DY. COMMISSIONER OF INCOME TAX, CC-4(3) CENTRAL RANGE-4 , MUMBAI V. M/S GROWMORE RESEARCH AND ASSETS MANAGEMENT LIMITED, MUMBAI

ITA 1125/MUM/2023

AI Insights

The case involves cross-appeals by M/s. Growmore Research and Assets Management Limited and the Deputy Commissioner of Income Tax (DCIT) against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The appeals pertain to the assessment year 1992-93 and involve complex issues related to unexplained investments, income from money market operations, and the admissibility of various evidences and documents. The Tribunal's decision addresses the procedural and substantive aspects of how income and investments should be assessed under the Income Tax Act, considering the unique circumstances of the stock market scam of 1992.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37907 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 1992-1993
• Other Referred Cases: Pratima Hitesh Mehta vs. ACIT, Jyoti H Mehta vs. ACIT, Deepika A Mehta vs. ACIT, Cascade Holding P Ltd vs. ACIT
• Laws Referred To: Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P. DANIEL SPL. COUNSEL
• Assessee Lawyers: VIJAY MEHTA; SHRIDHARMESH
• Keywords: Set aside; Business income; Additional evidence; Corroborative evidences; Depreciation; Unexplained investment; Rejection of books of accounts; Cost of acquisition; Document seized; Documents seized; Onus to prove; Capital Gains; Sham transactions; Valuation report; Share purchase agreement; Bogus
• Section: 144; 143(3); 32; 68; 22; 69; 69A; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “G” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. A.Y. Appellant Respondent 453/Mum/2023 1992-93 M/s.Growmore Research and Assets Management Limited, 32, Madhuli Apartment, 3rd Floor, Dr. A.B. Road, Worli, Mumbai PAN: AAACG4936C DCIT, CC-4(1), (Erstwhile ACIT, CC-31) 19th Floor, Air India Building, Nariman Point Mumbai 1125/Mum/2023 1992-93 DCIT, CC-4(3), Central Range-4, 19th Floor, Air India Building, Nariman Point Mumbai M/s.Growmore Research and Assets Management Limited, 32, Madhuli Apartment, 3rd Floor, Dr. A.B. Road, Worli, Mumbai PAN: AAACG4936C For Assessee : Shri Vijay Mehta and ShriDharmesh Shah For Revenue : Dr.P. Daniel – Spl. Counsel Date of Hearing : 25-10-2024 Date of Pronouncement : 21-01-2025 O R D E R PER B.R. BASKARAN, A.M : These cross appeals are directed against the order dated 09-01-2023 passed by the Ld.CIT(A)-52, Mumbai [„Ld.CIT(A)‟] and they relate to the Assessment Year (AY.)1992-93. 2. The facts relating to the case are set out in brief. This is second round of proceedings. The assessee company belongs to Harshad Mehta 2 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Group and is a notified entity under the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 due to stock market scam. The assessee company was promoted by Shri Harshad S Mehta and Shri Ashwin S Mehta. It is engaged in the business of purchase and sale of shares and securities. Due to the problems faced by the group on account of outburst of the scam, the assessee company could not file return of income for the year under consideration. Hence, the AO completed the assessment to the best of his judgement u/s 144 of the Act determining the total income at Rs.165.50 crores. 3. The assessee challenged the same by filing appeal before the Ld. CIT(A). It is pertinent to note that the assessee submitted the books of accounts before the Ld.CIT(A) with the petition to admit them as additional evidence. He, however, did not admit it and disposed of the appeal grating partial relief to the assessee, vide his order dated 27-03-2003. Hence, both the assessee and revenue challenged the above said order of Ld.CIT(A) by filing appeals before the ITAT. The Tribunal, vide its order dated 28-04- 2006 disposed of the appeal of the assessee, wherein it restored all the matters contested before it to the file of the Ld.CIT(A) with the direction to consider the books of accounts and take decision on merits afresh in accordance with law. Subsequently, the appeal filed by the revenue was also restored to the file of the Ld.CIT(A) by the Tribunal, vide its order dated 20-12-2006, with identical directions. 4. Consequent to the orders passed by the Tribunal in the first round, the Ld.CIT(A) has passed the impugned order on 09-01-2023 again granting partial relief. It is pertinent to note that, during second round of appellate proceedings, the Ld CIT(A) has called for remand reports from the assessing officer and the assessee was given opportunity by the AO during the course of remand proceedings. We notice that the Ld.CIT(A) has also 3 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management confronted the remand report with the assessee and also considered the replies given by it against the remand reports. Accordingly, the impugned order dated 09-01-2023 came to be passed by the Ld.CIT(A) after considering the explanations furnished by the assessee, remand reports furnished by the AO and the replies of the assessee to the remand reports. Since the Ld. CIT(A) has partly allowed the appeal of the assessee, both the parties have filed these appeals on the issues decided against each of them. 5. Some of the grounds urged by the parties are inter related, i.e.,where the Ld CIT(A) had granted partial relief, both the parties have come on appeal. Those grounds are being adjudicated together. Another fact to be noted down is that Shri Harshad S Mehta, Shri Ashwin S Mehta and Smt Jyoti H Mehta were carrying on share broking business under the name M/s Harshad S Mehta (hereinafter referred to as “HSM”), M/s Ashwin S Mehta (hereinafter referred to as “ASM”) and M/s J H Mehta (hereinafter referred to as “JHM”) respectively. The assessee has transacted its business mostly with these three concerns. 6. We shall first take up the appeal filed by the Revenue. 7. The Revenue has raised five grounds. As stated earlier, interrelated grounds are adjudicated together. 8. The Ground No.1 urged by the revenue is related to the relief granted by the Ld.CIT(A) in respect of unexplained investment made in purchase of shares of Reliance Industries Ltd (RIL). 8.1. The facts relating thereto are discussed in brief. The AO noticed that the assessee has sold 150000 shares of RIL in the month of June, 1991. With regard to the corresponding purchases, the AO noticed that the assessee has purchased 69,450 shares in the month of April, 1991. 4 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management According to the AO, the assessee did not prove the purchase of balance quantity of 80,550 shares. Accordingly, the AO treated it as unexplained investment and assessed a sum of Rs.1,23,13,150/-. Similarly, the AO had initially held that sources of 90,000 shares of M/s Grasim Industries Ltd were not explained and accordingly made addition towards unexplained investment. However, in the remand proceedings, the AO found that the corresponding purchases have been made and accordingly restricted the addition to the profit on sale of shares of M/s Grasim Industries Ltd amounting to Rs.16,15,000/-. The Ld.CIT(A) also, accordingly, sustained the addition in respect of M/s Grasim Industries Ltd to that extent and the assessee has also accepted the same. 8.2. With regard to unexplained investment of 80,550 shares of RIL, the assessee submitted the ledger account containing quantity details of purchases and sales of shares of above said company before the Ld.CIT(A), who has also extracted the same at pages 21 and 22 of his order. The main contention of the assessee was that it was holding 1,35,100 shares of RIL as at the beginning of the year and the above cited 80,550 shares were sold out of the opening stock of shares. The Ld.CIT(A) also found the same to be correct and accordingly deleted the addition relating to unexplained investment amounting to Rs.1,23,13,150/- in the shares of RIL. Accordingly, he sustained the addition of Rs.44,79,662/- relating to profit on sale of shares of RIL. Thus, the net relief granted by Ld.CIT(A) worked out to Rs.78,33,488/-, (Rs.1,23,13,150/- (-) Rs.44,79,662/-). The revenue is contesting this decision of Ld CIT(A) rendered on this issue. 8.3. We heard the parties on this issue and perused the record. We noticed that the Ld.CIT(A) has extracted the details of shares of RIL held by the assessee at pages 21 and 22 of Ld CIT(A)‟s order. A perusal of the same would show that the assessee was having 1,35,100 shares of RIL as 5 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management opening stock on 01-04-1991. Besides the above, there was continuous purchase and sale of shares of that company throughout the year. When the assessee sold 1,50,000 shares, the assessee was having 2,42,300 shares on its hand (which included the opening stock also). We notice that the AO did not recognize the fact of availability of the opening stock of shares of RIL, but the Ld.CIT(A) has considered the same and accordingly granted relief, i.e., he has accepted the 80,550 shares have been sold out of opening stock of shares of RIL. Though the revenue has challenged the said decision, yet it could not prove that the assessee was not having opening stock of shares of RIL as mentioned above. The Revenue could not furnish any material to contradict the findings given by Ld CIT(A).We noticed that the Ld.CIT(A) has sustained addition to the extent of profit earned on sale of above shares and the assessee has also accepted the same. Accordingly, under these set of facts, we are of the view that the order passed by Ld.CIT(A) does not call for any interference. Accordingly, we uphold the same. 9. The Ground No.2urged by the revenue and Ground No.2urged by the assesseeare related to the addition of unexplained investment. The AO made addition of unexplained investment of Rs.12,97,69,663/-. The Ld.CIT(A) sustained addition to the extent of Rs.8,99,80,563/- and granted relief in respect of remaining addition. The Revenue is challenging the relief granted, while the assessee is challenging the addition sustained. 9.1. The AO called for details of shares held by the assessee from various companies. Besides the above, the AO also collected information from the Custodian appointed under the Special Courts Act after the break out of Scam. During the course of search operations, the revenue had seized contract notes relating to the assessee. On the basisof those Contract notes, the AO prepared the list of shares that should be available with the 6 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management assessee. Then the AO compared the said list with the information received from various companies and the Custodian. On such comparison the AO noticed difference in the value of sharesat Rs.12,21,47,963/- and Rs.76,21,700/- respectively. Accordingly, the AO assessed the aggregate amount of Rs.12,97,69,663/- as unexplained investment. 9.2. The assessee explained the difference by producing contract notes that were not considered by the AO. Certain contract notes were filed before the AO and also before the Ld.CIT(A) along with the appeal forms filed before him. Upon examination of these details, the Ld CIT(A) granted partial relief as under:- (a) The Ld.CIT(A)accepted the contract notes filed before the AO only and accordingly granted relief to the extent of Rs.27,45,000/-. He did not recognize the contract notes furnished before him along with appeal papers. (b) The Ld.CIT(A) further noticed that the debentures of a company named M/s Reliance Petrochemicals Ltd had been converted into shares in the ratio of 1:15. However, the AO had converted them in the ratio of 1:10. Ld CIT(A) corrected the above error and it resulted in relief of Rs.3,46,99,100/-. (c) The Ld CIT(A) further noticed that the AO had added purchase of 7000 shares of Brooke Bond Ltd valuing the same at Rs.23,45,000/-. It was proved by the assessee that the above said shares were purchased on 02-04-1992 from the floor of Kolkata Stock Exchange by furnishing copy of contract note. The Ld. CIT(A) accordingly held that the above said addition cannot be made in this year. 7 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Accordingly, the Ld CIT(A) granted relief of Rs.3,97,89,100 (Rs,27,45,000/- (+) Rs.3,46,99,100/- (+) Rs.23,45,000/-). As noticed earlier, the Ld.CIT(A) did not accept the contract notes furnished before him along with the appeal documents on the reasoning that there is no way to verify those contract notes. The Ld.CIT(A) also rejected the claim of bonus shares received from ITC Ltd. Accordingly, he confirmed the remaining amount of addition of Rs.8,99,80,563/-. 