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TMI Blog2019 (4) TMI 1897X X X X Extracts X X X X X X X X Extracts X X X X ..... ed order for the sake of convenience. ITA No. 937/MUM/2017 (Assessment Year: 2003-2004) 2. Brief facts of the case are that the assessee is a notified person under the Special Court (Trial of offences relating to transactions in securities) Act, 1992. Since, the assessee's assets including the bank account were attached, the assessee did not file return of income even after the due date. The AO issued notice u/s 142 (1) and served upon the assessee. However, no response was received on the part of the assessee. Notice u/s 142 (1) was again served upon the assessee. In response thereof the authorized representative appeared, however submitted that assessee had not received the relevant details from the custodian. The AO granted two-three more opportunities to present its case, however, none appeared on behalf of the assessee. The AO obtained bank statements of assessee's accounts maintained with State Bank of Mysore from the custodian. The assessee was also served with the show cause notice as to why the income should not be estimated on the basis of available data. However, again the assessee did not respond. The AO accordingly determined the total income of the assessee at Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the custodian for release of appeal fees, therefore, the delay in the present case is on account of the inordinate delay on the part of the custodian and the banks in releasing the appeal fees. The Ld. counsel further pointed out that Tribunal has allowed the application for condoned the delay on the identical ground in the following cases:- i Orion Travels Pvt. Ltd. v. DCIT [ITA No. 1005/Mum.2017] dated 11.09.2017. ii Eminent Holdings Pvt. Ltd. v DCIT [ITA No. 1215/Mum/2017] dated 11.09.2017. iii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 1221/Mum/2017] dated 11.09.2017 iv Aatur Holdings Pvt. Ltd. v. DCIT [ITA No. 1223/Mum/2017] dated 11.09.2017. v Fortune Holdings Pvt. Ltd. v. DCIT [ITA No. 939/Mum/2017] dated 11.09.2017. vi Gromore Leasing & Investment Pvt. Ltd. v. DCIT [ITA No. 1219/Mum/2017] dated 27.12.2017 vii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 3596/Mum/2013] dated 05.05.2015. viii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 3464/Mum/2013] dated 08.10.2014. ix Rasila Mehta v. DCIT [ITA No. 3890/Mum/2012] dated 20.07.2016. x Growmore Exports Pvt. Ltd. v. DCIT ITA No. 4358/Mum/2013] dated 08.02.2016. xi Growmore Exports Pvt. Ltd. v. DCIT [ITA No. 3491- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so." 9. Hence, in the light of the facts of the case and the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. We have also gone through the case law as has been cited before us the relevant provisions of the Special Court Act which has been referred to before us during the course of hearing. This is an undisputed fact which we noted that the assessee is a notified person from 08.06.1992 under Section 3(2) of the Special Court Act. As per the provisions of the Special Court Act contract entered into by a notified person prior to notification made under Section 3(2) are not affected by the notification. Section 4(1) of the Special Court Act empowers the custodian to cancel any contract or agreement entered into between 01.04.1991 to 06.06.1992 if the custodian finds that these contracts have been entered into fraudulently or to defeat the provisions of the Special Court Act. In A.Y. 1990-91, the AO in the assessment order passed under Section 143(3) dated 26.03.1993 allowed the interest expenses to the assessee to the extent of Rs. 5,86,404/-. From page 75 of the paper book which contains the computation of income for A.Y. 1990-91, we noted that the assessee has disclosed the loan taken for the purchase of investment. The assessee is consistently following mercantile system of accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing payment of interest to the brokerage firms, the intentions of the parties were always so, this is evident from the fact that identical claim was also made during A.Y. 1990-91 and the same was allowed to the appellant and other concerns. The claim made in the affidavit of Custodian in MP No. 41 of 1999 also supports this claim. I also agree with the appellant that there need not be any written agreement and that the oral agreement coupled with the actions and intentions of the parties is sufficient to prove the existence of the liability." 