9911796707
TMI Blog2021 (5) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... before us we find that in this case the physical delivery has not taken place and therefore the transactions of sale and purchase of securities are speculative transactions and so is the profit resulting from those transactions. The speculative transactions are defined under section 43(5) of the Act and are eligible to be set off against the loss of share transactions. Accordingly, we hold that the speculative loss from share market transactions is eligible to be set off against the profit from trading in money market securities. We direct the AO to assess the net income which is the difference between the profit from trading in money market securities of nd losses from share market transactions as both being of speculative nature. Addition made on the basis of notings in the papers/ daily position sheets - addition towards speculative profit on trading in shares and towards speculative profit arising on shares held by the assessee on 24.01.1992 which were presumed to be carried forward and squared up on or before 31.03.1992 - HELD THAT:- Despite seized material containing transactions carried out by share brokerage firm M/s. J.H. Mehta, no statement was recorded of any employee or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by way of composite disclosure by Shri Harshad Mehta can not be added to the income of the assessee. The case of the assessee also is squarely covered by the decision of the coordinate bench of the Tribunal in the related concern case of M/s. Orion Travels Pvt. Ltd. vs. ACIT [ 2017 (1) TMI 1643 - ITAT MUMBAI] wherein identical issue has been decided in favour of the assessee. We, therefore set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition. Disallowance made towards the various expenses provided by the assessee in respect of services not rendered till the year end - CIT(A) in the second round again dismissed the appeal of the assessee - HELD THAT:- As the expenses of audit fees, professional fees, staff welfare have to be allowed on the basis of services availed by the assessee during the year whereas the admissibility of bonus and ex-gratia payment depends on the date of payment by the assessee before the due date of filing the return. Therefore, we are not in agreement with the conclusion drawn by the Ld. CIT(A) that disallowance is not allowable. The expenses incurred by the assessee on account of staff welfare expenses, audit fee, professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of business of the assessee are undisputed, therefore the assessee is entitled to claim depreciation on these assets in terms of the explanation 5 to section 32 of the Act. As brought to our notice that this issue has not been examined by the AO, therefore, we are restoring this issue for the limited purpose to the file of the AO to examine and verify the same and allow accordingly. The ground is allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that in In an eventuality of the additions made on the basis of incriminating seized material are finally deleted or restricted to an amount which is less than ₹ 33,60,000/-, then addition of ₹ 33,60,000/- made on the basis of aggregate disclosure by the Harshad Mehta Group would survive. 7) On the facts and the circumstances of the case, the Hon'ble C!T(A) erred in upholding the action of the AO in allowing only ₹ 1.82.028/- as expenditure out of total expenditure of ₹ 3,49,042/- claimed by the Appellant. The Appellant respectfully requests for deletion of the said impugned addition. 8) On the facts and the circumstances of the case, the Hon'ble CIT(A) erred in upholding the action of the AO of disallowing short-term capital loss on sale of 9% IRFC bonds amounting to ₹ 48,93,466/- by invoking Section 94(4) of the Act. The Appellant respectfully requests for deletion of the said impugned addition. 9) On the facts and in the circumstances of the case, the Hon'ble CIT(A) erred in upholding the action of AO in levying interest under Section 234A, 234B and 234C of the Income Tax Act, 1961. The Appellant craves leave to add, alter, va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, the Ld. A.R. relied on the following three decisions: 1. National Thermal Power Company Ltd. vs. CIT 229 ITR 383 (SC) 2. Jute Corporation of India Ltd. vs. CIT 187 ITR 688 (SC) 3. Ahmedabad Electricity Company Ltd. vs. CIT 199 ITR 359 (Bom.) The Ld. A.R., therefore, prayed that the ground may kindly be admitted and adjudicated. 7. The Ld. D.R., on the other hand, strongly opposed the admission of additional grounds raised at this stage by raising doubts about the intention of the assessee. The Ld. D.R. submitted that the assessee has neither raised this ground in the first round of litigation nor at the time of filing this appeal before the Tribunal. The Ld. D.R. submitted that only the legal issue can be allowed to be raised at this stage and not the factual issue as has been sought to be raised and racked up by the assessee. Therefore, the Ld. D.R. submitted that the additional ground may kindly be dismissed. 