9.3. We heard the parties on this issue and perused the record. The Revenue is contesting the relief granted by the Ld.CIT(A). However, with regard to the relief granted by the Ld.CIT(A), we notice that - (a) the Ld CIT(A) has granted relief in respect of additions relating to the investment made in the shares of Eicher Tractors Ltd on the basis of the fact that the relevant contract notes have been filed before the AO. (b) the Ld CIT(A) noticed that the conversion ratio debentures of Reliance Petrochemicals Ltd into shares of that company was 1:15, whereas the AO had determined the unexplained investment in the shares of that company by adopting the conversion ratio as 1:10. If the conversion ratio is taken as 1:15, there is no question of any unexplained investment. Accordingly, he gave relief in respect of this addition. (c) the Ltd CIT(A) noticed that the 7000 shares of Brooke Bond Ltd was purchased by the assessee on 02-04-1992 falling in the succeeding year, where as, the AO had made the addition in this year. Accordingly, the Ld CIT(A) granted relief in respect of this addition. 8 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Accordingly, we notice that the Ld.CIT(A) has granted relief on the basis of materials/material facts. Before us, the revenue could not controvert all these factual aspects considered by the Ld.CIT(A) for granting the relief. Unless the revenue could show any infirmity on the above said factual aspects, we are of the view that we may not be in a position to interfere with his decision to grant relief. Accordingly, we confirm the above said reliefs granted by the Ld.CIT(A). 9.4. The assessee is challenging the addition of Rs.8,99,80,563/- confirmed by the Ld.CIT(A). We noticed earlier that the AO has determined the unexplained investment in the shares on the basis of letters received from the Companies and Custodian. The Ld A.R submitted that the assessing officer has not supplied the copy of documents/letters, which were the basis for making the addition. The following additionshave been made on the basis of documents not confronted with theassessee:- Sr. No. Name of company Amount (Rs.) 1. JCT Limited 48,14,250 2. India Cements Ltd 4,80,500 3. J K Industries 1,08,000 4. ITC 4,91,96,300 TOTAL 5,45,99,050 The Ld A.R submitted that the AO has not supplied the materials on the basis of which above addition was made by him, even though it had requested the AO several times to supply copies of the documents. He contended that the AO could not have made the above said decision on the basis of materials collected behind the back of the assessee. He submitted that identical addition made in the hands of the members of same group on the basis of material not confronted with the respective assessees has been deleted by the Tribunal. 9 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 9.5. The Ld D.R, on the contrary, submitted that the assessee could not reconcile the investments as per the data collected by the AO from companies and Custodian. Hence, the AO has treated them as unexplained investment in the hands of the assessee. 9.6. It may be a fact that the assessee could not reconcile the difference noticed by the AO in respect of above said investments. However, the contention that the assessing officer did not furnish copies of the documents, which formed the basis of addition, to the assessee. It is well settled principle of law that the AO could not make any addition on the basis of materials collected behind the back of the assessee, unless he confront them with the AO. We notice that Co-ordinate Bench has taken identical view in the case of Pratima Hitesh Mehta (ITA No.416 & 1180/Mum/2023 dated 26-10-2023). The Ld A.R also furnished copies of orders passed in other family members of the group, wherein also identical view has been taken. Accordingly, we hold that the AO could not have made addition on the basis of materials, which were not supplied to the assessee and the Ld.CIT(A) was not justified in confirming the addition. Accordingly, we modify the order passed by the Ld.CIT(A) in respect of the above said companies and direct the AO to delete the addition of Rs.5,45,99,050/-. 9.7. The AO had made addition of Rs.3,00,97,813/- in respect of difference in the quantity of shares of RIL. According to AO, the assessee was having 9,40,500 shares only, while the above said company has reported holding of 10,09,295 shares. The first contention of the assessee is that RIL has reported shareholding as on 07-06-1992, while the last date of the year under consideration was 31-03-1992. Hence, the AO could not have based his decision on the basis of data of different date. The next contention of the assessee is that the AO did not take into 10 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management account opening balance of stock of 1,35,100 shares available with the assessee as on 01-04-1991. We noticed earlier that the Ld CIT(A) has extracted the details of purchase and sale of shares of RIL in pages 21 and 22 of his order, as per which the assessee was having 12,25,150 shares as on 31-03-1992. We noticed that the quantity of shares available with the assessee as at the year end was more than the quantity of 10,09,295/- considered by the AO for making this addition. 9.8. We heard the parties on this addition. We noticed earlier that the Ld. CIT(A) had deleted the addition towards unexplained investment of 80,550 shares accepting the Quantity ledger account of RIL, which was extracted by him in pages 21 and 22 of his order. We have also upheld the same. The Ld.CIT(A) himself has noted down the opening quantity of 1,35,100 shares therein. Further, as per the said quantity details, the assessee was having 12,25,150 shares as on 31-03-1992, which was more than that considered by the AO for making this addition. Under these set of facts, we are of the view that the question of unexplained investment in the shares of RIL does not arise and accordingly, the AO was not correct in computing unexplained investment in shares of RIL. Accordingly, we set aside the order passed by Ld CIT(A) in respect of this addition and direct the AO to delete the same. 9.9. The AO made addition of Rs.51,70,000/- in respect of shares of Colgate Palmolive shares. This addition pertained to 9,400 and 8.050 shares of above said company noticed by the AO. It is the submission of the assessee that the above said shares were purchased through the brokerage firm M/s Ashwin S Mehta on 22-01-1992 and they were duly accounted for in the books of the assessee. It is submitted that the relevant contract notes could not be filed before the AO and hence the assessee furnished them before the Ld.CIT(A) along with appeal papers. 11 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management We noticed earlier that the Ld.CIT(A) did not admit them on the reasoning that the same could not be verified. 9.10. We heard the parties on this issue and perused the record. We noticed earlier that the ITAT, in the earlier round, had directed the Ld. CIT(A) to decide the issue afresh by considering the books of accounts of the assessee. It appears that the Ld CIT(A) did not refer to the books of accounts in respect of this addition. We also notice that the Ld CIT(A) has also not rejected the books of accounts. It is stated that the impugned purchases of 9,400 and 8,050 shares have been duly recorded in the books of accounts and they are also supported by the contract notes. Accordingly, we are of the view that the Ld CIT(A) was not justified in deciding the issue against the assessee without verifying the relevant materials.Accordingly, we set aside the order passed by the Ld.CIT(A) in respect of this addition. Since the relevant contract notes and the ledger account were not verified by the tax authorities, we restore this issue for the limited purpose of verifying them. Accordingly, we set aside the order passed by the Ld.CIT(A) in respect of this investment and restore the same to the file of the AO with the direction to verify the relevant contract notes and also ledger account. After satisfying himself, the AO may delete this addition. 9.11. The last item of unexplained investment was the addition of Rs.1,06,700/- in respect of shares of NBS Industries. It is the submission of the assessee that no such company is in existence. It is also contended that the AO seems to have adopted the market rate as on 31.3.1992, while the unexplained investment has to be computed on the basis of rate prevailing as on the date of actual purchase. 9.12. We heard the parties on this issue and perused the record. It is the contention of the assessee that there is nocompany exists in the name of 12 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management NBS Industries. In that case, it is not discernible as to how the AO determined the value of investments that too, on the basis of market price as on 31-03-1992. Hence, we are of the view that there may be error in mentioning the name of the company. Since no detail was produced by the revenue also, we deem it proper to restore this addition to the file of the AO with the direction to furnish the material relating to the addition of NBS Industries Ltd to the assessee. After getting explanation from the assessee, the AO may take appropriate decision in accordance with law. 9.13. The order passed by the Ld.CIT(A) on this issue would stand modified according to our decision rendered in the earlier paragraphs. 10. The Ground No.3 urged by the revenue relates to the relief granted by the Ld.CIT(A) in respect of capital gain arising on sale of shares of TISCO Ltd. 10.1. The AO noticed that the assessee has sold 56000 shares of TISCO Ltd on 08-08-1991 for a consideration of Rs.1,30,48,000/-. When questioned about the purchases, the assessee furnished contract notes for purchase of 10,000 shares and another 46,600 shares of TISCO Ltd from M/s JHM and M/s ASM for an aggregate amount of Rs.1,19,70,000/-. The AO accepted the details of purchases. Accordingly, he computed short term capital gain of Rs.10,78,000/- (Rs.1,30,48,000 (-) Rs.1,19,70,000) and assessed the same as income in this year. 10.2. According to the assessee, the profit from sale of TISCO shares was lower than that assessed by the AO. Before the Ld.CIT(A), the assessee furnished charts relating to sale of TISCO shares. It was submitted that, during the year under consideration, the assessee has sold 95,500 shares of this company in total and made a profit of Rs.4,27,575/- only. Since the details of workings were given by the assessee along with 13 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management the evidences, the Ld CIT(A) accepted it. Accordingly, he sustained the addition to the extent of Rs.4,27,575/- only and deleted the balance amount of addition of Rs.6,50,425/-. The Revenue is aggrieved. 10.3. We heard the parties on this issue and perused the record. We notice that the AO has made this addition on the basis of selective information, while the Ld.CIT(A) granted relief on the basis of complete information. There should not be any dispute that the determination of profit on the basis of incomplete and selective information would result in incorrect results. We notice that the first appellate authority has considered all transactions of purchase and sale of shares of TISCO Ltd made during this year. Before us, the Revenue could not furnish any material to contradict the factual aspects considered by Ld CIT(A). Accordingly, we confirm the order passed by Ld CIT(A) on this issue. 11. The Ground No.4urged by the Revenuerelates to the relief granted in respect of addition of Rs.2,64,08,219/- on account of interest on 17% NTPC Bonds. 