9911796707
TMI Blog2023 (10) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... AO is directed to re-adjudicate this aspect of the addition as per our aforesaid directions. As a result, the cross-appeals limited to this issue are allowed for statistical purposes. Addition made on the basis of company letters - Addition is based on the evidence which was not furnished to the assessee. In view of the specific directions of the coordinate bench of the Tribunal in assessee s own case, in the second round of proceedings, we find no basis in sustaining such an addition. Accordingly, the addition made on the basis of company letters, which were not provided to the assessee is deleted.DR could not bring any material on record to controvert the partial relief granted by the CIT(A), accordingly, the relief so granted is upheld. Appeal by the assessee in respect of the aforesaid addition is allowed, while the appeal by the Revenue is dismissed. Addition on the basis of holding as per dividend income account - Addition in respect of shareholding in Brooke Bond Lipton India Ltd, 66 shares appears to be issued to the assessee as bonus on holding 200 shares in the company in the ratio of 1:3 and the dividend was received by the assessee on 266 shares (inclusive of bonus sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PREME COURT ] we are of the considered view that the assessee is entitled to claim a deduction of interest expenditure u/s 57 since receipt of dividend is merely due to the shareholding of the assessee and the interest expenditure has nexus with the income under the head income from other sources including dividend income even though not direct. Accordingly, the AO is directed to allow the interest expenditure claimed by the assessee u/s 57 of the Act. - Shri G.S. Pannu, Vice President, And Shri Sandeep Singh Karhail, Judicial Member For the Assessee : Shri Dharmesh Shah a/w Ms. Jigna Jain. For the Revenue : Dr. P. Daniel. ORDER The present cross-appeals have been filed challenging the impugned order dated 09/01/2023, passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals)-52, Mumbai, [ learned CIT(A) ], for the assessment year 1992-93. 2. In the larger interest of justice, the slight delay of 2 days in filing the appeal by the Revenue is condoned. 3. The brief facts of the case, as emanating from the record, are: The assessee is a notified person under the Special Court (Trial of Offences Relating to Transactions in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available on record. The learned CIT (A) upheld the addition of Rs. 1,47,77,303, as an unexplained investment in shares. The learned CIT (A) also directed the AO to restrict the deduction of interest expenditure to Rs. 15,73,548, in respect of share trading profit, while interest expenditure from capital gains and dividends was held to be not allowable. Being aggrieved, both the assessee and Revenue are in appeal before us. 5. In its appeal, the assessee has raised the following grounds:- 1. The Ld. CIT (A) erred in law and in facts in rejecting books of accounts of the appellant thereby that the books submitted by the appellant do not stand admitted. 2. The Ld. CIT (A) has erred in law and in facts in confirming the addition on account of unexplained investments to the tune of Rs. 1,47.77,303/- made by the Ld. A.O. 3. The Ld. CIT (A) has erred in law and in facts in not allowing the deduction of interest expenditure claimed by the appellant amounting to Rs. 2,46,33,261/- and restricting the deduction only to the tune of Rs. 15,73.548/-. 4. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal. 6. While the Revenue has raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not file her return of income within the due date, accordingly notice under section 142(1) of the Act was issued calling upon the assessee to file her return of income. As no return was filed by the assessee, the AO computed the original assessment proceedings under section 144 of the Act vide order dated 28/02/1995, inter-alia, after making an addition of Rs. 33,86,87,172, as unexplained investment. In further appeal, no relief was granted to the assessee on this issue by the learned CIT(A). The coordinate bench of the Tribunal vide order dated 23/02/2005, remanded the matter back to the file of the AO to pass a fresh order, after affording adequate and proper opportunity to the assessee. 10. In the second round of proceedings, the AO, vide order dated 22/12/2006, passed under section 144 read with section 254 of the Act, interalia, again made an addition of Rs. 33,86,87,172, as an unexplained investment. The learned CIT (A) granted partial relief to the assessee on this issue and restricted the addition on account of unexplained investment in shares to Rs. 12,19,62,849. The coordinate bench of the Tribunal vide order dated 30/06/2014 passed in ITA No. 2694/Mum./2012, restored th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 100 shares as per AO; Hence, addition stands deleted - BROOK POND 266 65,170 49,000 As per the appellant, he has holding of 200 shares whereas it is 266 shares as per AO; Addition stands partly confirmed 16,170 BSES LTD. 500 1,15,625 1,15,628 As per the appellant, he has holding of 5,000 shares which is more than 500 shares as per AO; Hence, addition stands deleted - EICHER MOTORS 2,400 1,44,000 1,44,000 As per the appellant, he has holding of 3,400 shares which is equal to 3400 shares as per AO; Hence, addition stands deleted - EXCEL INDUSTRIES 2,020 14,39,250 14,39,250 As per the appellant, he has holding of 14,500 shares which is more than 14,420 shares as per AO; Hence, addition stands deleted - FINLOEX CABLES 20 10,000 10,000 As per the appellant, he has holding of 100 shares which is more than 20 shares as per