Income Tax Appellate Tribunal - Mumbai
Deepika A Mehta, Mumbai vs Dcit Cen Cir 23, Mumbai on 21 December, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"b" BENCH, MUMBAI
BEFORE SHRI SAKTINIT DEY, JUDICIAL MEMBER AND
SHRI N.K. PRADHAN, ACCOUNTANT MEMBER
TTA no. 1549/Mum/2016
(Assessment Year : 1993-94)
Deepika A. Mehta
32, Madhuli, Dr. A.B. Road
Worl, Mumbai 400018 Appellant
PAN ~ ABNPM8231D
vis
Dy. Commissioner of Income Tax
Central Circle-23, [Now DCIT, Jes Respondent
Central Circle-4(1)], Mumbai
ITA no. 2740/Mum/2014
{Assessment Year ; 1993-94}
Dy. Commissioner of Income Tax dierd
(OSD), Central Circle-4(1), Mumbai womorenes APPEAL
vis
Deepika A. Mehta
32, Madhuli, Dr. A.B. Road ..
Worli, Mumbai 400 018 wees RESPONdeNnt
PAN -- ABNPM8231D
Assessee by : Shri Dharmesh Shah
Revenue by : Dr. P. Daniel
Date of Hearing ~ 09.10.2018 Date of Order ~ 2f-) 9 ia
a
2
Deepika A. Mehta
ORDER
PER SAKTIIIT DEY, 3.M. The aforesaid cross--appeals are directed against order dated 28"
January 2016, passed by the learned Commissioner (Appeals}-52, Mumbai, for the assessment year 1994-95, ITA no.1549 /Mum,./2016
2. In ground no.1, the assessee has challenged the decision of the learned Commissioner (Appeals) in confirming the action of the Assessing Officer in rejecting the books of account of the assessee.
3. Brief facts are, the assessee an individual is a notified person under the Special Court (Trial of Offenses Relating to Transaction in Securities) Act, 1992, and all its assets including bank accounts were attached and vested in the hands of the custodian appointed under the said Act. It is also relevant to mention that the assessee belongs to Harshad Mehta Group of cases. For the assessment year under dispute, the assessee did not file any return of income either under section 139(1) of the Income Tax Act, 1961 (for short "the Act") or in response to 142(1) of the Act. Originally, assessment in the case of the assessee was completed vide order 29" March 1996, determining total income at f>.10,30,87,565. Against' the assessment order so & 3 Deepika 4. Mehta passed, the assessee preferred appeal before the first appellate authority and thereafter before the Tribunal. The Tribunal vide order dated 31° August 2005, set-aside the assessment order to the Assessing Officer with a direction to frame the assessment denovo after due opportunity of being heard to the assessee. In pursuance to the directions of the Tribunal the Assessing Officer called upon the assessee to furnish various information and also her explanation against the additions made in the original assessment order. After considering the submissions / reply of the assessee the Assessing Officer observed that the assessee could not clearly specify the date and year when the books were written. He also observed that merely because the date specified under section 44AB of the Act has expired, that does not prevent the assessee from getting the books of account audited and verified by the Chartered Accountant. Further, the Assessing Officer observed that the Special Court had ordered review of unaudited accounts of various persons of Harshad Mehta Group including the assessee by a panel of Chartered Accountants. He observed that as per the report submitted by them, the books of account produced by the assessee before him suffered from serious defects. Thus, the Assessing Officer observed that the books of account produced by the assessee are unreliable and accordingly he rejected them under section 145(3) of "the.-Act and proceeded to 4 Deepika A. Menta compute the income of the assessee under section 144 of the Act to the best of his judgment and on the basis of information available. In the process, Assessing Officer repeated all the additions as were made in the original assessment order passed by him which are as under:-
i i) Unexplained Investment Ke. 9.42, 05,150 q
ii) | Unexplained Receipts | pa. 4,371 &.
fii} \ Dividend and interest income - LAS 88, 78,044 a
iv) | Capital Gain --_ Rs 7,83,21,959 ee Vv) | GACL Right Renanciation ; | '17,03, 625 c | Total Income & °10,47,91,190 2
4. Being aggrieved with the assessment order so passed, the assessee preferred appeal before the learned Commissioner (Appeals).