11.1. The AO noticed that the assessee had purchased 17% NTPC Bonds for a value of Rs.81 crores and a Bank Receipt (BR) was delivered to the assessee. The purchase consideration was paid by M/s HSM on behalf of the assessee. The relevant BR was handed over by the assessee to National Housing Bank (NHB). This security was a matter of dispute between the assessee and NHB. The said dispute was examined by the Hon‟ble Special Court in the application No.280 of 1993 filed by the assessee. The Hon‟ble Special Court accepted the plea of the assessee and accordingly the above said bonds were registered in the name of the assessee. It was also paid interest from 22-01-1992 onwards. Accordingly, the AO computed accrued interest from 22-01-1992 to 31-03- 1992 at Rs.2,64,08,219/- and assessed the same. 14 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 11.2. Before the Ld.CIT(A), the assessee relied upon the decision rendered by the ITAT in the assessee‟s own case in ITA No.259/M/2019 dated 09- 04-2021 relating to AY 1996-97. It was submitted that the AO had made identical addition in that year also in respect of interest accrued on NTPC bonds. However, as per subsequent developments that took place, the assessee lost its ownership rights. It was explained that State Bank of India filed a petition before Hon‟ble Supreme Court of India with the prayer that the securities handed over to NHB be declared as the property of State Bank of India. The said prayer was accepted by the Hon‟ble Supreme Court. The Tribunal also noticed the fact that the custodian has repaid the interest received on the above said bonds on behalf of the assessee to State Bank of India. On the basis of these facts, the ITAT held that the assessee cannot be considered to be owner of NTPC Bonds and hence the question of assessing accrued interest will not arise. Accordingly, the Tribunal deleted the addition of interest income in AY 1996-97. Following the said order, the Ld.CIT(A) deleted the addition of Rs.2,64,08,219/- made in the hands of the assessee during the year under consideration. The revenue is aggrieved. 11.3. We heard the parties and perused the record. We notice that the factual aspects relating to the purchase of NTPC bonds have been explained by the Co-ordinate Bench in the assessee‟s own case in AY 1996-97. It has been held that the assessee cannot be considered to be the owner of NTPC bonds in view of the order passed by Hon‟ble Supreme Court. When theassessee is not considered to be the owner of NTPC bonds as per the decision of Hon‟ble Supreme Court, then the question of assessing accrued interest income in this year out of the said bonds will not arise. Accordingly, in the facts discussed above, we hold that the Ld. CIT(A) was justified in deleting the addition. 15 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 12. The Ground No.5urged by the Revenueand the Ground No.15 urged by the assessee relate to the disallowance of expenses. 12.1. The AO had examined various expenses claimed by the assessee and disallowed aggregate amount of Rs.88,15,198/- and allowed a sum of Rs.95,51.042/-. 12.2. The Ld.CIT(A) noticed that the ITAT had considered identical disallowances made by the AO in AY 1991-92 in ITA No.504/Mum/2019, wherein it had sustained a portion of disallowance on adhoc basis by adopting certain percentage in respect of each of the expenses. Accordingly, the Ld.CIT(A) granted partial relief on the basis of order passed by ITAT in AY 1991-92. Both parties are aggrieved. 12.3. It is the submission of the assessee that the Ld CIT(A) has committed error in adopting the adhoc percentage determined by the ITAT in AY 1991-92. The assessee has furnished a chart in this regard. The Ld. D.R, on the contrary, contended that the disallowance of only a portion of expenses on adhoc basis is not justified, since it is the responsibility of the assessee to prove the expenses. 12.4. We heard the parties on this issue and perused the record. We notice that the Co-ordinate Bench has already taken a view on an identical disallowances made in AY 1991-92 and the Ld.CIT(A) has followed the same. Hence, we are of the view that the methodology adopted by Ld CIT(A) cannot be interfered with. However, it is the contention of the assessee that the adhoc percentage of disallowance adopted by Ld CIT(A) against certain expenses is not in accordance with the decision rendered by ITAT in 1991-92. Since it is a matter of verification, we modify the order passed by the Ld.CIT(A) and restore the same to the file of the AO with the direction to compute the disallowances of various expenses as per 16 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management the adhoc percentage determined in the decision rendered by ITAT in the assesee‟s own case in AY 1991-92 (referred supra). 13. We shall now take up the appeal filed by the assessee. In the original grounds of appeal filed by the assessee, it has raised 19 grounds. Thereafter, the assessee, vide its letter dated June 17, 2024 has modified grounds no.11 and 13. The assessee has also raised an additional ground, vide its letter filed on 23-02-2024. The Ld A.R did not press ground Nos. 1, 3, 4, 7. Accordingly, these grounds are dismissed as not pressed. Ground No.19 is general in nature. We shall proceed to adjudicate the remaining grounds. 14. The ground No. 2 urged by the assessee has already been disposed of along with the grounds contested by the revenue on the very same addition. 15. The Ground no.5 urged by the assessee is related to the addition of Rs. 17.35 crores made by the AO on account of un-explained investment. During the course of search proceedings conducted at the Madras Office of the assessee on 19-06-1992, certain loose documents were seized. One of the documents contained the portfolio valuation of investments on 06-12- 1991 at Rs. 12.36 crores. Another document showed the valuation of some other shares at Rs. 13.49 lakhs. Similar type of documents pertaining to the New Delhi office containing the details of portfolio was seized from the residence of Harshad S. Mehta. This document indicated investment of Rs. 4.86 crores, whose market value was shown at Rs. 10.35 crores. All these documents were considered as belonging to the assessee herein by the AO. Thus the aggregate value of investments noted down in the above said documents was Rs. 17.35 crores. 17 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 15.1. Before the AO, the assessee filed letter dt. 14-02-1995 submitting therein that the investments noted in these documents are reflected in the books of three brokerage firms, namely, M/s. HSM, M/s. ASM and M/s. JHMat their offices located in Madras and Delhi. It was submitted that these investments belong to others and these documents were prepared for the purpose of monitoring the performance of the shares purchased by the respective owners. However, the AO did not accept the above said explanations and accordingly made addition of Rs. 17.35 crores as un- explained investment u/s.69 of the Act. 15.2. It appears that identical addition made by the AO in AY 1991-92 had been deleted by Ld CIT(A) in that year. However, in the first round of proceedings, the Ld.CIT(A) took the view that the facts prevailing in this year is distinguishable from that of AY 1991-92. Accordingly, he did not follow the decision rendered by him in AY 1991-92 and had confirmed the addition made by the AO. Following the same, in the present proceedings also, the Ld.CIT(A) confirmed the addition made by the AO. 15.3. The Ld.AR reiterated the contention that the assessee was merely supervising the transactions of purchase and sale of shares belonging to various associate entities, which were given advice on the basis of research. He submitted that the shares noted down in the documents do not belong to the assessee. He submitted that the AOhas made this addition u/s 69 of the Act, on the basis of loose documents found during the course of search without brining any other credible material to show that these are unaccounted investments belong to the assessee. The Ld.AR reiterated that these documents only depicted portfolio valuation of shares held by others. He submitted that an identical addition was made in the immediately preceding assessment year, namely, AY. 1991-92 on the basis of similar documents and the said addition has been deleted by 18 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management the Tribunal vide its order dt. 30-03-2021 passed in ITA No. 1196 & 504/Mum/2019. 15.4. The Ld.AR submitted that the Ld.CIT(A) has followed the decision rendered by the predecessor in the first round, wherein he had tried to distinguish the decision rendered by the Ld.CIT(A) in AY.1991-92. However, he submitted that the said distinction is not factually correct. The contentionsmade by the assessee in its written submission in this regard are extracted below: “It has been erroneously observed that the heading of the seized paper is 'shares sent from Bombay to Madras'. It can be seen from the heading of the seized paper, relevant to A.Y. 1991- 92, at page No. 492 of PB No. 3 that the heading of the seized paper is 'portfolio valuation as on 26.03.1991 GRAM Madras'. A similar heading is to be found on the seized paper which is relevant for the year under consideration (page No. 367, 369 of PB No. 3). The CIT(A), in the above referred order, has erroneously considered heading of another seized paper of A.Y. 1991-92, which is at page No. 473 of PB No. 3. It is submitted that the said seized paper, which is at page No. 473 of PB No. 3, is not in respect of the shares handled by Madras office and, hence, the said seized paper is completely irrelevant. Therefore, the reasoning given on page No. 37 of CIT(A)'s order are factually erroneous and ought to be ignored and the relief prayed for by the assessee ought to be granted.” 15.5 In order to support the contention that there is no difference in facts between AY 1991-92 and this year, the Ld.AR submitted that 3715 shares of M/s.ACC Ltd noted down by the AO in the AY.1991-92 is also appearing in the document relied on by the AO in AY.1992-93. Similarly, some of the shares continued to appear in both the years as shown in the following chart prepared by the assessee:- 19 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 15.6 We noticed earlier that the assessee had contended that all theseshares belong to others and not to the assessee. To support of this contention, the Ld A.R submitted an instance from the document relied on by the AO, viz., the purchase and sale of 1,000 shares of M/s. Madura Coats Ltd., on 06-12-1991. He submitted that the above said shares belong to Smt. Deepika A. Mehta and they have been sold by her through M/s.HSM in Madras Stock Exchange through another Madras broker named, M/s. Auro Mira. He submitted that the relevant contract notes are available at pg. Nos.388 and 389 of Paper Book No.3. The Ld.AR submitted that this information supports the stand of the assessee that the shares mentioned in the portfolio valuation do not belong to the assessee. The Ld.AR further submitted thatthe assessee has been preparing this kind of portfolio valuationregularly, but the AO has picked up one of such documents prepared on 06-12-1991 and has made the impugned addition. He submitted thatthe assessee group is having many companies with the name starting with “Growmore”. Further, mereuse of word „GRAM‟ on the head of the documentwould not automatically mean that the shares mentioned in the document belong to the assessee. It only shows that the document was prepared by the assessee. Accordingly, he submitted that the AO should not have made this addition without bringing any other credible material to prove that the shares mentioned in 20 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management the document not only physically exists in the hands of the assessee, but also remained unaccounted. The Ld.ARsubmitted that the AO has also relied upon“minutes of meeting” held in Madras Office. A perusal of the samewould also show that the Board of directors has passed a resolution to deposit dividend warrants and debenture interest warrantsin the account of respective owners of securities as per the list that will be forwarded to Mumbai office. This fact would further prove that these investments do not belong to the assessee. 15.7 The Ld.AR further submitted that the investments noted in the paper seized from the residence of Shri Harshad S. Mehta as pertaining to the transaction carried out at Delhi also do not belong to the assessee. The Ld.AR cited the following examples to show that those shares belong to others:- (i) 13,500 shares of J.M. Rolled Glass, i.e. Jai Mata Rolled Glass, appearing on page No. 365, belongs to Shri Harshad S. Mehta who purchased it through Khandelwal Associates (page No. 401 of PB No.3) (ii) 2,500 shares of Shriram Honda, appearing on page No. 365. belongs to Shri Harshad S. Mehta who purchased it through Virendra Saigal & Co. (page No. 405 of PB). (iii) The list of shares prepared on other days are also available in the seized documents. In fact, the lists prepared on other days are accompanied by the reconciliation statement which shows the allocation of shares to other entities. For example, Page no.378 of Paper book is seized paper listing the shares as on 13.8.1991. The allocation of the said shares are available in another seized paper which is on page No.380. The reconciliation statement clearly shows that some of the shares have been transacted into by several other entities. This fact also proves that the presumption entertained by the AO is not correct. 