AO; Hence, addition stands deleted - FINOLEX PIPES LTD. 1,000 82,250 61,688 As per the appellant, he has holding of 1000 shares whereas it is 1250 shares as per AO; Addition stands partly confirmed 20,563 FORBES GOKAK 1,950 78,000 78,000 As per the appellant, he has holding of 2,100 shares which is more than 1,950 shares as per AO; Hence, addition stands delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, the addition stands deleted. - MODI ALKALI 50 3,769 - No reconciliation given; addition is confirmed 2,769 MRF 100 1,08,250 - No reconciliation given; addition is confirmed 1,08,250 NICHOLAS LABORATORY 850 2,76,250 - No reconciliation given; addition is confirmed 2,76,250 PARASRAM SYNTHETICS 7,790 9,38,748 9,36,748 As per the appellant, he has holding of 21040 shares which is more than 20740 shares as per AO; Hence, addition stands deleted - PREMIER AUTO 50 3,325 - No reconciliation given; addition is confirmed 3,325 RAJASTHAN PETRO 100 11,813 - As per the appellant, he has holding of 21040 shares which is more than 20740 shares as per AO; Hence, addition stands deleted 11,813 REVATHI CP EQUIPMENT LTD. 300 71,625 - No reconciliation given; addition is confirmed 71,625 STEEL TUBES OF INDIA LTD. 1,000 46,000 - No reconciliation given; addition is confirmed 46,000 TATA METALS AND STRIPS LTD. 200 78,750 - No reconciliation given; addition is confirmed 78,750 TATA POWER 490 8,95,475 - No reconciliation given; addition is confirmed 8,65,475 TISCO 34,245 1,29,91,697 1,29,91,697 The appellant has extracted various letters addressed by the company to AO in response to S.133(6) notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid source of information with respect to shareholding of the assessee. 14. The learned AR by referring to the information received from some of the companies regarding the shareholding of the assessee vis- -vis the details of shareholding as appearing in the Custodian letter dated 29/10/1993 submitted that the shareholding of the assessee as determined by the Custodian in its letter was different than the shareholding confirmed by the respective companies. The details of variation in shareholding of the assessee as per the information received from various companies and Custodian letter is as under:- Sl. No. Name of the company Shareholding as per custodian letter (on page 180 of the paper book) Shareholding as per Company s letter (on page 186-203 of the paper book) 1. ACC Ltd 47,858 32,132 2. Colgate-Palmolive (India) Ltd 140 100 3. Gujarat Ambuja Cements Ltd 76,150 1,48,150 4. Mysore Cements Ltd 16,950 13,450 15. Therefore on the basis of the aforesaid variation, it was submitted that the figures of shareholding of the assessee provided by the Custodian are not reliable. In support of this submission, reference was also made to the letter of the Custodian dated 28/11/2017, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shareholding of the assessee, which is claimed to be, inter-alia, the basis for addition in her hands as unexplained investment in shares, was held by the assessee as the second holder and she was not the owner of the shares as has been considered till date for determining the shareholding in the hands of the assessee. 17. During the hearing, the learned AR placed reliance upon the decisions of the coordinate bench of the Tribunal in Growmore Leasing and Investment Ltd v/s DCIT, in ITA No. 2192/Mum/2015, dated 17/11/2017 and in Hitesh S. Mehta v/s ACIT, in ITA No. 5190/Mum./2017, dated 31/08/2020, wherein the addition made on the basis of Custodian Letter was directed to be deleted. We are of the view that even if addition made on the basis of Custodian Letter, in the present case, is deleted following the aforesaid decisions of the coordinate bench of the Tribunal, the actual shareholding of the assessee still has to be determined. We further find that the aforesaid clarification dated 28/11/2017, issued by the Custodian was not brought to the notice of the coordinate bench in the decisions relied upon by the learned AR in the Harshad Mehta group cases. It is also undisputed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submitted that during the course of proceedings before the learned CIT(A), even though several letters were provided to the assessee, the copies of letters based on which the addition of Rs. 3,13,213, was sustained, were not provided to the assessee. 19. We find that the coordinate bench of the Tribunal vide its order, in the second round of proceedings, in ITA No. 2694/Mum./2012, vide order dated 30/06/2014, specifically directed the AO to provide copies of all information on the basis of which additions were made in the hands of the assessee. The coordinate bench further held that if the AO does not provide the material then the addition cannot be made. The relevant findings of the coordinate bench in the aforesaid decision, are reproduced as under:- 5. After considering the impugned order, various Tribunal orders in the group cases of the assessee and also the grounds raised before us, we find that in the case of Smt. Rasila S. Mehta (supra) and in other cases also, similar grounds were raised. In these cases, the Tribunal has set aside the entire matter to the file of the Assessing Officer for making fresh assessment denovo. Since the facts of the assessee s case are simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be made, In view of above facts and circumstances, we set aside order of the authorities below and restore the issues to the file of the Assessing Officer to pass assessment de novo after affording reasonable opportunity of being heard to the assessee and as per observations of ours made in the order as above. We order accordingly. 