2. The learned Commissioner (Appeals) after considering the submissions of the assessee in the context of facts and materia! on record observed that similar issue was examined by his predecessor- in-office in case of Hitesh Mehta for assessment year 1993-94 in the order dated 29° March 2012. He also referred to the order passed by his predecessor~--in-office in case of Pratima Mehta for assessment year 1993-94 in order dated 30° March 2012. Following the observations made by his predecessor-in-office in the aforesaid orders oe the learned Commissioner (Appeals) upheld--réjection of books of 5 Deepika A, Mehta account under section 145(3) of the Act,
6. The learned Authorised Representative submitted, while deciding the appeals in case of Pratima H. Mehta in ITA no.3443/Mum./2012, dated 5" March 2014, the Tribunal has restored the issue to the Assessing Officer with a direction to examine the correctness of books of account with supporting evidences. He submitted, the aforesaid decision of the Tribunal was upheld by the Hon'ble High Court while deciding the Department's appeal in ITA no.521/2015, dated 26"
September 2017. Thus, he submitted, similar direction may be given to the Assessing Officer in the present appeal also.
7. The learned Departmental Representative, though, relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals), however, he agreed with the learned Authorised Representative that in case of Pratima H. Mehta (supra) the issue has been restored back to the Assessing Officer.
8. We have considered rival submissions and perused materials an record. It is evident that the Assessing Officer has rejected the books of account of the assessee under section 145(3) of the Act with the observations that such unaudited books of account are not reliable. While confirming the aforesaid decision of the Assessing Officer the learned Commissioner (Appeals) has followed the decision of his 6 Deepika A. Mehta predecessor--in~office in case of two other assessees including Pratima H. Mehta relating to assessment year 1993-94. Notably, while deciding the appeal of Pratima H. Mehta, the Tribunal has restored the issue back to the Assessing Officer with the following observations: --
"6. A perusal of the order of the Tribunal in the first round of litigation In ITA No, 5192/Mum/2003 shows that the Tribunal has observed that the Id. CIT{(A) himself had admitted the books of account as an additional evidence and the Department is nat in appeal against those orders. Once the admission of the books of account has been accepted, then the id. CIT(A) ought ta have gone with the Books of account and if the books of account were not found proper ar as per the accounting policies, the same Should have been rejected but that being not the case, we do not find any reason for not admitting the books of account. Considering the past history and the order of the Tribunal (supra), in our considered opinion, the books of account ought to have been examined by the authorities below. We therefore restore this issue to the file of the A.O. to examine the correctness of the books of account with supporting evidences. Ground No, 2 of assessee's appeal is allowed for statistical purpose."
9. itis also relevant to observe that the aforesaid decision of the Tribunal has been upheld by the Hon'ble Jurisdictional High Court in the order referred to above. Facts being identical, following the decision of the Co-ordinate Bench in Pratima H. Mehta, we restore the issue to the file of the Assessing Officer for deciding afresh with similar direction. This ground is allowed for statistical purposes.
10, Ground no.2, the assessee has challenged disallowance of interest expenditure amounting to %20,00,080. f-
Deepika A, Mehta il. Brief facts are, during the assessment proceedings, the assessee stated that she was undertaking transactions in the capital market through three broking firms belonging to family members. On verifying the books of account of the assessee the Assessing Officer noted that the assessee was due to pay interest of &.20 lakh to the aforesaid broking firms. Therefore, he called upon the assessee to furnish the basis of provision made in the books of account for interest expenditure. As alleged by the Assessing Officer, the assessee did not respond to the query raised by him. Accordingly, holding that the assessee failed to prove the genuineness of interest expenditure, he disallowed assessee's claim in this regard. Being aggrieved of such disallowance, the assessee preferred appeal before the first appellate authority.