21 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management (iv) Most importantly, while passing the assessment order in the case of Shri Harshad S. Mehta for A.Y. 1992-93, the A.O. himself has gathered the information about the transactions undertaken by Shri Harshad S. Mehta. He has referred to the above transactions in the annexure to the assessment order at page Nos. 422, 423, 427 and 428 of PB No. 3. (v) It has been already established herein above that merely the word 'GRAM', appearing in the title, do not mean that the ownership of the shares is that of the assessee. The Ld.AR further submitted that the brokerage firms of the group have confirmed that the shares listed in the seized papers either belonged to them or to their clients, as the case may be. However, the same has not been disproved by the AO. 15.8. The Ld.AR summarized his arguments as under:  the books of account of the assessee have not been rejected.  the A.O. has not been able to bring on record any corroborative evidence.  the assessee has established by leading a positive evidence that the shares belong to other entities.  The A.O. himself has considered some of the shares as belonging to other associate entities who have accounted thesame.  presumption of the A.O. that the assessee had entered into such huge number of transactions on regular basis outside the books of account is improbable and wild, to say theleast. 15.9 The Ld D.R, on the contrary, submitted that even though the assessee has claimed that the shares noted down in the seized document 22 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management did not belong to it, but the assessee has not identified the real owners or beneficiaries for all the shares. All these details were found from the office of the assessee located in Madras. Further, the minutes of meeting of the directors have also been recorded therein and the chairman‟s statement also speaks about the growth of the assessee company only. He further submitted that the assessee has prepared the books of accounts subsequent to the date of search only. Hence full reliance cannot be placed upon them. Accordingly, the Ld D.R submitted that the assessee has not discharged its onus to prove that the investments noted down in the documents do not belong to it.Further, the assessee has not shown that the investments belonging to it have been accounted for in the books of accounts. 15.10 We heard rival contentions and perused the record. We notice that the assessing officer has made this addition on the basis of a loose paper, which according to the assessee was „valuation report‟ of the portfolio of certain clients as on a particular date, i.e., on 06-12-1991. According to the assessee, several such statements are prepared during the course of the year in order to monitor the growth movement of the investments of the clients. It is stated that the assessee was conducting research on various securities and accordingly, it was giving advice its clients. Accordingly, it was contended that the shares noted down in the document cannot be considered to belong to the assessee, merely on the basis of a portfolio valuation report. In support of this contentions, the assessee also cited certain examples like, transactions undertaken for other family members; the details of shares being brought forward from earlier years etc. In our view, there is merit in the contentions of the assessee. We notice thatthe Search team did not unearth any physical share certificates mentioned in the document. Further the transactions of purchase and sale of shares are usually undertaken through share brokers in the stock 23 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management exchange. Those transactions are supported by the broker notes. We notice that, no document to show the purchase of these shares was found during the course of search. No document to show the corresponding money transaction was found.In our view, all these factors would support the claim of the assessee. 15.11 Another important legal contention raised is that the addition u/s 69 of the Act could be made only “if the assessee has made investments which are not recorded in the books of account”, which would mean that there should be some credible material to show that the assessee has made investments. When the assessee denies making of any investment, then the onus will be placed upon the AO to show that the assessee has made investments outside the books. We notice that the AO did not bring any material on record to show that the assessee has made unaccounted investments, except a loose document found during the course of search. We noticed that the stock market scam unearthed at that point of time has shook the Country and all the assets of the assessee‟s group have been taken over by the custodian, meaning thereby, all the details of investments are now available with the Custodian. We notice that the AO had also collected the details of investments from the custodian and has also made additions in respect of unexplained investments on the basis of information received so received. However, the AO did not establish on the basis of said information that the investments found in the seized documents were in fact available in the name of the assessee and they were not unaccounted. On the contrary, we notice that the assessee has furnished various instances to show that the said investments did belong to others. 15.12 We notice that the AO had made identical addition in AY 1991-92 also on the basis of similar seized document and the co-ordinate bench, 24 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management vide its order dated 30-03-2021 passed in ITA No.1196 & 504/M/2019 has deleted the addition, after giving a finding that the said investments belong to others and the said fact has also been confirmed by the brokers M/s HSM, M/s ASM and M/s JHM. We noticed that the Ld CIT(A) has followed the decision rendered by his predecessor in the first round. However, the assessee has pointed out that the Ld CIT(A), in the first round, had incorrectly appreciated thedecision rendered in AY 1991-92, wherein identical addition was deleted. Be that as it may, we notice that the Tribunal has considered an identical issue and has deleted the additionin AY 1991-92 accepting that the said investments do not belong to the assessee. Accordingly, in the absence of any evidence to show that the relevant share certificates were available and they remained unaccounted, we are of the view that the AO could not have made the addition u/s 69 of the Act on the basis of a loose document. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. 16. The Ground no.6 urged by the assessee relates to the addition of unexplained investment of Rs.23.06 crores in PSU Bonds. The AO collected information from Public Sector Undertakings about the investments made by the assessee. It was noticed that the assessee has purchased following PSU bonds from them during the year relevant to AY 1992-93:- 25 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management The AO assessed the above said amount of Rs.51.06 cores as unexplained investment. We notice that there is contradiction between the claims of both the parties. The assessee has claimed that it has furnished debit and credit advices and/or contract notes relating to the above said purchases before the AO and also before Ld CIT(A) in the first round of proceedings. However, the AO has observed that the assessee has not submitted those details. 16.1 The Ld CIT(A), in the first round, had also confirmed the addition by observing that the assessee has not produced any details even though it is claimed that the details of debit/credit advice and/or contract notes were submitted. The assessee had also claimed that some of the bonds might have been sold and they would remain in its name till it is transferred to the name of the buyer, but these explanations were rejected in the absence of any proof. 16.2 In the present second round of proceeding before Ld CIT(A), the assessee reiterated its submissions that the evidences were furnished before the AO as well as to the predecessor CIT(A). Alternatively, it was 26 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management prayed that those evidences may be admitted as additional evidences. However, the Ld CIT(A) took the view that the assessee is shifting its stands in offering proper explanations and accordingly took the view that the additional evidences cannot be admitted. The Ld CIT(A) further noticed that IRFC bonds to the tune of Rs.28.00 crores has been held to be belonging to SBI by Hon‟ble Supreme Court. Accordingly, the Ld CIT(A) granted relief of Rs.28.00 crores. With regard to the claim of transaction of sale of bonds, the ld CIT(A) referred to the Bhav copy published by BSE and noticed that last transaction in IRFC Bond has taken place on the floor of BSE on 30-03-1990 only. Accordingly, the Ld CIT(A) took the view that the claim of sale of bonds has not been proved with evidences. Accordingly, he confirmed addition of balance amount of Rs.23.06 crores. The assessee is aggrieved. We notice that the revenue is not contesting the relief of Rs.28.00 crores granted by Ld CIT(A) and his decision in granting relief has attained finality. 16.3 We heard the parties and perused the record. With regard to the comparison of Bhav copy of BSE, which has also been extracted by Ld CIT(A) at page 46 of his order, we notice that the said Bhav copy pertained to “Debentures” and not to the “Bonds”. The impugned addition is related to purchase of “bonds”. Hence the Ld CIT(A) was not correct in referring to Bhav Copy pertaining to the debentures. 16.4 The main contention of the assessee is that all the PSU bonds have been purchased by the assessee on credit from the broking firm M/s HSM only. It is submitted that the above said broking firm, in turn, has purchased the bonds from the market. Accordingly, it was submitted that all the transactions of purchase/sale were back to back transactions. It was also submitted that the payments for purchase of bonds were made by M/s HSM to the sellers of the bond. It was submitted that the assessee 27 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management was having running account with M/s HSM with transactions of both purchases and sales. Hence specific paymentswere not made at the time of purchase of PSU Bonds. The assessee furnished details for entire investment of Rs.51.06 crores as under:- “Acquisition of 9% IRFC Bonds of FV Rs. 25 Crores The assessee has purchased IRFC Bonds of FV Rs.50 Crores through M/s Harshad S. Mehta on 26.09.1991. Out of the same, the addition was made by the AO on account of acquisition of Bonds of FV Rs.25 Crores. The said purchase of Bonds of FV Rs.50 Crores is supported by the following documents. a. Debit Note with Cost Memo dated 26.09.1991 issued by M/s. Harshad S. Mehta reflecting purchase of Bonds of F.V. Rs. 50 Crores by the assessee. (page No. 561, 562 of PB) b. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page No. 563, 574 of PB) c. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page no. 585 of PB) d. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page no. 586, 587 of PB). e. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) M/s. Harshad S. Mehta in turn had in turn purchased Bonds of FV Rs.100 Crores from M/s. V. B. Desai on the same day, ie. 26.09.1991, out of which the aforesaid Bonds of FV Rs.50 Crores were purchased on behalf of the assessee. This is supported by the following documents: a. Contract Note dated 26.09.1991 issued by M/s. Harshad S. Mehta to M/s. V. B. Desai in respect of purchase of 9% IRFC Bonds of FV Rs. 100 Crores. (page no. 605 of PB) b. Relevant Deal Slip extracted from the seized computer data pertaining to the aforesaid transaction. (page No. 606 of PB) c. Ledger of M/s. V. B. Desai in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank (page no. 607, 613 of PB) d. