appellant that these are only probable or projected figures and not figures of hard cash..
Another noteworthy fact which emerges on viewing CD 19 containing pages 37 & 38 is that the content there of was created on 28.03.2003. The properties of this CD/file as recorded in the computer at the time of its creation, which was also demonstrated before me, appear as under:
There is therefore merit in the contention of the AR that this CII) was created on 28.03.2003 a date falling beyond six year limitation period prescribed in section 53A(1) the Act.
In my opinion the appeal merits being allowed both on 40 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 grounds of limitation and the ground that the figures are in any event only probable balance sheets and do not reflect actual transactions of CASH PAID AND CASH RECD. These probable balance sheets were themselves based on balance sheets as on 13.03.2003 drawn up from the regular books of account maintained by the appellant.
Moreover the words CASH PAID AND CASH RECD do not in fact reflect hard cash but identified and accounted liquid assets.
For all the reasons discussed hereinabove, the assessment is annulled and ex consequentia the sum of Rs.42,89,00,000/- added to the total income of the Appellant does no t survive and ge ts del ete" .
42. As the issues involved in the impugned appeal are common as deliberated and decided by us hereinabove in our order while adjudicating the Department appeal in ITA No. 3767/Mum/2013 at length and following the same decided another two appeal of the department in ITAs No. 3777/Mum/2013 & ITA 3765/Mum/2013. The relevant conclusive paras of our order read as under:
"20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand CKM
Mehta
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation
Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments YIL
Ltd
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, period prior to the 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs 41 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition can be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, capital gains had been paid.
25. Before us though the AR placed reliance on the decisions of In the case of P R Metrani vs CIT- 287 ITR 209 (SC) In the case of Surendra M Khandhar vs ACIT 321 ITR 254 (Bom) in our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition has not been occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have held cannot be sustained.
26. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any evidence, which was not before the AO or was not in the seized material.
27. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
28. In the result, Departmental appeal, as filed by the revenue stands dismissed.
42 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
43. Following the above said paras, we dismiss the grounds involved in department's ITA No. 3766/Mum/2013. Accordingly, Department's appeal stands dismissed.
ITA No. : 3764/Mum/2013 : Department Appeal :
44. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the ground of limitation by holding that the C.D. was created on 28.3.2003, falling beyond six years limitation period prescribed in section 153A(1) without getting any forensic examination.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in annulling the assessment on the basis of surmises and presumptions without verifying the facts as available on record.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs.
49,39,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 24,99,00,000/- on account of unaccounted payments due to family arrangement ignoring the presumptions with regard to the entries found in seized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the assessment and deleting the additions by relying on the additional evidence in the form of family agreements dated March, 2000 and 01.01.2003 but ignoring that these agreements indicated financial transactions during the years covered u/s 153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary".
45. The CIT(A) on consideration of the submissions as made by the assessee along with the documents found seized, has observed:
Thus the word CASH has been used in the context of liquid assets not only by the appellant but also by an external CA and by the Pane Off ice of the Appellant. This ther ef ore 43 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 establ ishes a set pattern of using the wo rd CASH l oosel y not only wi th reference to hard cash but also other liquid assets.
It is also a fact that the Letter dated 03.12.2008 was dictated to the Secretary of CKM and copies thereof were also marked to Company Executives, eminent Solicitor and also given to Arbitrators. T h e r e i s me r i t i n t h e c o n te n ti o n of th e A R t h a t s u c h o p e n r ef e re n c e to C A S H o r unaccounted transactions of such magnitude can be said to be contrary to normal human conduct.
As rightly pointed out by the AR SCM in his letter dated 11/12/2008 has questioned the correctness of the contents of CKM;s letter dated 03/12/2008. It is seen that this letter is again marked to a Company Executive and to the same Solicitor. The Assessing Officer has not made a reference to this letter in the assessment order though it was part of the seized material.