12. However, the learned Commissioner (Appeals) also confirmed the disallowance made by the Assessing Officer.
i3. The learned Authorised Representative submitted, disallowance of interest expenditure is a recurring issue not only in the case of the assessee but also the other notified persons and family members of the assessee. He submitted, in assessee's own case, for assessment year 2011-12 and 2012-13, the Tribunal while deciding the appeals in eo, fe ITA no.418/Mum./2016 and ITA no.2¢36/-Mum./2017, has allowed 8 Deepika A, Mehta interest expenditure claimed by the assessee. In this context, he drew our attention to the relevant observations of the Tribunal in this regard. The learned Authorised Representative submitted, since in assessment year 2011-12 and 2012-13, the dividend income earned by the assessee was exempt the Tribunal sustained part disallowance out of the interest expenditure claimed. He submitted, since in the impugned assessment year the dividend income is taxable, no disallowance out of the interest expenditure should be made.
14. The learned Departmental Representative relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals).
15. We have considered rival submissions and perused materials on record. As could be seen, the Assessing Officer has disallowed the interest expenditure simply because the assessee did not respond to the query raised by him. However, the learned Commissioner (Appeals) confirmed the disallowance made by the Assessing Officer keeping in view the orders passed by him and his predecessor-in- office in various cases belonging to Harshad Mehta Group for different assessment years. Notably, while deciding identical issue arising in assessee's Own case in assessment year 2011-12 and 2012-13 in ITA no.418/Mum./2016 and ITA no.2736/Mum./2017, dated 27"
9Deepika A. Mehta December 2017, and other group cases the Tribunal while considering identical nature of dispute has decided the issue in the following manner.--
"37. In these cases in A.Y. 2011-12 the assessee has taken as many as five grounds of appeal. Ground No. 1 since not pressed stands dismissed as not pressed thereby surviving the following grounds: -
"2. The Ld. Commissioner of Income-Tax (Appeals) ought to have allawed the deduction of interest expenditure to the extent of Rs.1,35,81,461/- as follows:
Sr. Entities Outstanding Interest @ 12% no, Amount Payable p.a. payable Ashwin S. Mehta 99, 17,408 11,90,089 2, Jyoti H. Mehta 1,03,77,667 12,45,320 Harshad S. Mehta 9,47,79,200 1,13,73,504 Total 11,50,74,275 1,38,08,913 Less: Proportionate disallowance of 2,27,45 interest u/s 14A of the Act. 2 Total: tel
3. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the disalfowance u/s. 144 of the Act.
4. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 2348 and 234C of the Act.
5, The La, Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions af TDS and hence on the said amount of tax no interest can be computed u/s. 234B and 234C of the Act."
Except the ground relating to sustenance of disallowance under Section 14A, ground relating to the €laim of interest expenditure 10 Deepika A. Mehta is similar to ground No, 4 in y 2011-12 except change in figure. In A.Y. 2012-13 the claim of the assessee for interest is °4,15,511/- after proportionate disaliawance of °2,06,778/-. Both the parties agreed that both the appeals be decided an the basis of the facts relating to A.Y. 2011-12. In both the assessment years the assessee fhas also taken the additional ground relating to capitalization of interest. As the additional ground has been admitted in all the other cases, therefore the said ground stand admitted in both the years.
38. So far as the ground relating to the claim of interest after disallowing proportionate interest is concerned in both the assessment years, both the parties agreed that similar issue has arising in ground 1 in ITA No. 5799/Mum/2015 in the case of Shri Sudhir S. Mehta and whatever view this Tribunal may take in the case of Shri Sudhir S. Mehta same may be taken in the case of the assessee. While disposing of the appeal for A.Y. 2009-10 ITA No. 5799/Mum/2015 in the case of Shri Sudhir S. Mehta relating to disallowance of interest we have defeted the said disallowance and directed the AO to allow the deduction of interest after reducing proportionate interest out of the interest earned on deposits. Respectfully following the said decision in the preceding paragraph we allow the ground on similar terms relating ta the claim of interest taken by the assessee.
39. The assessee has taken additional ground in both the assessment years refating to the disallowance of proportionate interest which has been claimed by the assessee to be capitalised towards the cost of shares and securities. As both the parties agreed that similar issue has arising in the case of Shri Sudhir S. Mehta in ITA No. 5799/Mum/2015 for ALY. 2009-10 and whatever view this Tribunal may take in the case of Shri Sudhir S. Mehta the same view may be taken in the case of the assessee also. We therefore respectfully following the said decision of the Tribunal in the case of Shri Sudhir S. Mehta direct the AO to treat the proportionate interest disallowed in each assessment year to be part of cost of acquisition of shares and securities. Thus the additional ground in each of the assessment year stand allowed."