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A) 28 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management along with the relevant extract of Deal File reflecting the above transaction. (page No. 622, 627 of PB) Out of the above purchase of Bonds of FV Rs. 100 Crores, M/s. Harshad S. Mehta had purchased the balance Bonds of FV Rs. 50 Crores for M/s. Growmore Leasing and Investments Ltd. on the same day, i.e. 26.09.1991. This transaction has been verified and accepted by the A.O. while passing the assessment order u/s. 143(3) r.w.s. 147 r.w.s. 254 of the Act in the case of M/s. Growmore Leasing and Investments Ltd. for A.Y. 1992-93 on 28.12.2006. (page no. 631, 636 of PB) Acquisition of 9% NHPC Bonds of FV Rs. 56.50 lakhs The assessee has purchased NHPC bonds of FV Rs. 56.50 Lakhs through M/s. Harshad S. Mehta on 25.09.1991. The said purchase of Bonds of FV Rs.56.50 Lakhs is supported by the following documents. a. Debit Note with Cost Memo dated 25.09.1991 issued by M/s. Harshad S. Mehta reflecting purchase of Bonds of F.V. Rs. 56.50 Lakhs by the assessee. (page no. 645, 646 of PB) b. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page No. 563, 574 of PB) c. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page No. 585 of PB) d. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page no. 586 of PB) e. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) M/s. Harshad S. Mehta in turn had purchased these bonds of FV Rs. 56.50Lakhs from M/s. ANZ Grindlays Bank PLC on the same day, i.e. 25.09.1991. This is supported by the following documents. a. Contract Note dated 25.09.1991 issued by M/s. Harshad S. Mehta to M/s. ANZ Grindlays Bank PLC. in respect of purchase of 9% NHPC Bonds of FV Rs. 56.50 Lakhs. (page no. 647 of PB) b. Relevant Deal Slip extracted from the seized computer data pertaining to the aforesaid transaction. (page No. 648 of PB) c. Ledger of M/s. ANZ Grindlays Bank PLC in the books of M/s.. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 649, 652, 653 of PB) d. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A) 29 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management along with the relevant extract of Deal File reflecting the above transaction. (page No. 665 of PB) Acquisition of 9% NHPC Bonds of FV Rs. 50 lakhs The assessee has purchased NHPC Bonds of FV Rs. 50 Lakhs through M/s. Harshad S. Mehta on 25.09.1991. The said purchase of Bonds of FV Rs. 50 Lakhs is supported by the following documents: a. Debit Note with Cost Memo dated 25.09.1991 issued by M/s. Harshad S. Mehta reflecting purchase of Bonds of F.V. Rs. 50 Lakhs by the assessee. (page No. 669, 670 of PB) b. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page no. 563, 574 of PB) c. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page No. 585 of PB) d. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page no. 586 of PB) e. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) Shri Harshad S. Mehta in turn had purchased NHPC bonds of FV Rs. 5 Crores from M/s. ANZ Grindlays Bank PLC on the same day, i.e. 25.09.1991 out of which the aforesaid bonds of FV Rs. 50 Lakhs were purchased on behalf of the assessee. This is supported by the following documents. a. Contract Note along with delivery order, both dated 25.09.1991 issued by M/s. Harshad S. Mehta to M/s. ANZ Grindlays Bank Ltd. in respect of purchase of 9% NHPC Bonds of FV Rs. 5 Crores. (page no. 671, 672 of PB) b. Relevant Deal Slip extracted from the seized computer data pertaining to the said transaction. (page no. 673 of PB) c. Ledger of M/s. ANZ Grindlays Bank PLC in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 649, 652 of PB) d. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A)along with the relevant extract of deal file reflecting the above transaction. (page no. 665 of PB) Acquisition of 9% IRFC Bonds of FV Rs. 15 crores 30 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management The assessee has purchased 9% IRFC bonds of FV Rs. 15 Crores through M/s. Harshad S. Mehta on 26.06.1991. The said purchase of Bonds of FV Rs. 15 Crores is supported by the following documents: a. Contract Note dated 26.06.1991 issued by M/s. Harshad S. Mehta to the Appellant in respect of purchase of 9% IRFC Bonds of FV Rs. 15 crores. (page no. 674 of PB) b. Details of transactions carried out by M/s. Harshad S. Mehta as extracted by the A.O. in his Notice dated 16.04.1994. (page No. 516, 523 of PB) c. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page No. 563, 568 of PB) d. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page No. 585 of PB) e. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page No. 586 of PB) f. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) M/s. Shri Harshad S. Mehta in turn had purchased these Bonds of FV Rs. 15 Crores from SBI Capital Markets Ltd. (Rs. 10 crores), Banque Indosuez (Rs. 3 crores) and Hindalco Industries Ltd. (Rs. 4 crores) for delivery on the same day i.e. 26.06.1991 out of which the aforesaid bonds of FV Rs. 15 crores were purchased on behalf of the assessee. This is supported by the following documents: a. Contract Note dated 27.05.1991 issued by M/s. Harshad S. Mehta to M/s. SBI Capital Markets Ltd. in respect of purchase of 9% IRFC Bonds of FV Rs. 10 crores for delivery on 26.06.1991. (page no. 675 of PB) b. Relevant Deal Slips extracted from the seized computer data pertaining to the above transactions. (page no. 676-678 of PB) c. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A) along with the relevant extract of Deal File reflecting the above transactions. (page no. 679 of PB) d. Ledger of M/s. SBI Capital markets Ltd. in the books of M/s. Harshad S. Mehta (relevant pages) reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 683, 685 of PB) 31 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management e. Ledger of M/s. Banque Indosuez in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 688 of PB) f. Ledger of M/s. Hindalco Industries Ltd. in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page no. 689 of PB) Acquisition of 9% PFC Bonds of FV Rs. 10 crores The assessee has purchased 9% PFC bonds of FV Rs. 10 Crores through M/s. Harshad S. Mehta on 01.10.1991. The said purchase of Bonds of FVRs. 10 Crores is supported by the following documents: a. Debit Note with Cost Memo dated 01.10.1991 issued by M/s. Harshad S. Mehta reflecting purchase of Bonds of F.V. Rs. 10 Crores by the assessee. (page No. 690, 691 of PB) b. Ledger of M/s. Harshad S. Mehta in the books of the assessee. (page No. 563, 575 of PB) c. Ledger of the assessee in the books of M/s. Harshad S. Mehta. (page No. 585 of PB) d. Ledger of investment in PSU Bonds / Securities A/c in the books of the assessee. (page No. 586, 587 of PB) e. Affidavit of Shri Harshad S. Mehta. (page no. 590 of PB) M/s. Harshad S. Mehta in turn had purchased these Bonds of FV Rs. 10 Crores from M/s. National Housing Bank (NHB) on 24.09.1991. This is supported by the following documents: a. Relevant Deal Slips extracted from the seized computer data pertaining to the said transaction. (page no. 692 of PB) b. Submissions of the A.O. vide letter dated 17.07.2009 in the case of Late Shri Harshad S. Mehta for A.Y. 1992-93 filed before the CIT(A) along with the relevant extract of Deal File reflecting the above transaction. (page no. 693 of PB) c. Ledger of NHB in the books of M/s. Harshad S. Mehta reflecting the purchase of the Bonds and payment for the same from the bank. (page No. 697, 700 of PB) 16.5 The Ld A.R also submitted that the AO has made addition on the basis of information received from PSUs, but did not supply the same to the assessee, though the assessee had asked for the details several times. 32 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management He further submitted thatthe assessee has purchased these bonds on credit from M/s HSM out of the running account maintained with it. Accordingly, in the absence of any proof to show that cash was given outside the books, the question of assessing them u/s 69 of the Act as unexplained investment does not arise. He submitted that the interest earned on these bonds have been duly disclosed in the books of accounts, i.e., if it were unaccounted investment, the assessee would not have declared the interest income in its books. He further submitted that the ITAT, in the first round, had directed Ld CIT(A) to decide the issue afresh by considering the books of accounts of the assessee. However, it appears that the Ld CIT(A) did not refer the books and also did not reject it also. Hence, he should have accepted the entries made in the books of accounts. 16.6 The Ld.DR, on the contrary, submitted that the assessee did not furnish the books of account before the AO during the course of assessment proceedings. He submitted that the assessee is placing reliance on the running account maintained with M/s HSM, but the books of accounts of Mr Harshad Mehta has been rejected by the Tribunal in AY 1992-93. He further submitted that the assessee has claimed that it has submitted evidences before the AO and the Ld.CIT(A) in the first round, but both the authorities have observed that the assessee has not furnished the evidences. 16.7 Having heard rival contentions, we notice that the assessee has repeatedly claimed that the above said PSU bonds were purchased by it from the brokerage firm M/s HSM on credit, i.e., the assessee was having a running account, wherein the purchases and sales made by the assessee are recorded. Thus, it is the claim of the assessee that no separate payment has been made specifically for purchase of these PSU bonds. 33 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management According to the assessee, the purchases of these bonds have been duly accounted for in its books of accounts. We have earlier extracted the explanation given by the assessee containing details of purchase of each of PSU bonds. It is noticed that these bonds have been purchased from M/s HSM only, who in turn, had purchased them from the market. It is submitted that the payments were made by M/s HSM to the sellers. These details would show that the assessee has not made any payment towards the purchase consideration. Further, it is stated that the interest income from PSU bonds have also been accounted for in the books of accounts. The Ld D.R submitted that the books of accounts of Shri Harshad Mehta had been rejected by ITAT. The rejection may be in the context of determining the income of Shri Harshad Mehta, but that does not mean other commercial transactions entered by him were disproved. 16.8 We noticed that the AO has made this addition u/s 69 of the Act. The said provision read as under:- “69. Unexplained investments. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.” The conditions for invoking the provisions of sec. 69 are that the (a) the assessee should have made investments (b) those investments have not been recorded in the books 34 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management (c) the assessee offers no explanation about the nature and source of investments or the explanation offered by him is not, in the opinion of AO is satisfactory. According to the AO those investments have not been recorded in the books of accounts and further, the assessee has not offered any explanation about the source of investments. However, we noticed that the assessee has accepted that it has made these investments and further explained that they have been purchasedon credit from M/s HSM, who in turn, had made payments to the seller. It is stated that those investments have been duly recorded in the books of accounts and the claim of credit purchases was proved by submitting the ledger extract of M/s HSM. When the investments have been made on credit, the question of cash outflow will not arise. Hence the question of making any addition u/s 69 of the Act does not arise, in the absence of any cash outflow. We notice that the books of accounts were not produced before the AO during the course of assessment proceedings, but they were produced before Ld CIT(A). We noticed that the ITAT had directed the Ld CIT(A) to decide the issues after examining the books of accounts of the assessee. We notice that the Ld CIT(A) does not appear to have referred to the books of accounts of the assessee at all. Accordingly, we are of the view that the conditions prescribed in sec.69 of the Act for invoking that provision have not satisfied in the instant case and hence the tax authorities are not justified in making addition u/s 69 of the Act. Accordingly, we modify the order passed by Ld CIT(A) on this issue and direct the AO to delete the entire addition of Rs.51.06 crores. 