The other material fact which the Assessing Officer has not given due importance is that d u r i n g th e c o u r s e of th e s e a r c h c o v e r i n g t h e e n ti r e D e e p ak G r o u p c o v e r i n g b o t h residences of all family members and all the companies, no unaccounted cash was found.
Going by the Assessing Officer own presumption, this cash transaction is supposed to have taken place during the period 01.04.2008 to 31.03.2009 while the search took place on 21.07.2009. During this extensive search neither was any unaccounted cash or any unaccounted investment or unaccounted expenditure was detected either by the search party or by the Assessing Officer during assessment proceedings barring use of the word CASH in the said letter of 03.12.2008.
In my opinion this fact lends further credence to the argument of the AR that use of the word CASH in the said letter was in the context of liquid funds only and not hard cash as presumed by the Assessing Officer.
The other relevant f act is that the f amily disputes particularly between CKM and SCM have not been settled even today and the matter is pending before Arbitrators. This fact is also coming out from the submissions made during assessment proceedings. It is also seen that the Assessing Officer has brought Rs.20 crores to tax in A.Y. 2009-10 only because there is use of the word CASH in the letter dated 03.12.2008. In my opinion there is no basis for such approach. The seized material clearly shows that family disputes are deep rooted and going on since prior to the year 2000. The first family agreement is of March, 2000. The second family agreement is of 01/01/2003. The 2003 agreement speaks of the Appellant being required to pay Rs.30 crs. to ACM on or before 31.03.2003. The agreement also notes as a fact that "which 44 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 funds have been provided by CKM to SCM".
Thus, according to the January 2003 agreement this was the only obligation undertaken by the Appellant vis- ã-vis SCM's liability to pay 53 crores to ACM. On the date of execution of the agreement itself on 01/01/2003 the agreement uses the past tense "which f unds have been provided by CKM to SCM" suggesting that the event, if at all, has already happened and CKM has already discharged his undertaking by providing funds to ACM as early as 01/01/2003. There is theref ore no basis f or the Assessing Off icer to come to a conclusion that the alleged CASH transaction took place in F.Y.2008-09 warranting an addition in A.Y.2008-09. The transaction of sale of FSI by the CKM Group company Sof otel to DFPCL, SCM Group Company, is also stated to have taken place in March, 2003. This transaction, was duly approved by the Board of Directors of DFPCL and has also been accepted by the Department both in the case of Sofotel and DFPCL. This transaction was undertaken to provide liquidity to the f amily. This event has also occurred in March 2003 which coincides with the deadline for discharge by SCM of his obligation to pay ACM Rs.30 crores on or before 3 1.03.2003 for which funds were provided by CKM at that point of time since SCM did not have liquidity.
This fact also does not support the AO conclusion that the alleged CASH transaction took place in F.Y.2008-09 warranting an addition in A.Y.2008-09. On a combined reading of Para 18 and Para 31 of the Statement of facts with the appeal Memo two things emerge namely that CKM had provided (in the sense of arranged) assets worth Rs.30 crores for ACM and his group entities before 31/03/2003 and further that, in course of time, ACM was provided (in the sense of made available) funds in liquid form to the extent of Rs.34.83 crores by CKM by providing control over certain private companies having liquid funds. Correctness of this Statement of facts has not been challenged by the AO at any point of time after filing of the appeal memo and therefore should be presumed to be correct.
In this manner CKM can be said to have discharged his only obligation towards ACM undertaken on behalf of SCM.
The seized material does not and it is also not the case of the AC that there was any other obligation undertaken by CKM under the family agreement of 2003.
There was therefore no question of CKM being required to pay hard CASH to ACM on behalf of SCM in pursuance of the said agreement.
The word CASH has therefore to be necessarily interpreted consistent with the manner in which it has been generally used within Group which seems to be 45 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 the normal conduct of the Group.
The fact also remains that CKM and SCM and the rest of the family were having deep rooted differences which even the 2003 agreement did not fully resolve notwithstanding the fact that the scheme of control over the two public limited companies was completely changed therein as compared to the 2000 family agreement.