16. In view of the aforesaid decision of the Tribunal in assessee's own case, we direct the Assessing Officer to decide the issue relating to allowability of assessee's claim of interest expenditure following the decision of the Tribunal as referred teabove. While 1h Deepika A. Mehta Assessing Officer is also directed to consider assessee's claim that since in the impugned assessment year the dividend income is taxable no proportionate disallowance out of interest expenditure should be made. The Assessing Officer must decide the issue after due opportunity of being heard to the assessee. This ground is allowed for Statistical purposes,
17. Ground no.3, is dismissed as not pressed.
18. Grounds no.4 and 5 are in relation to levy of interest under section 234A, 234B and 234C of the Act.
19. At the outset, the learned Authorised Representative fairly conceded that the issue has been decided against the assessee by the Tribunal and the Hon'ble Jurisdictional High Court in case of other assessees relating to Harshad Mehta Group. In this context, he drew our attention to the order passed by the Tribunal in case of Grawmore Leasing and Investment Ltd. & Ors. v/s DCIT, ITA no.129/Mum./2017 dated 27° December 2017. In view of the aforesaid, we direct the Assessing Officer to re-compute the interest liability in terms with the direction of the Tribunal as contained in Para~20 of the order referred to above. In view of the above, ground no.4 is dismissed and ground no.5 is partly allowed.
20. As regards ground no.6, the learned. Authorised Representative 12 Deepika A. Mehta submitted that the issue raised therein has now become academic since the learned Commissioner (Appeals) has deleted the interest levied under section 220(2) of the Act. Accordingly, this ground is dismissed,
21. Inthe result, assessee's appeal is partly allowed.
ITA no.2740/Mum,/2015 Revenue's Appeal
22. The solitary ground raised by the Revenue is against deletion of addition of 8.9,42,05,150, made by the Assessing Officer on account of | unexplained business profit on sale of shares.
23. Brief facts are, during the course of assessment proceedings in pursuance to the directions of the Tribunal, the Assessing Officer noted that during the original assessment proceedings, the Assessing Officer has made the aforesaid addition on the basis of information obtained from various external sources as well as material seized from various premises of the group. He observed that such information was collated and analysed to find out assessee's share holding and scrip~-wise trading account and closing stock were prepared. As alleged, since the assessee failed to explain the source of Investment made in various shares held / traded by her, he treated the investment in shares 13 Deepika A, Mehta amounting to 49,42,05,150, as unexplained investment and added back to the income of the assessee while completing the original assessment. In the freshly initiated assessment proceedings, the Assessing Officer again called upon the assessee to explain the source of investment in shares. As observed by the Assessing Officer, in response to the query raised by him, the assessee filed her submissions vide letter dated 23 August 2006 and 19" September 2006. She also disputed the working of investment made in shares in the original assessment order. The assessee further submitted that all share transactions made by her are reflected in the books of account produced in the assessment proceedings. It was submitted that shares and debentures were purchased from broking firms who conducted the transactions through stock exchange and made payment by cheque. It was submitted, there is no evidence before the Departmental Authorities to demonstrate that any investment was made outside the books. The Assessing Officer, however, was not convinced with the submissions of the assessee. He observed, merely because the assessee has passed entries in the books of account which are also unreliable, on that basis the assessee's claim cannot be accepted. Thereafter, the Assessing Officer primarily relying upon the observations made in the original assessment order, ultimately held that the amount of %42,05,150, has #6 be treated as unexplained 14 Deapika A. Mehta investment in shares. Accordingly, he added back the said amount to the income of the assessee. Being aggrieved with such addition, the assessee preferred appeal before the learned Commissioner (Appeals).