17. The Ground no.8 urged by the assessee relates to the disallowance of depreciation of Rs.1.27 crores on leased plant and machinery. The AO noticed that the assessee has purchased one machine from M/s Mazda Packaging Ltd and leased back it to the very same company. According to 35 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management the AO, the machinery was purchased for a sum of Rs.5.03 crores, but it was given on a lease for Rs.5000/- per month. The AO took the view that these terms is beyond human probabilities and accordingly, held that it is not a proper business deal and accordingly assessed the lease rent of Rs.30,000/- received in this year as income under the head Income from other sources. The AO noticed that the assessee has claimed depreciation of Rs.1.27 crores calculated @ 25% of the cost of machinery of Rs.5.03 crores. Since the lease rent was assessed as income under the head Income from other sources, the AO disallowed the depreciation claim of Rs.1.27 crores. 17.1 The Ld CIT(A) noticed that the lease agreement has been entered on 16-04-1992, but the lease payment has started from 16.9.1991 itself, i.e., about seven months prior to the date of agreement. The Ld CIT(A) considered the same as against corporate governance principles. Further, he held that the lease rent received by the assessee was very low. Accordingly, he suspected the deal itself and accordingly observed that the transaction is more than what meets the eye. Accordingly, he confirmed the disallowance of depreciation. 17.2 We heard the parties and perused the record. We notice that the tax authorities have suspected the transaction entered between the assessee and M/s Mazda Packaging Ltd. But what we notice is that the lease rent of Rs.5000/- per month received by the assessee has been taxed, even though it is considered to be a paltry sum vis-à-vis the cost of machinery. The Ld A.R submitted that the above said amount of Rs.5000/- was payable from October, 1991 to March, 1992 (i..e, for the period prior to entering of lease agreement) and thereafter, the lease rent is payable @ Rs.27/- per thousand per month of sales turnover as per the agreement itself. Hence we notice that the tax authorities did not examine 36 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management lease agreement in toto and relied on one clause of the agreement, which is not justified. The Ld A.R further submitted that the assessee has continued to receive lease rent in the subsequent years also and has also claimed depreciation. The lease rent receiptshave been taxed in assessment year 1994-95 & 1995-96 and the depreciation claim has also been allowed in both the years. The Ld A.R also relied upon a letter dated 17-04-1996 written by advocate of the Custodian to the Court receiver of M/s Mazda Enterprises (earlier known as Mazda Packaging Ltd), wherein he has given the details of purchase of machinery and lease details. Further, he has also requested the Court Receiver not to deal with the said machinery, which was an attached property. Accordingly, the Ld A.R submitted that the tax authorities have disallowed depreciation claim on incorrect appreciation of facts relating to this issue. The Ld D.R, however, submitted that these lease transaction is a sham transaction and it does not fit into the human probabilities. 17.3 We thus notice that the tax authorities did not examine the lease agreement only partially and did not notice the enhancement of lease rent after acquiring of machinery. We notice that the actual transaction of sale of machinery by M/s Mazda Packaging Ltd to the assessee is not doubted. Similarly, the transaction of leasing of the same to M/s Mazda packaging Ltd is also not being doubted. The only suspicion was with regard to the lease rent of Rs.5000/- only, which was payable before the acquiring of machinery. In any case, the lease rent received by the assessee has been assessed to tax under the head Income from other sources. When an income is assessed to tax, then the tax authorities are obliged to allow all the expenses incurred in earning that income and also deductions statutorily allowable thereon. The depreciation prescribed in s. 32 of the Act is allowed against the income assessed under the head income from other sources also. Since, it is a statutory deduction prescribed under the 37 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Act, we are of the view that the tax authorities are not justified in rejecting the said claim, that too after assessing the relevant income. Further, the assessee has continued to declare lease rental income in the subsequent years, viz., AY 1994-95 and 1995-96. The depreciation has also been claimed on the very same asset. It was submitted that the AO has assessed lease rental income after allowing depreciation so claimed by the assessee in those years. 17.4 This issue can be looked from another angle. It is well settled proposition of law that the tax authorities are not entitled to question the wisdom of a businessman. The purchase of machinery and leasing out the same are in the nature of commercial transactions entered into by the assessee. In our view, the AO is not entitled to question them, unless he could establish that the entire transactions are sham transactions. If the transactions are entered between two related parties, then it may instigate the AO to further probe the transaction. At the most, the AO could have established suppression of lease rental income only and even in that case, the depreciation allowable under the Act could not have been disallowed, after accepting the cost of asset. In the instant case, the AO did not carry out any enquiry with regard to the same. If the AO disbelieves the transactions without making any enquiry, it would mean that he has decided this issue only on suspicions and surmises, which is not permitted under the Income tax Act. We notice that the Ld CIT(A) has also endorsed the decision so reached by the AO without causing any further enquiry. 17.5 In view of the foregoing discussions, we are of the view that the tax authorities are not justified in disallowing the statutory deduction of depreciation mandatorily allowable under the Act under suspicions and surmises, that too after assessing the corresponding rental income. Hence, it is not in accordance with law. Accordingly, we set aside the 38 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management order passed by Ld CIT(A) on this issue and direct the AO to allow the depreciation claimed by the assessee in this year. 18. The Ground No.9 urged by the assessee relates to the addition of Rs.1,01,23,655/- relating to the bank drafts found at the Madras Office of the assessee. 18.1 During the course of search conducted at the Madras office of the assessee, bank drafts having value of Rs.1,01,23,655/- were seized. The demand drafts were in the name of M/s Investment Advisory P Ltd (IAPL). It was also noticed that these drafts were issued by four brokers viz., Shri R RMohata, Shri ChampaklalJamnadas, Shri Sagar Bihani and Shri Shrenik J Shah, who were also subjected to search or survey operations. The brokers have stated that the drafts represented sale proceeds of shares of M/s Karnataka Ball Bearing belonging to M/s IAPL. However, Shri R Srinivasan, the principal officer of M/s IAPL denied sale of any shares and submitted that these drafts were handed over to him by the employees of Bombay Office of the assessee with the request to hand over the same to Madras office. The assessee, on the contrary, submitted that the shares of Karnataka ball bearing were purchased by IAPL through broking firms of the group and later sold through four brokers, who had issued demand drafts in the name of IAPL towards the sale consideration. Accordingly, the assessee disowned the bank demand drafts. However, the AO did not accept the same and took the view that the demand drafts represent sale proceed of shares and unexplained investment of the assessee. 18.2 The Ld CIT(A) noticed that the assessee did not furnish any documents like contract notes or supporting evidences to prove its explanations. He held that the demand drafts were seized from the office of the assessee and hence, the primary onus to prove that the same does not 39 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management belong to it lies upon the assessee. The Ld CIT(A), relying upon a letter written by Shri R Srinivasan of IAPL to the director of the assessee, took the view that the above said Shri Srinivasan is the agent of the assessee only, which is corroborated by the fact that the assessee has been paying maintenance charges to IAPL. The Ld CIT(A) also noticed that Shri Srinivasan has implicated two employees of the assessee also. Accordingly, he took the view that the assessee did not come clean on this matter. Accordingly, he confirmed the addition made by the AO. 18.3 We heard the parties on this issue and perused the record. The AO has assessed the amount of Rs.1,01,23,655/- as unaccounted sale of shares of M/s Karnataka Ball Bearing Ltd. The basis of this addition is that the demand drafts seized from the premises of the assessee. The fact is that the above said demand drafts stood in the name of M/s IAPL and the brokers, who issued the shares have stated that they have issued the demand drafts towards sale value of sale of shares of M/s Karnataka Ball Bearing. The assessee has explained that the above said shares were purchased by IAPL through its associate broking firms and sold through the four brokers. However, the explanations of the assessee were not accepted for the reason that (a) the demand drafts were found in the premises of the assessee. (b) the principal officer of M/s IAPL had denied sale of shares and claimed to have received the demand drafts from the Bombay office of the assessee. (c) there is commercial transaction of reimbursement of expenses between the assessee and IAPL. Hence Srinivasan also appears to be the employee of the assessee. 40 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 18.4 However, we notice that the AO did not enquire as to why the demand drafts are in the name of IAPL, when he assumes that they belong to the assessee. He also did not establish that the shares of Karnataka Ball Bearing Ltd were owned by the assessee only. In the absence of shares, it may not be possible to presume that the assessee has sold the shares of Karnataka ball bearing Ltd. It is true that it is the responsibility of the assessee to explain about the demand drafts, since they were seized from the premises of the assessee. However, we notice that the assessee has given explanations, but the same were rejected by the AO, mainly for the reason that one of the employees of IAPL had denied sale of shares. 18.5 In this regard, as contended by Ld A.R, we notice that the AO did not bring on record the statement, if any, given by the brokers implicating the assessee. It is a fact that the three associate broking firms of the group were also operating in the very same premises in Madras. Hence, it cannot be conclusively said that these demand drafts belong to the assessee. From the explanation given by the assessee it can be noticed that it is quite possible that the demand drafts were related to the transactions carried between the broking firms with the four brokers. No explanation is available as to why the demand drafts representing sale consideration of shares were issued in the name of IAPL. This important question remains unanswered by anyone. 