In my opinion in such a situation and in the background of such deep rooted family disputes, normal human conduct would be of settling inter se obligations and claims using accounted funds thereby clearly leaving a trail establishing fact of settlement of each claim and counter claim.
In the face of the bitterness in relations between CKM and SCM as reflected in of some of the letters forming part of the seized material, presumption that CASH would have been paid by CKM to ACM on behalf of SCM would be contrary to normal human conduct. Normal human conduct would suggest payment by cheque or by providing other liquid funds only. The letter of 03.12.2008 has been formally marked to the Solicitor Bergis Desai and also to DAD and ACM. This would suggest that CKM wanted keep a trail of the discharge by him of his obligation to pay 30 crores on behalf of SCM. This conduct is more in tune with recording of fact of transactions in accounted funds rather than of unaccounted cash.
Even on a preponderance of probability this would appear to be true.
The fact that emerges on a conjoint reading of the relevant seized material is that the sum of Rs.20 crores in fact merely represents value of disputed net credit claimed by CKM from SCM arising out of sale of FSI in March, 2003 by Sofotel (CKM Group company) to DFPCL (SCM group company) and not cash as a plain and isolated reading of the letter dated 03.12.2008 would suggest. In my opinion keeping in mind the totality of the facts of the case there is no warrant for such plain and isolated reading. It is also seen that though as per the Family agreement of 2003 ACM was to be paid 'cash' of 53 crores it is not the case of the Assessing Officer that ACM has in fact been paid Rs. 53 crores in unaccounted cash. In my opinion the addition of Rs. 20 crs made by the AO as unexplained payment in cash is contrary to the material on record. The addition is made purely on the basis of conjectures and surmises and on a plain and isolated reading of a solitary letter and without giving weightage to the other letters and other seized material on record and the to the conduct of the Group in the matter of use of the word CASH as clearly emerging from the seized material. The said figure of Rs. 20 crores does not represent any CASH transaction as presumed by the Assessing Officer".
46 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
46. As the issues involved in the impugned appeal are common as deliberated and decided by us hereinabove in our order while adjudicating the Department appeal in ITA No. 3767/Mum/2013 at length and following the same decided another three appeals of the department in ITAs No. 3777/Mum/2013, ITA 3765/Mum/2013 & 3766/Mum/2013. The relevant conclusive paras of our order read as under:
"20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal CKM
Khimchand Mehta
2 Mr. Deepak Chimanlal DCM
Mehta
3 Mr. Sailesh Chimanlal SCM
Mehta
4 Mr. Ajay Chimanlal ACM
Mehta
5 M/s. Deepak Fertilizers DFPCL
& Petrochemicals
Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada YIL
Investments Ltd
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, period prior to the period for 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs
47 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition can be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, capital gains had been paid.
25. Before us though the AR placed reliance on the decisions of In the case of P R Metrani vs CIT- 287 ITR 209 (SC) In the case of Surendra M Khandhar vs ACIT 321 ITR 254 (Bom) in our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition has not been occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have held cannot be sustained.
26. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any evidence, which was not before the AO or was not in the seized material.
27. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
28. In the result, Departmental appeal, as filed by the revenue stands dismissed.
47. Following the above said paras, we dismiss the grounds involved in department's ITA No. 3764/Mum/2013. Accordingly, Department's appeal stands dismissed.
ITA No. : 3778/Mum/2013 : Department Appeal : AY 2009-10 :
48. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 20,00,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in 48 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary A copy of the order of the CIT(A), Mumbai was received in this office on 15.03.2013. The limitation date for filing of appeal u/s 253(2) is 13.5.2013. However, the appeal should be filed immediately"".