8. Having heard the rival submissions and perusing the material on record, we find that the issue raised by the assessee are arising out of the assessment records before the authorities below and does not require any verification of facts or any fresh material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.2018 in course of the appellate proceedings was examined. From this ledger account, it was observed that the other entries are related to speculative trading of shares in forward market, which do not entail any delivery. This conclusion is also arrived since it is observed that both the sale as well as purchase transactions have been undertaken on the same date and only the difference has been credited / debited to the said trading account. Thus the other share market transactions forming a part of the said trading account are clearly speculative in nature. It is also pertinent to mention that the assessee vide this office letter dated 10.10.2018, was specifically asked to furnish details of the sale / purchase of shares as well as of money market transactions entered during the relevant year along with specific information as to whether delivery was taken / given and also proof. However, this was not submitted by the assessee, despite several reminders. Thus, the assessee has also not provided any evidence to suggest that the said other share trading transactions are delivery based transactions. It is therefore held that the assessee has wrongly claimed set off of the share tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulative transactions in shares. The Ld. A.R. also submitted that issue as to whether the money market transactions are speculative or not has come up before the co-ordinate bench of the Tribunal in the case of Growmore Research & Assets Management Ltd. vs. DCIT ITA No.1785/M/2015 A.Y. 1990-91 wherein the coordinate bench of the Tribunal vide order dated 28.02.2017 has held that transaction of sale and purchase of units and government securities without taking actual delivery would fall within the ambit of speculative transactions as defined under section 43(5) of the Act and therefore are eligible for setting off against the losses from share market transactions. The Ld. A.R. finally prayed before the Bench that loss from share transactions of ₹ 76,76,455/- may kindly be allowed to be set off and adjusted against the profit from money market transactions by setting aside the order of ld CIT(A) and AO may be directed to take the net difference 4,39,395/- as income. 12. We have heard the rival submissions of both the parties and perused the material on record as placed before us including the order of AO and Ld. CIT(A). We find that AO has made an addition of ₹ 81,15,850 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd are that no deliveries were exchanged for carrying out money market transactions by the assessee. It is noted that in the identical circumstances ITAT in the case of Group companies of the assessee namely M/s. Growmore Leasing Investment held that such transactions would be speculated transactions by observing as under: "5.4 We have heard both sides in detail on this point. Shri Vijay Mehta, the learned Chartered Accountant appearing for the assessee, has placed before us a copy of the judgment in Suit No.1 of 2005 (O.S. Transferred Suit No.4018 of 1995) delivered on 17.4.2007, by the Special Court in the case of Canbank Financial Services Limited Vs. M/s.V.B.Desai The suit raised issues relating to the nature of legality of forward contract transactions in Government securities. Issues No.4 and 5 framed by the Special Court are as follows:- "4. Whether the Suit transactions are prohibited by the Securities Contract (Regulation) Act, 1956 as alleged in para V of the Written Statement? 5. Whether the Suit is based on an illegality and is liable to be dismissed on that ground as alleged in para IV and VI of the Written Statement? 5.5 The finding of the Special Court o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled off by paying the differential amount. The transactions are speculative transactions. The assessee has also shown income out of same-set of transactions, which is more than the loss declared by the assessee. The Assessing officer has assessed the profit as income. But he declined to allow the loss as deduction on the ground of illegality. 5.8. In the light of the judgment of the Special Court, as mentioned above, it is to be held that the forward transactions entered into by the assessee were not illegal. Therefore, the loss cannot be disallowed on that ground." 3.8. Thus, from the above order it is clear that special court has held that the forward transactions in Government securities were not illegal. It was further held that these transactions were speculative transactions. As far as reliance placed by Ld. special counsel upon the judgment of Hon'ble Supreme Court in the case of M/s. Appollo Tyres Ltd. (supra) is concerned, it is noted that the said judgment merely analysed the scope of section 73 wherein expression used by the legislature was 'shares'. On the other hand, the expression used in section 43(5) is not only 'shares' but 'securities' as well'. This di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Based on the said sheets/papers, the AO calculated the profit on sale of shares which is attached as annexure 'B' to the assessment order and filed at page No.36 to 44 of the paper book. The AO also calculated the carry forward position as on 24.01.1992. In respect of sale transactions reflected on these papers, the AO computed the profit in respect of each scrip aggregating to ₹ 1,92,05,630/- and added the same to the income of the assessee. 