18.6 We noticed that the Ld CIT(A) has entertained the view that Shri Srinivasan is the agent of the assessee and the demand drafts were received from two employees of the assessee at Bombay by him. The employees name was mentioned as Shri Kirti Shah and Shri Arun Bhaiya. The Ld A.R submitted that all the above said three persons are not employees of the assessee. We also notice that the AO has not shown that IAPL is either subsidiary or benami concern of the assessee. The ld A.R 41 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management also submitted that none of the statements were confronted with the assessee. However, it appears that the assessee had sought for cross examination only in the year 2022. Hence this contention may not be justified due to lapse of huge time. 18.7 We notice that the tax authorities have also observed that the assessee did not offer any explanation in the proceedings conducted u/s 132(5) of the Act. The Ld A.R submitted that the assessee was facing enquiries from several authorities at that point of time, viz., CBI, Company Law Board and further prohibitory orders were issued on the computers of the assessee. Hence, it could not furnish any reply. In our view, the same may not be relevant. In our view, the assessee can be subjected to tax in respect of undisclosed income of the assessee only. Hence, it is necessary to establish that the demand drafts seized from its premises actually belonged to the assessee. There is no doubt that the assessee has not purchased the demand drafts and it was given by the four share brokers. The statements given by those brokers have not been brought on record. Even Mr Srinivasan of IAPL did not say that these demand drafts belong to the assessee, i.e., he has only stated that they were collected by him from Bombay office and handed over to the Madras office. Since the brokers who had given demand drafts had admitted that they have given them towards value of sale of shares, it is not discernible as to how the AO could not find out the real seller of the shares. It was possible to ascertain the same from the very same brokers only on the basis of the broker notes issued by them. We notice that the AO did not discuss anything about the nature of enquiry conducted with the brokers. All these facts would show that the AO has selectively relied upon certain information and accordingly drawn adverse inferences against the assessee. In our view, the same is not legally sustainable. In the absence of any proof to link the demand drafts with the assessee, we are of the view that the AO was not justified in 42 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management making this addition. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.1,01,23,655/-. 19. The Ground No.10 urged by the assessee relates to the addition of Rs.15.76 crores relating to value of shares seized from the assessee‟s premises. 19.1. During the course of search proceedings conducted on 14-05-1992, shares worth Rs. 15.76 crores were seized and the inventory of the seized shares were prepared. As per the direction given by the Hon‟ble Special Court, the copies of inventory sheets consisting of 330 pages were given to the assessee in the month of November, 1992. The AO asked the assessee to explain the sourcesof investments made in these shares. The assessee replied that theseshares may belong to different entities of the group. Accordingly, it requested the AO to furnish the details of shares as well asthe details of premises from which they were seized, so that it could identify the owners of those shares.According to Ld A.R, these shares were seized from various premises and all of them were brought to one place and thereafter, prohibitory orders were issued and they were seized. However, the AO did not accept the above said explanations of the assessee. He noticed that the shares found and seized were mostly unregistered shares, i.e., they have not been transferred to the name of the buyer yet. Since the shares were seized from the premises of the assessee, the AOassessed the entire valueof Rs. 15.76 croresas unexplained investment u/s. 69 of the Act. 19.2. Before the Ld.CIT(A), the assessee contended thatthe AO has not given details of shares, viz., the name of the holders, the place wherefrom they were seized etc. It also submitted that the AO did not allow inspection of the shares seized by the department. It submitted that the 43 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management registered shares are very much accounted in the books of the respective owners. It was also submitted that the un-registered shares have also been duly accounted for in the Books of Account of the respective owners. Accordingly, it was contended that those shares cannot be treated as “unaccounted investments”. However, according to Ld.CIT(A), the assessee has been given a copy of inventory in November, 1992, but the assessee has failed to explain the sources of investments of seized shares during the course of proceedings conductedu/s.132(5) of the Act. Further, the Ld.CIT(A) took the view that these shares have been seized from the assessee only and hence it is the responsibility of the assessee to explain the sources of making investment in unregistered shares.Accordingly, he confirmed the addition. 19.3. The submissions of the Ld.AR before us are summarized as under : a. A perusal of final Panchanama drawn on 14-05-1992 in respect of seized shares shows that the office located in No. 1418, but the said place belongs to another entity in the group, named M/s Growmore Leasing and Investment Ltd. The shares were found and inventorised on different dates at different premises and they were brought to the above said office for preparing final Panchanama. However, it has been presumed that they belong to the assessee only.It is further submitted that the said premises do not belong to the assessee nor the shares were found from the possession of the assessee. Hence, there cannot be any presumption that they belong to the assessee. b. The AO did not furnish a copy of seized documents in spite of repeated request. The assessee was given only inventory of shares and debentures prepared on different dates. The said inventory run 44 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management into 330 pages and their value was arrived at Rs. 15.76 crores by the AO. c. A careful perusal of the inventory sheets would reveal that the last column is titled as “market value”, but the same has been left blank. Hence, it is not clear as to how the value of Rs. 15.76 crores was arrived at by the AO, as the said amount was not mentioned anywhere in the inventory sheets. d. Further, contrary to what has been stated by the AO, most of the shares were registered shares and only few shares were un- registered shares. There is no indication as to whether the unregistered shares areavailable with transfer deed. e. Many of the business premises were shared by Various entities of the assessee‟s group. Further all of them were holding shares and they have been duly accounted for in their books of accounts.Hence, the assessee had repeatedly asked for the details, without which, the assessee could not correlate the shares with the related entities. But the AO did not supply the details requested by the AO. Accordingly, it is contended that the entire shareholding cannot be considered to belong to the assessee. f. The registered shares will show the name of the owner and hence, it can belinked to the concerned entity in whose name it has been registered. In that case, those shares cannot be considered as belonging to the assessee. g. In respect of unregistered shares, if the AO furnishes copies of blank transfer deeds attached with un-registered shares, then the assessee would be in a position to identify the entity in whose books those shares have been recorded. In respect of the un-registered 45 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management shares, the AO has also assessed them as belonging to three brokerage firms, namely, M/s.HSM, M/s.ASM and M/s.JHM. Accordingly, the Ld.AR contended that this addition has been made without establishing that all of these shares belong to the assessee and hence, the AO was not justified in making the addition. 19.4 On the contrary, the Ld.DRsubmitted that the assessee did not furnish any explanationwith regard to these shares before the AO during the 132(5) proceedings. Further, the assessee has failed to discharge its onus to show that these shares belong to others or it has been accounted for in the Books of Account. Accordingly, the Ld.DRsubmitted that the Ld.CIT(A) was justified in confirming the addition. 19.5 We heard the parties and perused the record. From the submissions made by the Ld.AR, we notice that the assessee has been given a list of inventory of shares seized from one of the premises of the assesseeconsisting of 330 pages. It is the submission of the assessee that the shares were seized from different premises of the group and all of them were brought in one premises for the purpose of issuing prohibitory order/seizure. According to the assessee, the premises no.1418 from where the inventory list was prepared does not belong to it and it belonged to another group entity viz., M/s Growmore Leasing and Investment Ltd. It is the submission of the assessee that it was given only the inventory sheets and not the copies of Shares certificates and transfer deeds, if any, attached thereto. Though the AO has observed that these shares are un- registered shares. However, according to the assessee, most of the shares are registered shares and only few shares are un-registered shares. 19.6 Insofar as the registered shares are concerned, it was submitted that the name of the owner of shares could be found from the Share 46 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Certificate itself. In that case, the assessee cannot be considered as owner of the shares. According to the Ld.AR, the registered shares belong to various members of the group and they should have been accounted for in their respective Books of Account. 19.7 We find merit in the said submissions. We are also of the view that the assessee can be considered as owner only if the shares are registered in the name of the assessee. Accordingly, in respect of shares registered in the name of other persons, in our view, the addition could not be made in the hands of the assessee. 19.8In respect of un-registered shares, it is the contention of the Ld.AR that the assessee would be in a position to correlate the shares with any of the entities in the group, provided details thereof are given to the assessee. As submitted by the Ld.AR, if the un-registered shares could be linked to any of other entities of the group and they have been accounted in their books, then also the value of those shares cannot be assessed in the hands of the assessee. 19.9We notice that the above submissions of the assessee could be appreciated only if the factual details relating to the shares seized by the revenue are properly analysed. However, we notice that the tax authorities have sought explanations from the assesseewith regard to the sources of investments, without providing all the relevant details that were requested by the assessee, which may not be possible for the assessee.As noticed earlier, the assessee has been given only inventory sheets of shares, which consisted of 330 shares. Hence,it would not be possible for anyone to identity the owners of shares on the basis of inventory alone. We noticed that the inventory sheet itself consisted of more than 300 pgs. In view of the foregoing discussions, we are of the view that the AO could not have made this addition without giving all the details relating to the shares. 47 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 19.10 Since physical stock of shares have been found and seized during the course of search, in our view, they have to be examined in order to differentiate between accounted and unaccounted shares. If any unaccounted shares could be found out, then they can be subjected to tax in the hands of the respective owners only, that too, if the explanation given by the assessee/owner of the shares was not satisfactory. Accordingly, we are of the view that this issue requires examination afresh at the end of the AO. Accordingly, we set aside the order passed byLd.CIT(A) on this issue and restore the same to the file of the AO for examining this issue afresh in the light of discussions made supra. 19.11 We have noticed that the assessee has contended that there was no break-up available for the impugned addition of Rs.15.76 crores. Accordingly, for offering proper explanations, we are of the view that the assessee shouldbe furnishedwith break-up details of the above said addition. Further, the assessee shall also be provided withcopies of relevant share certificates and blank transfer deeds, if any, attached thereto. 