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TMI Blog2020 (9) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... any letter/material should be given before raising the addition in accordance with law, hence addition is not liable to be sustainable - HELD THAT:- Addition is liable to be examined once again by the necessary documents/opportunity to the assessee in accordance with law. Addition of unexplained deposits - HELD THAT:- Since this addition are required to be confirmed, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the matter of controversy afresh in the light of evidence mentioned above in accordance with law. Accordingly, this issue is decided in favour of the assessee against the revenue. Addition of share of profit from partnership firm - HELD THAT:- As specifically argued that the final figure is not on record, therefore, the issue is liable to be restored to the file of the AO to decide the matter of controversy afresh to adopt the final figure of profit determined in case of M/s. Sunrise Enterprises in the hands of the assessee. Anyhow when the profit figure has been taken from the M/s. Sunrise Enterprises, therefore, it is necessary to determine the matter of controversy on the basis of the final figure of profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -. 4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming addition of unexplained deposits in bank account of the appellant amounting to 85,225/-. 5. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming addition of share of profit of MIs. Sunrise Enterprises amounting to 252075/-. 6. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming disallowance of interest expenditure amounting to 2.76,76,843/- 7. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in not considering the claim of the appellant relating to deduction u/s. 80L of the Act amounting to ₹ 12,000/-. 8. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 234B and 234C of the Act. 9. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s. 234B and 234C of the Act. 10. The appellant craves leave of Your Honour to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nrise Ent. ₹ 2,52,075/- 4. Dividend and interest income ₹ 60,61,163/- 5. Share Trading Profit. ₹ 1,56,96,071/- 6. Long Term Capital Gain ₹ 23,61,869/- 7. Salary Income ₹ 65,703/- Thereafter the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee, therefore, the assessee has filed the present appeal before us. ISSUE NO. 1 5. This issue was not pressed by the Ld. Representative of the assessee, therefore, this issue is being decided in favour of the revenue against the assessee being not pressed. ISSUE NO.2 6. Under this issue the assessee has challenged the issue of rejection of the books of account by the AO which was confirmed by CIT(A). It is a third round of the appeal before the Hon ble ITAT. Initially assessment was completed u/s 144 of the Act on 28.02.1995. The books of accounts were rejected by AO. The said issue was upheld by CIT(A) vide its order dated 28.02.2003. Thereafter, the assessee has challenged the issue before the Hon ble ITAT and vide order dated 20.10.2005, the issue was restored to the file of the AO to decide the matter of controversy afresh by giving certain directions. Thereafter, the AO com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement, it is submitted that while completing the original assessment u/s 144 of the Act on 28.02.1995, the copy of the bank statements was called from the RBI and was available with the assessing officer. [Pg. 6-7 of PB]. b) The objections in the Special Audit Report dated 06.02.2002 were mainly because certain documents were not submitted to the auditors due to its unavailability at the relevant point of time i.e. in 2001. This was mainly because, Late Shri Harshad Mehta had expired on 31.12.2001 and there was complete imbalance in the family. However, later in 2006, complete, books of account and explanations have been submitted before the Assessing Officer with respect to these discrepancies at the time of assessment proceedings. Hence, reference to the observations of special auditor is of no relevance as complete books of account have been filed subsequent to the report of the special auditor. In any case, the report given by the auditors was merely an opinion and cannot form basis for rejection of books of account. c) The contract notes were liable for stamp duty which was to be paid by the brokers. The brokers had paid the stamp duty periodically on consolidated basis and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific defects were found in the books of account. h) As regards day to day drawing of books of account, it is submitted that at the time of search, incomplete books of account were seized. The books of account could not be fully drawn due to notification and other difficulties. The assessee could draw it's complete books in 2006. These books of account were filed before the assessing officerand hence ought to have been examined by the assessing officer and could not have been rejected at the threshhold. Hence, the aforesaid observation is not relevant now. i) As regards uniform drawings of ₹ 5,000/- per month, it is submitted that the same is factually incorrect. There are no uniform drawings of such amount in case of the assessee. On perusal of ledger account of Drawings at Page 177, it can be seen that there are different amount of drawings by the assessee. j) Since the purchase and sale of shares were made through contract notes issued by brokers, the entries for the same have to be made by way of journal entries. Further, as stated above, the payments/receipts from these parties are made on Iumpsum basis. The contract notes are also accepted by the assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f India Ltd. 85,100 12 Indo Rama Synthetics India Ltd. 3,84,800 Total 12,38,857 10. The Ld. Representative of the assessee has argued that the AO nowhere provided company letter of scrips corresponding the addition of ₹ 5,09,932/- on account of following parties.:- Sr. No. Nature of scrip Amount 1 Bihar Alloys Steels Ltd. 4,175 2 Goa Carbon 53,250 3 Additions based on seized assets 58,652 4 Ispat Alloys Ltd. 4,410 5 Manglore Chemicals and Fertilizers Ltd. 1,638 6 Onida 81,763 7 Singer India Ltd. 1,000 8 Southern Petrochemcal Ind. Corp. Ltd. 3,05,044 Total 5,09,932 11. The basic contention of the assessee is that the AO nowhere provided company letter of scrips before addition, therefore, in the interest of justice, the company letter/material should be given before raising the