16. The AO also observed from certain daily position sheets which were found and seized at the time of search from the premises of brokerage firm M/s. J.H. Mehta that assessee also held positions in various scripts. These sheets were containing details of positions on various dates such as 24.1.1992,12.02.1992, 18.02.1992 & 27.02.1992. On the said sheets several figures were noted against the names of various shares and scrips. On the basis of said papers, the AO came to conclusion that said notings reflected the position held by the assessee in the shares of various companies as on the date when these sheets were prepared. In some cases, the name of the assessee was also mentioned. The AO prepared the statement showing the position o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors of the assessee. On this contention of the assessee, it is noted that searches were carried out on Harshad Mehta group on 27.09.1990 and 28.02.1992. There is no dispute that the assessee is also a part of Harshad Mehta group. Further, in course of the said searches, it was found that there is no entity wise demarcation of the various premises of Harshad Mehta group. It is noted that M/s Harshad Mehta, M/s Jyoti Mehta & M/s Ashwin Mehta are the broker entities of the Harshad Mehta Group and they in turn have carried out share market as well as money market transactions for themselves as well as the other entities of the Harshad Mehta Group. The seized material collected from the various premises of the Harshad Mehta Group pertains to all the different entities of this group. Therefore, the contention of the assessee that since the said documents were neither seized from its premises nor from the premises of any of its directors, the AO could not have made the addition on their basis, is rejected. On the contention of the assessee that the AO has wrongly relied upon the presumptions u/s 132(4), as noted earlier, the provisions of section 292C have been inserted by the Finance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said affidavit that no reliance can be placed on the said seized documents for the purpose of computing the income of the assessee. The relevant portion of the affidavit of M/s J H Mehta is reproduced as under: "11. I say that Annexures 'A' and 'B' enclosed to the above referred assessment order of M/s. Cascade Holdings P. Ltd. do not represent transactions undertaken on behalf of M/s. Cascade Holdings P. Ltd. save and except to the extent that I have issued the contract notes which actually represent the transactions undertaken by M/s. Cascade Holdings P. Ltd, Further, I confirm that I have ......................... order, I deny that any profit has been made by Cascade Holdings P. Ltd. as computed in the assessment order on the basis of alleged positions outstanding on various dates as indicated on Page 4 of the assessment order and elsewhere, save and except to the extent I have issued the contract notes to M/s. Cascade Holdings P. Ltd. I say that there is no material to establish any alleged sales nor there is material to establish the alleged purchase." 12. In respect of the contents of Annexure 'A' enclosed with the above referred assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e name of M/s J H Mehta itself as one of the clients. For example, as per the said client-wise break-up submitted, the position of ACC shares in respect of M/s J H Mehta as on 12.02.1992 is of 72080 shares. By no stretch of imagination, can the transactions carried out by M/s J H Mehta in the capacity of principal be included in the transactions carried out on behalf of the clients. There is a clear distinction between the transactions which are being carried out by the broker in the capacity of the principal and the transactions which are being carried out by the broker on behalf of the clients. Even in the mandatory reportings to the Stock Exchange by the broker, the transactions are segregated into (i) the transactions carried out in the capacity of principal and (ii) transactions carried out on behalf of the clients. Thus, the claim of the assessee that it was using a dummy name "CASCADE HOLDINGS /CASCADE" in respect of the various transactions undertaken for its clients prior to validation / correction is rejected. Moreover, no sensible person will use the name of its own related entity as a dummy name when the said related entity also happen to be its client. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions for which additions have been made by the AO and for which the assessee contends that the same have been undertaken primarily by the other entities of the Harshad Mehta Group. 14.18 In the instant case, it is noted that the AO on the basis of the notings on the said seized documents concluded that the assessee had a certain stock position in various scrips on different dates and since, the assessee could not provide any details of the ultimate fate of the said stock of shares and/or proof of delivery etc., he presumed that the same was carried forward and the position was squared up on or before 31.03.1992. On the other hand, the assessee in the present appellate proceedings contends that bulk of the said stock of shares comprised of shares of ACC, which were purchased by M/s. J.H. Mehta from certain 4 brokers of Calcutta Stock Exchange not only for the assessee but also for the other notified entities of Harshad Mehta Group. It is also claimed by the assessee that these shares have been subsequently registered in the hands of the assessee and the other notified entities of Harshad Mehta Group by the Custodian as per the order of the Hon'ble Special Court. However, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as per the books of M/s. J.H. Mehta, the delivery based transactions of the assessee are of only 20,850 shares of ACC as against more than 3,00,000 shares as per the AO, it is noted that the claim of the assessee that the said transactions were carried out by M/s. J.H. Mehta on behalf of the other entities of the Harshad Mehta Group itself has been rejected earlier and therefore, this contention of the assessee cannot help its cause. 