24, After considering the submissions of the assessee in the context of facts and material available before him, learned Commissioner (Appeals) observed that similar addition was made by the Assessing Officer in the hands of Hitesh S. Mehta, belonging to Harshad Mehta Group in the assessment order passed in the assessment year 1993-
94. He observed, while deciding the appeal filed by the said assessee his predecessor had found number of anomalies in the working of the Assessing Officer, such as, closing stock as on 31° March 1992, was not adopted as opening stock as on 1* April 1992, some of the shares shown as unsold were aiso shown as sold, rate of sale was not applied properly and the Assessing Officer was not in a position to give clear cut working of various assumed transactions of sale. Keeping in view the aforesaid factual errors and anomalies, the first appellate authority had deleted the addition made on account of unexplained investment in shares. Further, the learned Commissioner (Appeals) observed that while deciding identical issue in case of Pratima H. Mehta, belonging to Harshad Mehta Group for assessment year 1993~94, his predecessor- in-office has deleted similar addition. He observed that the aforesaid decision of the first appellate authority,in case of Pratima H. Mehta 15 Deepika A. Mehta was also upheld by the Tribunal while deciding the appeal in ITA no.3443/Mum./2012 and ITA no.4288/ Mum./2012. Thus, following the aforesaid decisions of his predecessor~in-office and the Tribunal in case of other assessees relating to the same group, the learned Commissioner (Appeals) deleted the addition made by the Assessing Officer.
25. The learned Departmental Representative submitted that learned Commissioner (Appeals) relying upon the order passed in case of other assessee's belonging to the group has deleted the addition. He submitted, facts in case of each assessee have to be seen separately, as shortage of share is a factual issue. Therefore, he submitted that by simply relying upon the appeal orders passed in case of other assessees the addition made by the Assessing Officer cannot be deleted. The learned Departmental Representative submitted, in case of other assessees referred to by the learned Commissioner (Appeals) facts were examined not only during the assessment proceedings but also by way of demand. Whereas, in case of the present assessee the learned Commissioner (Appeals) has not remanded to the Assessing Officer for examination of facts. Thus, he submitted that the assessee's case cannot be equated with the other cases.
26. The learned Authorised Representative strongly relvina tinnn the 16 Deepika A. Menta decision of the learned Commissioner (Appeals) submitted that facts in assessee's case as well as the other cases relled upon by the learned Commissioner (Appeals) are same and identical. He submitted, assessment orders in case of all the assessees belong to the Harshad Mehta Group are not only identically worded but were passed on the very same date. He submitted, while making additions on account of unexplained investment in case of all assessees the Assessing Officer relied upon information obtained from common source. In this context, he drew our attention to the relevant observations of the Assessing Officer. He submitted, in case of the assessee the Assessing Officer has made the addition relying upon the observations made in the original assessment order. Drawing our attention to the facts discussed by the Tribunal in the case of Pratima H. Mehta, in ITA no.3443/Mum./2012 and ITA no.4288/Mum./2012, dated 5° September 2014, he submitted that facts are identical. He submitted, the same anomalies in valuation of shares as pointed out by the first appellate authority and the Tribunal in case of Hitesh S. Mehta and Pratima H. Mehta, also exist in case of the present assessee. Thus, he submitted, there being no difference in primary facts between the assessee's case and the cases of other assessees belonging to the same group, the decision of the appellate authorities in case of Hitesh S. Mehta and Pratima H. Mehta would be squarely applicable to the i?
& Deepika A. Mehta facts of the present case.