addition in accordance with law, hence addition is not liable to be sustainable. It is against the principal of natural justice. Accordingly, we are of the view that the addition in sum of ₹ 5,09,932/- is liable to be examined once again by the necessary documents/opportunity to the assessee in accordance with law. So far as the remaining addition in sum of ₹ 17,76,26,579/- is concern, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Growmore Leasing Investment Ltd. (supra) so far as the addition of ₹ 82,775/- and ₹ 62,400/- is concerned, the contention of the assessee is that the no material was given to the assessee before raising the said addition. Anyhow in the interest of justice, the relevant record/ opportunity is liable to be given to the assessee before raising the addition, hence, taking into account all the transaction mentioned above, we are of the view that the same is also required to be re-examined in view of the directions mentioned above. Hence we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the matter of controversy afresh in view of the directions mentioned above in accordance with law. Accordingly, we decide this issue in favour of the assessee against the revenue. ISSUE NO.4 13. Issue no. 4 is in connection with the addition of unexplained deposits of ₹ 85,225/-. Initially AO raised the addition in sum of ₹ 1,62,327/- however the CIT(A) deleted the addition to the tune of ₹ 77,102/- remaining in sum of ₹ 85,225/- has been confirmed. The assessee has explained the deposits in the bank account in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the case of M/s. Sunrise Enterprises. Accordingly, this issue is decided in favour of the assessee against the revenue. ISSUE NO. 6 16. Under this issue the assessee has challenged the disallowance of interest expenditure amounting to ₹ 2,76,76,843/- It is argued that the interest expenses have been allowed in ITA. No.4430/M/2017 for the A.Y.2012-13 dated 27.12.2017, therefore, in the said circumstances, the interest expenses is liable to be allowed in the interest of justice. It is also argued that in the case of brother of the assessee Ashwin S. Mehta Vs. ACIT in ITA. No.2474/M/2015 dated 07.12.2018, the expences has also allowed the expenses, therefore, the claim of the assessee is liable to be allowed in the interest of justice. It is specifically argued that the assessee nowhere earned any exempt income, hence, no disallowance u/s 14A of the Act. It is also argued that the issue has been challenged in the case of the assessee and several other family members wherein on similar facts, the interest claimed as payable to Late Shri Harshad S. Mehta, Shri Ashwin S. Mehta and Smt. Jyoti H. Mehta was held allowable by the Hon ble Tribunal subject to verification of disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an taken for the purchase of investment The assessee is consistently following mercantile system of accounting which is apparent even from the assessment order of A. V. 1990-91 as well as from the impugned assessment year The order for A. Y 1990-91 in fact has been passed by the AO after the date of notification and the enactment of the Special Court Act. We have gone through the order passed by the CJT(A) in the case of Shri Ashwin S Mehta assessment years 2010-11 and 2011-12, where we noted that this issue of taxability of interest income of the assessee and other parties has specifically been dealt with by the CIT(A) and accordingly interest income of ₹ 10,68,83,732/- was brought to tax. In view of this fact it is apparent that the assessee is liable to pay interest on the amount outstanding. Therefore. the liability towards interest got accrued. Under the mercantile system of accounting interest is deductible when it has accrued. This also proves that there was an agreement, may be oral, to pay the interest on the borrowed funds by the assessee to the other family members. We, therefore, reject the plea of the learned D.R. that no liability towards interest has accrued bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts of law, contrary to the decision of the coordinate Bench. Hence, respectfully following the decision of the coordinate Bench, we allow this ground of appeal of the assessee and set aside the findings of the Ld. CIT(A). We accordingly direct the AO to delete the addition. 19. The copy of order in the case of Cascade Holding Pvt. Ltd. Vs. ACIT vice-versa bearing ITA. No.937 938/M/2017 dated 04.04.2019 is on the file in which the relevant finding is hereby reproduced as under.:- 13. The facts of the present case are similar to the facts of the case of Sudhir Mehta vs. DCIT, discussed above and the issues involved in both the cases are identical. Since, the coordinate Bench of the Tribunal has dealt with the identical issue in the aforesaid case and directed the AO to allow deduction in respect of interest accrued and calculate @ 12% per annum after disallowing proportionate interest in respect of investment in shares after verifying calculation of the interest quantification, we respectfully following the decision of the coordinate Bench, set aside the findings of the Ld. CIT(A) allow this ground of appeal. Since the assessee had not earned any exempt income during the year rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seamless DEB 540 54000 ITC Ltd. 12185 6068130 L T DEB 110 13200 Metalman Pipe 3600 343800 Modi Cement 1290 62081 Mukund Steel-DEB 150 15000 Swaraj Engines 350 47688 Universal luggage 4900 2303000 Total 7843099 Therefore, the balance addition of ₹ 38,08,416 is confirmed in the and of the assessee. Thus, this ground taken by the assessee is partly allowed. 24. On appraisal of the above mentioned finding, we noticed that the assessee has furnished the detailed explanation in nature of company letter including share holdings of the assessee company and the custodian letters and affidavit of third parties showing the purchase on behalf of the assessee. The discrepancies has been explained after due verification of the claim. The CIT(A) has deleted the addition to the extent of ₹ 78,43,099/-. Nothing came into noticed that which scrips has not been explained by assessee. The transaction has been explained satisfactorily. Since the CIT(A) has allowed the claim of the assessee on the basis of satisfactorily explanation of the assessee in connection with the transaction in question, therefore, we nowhere found any ground to interfere with the finding of the CIT(A) in question. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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