49. The CIT(A) on consideration of the submissions as made by the assessee along with the documents found seized, has observed:
"Thus the word CASH has been used in the context of liquid assets not only by the appellant but also by an external CA and by the Pane Off ice of the Appellant. This theref ore establishes a set pattern of using the word CASH loosely not only wi th reference to hard cash but also other liquid assets. It is also a fact that the Letter dated 03.12.2008 was dictated to the Secretary of CKM and copies thereof were also marked to Company Executives, eminent Solicitor and also given to Arbitrators. T h e r e i s m e r i t i n t h e c o n te n ti o n o f th e A R th a t s u c h o p e n r ef e r e n ce to C A S H o r unaccounted transactions of such magnitude can be said to be contrary to normal human conduct.
As rightly pointed out by the AR SCM in his letter dated 11/12/2008 has questioned the correctness of the contents of CKM;s letter dated 03/12/2008. It is seen that this letter is again marked to a Company Executive and to the same Solicitor. The Assessing Officer has not made a reference to this letter in the assessment order though it was part of the seized material.
The other material fact which the Assessing Officer has not given due importance is that d ur i n g th e co ur se of th e se ar c h cove r i n g th e e n ti re D eep ak Gr o up co ve ri n g b o th residences of all family members and all the companies, no unaccounted cash was found.
Going by the Assessing Officer own presumption, this cash transaction is supposed to have taken place during the period 0 1.04.2008 to 3 1.03.2009 while the search took place 011 21.07.2009. During this extensive search neither was any unaccounted cash or any unaccounted investment or unaccounted expenditure was detected either by the search party or by the Assessing Officer during assessment proceedings barring use of the word CASH in the said letter of 03.12.2008. In my opinion this fact lends further credence to the argument of the AR that use of the word CASH in the said letter was in the context of liquid funds only and not hard cash as presumed by the Assessing Officer. 49 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 The other relevant fact is that the family disputes particularly between CKM and SCM have not been settled even today and the matter is pending before Arbitrators. This fact is also coming out from the submissions made during assessment proceedings. It is also seen that the Assessing Officer has brought Rs.20 crores to tax in A.Y. 2009-10 only because there is use of the word CASH in the letter dated 03.12.2008.
In my opinion there is no basis for such approach. The seized material clearly shows that family disputes are deep rooted and going on since prior to the year 2000. The first family agreement is of March, 2000. The second family agreement is of 01/01/2003. The 2003 agreement speaks of the Appellant being required to pay Rs.30 crs. to ACM on or before 31.03.2003. The agreement also notes as a fact that "which funds have been provided by CKM to SCM".
Thus, according to the January 2003 agreement this was the only obligation undertaken by the Appellant vis- à-vis SCM's liability to pay 53 crores to ACM. On the date of execution of the agreement itself on 01/01/2003 the agreement uses the past tense "which f unds have been provided by CKM to SCM" suggesting that the event, if at all, has already happened and CKM has already discharged his undertaking by providing funds to ACM as early as 01/01/2003. There is theref ore no basis f or the Assessing Off icer to come to a conclusion that the alleged CASH transaction took pl ace in F.Y.2008-09 warranting an addition in A.Y.2008-09.
The transaction of sale of FSI by the CKM Group company Softel to DFPCL, SCM Group Company, is also stated to have taken place in March, 2003. This transaction, was duly approved by the Board of Directors of DFPCL and has also been accepted by the Department both in the case of Softel and DFPCL. This transaction was undertaken to provide liquidity to the f amily. This event has also occurred in March 2003 which coincides with the deadline for discharge by SCM of his obligation to pay ACM Rs.30 crores on or before 3 1.03.2003 for which hinds were provided by CKM at that point of time since SCM did not have liquidity.
This fact also does not support the AG conclusion that the alleged CASH transaction took place in F.Y.2008-09 warranting an addition in A.Y.2008-09. On a combined reading of Para 18 and Para 31 of the Statement of facts with the appeal Memo two things emerge namely that CKM had provided (in the sense of arranged) assets worth Rs.30 crores for ACM and his group entities before 31/03/2003 and further that, in course of time, ACM was provided (in the sense of made available) hinds in liquid form to the extent of Rs.34.83 crores by CKM by providing control over certain private companies having liquid funds.