14.20 The assessee contends that the AO has made a number of presumptions which include (i) that the entire stock position was carried forward and squared up on 31.03.1992, (ii) though there was no noting in the said seized documents in respect of sale of the said stock position, it was presumed that the same were sold and the rates as on 31.03.1992 were applied only because the rates of various scrips as on 31.03.1992 were at its peak, (iii) deliberately it was presumed that the said shares were carried forward and squared up since if it would have been held that delivery of those shares was taken, the profits could have been taxed only on their actual sale. On these contentions of the assessee, it is noted that the AO had called for details o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ian or the Hon'ble Special Court about the ownership over the said shares. In any case, in absence of distinctive numbers and proof of delivery of shares, it is not possible to show that said shares registered in the names of the said other entities of the Harshad Mehta Group are the same as the shares for which the said additions were made in the hands of the assessee. This issue has also been adjudicated against the assessee by my Learned Predecessor in the case of Harshad Mehta for AY 1992-93 in IT 59/95-96 dated 24.03.2010. The relevant portion of the said appellate order on this issue is reproduced as under :- "The appellant has also raised the issue that the Assessing Officer did not have the authority to decide the ownership of shares in view of the orders of the Hon'ble Special Court as mentioned by the appellant in his submissions. This submission is misplace. In this context, I find that the Hon'ble Special Court has from to time passed orders delivered on 17.07.1996 and 29.03.1996 in three petitions immediately after submission of the list by the appellant. In these orders, the Hon'ble Special Court has directed that wherever the appellant had fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Custodian any accruals on those shares. In similar vein, vide its order dated 08.04.3002, the Hon'ble Special Court had the occasion to pass similar orders in respect of benami shares. While passing this order, the Hon'ble Special Court had the occasion to observe that despite repeated reminders, the appellant did not name the entities in whose favour, and the benami shares were to be transferred. The Hon'ble Special Court in this order, had the occasion to direct that the shares are to be dematerialized into the Depository Account of the Custodian. As I find, the appellant has not been able to give the names of the owner of these shares despite being given several opportunities by the Custodian. ............................. 14.23 The assessee, in the present appellate proceedings, has also submitted that the Hon'ble ITAT in the cases of Topaz Holdings P Ltd (supra) & Pallavi Holdings P Ltd. (supra), has held that the AO cannot presume sale of shares on 31.03.1993 and therefore, had deleted the addition. Accordingly, it was contended that the action of the AO of presuming that the said shares were squared up on 31.03.1992 and thereby determining its profits t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought on record in this respect clearly point to the fact that the shares were sold. As against this, in the two cases cited by the appellant the fate of the shares was still unknown and it is in these circumstances that the Hon'ble ITAT held that the Assessing Officer cannot nick and choose selectively on one or some of the possibilities out of many other available. On the issue of the basis of pricing of the shares, the appellant has relied on the decisions dated 28.1.2002 and 28.2.2002 in the cases M/s. Pallavi Holdings Pvt. Ltd. and M/s. Topaz Holdings Pvt. Ltd. as given by CIT(A). These decisions are not applicable to the appellant's case, since as already discussed, in the appellant's case, the Assessing Officer has gone by established accounting principles and taken the prevalent price as on 31.3.2002 clued into the fact that the appellant had continued to carry on his business even after the search on 28.2.1992. The appellant has a/so placed reliance on four other decisions which have been listed while discussing the appellant's submissions. The appellant has, however, not spelt out how these decisions advance his case. In any case, the appellant's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... broker daily. This is evident from the fact that the sheet shows the notings which are unsystematic in nature, written in a very rough and haphazard manner and also does not bear any reference to the figures written nor signed by any employee or the broker. The ld AR admitted that the noting 'Cascade' ' is also written without any correlation to any figure and that it cannot be deciphered whether the figures written across the said noting 'Cascade' are relevant or the figures written below. Moreover, the statement of position as on 24.01.1992 in the name of 'Cascade" also does not bear any reference to the Contract Notes and the