13. Similar issue was involved in the case of other family member, i.e. Shri Hitesh S. Mehta for A.Y. 2005-06 where also the AO has disputed the very existence of liability towards interest to creditors. The CIT(A) vide his order dated 31.08.2010 confirmed and approved the claim of the assessee that there was no need for any written agreement and that the oral agreement coupled with action and intentions of the parties is sufficient to prove the existence of liability. This order of the CIT(A) was followed by him in the case of the assessee while adjudicating the ground relating to the interest expenses for A.Y. 2006-07 vide order dated 27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n term deposits with the banks and accordingly the assessee has claimed interest expenditure against the interest earned on term deposits. No contrary evidences or material were brought to our knowledge to contradict this fact. In view of this fact we find that there is a nexus between borrowed funds and investments in term deposits. Therefore, the interest paid on the borrowed funds has to be allowed out of the interest earned by the assessee on term deposits. We noted that identical issue was raised in the case of M/s. Growmore Leasing & Investment Ltd. in A.Y. 2007-08. The CIT(A) in his order dated 26.02.2012 considered the issue of nexus of interest expenditure with interest income, following his own finding in the case of another notified entity, i.e. Eminent Holding Pvt. Ltd. for A.Y. 2007-08 which are reproduced as under: - "As regards the nexus of the interest expenditure with the interest income, I find that the Balance Sheet of the appellant and the affidavit filed by the custodian before the Hon'ble Special Court supports the fact that the funds borrowed from Shri Harshad S. Mehta were deployed by the appellant in various assets like shares and securities, properti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff and traversable by the Defendant, has not been traversed. In that case also a Defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken." At pg 329 of the judgment, Their Lordships observed as under: "We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating though the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assesses - we do not think the question should have been reopened and contrary to what had been decided by the Commission of Income-Tax in the earlier proceedings, a different and contradictory stand sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged u/s 234A, 234B and 234C of the Act. Ignoring the fact that the assessee was subjected to the provisions of TDS and hence all the said amount of tax no interest can be computed u/s 234B and 234C of the Act. 15. The Ld. counsel pointed out that the ITAT, Mumbai has dealt with the identical issue in the related case of Sudhir Mehta vs. DCIT and Ors. ITA No. 5799/Mum/2015 and Ors and the Tribunal has set aside the issue to the file of Assessing Officer for calculating the quantum of interest u/s 234B and 234C of the Act after reducing the amount of tax deductable at source. 16. On the other hand, the Ld. DR did not controvert the facts submitted before the Tribunal by the Ld. counsel, however, supported the order of the Ld. CIT (A). 17. We have perused the relevant material on record in the light of the rival submissions of the parties including the case relied upon by the assessee. The coordinate Bench has set aside the issue to the file of AO with the direction to re-compute the interest liability after reducing the amount of tax deductible at source on the income earned. The relevant paras of the order passed by the coordinate Bench are reproduced as under:- 20. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing to the assessee. Ground no.5 is allowed in part in favour of the assessee." Respectfully following the said order of the Tribunal in the case of Eminent Holding P. Ltd. (supra) we direct the AO to re-computed the interest liability after reducing the amount of tax deductible at source on the income earned. Thus, ground No. 3 stand dismissed while ground No. 4 stand partly allowed." 18. Since, the coordinate Bench has dealt with the identical issue and set aside the said issue to the file of AO for re-computation after reducing the amount of tax deductible at source on the income earned and since there is no material change in the facts of the case, there is no reason to take a different view other than the view already taken in the similar matter. Hence, respectfully following the decision of the coordinate Bench, we set aside this issue to the file of AO for re-computing the amount after reducing the amount of tax deductible at source. Hence, this ground of appeal is allowed for statistical purposes. ITA No. 938/M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assesse's own case for the A.Y. 2003-04. Since, we have allowed the application and condoned the delay of 661 days in the assessee's own case for the A.Y. 2003-04, we allow the application for condonation of delay in the present case for the same reasons. Accordingly, we allowe the Ld. counsel for the assessee to argue the case on merits. 4. Before us, the ld. counsel for the assessee submitted that the assessee does not want to press Ground No. 1 of the appeal. We accordingly dismiss Ground No. 1 of the appeal as not pressed. 5. So far as Ground No. 2 of the appeal is concerned, this ground is identical to the ground No.2 of appeal in the assessee's own case for the A.Y. 2003-04. Since, we have allowed the identical ground in the assessee's own case for the A.Y.2003-04, consistent with our findings, we allow this ground of appeal for the same reasons. 6. Ground No. 3 and 4 pertain to the levy of interest u/s 234A, 234B and 234C of the Act. Since, we have set aside the issue to the file of AO for calculating the quantum of interest u/s 234B and 234C of the Act after reducing the tax deductible at source in the assessee's own case for the A.Y. 2003-04, consistent with our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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