50 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 Correctness of this Statement of facts has not been challenged by the AG at any point of time after filing of the appeal memo and therefore should be presumed to be correct.
In this manner CKM can be said to have discharged his only obligation towards ACM undertaken on behalf of SCM.
The seized material does not and it is also not the case of the AG that there was any other obligation undertaken by CKM under the family agreement of 2003. There was therefore no question of CKM being required to pay hard CASH to ACM on behalf of SCM in pursuance of the said agreement.
The word CASH has therefore to be necessarily interpreted consistent with the manner in which it has been generally used within Group which seems to be the normal conduct of t h e G r o u p .
The fact also remains that CKM and SCM and the rest of the family were having deep rooted differences which even the 2003 agreement did not fully resolve notwithstanding the fact that the scheme of control over the two public limited companies was completely changed therein as compared to the 2000 family agreement.
In my opinion in such a situation and in the background of such deep rooted family disputes, normal human conduct would be of settling inter se obligations and claims using accounted funds thereby clearly leaving a trail establishing fact of settlement of each claim and counter claim.
In the face of the bitterness in relations between CKM and SCM as reflected in of some of the letters forming part of the seized material, presumption that CASH would have been paid by CKM to ACM on behalf of SCM would be contrary to normal human conduct. Normal human conduct would suggest payment by cheque or by providing other liquid funds only.
The letter of 03.12.2008 has been formally marked to the Solicitor Bergis Desai and also to DAD and ACM. This would suggest that CKM wanted keep a trail of the discharge by him of his obligation to pay 30 crores on behalf of SCM. This conduct is more in tune with recording of fact of transactions in accounted funds rather than of unaccounted cash.
Even on a preponderance of probability this would appear to be true.
The fact that emerges on a conjoint reading of the relevant seized material is that the sum of Rs.20 crores in fact merely represents value of disputed net credit claimed by CKM from SCM arising out of sale of FSI in March, 2003 by Sofotel (CKM Group company) to DFPCL (SCM group company) and not cash as a plain and isolated reading of the letter dated 03.12.2008 would suggest. In my opinion keeping in mind the totality of the facts of the case there is no warrant for such plain and isolated reading. It is also seen that though as per the Family agreement of 2003 ACM was to be paid 'cash' of 53 51 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 crores it is not the case of the Assessing Officer that ACM has in fact been paid Rs.53 crores in unaccounted cash.
In my opinion the addition of Rs.20 crs. made by the AO as unexplained payment in cash is contrary to the material on record. The addition is made purely on the basis of conjectures and surmises and on a plain and isolated reading of a solitary letter and without giving weightage to the other letters and other seized material on record and the to the conduct of the Group in the matter of use of the word CASH as clearly emerging from the seized material. The said figure of Rs.20 crores does not represent any CASH transaction as presumed by the Assessing Officer".
50. As the basic issues involved in the impugned appeal are common as deliberated and decided by us hereinabove in our order while adjudicating the Department appeal in ITA No. 3767/Mum/2013 at length and following the same decided another four appeals heard on 10.11.2014 of the department in ITAs No. 3777/Mum/2013, ITA 3765/Mum/2013, 3766/Mum/2013 & 3764/Mum/2013. The relevant conclusive paras of our order read as under:
"20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand CKM
Mehta
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation
Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments YIL
Ltd
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, period prior to the period for 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs 52 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition can be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, capital gains had been paid.
25. Before us though the AR placed reliance on the decisions of In the case of P R Metrani vs CIT- 287 ITR 209 (SC) In the case of Surendra M Khandhar vs ACIT 321 ITR 254 (Bom) in our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition has not been occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have held cannot be sustained.
26. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any evidence, which was not before the AO or was not in the seized material.
27. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
28. In the result, Departmental appeal, as filed by the revenue stands dismissed.
51. Following the above said paras, we dismiss the grounds involved in department's appeal in ITA No. 3778/Mum/2013. Accordingly, Department's appeal stands dismissed.