details reflected in the column 'Contract No.' consists of dummy nos. [Ref, last Column of seized page enclosed at Page 21-35 of PB]. This proves that the notings are rough notings and jottings before the issue of Contract Notes in favour of actual clients and the same cannot be considered to be final, authenticated and reliable record of any actual and concluded transactions of purchase and sale of shares. Such notings on the sheets cannot be considered to be actual and final position in shares and further that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch scenario, the sheets would have been marked final or signed by the concerned employees as mark of an internal check. No such markings or signatures are found on such sheets. Under these circumstances, if the sheets were being regularly maintained and were supposed to reflect the correct and final position of the holdings of the appellant, sheets for each day would have been found and seized and would have been authenticated and signed by someone in the organization. The ld AR submitted that the AO has given substantial importance to the dates mentioned on each sheet. It is submitted that several such sheets found does not mention any date and time on the sheet. This proves that the sheets were used only for making rough jottings of the transactions either executed or to be executed by the broker, M/s. J H. Mehta in the shares of various companies on behalf of its several clients. The ld AR further referring to said sheets the remarks column states that on the said sheet reflects notings like 'Pending', 'N.T,', 'Check', etc. which proves that several entries recorded on the sheet could be mere orders which were not complete and were subject to checking h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. Your Honour would notice that based on such seized pages, the AO has worked out an income of almost ₹ 100 crores earned by the appellant in a period of just 2 months and that too without knowing as to the where of the said income lying in the form of cash and the details of the counterparties with whom the ld. AR transactions are carried out. The ld AR submits that the business of stock broking is highly regulated both under the Securities Contract Regulation Act of 1956 as also by Rules, Regulations and Bye laws framed by the Bombay Stock Exchange of Bombay in 1957. The transactions undertaken on the floor of the Bombay Stock Exchange had to be reported to the Stock Exchange on a daily basis and settlement for these transactions was to be made by cheque only. Therefore it was not possible to undertake any transactions in cash or outside the books of account or settle them in any other manner except payment by cheques. Ld AR submits that the alleged profit is claimed to have been earned outside the books of account at a time when a massive raid was conducted by the department from 28.02.1992. This is more so when the income so determined by the AO is pertainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the nature of dumb documents without any corroborative evidence found as a result of search. The settled legal position in this regard, as held by the various courts, also establishes that such loose sheets without any corroborative evidence can at the most be regarded as a dumb document and no addition can be made on the basis of the same. In this regard, reliance is placed upon following decisions; a. N. K. Malhan v. DCIT [91 TTJ 938 (Del Trib)] [Page 199-208 of PB No. 3] b. Atul Kumar Jain v. DCIT [64 TTJ 786 (Del Trib)] [Page 209-220 of PB No. 3] c. DCIT v. C. Krishna Yadav [12 taxmann.com 4 (Hyd) [Page 221-225 of PB No.3] d. Neeraj Goel v. ACIT [1TA no. 5952-5956/Del/2017] dated 28.02.2019 [Page 226-235 of PB No.3] e. Suresh Virji Thakkar v. DCIT [ITA No. 5819-5820/Mum/2017 & 109/Mum/2016] dated 01.10.2018 [Page 236-243 of PB No. 3] f. ACIT v. Sharad Chaudhary [55 taxmann.com 234 (Del Trib)] [Page 244-253 of PB No. 3] g. Shreeji Transport Services P. Ltd. v. DCIT [ITA No. 1353/Mum/2014] [Page 254-283 of PB No. 3] 19.5. The ld. AR submits that the assessment proceedings were concluded after making detailed inquiry in respect of the transactions carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 of PB. c. M/s. J H. Mehta A/c. in the books of the appellant recording purchases made by the appellant through her filed at Page 77-78 of PB. d. Account of the appellant and some of the other clients in the books of M/s. J H. Mehta filed at Page 79-84 of PB. 19.7. The ld AR submits that no doubt has been raised with respect to the transactions reflected in the books of the account. The appellant also refers to the affidavit issued by Smt. Jyoti H. Mehta filed at Page 85-93 of PB, wherein she has confirmed that the notings made on the various daily position sheets, as well as the statement showing position as on 24.01.1992 in the name of the assessee cannot be considered to be final and conclusive. She has confirmed that all the transactions which were made in the name of the assessee are supported by duly executed Contract Notes and that the same are duly accounted for by her in the books of accounts. In the said affidavit she has also denied any carryover or squaring up as indicated in the daily position sheets seized at the time of search. No adverse inference can be drawn in absence of any evidences being brought on record by the AO to disprove the facts stated in the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e daily position sheets which contained the rough