27. We have considered rival submissions and perused materials on record. A perusal of the impugned assessment order makes it clear that the Assessing Officer has made the addition on account of unexplained investment in shares by simply relying upon the observations of the Assessing Officer in the original assessment order. It is also a fact on record that identical additions were made in case of other assessee''s belonging to the same group. While deciding the appeals of Hitesh S. Mehta and Pratima H. Mehta, the first appellate authority deleted the additions made by the Assessing Officer pointing out various anomalies / discrepancies in the working of the Assessing Officer. The order passed by the first appellate authority in case of Pratima H. Mehta was challenged by the department before the Tribunal. The Tribunal while deciding the appeal filed by the Department upheld the decision of the first appellate authority with the following observations: -
"20. The id. CITfA) has considered this issue at para 6{C) of his order. During the course of assessment proceedings, on the basis of several information obtained from RBI, Custodian, BSE companies and third parties about the share haiding of the assesses, the data were analysed and the halding in share of the assessee was determined as on 31-3-1992. The same was taken as opening stock for the year under consideration. The closing stock of the assessee was determined for the year under consideration and on comparing the opening stock and closing stock, whenever there was 2 difference where opening stock was higher than the closing stock, ik was treated as sale and 18 Deepika A. Mehta wherever the closing stock was higher than the opening stock, the difference was treated as unexplained purchase. The purchases were determined at Rs. 8,85,75,861/- and the sales were determined at Rs. 15,55,67,482/-. The profit on sale of shares was determined at Rs. 3,31,20,180/-. The A.O. added this amount. Before the id. CIT(A), it was contended that the information relied upon by the A.O. were either given to the assessee during the proceedings of A.Y. 1992-93 or during the proceedings for A.Y¥, 1993-94. It was further contended that the A.O. has computed the holding of shares from the information collected from difference sources. It was further submitted that the working of opening stock is borrowed from the working given in A.Y. 1992-93 without any break-up and without any basis. After considering the facts and the submissions, the Id. CIT(A) at para 9.7 of his order observed that the A.O. did not gave any breakup and the basis as to how the figures of sales and purchases were derived by him which fact was a/so admitted by the A.O. in the remand proceedings. At para 9.8, the id. CIT(A) held "I find that during the course of present proceedings also, the things have not improved. The A.O. has still not been able to provide any break up or the details and information as to how the figure of profit on sale of shares have been derived by him in the assessment order. Thus, I find that the very basis details germane to the addition made by the A.O. are not available an record". Thereafter the Id. CIT(A) foliowed the findings given in the case of Shri Hitesh Mehta far A.Y. 1993-94 and deleted the addition. Aggrieved by this, the Revenue fs in appeal before us.
21. The Id. D.R. strongly supported the findings of the A.O, Per contra, the id. Counsel for the assessee reiterated what has been submitted before the lower authorities.
22. We have carefully perused the orders of the authorities befow. We have also gone through the order of the first appellate authority in the case of Shri Hitesh Mehta dtd, 29-3-2012. We find that the entire addition has been made by the A.O. on the basis of information gathered from different sources. We find that the A.O. has merely picked up figure from the Annexure and arrived at the figure of addition without making enquiry or bringing any evidence on record. We find that an identical facts in the case of Shri Hitesh Mehta, the additions were defeted. The said order was challenged before the Tribunal in ITA No. 5138/Mum/2003 but this issue was not raised before the Tribunal, The facts and circumstances are being similar, we do not find any reason to interfere with the findings of the fd. CIT(A). Ground No. is accordingly dismissed."
rece enews oven tires Bee ces ee ees eenea es 19 Deepika A. Mehta Hon'ble Jurisdictional High Court while deciding the department's appeal in ITA no.521/2015, dated 26 September 2017. Though, the learned Departmental Representative has submitted that there are factual difference in the case of the assessee and other cases, however, he has not brought to our notice the specific factual difference between the case of assessee and other group cases relied upon by the learned Cammissioner (Appeals). In view of the aforesaid, we do not find any infirmity in the order of the learned Commissioner (Appeals) in deleting the addition made by the Assessing Officer purely on conjecture and surmises. Ground raised is dismissed.
29. In the result, Revenue's appeal is dismissed.
30. To sum up, assessee's appeal is partly allowed and Revenue's appeal is dismissed.
Order pronounced in the open Court on Ab ta ROR.
sa}. Sal /:
jal! N.K. PRADHAN ~ SAKTAII DEX _-" ACCOUNTANT MEMBER JUDIOUAL MEMBER MUMBAI, DATED: 20. /2. I¢/2- ae 50 e Deepika A. Mehta Copy of the order forwarded to:
{i} The Assessee;
(2) The Revenue;
(3) The CIT{A);
{4} The CIT, Mumbai City concerned; (5) The OR, ITAT, Mumbai;
(6) Guard file.
Fut. Copy By Order Pradeep J. Chowdhury Sr. Private Secretary (Sr. Private Secretary) TAT, Mumbai