53 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 ITA No. : 3779/Mum/2013 : Department Appeal : AY 2009-10 :
52. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in deleting the addition of Rs. 20,00,00,000/- on account of unaccounted receipts due to family arrangement ignoring the presumptions with regard to the entries found in sized material as per provisions of Section 292C r.w.s. 132(4A) of I.T. Act.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in admitting the additional evidence in violation of Rule 46A of the I.T. Rules 1962 without providing the AO opportunity to comment on merits. The appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored.
The appellant craves leave to amend or alter any ground and/or add new grounds which may be necessary A copy of the order of the CIT(A), Mumbai was received in this office on 15.03.2013. The limitation date for filing of appeal u/s 253(2) is 13.5.2013. However, the appeal should be filed immediately".
53. As the basic issues involved in the impugned appeal are common as deliberated and decided by us hereinabove in our order while adjudicating the Department appeal in ITA No. 3767/Mum/2013 at length and following the same decided another five appeals heard on 10.11.2014 of the department in ITAs No. 3777/Mum/2013, ITA 3765/Mum/2013, 3766/Mum/2013, 3764/Mum/2013 & 3778/Mum/2013. The relevant conclusive paras of our order read as under:
"20. We have perused the arguments from either side and have also perused the material placed before us along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal CKM
Khimchand Mehta
2 Mr. Deepak Chimanlal DCM
Mehta
3 Mr. Sailesh Chimanlal SCM
Mehta
4 Mr. Ajay Chimanlal ACM
Mehta
5 M/s. Deepak Fertilizers DFPCL
& Petrochemicals
Corporation Ltd.
54 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14 6 M/s. Deepak Nitrate Ltd DNL 7 M/s. Yerrowada YIL Investments Ltd
22. The fact that papers and CDs were seized at the time of search on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912). It is also a fact that the hard copies of print out which were undated were found in the loose papers, which, when examined by running the CDs were found to be pertaining to 23.03.2003 and 28.03.2003, period prior to the period for 153A proceedings.
23. On examination of the seized print out, it is seen that the impugned CDs was in fact created on 28.03.2003. This means that seized hard copies was nothing but the print out of the CD prepared on 28.03.2003, therefore, the assumption of the AO that since the papers were undated, and therefore, they have to be presumed to be pertaining to the financial year, in which they were found, losses its legs and this assumption falls. Hence addition can be sustained on this arguments.
24. On the other hand, the submissions of the AR cannot be ignored that all the assets and liabilities were distributed as per the family arrangement immediately thereafter and wherever necessary, capital gains had been paid.
25. Before us though the AR placed reliance on the decisions of In the case of P R Metrani vs CIT- 287 ITR 209 (SC) In the case of Surendra M Khandhar vs ACIT 321 ITR 254 (Bom) in our view both these decisions may not be necessary, because, the question of rebuttal on the proposed addition has not been occasioned because the additions made by the AO, have been based on notings on the CDs prepared on 28.03.2003, which we have held cannot be sustained.
26. We also reject the GOA no. 6, wherein the department has sought restoration of the case to the file of the AO, because of non allowance of proper opportunity under Rule 46A. This has been categorically rejected by the CIT(A), wherein he has held that the assessee has not produced/submitted anything or any 55 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 evidence, which was not before the AO or was not in the seized material.
27. We, therefore, reject the grounds as raised by the department and consequentially dismiss the appeal as filed by the department.
28. In the result, Departmental appeal, as filed by the revenue stands dismissed.
54. Following the above said paras, we dismiss the grounds involved in department's appeal in ITA No. 3778/Mum/2013. Accordingly, Department's appeal stands dismissed. Issue of limitation is not adjudicated since on merits, addition has been deleted while deciding Ground nos. 5 & 6. Therefore, addition of Rs. 20 crores on this count is hereby deleted. Hence, these grounds of appeal are hereby allowed.
55. Now, we shall deal with the Cross Objections filed by the assessee Group, one-by-one for assessment years 2010-11 & 2009-10 respectively.