notings and entries, no incriminating evidences have been found during the course of search which confirmed or corroborated the purchase and sale of shares by the assessee. Moreover, these sheets were recovered from the office of share brokerage firm M/s. J.H. Mehta and can not be taken as outstanding position of holding of the assessee of various scrips and shares. We note that the brokerage firm M/s. J.H. Mehta along with others connected brokerage entities were conducting various operations from various locations like Bombay, Kolkata, Delhi and Madras on all stock exchanges and also operating from several offices, in such a scenario the loose sheets which contained the rough notings as to the some shares against the name of the assessee can not be held to be the outstanding position of the shares in the hands of the assessee when there is no corroborating or substantive evidences brought on record by the AO despite having enquired from various brokers about the transactions of the assessee. We have examined the sheets and found that in some cases the name of the assessee appeared without any correlation to the figure. We find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arshad Mehta made a composite disclosure of ₹ 100 crores in the hands of various group entities, the break up whereof was not submitted before the AO. The AO calculated the proportionate share of the assessee in the consolidated disclosure of ₹ 100 crores at ₹ 33,60,000/- and added the same to the income of the assessee. 24. In the first round of litigation, the Ld. CIT(A) confirmed the addition on the ground that books of accounts were not produced before the AO. The Ld. CIT(A) noted that now the books of accounts have been allowed as additional evidence by the Tribunal, therefore addition sustained by the Ld. CIT(A) in the first round is not applicable. The Ld. CIT(A) observed that in the first round in the case of Shri Ashwin S. Mehta for A.Y. 1992-93 has adjudicated the issue in favour of the assessee by following his own decision in the case of Smt. Deepika A. Mehta for A.Y. 1991-92. The Ld. CIT(A) in the second round deleted the addition by following the decision in the case of Smt. Deepika A. Mehta for A.Y. 1991-92 and Shri Ashwin S. Mehta for A.Y. 1992-93, however, put a rider that in the eventuality of addition made on the basis of incriminating seized m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and restored the matter back to the file of the Ld. CIT(A) to decide the issues on the basis of books of accounts. We find merit in the contentions and arguments of the Ld. A.R. that the disclosure was made at a stage when the complete books of accounts were not available and it was not possible for the group to determine its correct income from share trading profit, dividend and capital gain etc. and the disclosure was purely on estimation basis. But now since the books of accounts are before the Revenue Authorities and contains all the information qua the income of the assessee by way of profit on share trading, dividend and capital gain etc and the actual income of the assessee has been assessed by the Revenue Authorities based on the bank statements and other accounting records, therefore the income as offered by way of composite disclosure by Shri Harshad Mehta can not be added to the income of the assessee. The case of the assessee also is squarely covered by the decision of the coordinate bench of the Tribunal in the related concern case of M/s. Orion Travels Pvt. Ltd. vs. ACIT (supra) wherein identical issue has been decided in favour of the assessee. We, therefore, respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es during the year. Similarly, the assessee has provided a bonus and exgratia payment as the same was payable to the employees relating to F.Y. 1991-92. The Ld. A.R. submitted that the preliminary expenses to the extent not allowable during the year were added back to the income of the assessee in the computation of income itself suo motto. The Ld. A.R., therefore, prayed that considering all these facts the disallowance may kindly be deleted. 31. The Ld. D.R., on the other hand, relied heavily on the order of authorities below by submitting that books of accounts were not available in the first round of litigation and only compiled later and furnished before the tribunal for the first time and therefore it would be unfair on the part of the assessee to claim these expenses when there are no evidences to that effect that these expenses were actually incurred in relation to the current financial year. The ld DR prayed that the order of ld CIT(A) deserved to be affirmed. 32. Having heard the rival submissions and perusing the material on record, we observe that the expenses of audit fees, professional fees, staff welfare have to be allowed on the basis of services availed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground raised by the assessee by holding that the short term capital loss of ₹ 48,93,466/- can not be allowed. 