4 Since the facts and circumstances are identical and the nature of issue raised in the case of the assessee as well as in the case of Shri Hitesh S Mehta (supra) are also similar; therefore, to maintain the rule of consistency, we set aside the matter to the record of the Assessing Officer with the similar directions and terms as in the case of Shri Hitesh S Mehta (above). 6. Thus, consistent with the view taken by the Tribunal in all these cases, wherein identical facts and issues are involved, therefore, we also set aside the impugned order passed by the learned Commissioner (Appeals) and restore back the entire issue to the file of the Assessing Officer for denovo assessment with similar directions. The Assessing Officer shall provide due and effective opportunity of hearing to the assessee. We order accordingly. 20. We further find that the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the dividend was received by the assessee on 266 shares (inclusive of bonus shares of 66 shares). Accordingly, we find no merits in the addition on the basis of the difference in shareholding in Brooke Bond Lipton India Ltd as per the dividend income account. Therefore, the same is directed to be deleted. 23. As regards the addition in respect of shareholding in Gujarat Ambuja Cements Ltd, as per the assessee, the dividend was received on 04/10/1991 and 10/10/1991 on 1,42,500 and 2950 shares respectively (aggregating to 1,45,500 shares). As per the assessee on the date of declaration of dividend, it had aggregate holding to the tune of 1,53,200 shares, and out of same the assessee sold a total of 42,500 shares during the year on 20/11/1991 and 29/03/1992 and offered to tax the capital gains. We find that the aforesaid submission is duly corroborated by the ledger account of dividend and share holing in Gujarat Ambuja Cements Ltd. in the books of the assessee, forming part of the paper book on pages 526, and 541- 543. We find that the opening balance in the shares of Gujarat Ambuja Cements Ltd. is Rs. 72,76,550, which as per the assessee is a value of 74,800 shares held in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the shareholding accepted by the Revenue. Further, the fact that the assessee received Rs. 4,656 as a dividend on 4000 shares in Kilburn Reprographics on 27/08/1991 and Rs. 1,689 as a dividend on 5000 shares in Kilburn Reprographics on 03/09/1991 also substantiates this claim. It is pertinent to note that the aforesaid sales transaction took place within a few months prior to the declaration of the dividend. Further, in the year under consideration, i.e. 1992-93, the share certificate and the share transaction used to be in physical/paper mode and the transfer of shares in the name of the purchaser in the record of the company used to take sufficient time, unlike the present digital mode. Further, the fact that the assessee received dividend on 9000 shares from Kilburn Reprographics also goes on to prove that the said company recognised the assessee as a shareholder in respect of the aforesaid shareholding on the date of declaration of dividend. Therefore, all the aforesaid facts lead to the conclusion in favour of the assessee that she had a shareholding of 9000 shares in Kilburn Reprographics and the same is much more than as accepted by the Revenue. Accordingly, the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue s appeal, pertains to the deduction of interest expenditure, therefore the aforesaid grounds are dealt with together. 28. The brief facts of the case pertaining to this issue, as emanating from the record, are: During the assessment proceedings, the assessee submitted that the transactions in the capital market have been made through three broking firms belonging to the family members of the assessee. As per the details submitted by the assessee, it was submitted that the amount of interest of Rs. 2,46,33,261 are shown as payable to family run broking firms such as M/s HSM, M/s ASM and M/s JHM. The AO vide order passed under section 144 read with section 254 of the Act did not agree with the submissions of the assessee and disallowed the deduction of interest claimed for the following reasons:- (i) The liabilities were not crystallise during the year. (ii) The interest payable is tentative and provisional. (iii) There is no basis as per which the assessee has a right to pay and the creditors has are right to receive. (iv) There is no basis of computation of interest payable which has been provided by the assessee. (v) The provisions made on account of interest payable is a conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure incurred solely for the purpose of making or earning dividend income. Emphasis thus appears to be on the object or purpose of incurring of the expenditure. The exclusive object of incurring the expenditure has to be the making or earning of the dividend income. The mere fact that income by way of dividend has accrued and that the expenditure incurred is in some manner or other related to the accrual of the dividend income is not sufficient. 31. We find that the Hon ble Supreme Court in Seth R. Dalmia v/s CIT, [1977] 110 ITR 644 (SC) agreed with the view taken by the Hon ble jurisdictional High Court in CIT v/s H.H. Maharani Vijaykuverba Saheb of Morvi [1975] 100 ITR 67 (Bom), wherein it was held that the connection between the expenditure and the earning of income need not be direct, and even an indirect connection could prove the nexus between the expenditure incurred and the income. We further find that in CIT v/s Smt. Sushila Devi Khadaria, [2009] 319 ITR 413 (Bom.), in a similar factual matrix, i.e. wherein the AO denied the deduction claimed under section 57(iii) of the Act on the basis that the expenditure was not incurred wholly for the purpose of earning income a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