CO No. 148/Mum/2014 : By Assessee :
Arising out of ITA 3767/Mum/2013 :
56. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) rejecting the contention of the Respondent before him that either no approval of the Additional Commissioner u/s 153D was at all obtained or that the said approval was non est as it suffered from severe inadequacies and for that reason also the impugned assessment order was bad in law. On facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that the assessment order was passed by the learned AO after giving a reasonable opportunity of being heard to the respondent and that the order is not contrary to the principles of natural justice.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act, 1961 was illegal and void.
56 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not adjudicating Grounds Nos. 7 to 12 raised in the Appeal Memo filed before him for the reason that these grounds do not survive as he had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
57. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013 on quantum and on facts. The instant CO filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
58. As a result, the CO, as filed by the assessee is dismissed.
CO No. 150/Mum/2014 : By Assessee :
Arising out of ITA 3777/Mum/2013 :
59. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) - 36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) rejecting the contention of the Respondent before him that either no approval of the Additional Commissioner u/s 153D was at all obtained or that the said approval was non est as it suffered from severe inadequacies and for that reason also the impugned assessment order was bad in law.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not adjudicating Grounds Nos. 7 to 11 raised in the Appeal Memo filed before him for the reason that these grounds do not survive as he had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
60. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013. On quantum and on 57 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 facts. The instant CO filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
61. As a result, the CO, as filed by the assessee is dismissed.
CO No. 149/Mum/2014 : By Assessee :
Arising out of ITA 3765/Mum/2013 :
62. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) rejecting the contention of the Respondent before him that either no approval of the Additional Commissioner u/s 153D was at all obtained or that the said approval was non est as it suffered from severe inadequacies and for that reason also the impugned assessment order was bad in law. On facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that the assessment order was passed by the learned AO after giving a reasonable opportunity of being heard to the respondent and that the order is not contrary to the principles of natural justice.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not adjudicating Grounds Nos. 7 to 12 raised in the Appeal Memo filed before him for the reason that these grounds do not survive as he had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
63. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013. On quantum and on facts. The instant CO filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
58 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
64. As a result, the CO, as filed by the assessee is dismissed.
CO No. 159/Mum/2014 : By Assessee :
Arising out of ITA 3766/Mum/2013 :
66. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) rejecting the contention of the Respondent before him that either no approval of the Additional Commissioner u/s 135D was at all obtained or that the said approval was non est as it suffered from severe inadequacies and for that reason also the impugned assessment order was bad in law. On facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that the assessment order was passed by the learned AO after giving a reasonable opportunity of being heard to the respondent and that the order is not contrary to the principles of natural justice.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not adjudicating Grounds Nos. 7 to 12 raised in the Appeal Memo filed before him for the reason that these grounds do not survive as he had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
67. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013. On quantum and on facts. The instant CO filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
68. As a result, the CO, as filed by the assessee is dismissed.
59 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 CO No. 146/Mum/2014 : By Assessee :
Arising out of ITA 3764/Mum/2013 :
69. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) rejecting the contention of the Respondent before him that either no approval of the Additional Commissioner u/s 153D was at all obtained or that the said approval was non est as it suffered from severe inadequacies and for that reason also the impugned assessment order was bad in law. On facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that the assessment order was passed by the learned AO after giving a reasonable opportunity of being heard to the respondent and that the order is not contrary to the principles of natural justice.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not adjudicating Grounds Nos. 7 to 12 raised in the Appeal Memo filed before him for the reason that these grounds do not survive as he had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
70. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013. On quantum and on facts. The instant CO filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
71. As a result, the CO, as filed by the assessee is dismissed.
CO No. 147/Mum/2014 : By Assessee :
Arising out of ITA 3778/Mum/2013 : AY 2009-10 :
60 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
72. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that the assessment order was passed by the learned AO after giving reasonable opportunity of being heard to the respondent and that the order Is not contrary to the principles of natural justice.