36. The Ld. A.R. submitted before the Bench that the said short term capital loss was disallowed on the ground that bonds were purchased prior to the record date and after receiving tax free interest by the assessee, the same were sold at a loss resulting into earning of exempt income and therefore in terms of section 94(4) of the Act, the loss to the extent of exempt income was not allowable as deduction. The Ld. A.R. submits that the Ld. CIT(A) has not construed the provisions of section 94(4) in correct perspective. The Ld. A.R. submits that the provisions of section 94(4) of the Act are applicable in case of transactions carried out under the head "Business income". Since the transactions in question were on capital account the provisions of section 94(4) are not applicable. The Ld. A.R. submits that in any case provisions of section 94(4) of the Act can not be invoked unless and until in terms of section 94(4) of the Act the relevant income is brought to tax in the hands of counter party. In other words unless the interest income arising from securities d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee by holding as under: "6. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that that the assessee purchased 9% tax free IRFC bonds for the value of ₹ 50 crores from Harshad S Mehta for a total consideration of ₹ 50,31,95,205/- on 26-09-1991 and sells the same within a short period of 15 days on 11-10-1991 for a total consideration of ₹ 47,87,32,877/-. In this process the assessee claimed loss of ₹ 2,44,62,328/- and also received tax free interest from these IRFC bonds at ₹ 1,84,50,000/-. Whether in such circumstances, in view of the provisions of section of 94(1) & (4) of the Act, the loss claimed by the assessee is to be disallowed. We have gone through the provision of section and the same reads as under:- 94. Avoidance of tax by certain transactions in securities,- (1) Where the owner of any securities (in this sub- section and in subsection (2) referred to as" the owner") sells or transfers those securities, and buys back or reacquires the securities, then, if the result of the transaction is that any interest becoming payable in respect of the securities is receivable other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S Mehta and not of the assessee. Similarly, in respect to loss sustained on account of this transaction has been clarified by sub section of section 94 of the Act, which states that any person carrying on a business consists wholly or partly in dealing in securities, buys or acquires any securities and sell back or retransfer the securities then, if the result of the transaction is that, interest become payable in respect of securities is receivable by him but is not deemed to be his income in view of the provisions of sub section (1). Further, no account shall be taken of the transaction in computing for any of the purposes of this act, the profit arises from or loss sustained in the business. 7. We are of the view that the provisions of section 94(4) can be invoked only in case the provision of section 94(1) was applicable to the counter party. The loss on sale of securities can be disallowed only if the assessee in the course of business, bought and sold any securities and as a result of the transaction, interest was receivable by him which was not deemed to be his income by reason of Sec. 94(1) of the Act. The provisions of Sec. 94(4) would come into operation only if:- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares." 39. We, therefore, respectfully following the decision of the coordinate bench of the Tribunal set aside the order of Ld. CIT(A) and direct the AO to allow the set off of loss of ₹ 48,93,466/- to the assessee as suffered by it from 9% of IRFC bonds against the profit on sale of shares. The ground no. 8 is allowed. 40. In the ground No.9, the assessee has challenged the levy of interest under section 234A, 234B & 234C of the Act. 41. After hearing both the parties and perusing the relevant provisions of the Act and also the various decisions of the coordinate benches of the Tribunal, we hold that interest charged under section 234A, 234B & 234C is inevitable and is leviable in any case but same needs to be recomputed by the AO in terms of the decision of the co-ordinate bench of the Tribunal in the case of related entities M/s. Growmore Research and Assets Management Ltd. ITA No.1807 & 2192/M/2015 A.Y. 1992-93. The operative part whereof is reproduced as under: "24. At the outset, the learned Counsel for the assessee stated that the identical issue has been dealt with by the Tribunal in assessee's own group cases, in the case of Harshad S Mehta vs. ACIT in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artly succeeds." 5. Respectfully following the decision of the Co-ordinate Bench of the Tribunal in assessee's own case, we restore the issue to the file of the AO with a direction to recompute the interest u/s 234A, 234B and 234C after taking into account the tax deductible on total income of the assessee by affording fair and reasonable opportunity of being heard to the assessee." 25. In view of the above, we direct the AO to recompute the interest under section 234A, 234B, 234C and 220 of the Act as held by Tribunal in the case of Harshad S Mehta (supra). This issue of assessee's appeal is allowed for statistical purposes." 42. Since the facts of the instant issue before us is identical vis-à-vis the coordinate bench decision supra, we accordingly, direct the AO to recompute the interest in terms of the above decision after taking into account the amount of tax deductible at source on the assessed income. Ground is allowed for statistical purposes. 43. The assessee has also raised additional grounds which have been admitted by us challenging therein rejection of audited books of accounts of the assessee. Since we have decided the other issues in the foregoing paras ..... X X X X Extracts X X X X X X X X Extracts X X X X
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