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act,1961 was illegal and void.
4) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not annulling the assessment as the alleged 'unaccounted cash' relates to a family arrangement made before 31/03/2003, which falls beyond the six years period of limitation laid down by law.
5) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
73. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013. On quantum and on facts. The instant CO filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
74. As a result, the CO, as filed by the assessee is dismissed.
CO No. 145/Mum/2014 : By Assessee :
Arising out of ITA 3779/Mum/2013 : AY 2009-10 :
75. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned Commissioner of Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not accepting the contention of the Respondent that the assessment order was bad in law and on facts.
2) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that the assessment order was passed by the learned AO after giving reasonable opportunity of being heard to the respondent and that the order Is not contrary to the principles of natural justice.
61 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14
3) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) holding that challenge to validity of the search u/s 132 could not be raised before him and therefore rejecting the contention of the Respondent that the assessment order, passed by the learned AO is bad in law in as much as the search u/s 132 of the Income Tax Act,1961 was illegal and void.
4) On the facts and in the circumstances of the case and in law, the Respondent objects to the learned CIT(A) not annulling the assessment as the alleged 'unaccounted cash' relates to a family arrangement made before 31/03/2003, which falls beyond the six years period of limitation laid down by law.
5) The appellant craves leave to add to, alter, delete or modify any of the above Objections".
76. After due deliberations we have conclusively dismissed the department appeal in ITA No. 3767/Mum/2013 on quantum and on facts. In the corresponding CO No. 148/Mum/2014 filed by the assessee is primarily on legal issues involved, which according to us, would now become infructuous. We, therefore, reject the grounds raised in the CO.
77. Thus, the CO, as filed by the assessee is dismissed.
72. All the appeals captioned at the head of the order, and connected to the lead case as filed by the department are dismissed. Corresponding COs as filed by the assessees are held to be infructuous and are dismissed.
To sum-up:
Department appeal in, ITA No. 3767/Mum/2013 stands dismissed ITA No. 3777/Mum/2013 stands dismissed ITA No. 3765/Mum/2013 stands dismissed ITA No. 3766/Mum/2013 stands dismissed ITA No. 3764/Mum/2013 stands dismissed ITA No. 3778/Mum/2013 stands dismissed ITA No. 3779/Mum/2013 stands dismissed. Assessee's CO in, CO No. 148/Mum/2014 stands dismissed CO No. 150/Mum/2014 stands dismissed 62 Shri Chimanlal K Mehta ITA No. 3767/Mum/2013 CO 148/Mum/2014 & Six Group comprising (06 ITAs & 06 Cos)=Total-14 CO No. 149/Mum/2014 stands dismissed CO No. 159/Mum/2014 stands dismissed CO No. 146/Mum/2014 stands dismissed CO No. 147/Mum/2014 stands dismissed.
CO No. 145/Mum/2014 stands dismissed.
Order pronounced in the open Court on 26th December, 2014.
Sd/- Sd/-
(आर
आर.
आर. सी.
सी. षमा[) (ǒववे
ǒववेक वमा[)
लेखा सदःय Ûयाईक सदःय
(R C SHARMA) (VIVEK VARMA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date : 26th December, 2014
ूित/Copy to:-
1) अपीलाथȸ /The Appellant/Applicant-Cross Objector.
2) ू×यथȸ /The Respondent.
3) The CIT(A)-36, Mumbai.
4) The CIT(C) -IV/Concerned ______, Mumbai
5) ǒवभागीय ूितिनिध "G", आयकर अपीलीय अिधकरण, मुब ं ई/ The DR "G" Bench ITAT, Mumbai.
6) गाड[ फाईल
Copy to Guard File.
आदे शानुसार/By Order
/ / True Copy / /
उप/सहायक पंजीकार
आयकर अपीलीय अिधकरण, मुबं ई
Dy./Asstt. Registrar
I.T.A.T., Mumbai
*चåहान व.िन.स
*Chavan, Sr.PS