19.12 It is well settled proposition of law that the Income tax authorities are entitled to assess any undisclosed income only on the basis of some credible materials, i.e., additions on the basis of presumption, surmises and conjectures are not permitted. Accordingly, if the AO is not able to furnish the evidences in support of this addition, the assessee would not be in a position to offer any explanation. In that case, we are of the view that no addition can be made on account of these investments. Further, the presumption about the ownership of the shares can be made only if it is proved that the shares have been found in the possession of the assessee and they do not belong to any other related entity. There should not be any dispute that the value of investment should be determined on 48 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management the basis of actual purchase cost and not on the basis of market price on the date of seizure. We order accordingly. 20. The modified Ground no.11 urged by the assessee relates to the partial confirmation of addition of unexplained deposits made in bank accounts of the assessee. The AO noticed that the assessee is having 11 bank accounts in cities of Bombay, Delhi, Madras and Bangalore. Even though, the assessee furnished copies of bank accounts, according to AO, the assessee did not explain the transactions details. During the course of assessment proceedings, the AO collected certain details from RBI. On the basis of those details and also on the basis of voucher files available with the assessee, the AO prepared a “Receipts and Payments account” in respect of bank entries. The AO asked the assessee to explain the receipts and payments account prepared by him. Since the assessee did not furnish any explanation, the AO assessed entire receipts aggregating to Rs.29,12,96,041/- as unexplained income u/s 69A of the Act. 20.1 The assessee furnished a detailed written submissions before Ld CIT(A) giving details of deposits made into the various bank accounts. Based on the same, the Ld CIT(A) granted partial relief and confirmed additions to the extent of Rs.24,36,94,340/-. The assessee is aggrieved. We notice that the revenue is not contesting the relief granted by Ld CIT(A) and hence his decision thereon has attained finality. 20.2 The main contention of the assessee is that all the transactions made in the bank accounts of the assessee have been duly recorded in the books of accounts and hence they cannot be considered as unexplained deposits. It was submitted that the deposits made into the bank account are business transactions of the assessee and further, they are supported by the relevant contract notes. Out of the additions confirmed by Ld CIT(A), the Ld A.R explained two major transactions and further submitted 49 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management that the remaining deposits also were duly explained in the submissions made to Ld CIT(A). Accordingly, he prayed for deletion of this addition. 20.3 The Ld D.R, on the contrary, submitted that the assessee did not furnish any detail before the AO during the course of assessment proceedings. All these documents have been prepared later and hence they cannot be relied fully. 20.4 We heard rival contentions on this issue and perused the record. We noticed earlier that the assessee has prepared the books of accounts after completion of assessment and hence, the Tribunal has restored all the issues to the file of Ld CIT(A) to examine them afresh by considering the books of accounts. The books of accounts of any business concern cannot be prepared unless all the transactions made in the bank accounts are duly recorded. In this case, the assessee has maintained 11 bank accounts spread in various cities and through them only, it has transacted its business. Once the deposits made into those bank accounts are accepted as business transactions, it may not be right to assess the entire deposits as unexplained income of the assessee, since the law is settled that the AO can assess only income element involved in those transactions. However, in the instant case, the AO has assessed entire deposits aggregating to Rs.29.12 crores as unexplained income of the assessee, even though he was aware that the assessee is involved in share and money market transactions. He has done so mainly for the reason that the assessee could not explain each and every deposits made into the bank accounts. Everyone was aware the difficulties faced by the assessee, group entities, family members etc after the outburst of the stock scam and hence assessee‟s explanation before the AO that it could not explain the details due to difficulties faced by it and in our view, it should have been appreciated. 50 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 20.5 As noticed earlier, the assessee has prepared books of accounts duly incorporating all the bank transactions therein. We notice that the Ld CIT(A) did not examine the books of accounts before rendering his decision. If the transactions made in the bank accounts have been duly recorded in the books, then the AO cannot make any addition on the basis of details collected from RBI and vouchers. This is for the reason that, under the double entry principle, one transaction will consists of two legs. Hence the transaction found in the bank account is only one leg and the details of other leg of the said transaction will be available in the books of accounts. Accordingly, unless one examine both the legs of the transactions, it will not be possible for anyone to reach any conclusion. For example, if a person named “A” obtains loan of say Rs.10.00 lakhs from Mr.X by way of cheque, the same will be recorded in the books by passing double entry, viz., Bank account will be debited with Rs.10.00 lakhs and the corresponding credit will be given to the account of Mr.X. So far as the bank deposit of Rs.10.00 lakhs is concerned, the same would stand explained as the receipt from Mr.X. Hence the AO cannot make addition of deposit of Rs.10.00 lakhs made in the bank account as unexplained deposit. However, the AO is entitled to examine the account of Mr X in order to find out the genuineness of loan in terms of sec.68 of the Act. If he is satisfied with it, the AO cannot make any addition. However, if he is not satisfied, then he can make addition of loan received from Mr X u/s 68 of the Act (not the bank deposit). This example would explain the requirement of examining both the legs of a transaction. 20.6 In the instant case, we notice that there are two major deposits found in the bank accounts of the assessee viz., (a) deposit of Rs.10.18 crores on 15-01-1992 with ANZ Grindlays Bank, Bombay 51 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management (b) deposit of Rs.14.14 crores on 24.03.1992 with UCO bank , Nariman Point Branch, Bombay. With regard to the deposit of Rs.10.18 crores deposited in ANZ Grindlays bank, the Ld A.R explained the same as under, i.e., M/s Harshad S Mehta has sold 9% IRFC Bonds having Face Value of Rs.11.00 crores to M/s ANZ Grindlays Bank for Rs.10.18 crores. Hence, the above said bank was liable to pay the above said amount to M/s Harshad S Mehta. It is submitted that M/s Harshad S Mehta has instructed the above said bank to make the payment to the assessee. Accordingly, the above said amount of Rs.10.18 crores was paid by ANZ Grindlays bank to the assessee by crediting the bank account of the assessee. The Ld A.R submitted that the bank statement would show that the above said amount was credited in the bank account with the narration “SS purchase consideration”. Further, the Ld A.R submitted that the copy of Contract note dated 15-01- 1992 in respect of the purchase of security is placed at page 1047 of the paper book and the corresponding Deal slip is enclosed at page 1048. The ANZ Grindlays bank has also issued a Security deal slip and it is available at page 1087 of paper book. The Ld A.R submitted that the above said transactions are also available in the computer data seized by the revenue. 20.7 It can be noticed that the assessee received the above said amount of Rs.10.18 crores from M/s ANZ Grindlays bank on the instruction of M/s Harshad S Mehta. Accordingly, the assessee has incorporated the transaction by debiting the bank account and making corresponding credit in the account of M/s Harshad S Mehta. We notice that the above said transaction was a commercial transaction entered between the bank and M/s Harshad S Mehta. The corresponding Contract notes and Deal slips are also submitted in the paper book. Under these set of facts, we are of the view that the deposit of Rs.10.18 crores stood explained and 52 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management accordingly, it cannot be considered as unexplained deposit in the hands of the assessee. 20.8 The next major deposit is the amount of Rs.14.14 crores found deposited in the UCO bank account of the assessee. We notice that the assessee has offered certain explanations before Ld CIT(A), but he decided this issue against the assessee with the following observations:- “According to the appellant, pursuant to the purchase of ICICI Shares, ACC shares and Reliance Ind Shares by the Appellant from the broker firm – M/s Jyoti H Mehta on 20.3.92, the consideration to Jyoti H Mehta was paid through UCO Bank Bill discounting. The credit in the appellant‟s UCO bank a/c represents the amount of Bill discounting receipts returned by M/s Jyoti H Mehta from her UCO Bank account. To settle the purchase consideration, the said amount is transferred back in her ANZ Grindlays bank account on 25.3.1992 through appellant‟s bank account held with ANZ Grindlays bank. The JPC report submitted to the Parliament on 21.12.1993 states “27. The scam is basically a deliberate and criminal misuse of public funds through various types of securities transaction with the aim of illegally siphoning of funds of banks and PSUs to select brokers for speculative returns”. Further, there are adverse findings related to transactions with UCO Bank. Hence this addition stands confirmed.” We notice that the assessee has explained the sources of deposit of Rs.14.14 crores. However, the Ld CIT(A) has confirmed the addition on the basis of observations made in the JPC report, without finding any fault with the explanation given by the assessee. Before us, the Ld A.R submitted that the JPC report is a general report with regard to stock market scam and it did not deal with any specific transaction. We agree 53 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management with the same and accordingly, we are of the view that the Ld CIT(A) was not justified in placing reliance on JPC report, when the assessee is explaining the specific transaction of deposit found credited in the UCO bank. 20.9 From the explanation furnished by the assessee before Ld CIT(A), it can be noticed that the broker firm M/s Jyoti H Mehta has transferred the amount of Rs.14.14 crores to the account of the assessee. The Ld A.R submitted that the assessee has placed in the paper book, the bank accounts and ledger extract of assessee in the books of assessee M/s Jyoti H Mehta and also the bank accounts and ledger account of M/s Jyoti H Mehta in the books of the assessee. Thus, we notice that it was a business transaction between the assessee and M/s Jyoti H Mehta. The important point is that the funds have been received by the assessee from the above said brokerage firm, which, in turn, has received the same by way of bill discounting from UCO Bank. Accordingly, we are of the view that the deposit of Rs.14.14 crores cannot be considered as unexplained deposit. 20.10 With regard to the remaining deposit of Rs.3,78,154/-, we notice that the same represents 14 items of small deposits. All of them have been made available in the chart prepared by Ld CIT(A). We notice that these deposits consists of Rs.1,130/- to Rs.57,624/-. As noticed earlier, addition of all these deposits is not called for, when the assessee has accounted them in its books of accounts. 20.11 We notice that the Ld CIT(A) has directed the AO to assess interest income on certain deposits. We notice that the assessee has not contested the direction given by Ld CIT(A). Hence, we do not interfere with those directions. 54 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 20.12 In view of the above, we modify the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to unexplained deposits. 21. The Ground no.12 urged by the assessee relates to the addition of bill discounting charges of Rs.46,14,869/-. The AO noticed that the assessee has discounted two bills of Rs.15.00 crores and Rs.11.00 cores for M/s Reliance Capital & Finance Trust Ltd (RCFTL). In this connection, RCFTL has paid discounting charges of Rs.12,17,698/- for discounting bill of Rs.15.00 cores. The discount charges accrued on the other bill of Rs.11.00 crores was Rs.33,97,174/-. Thus, the aggregate amount of bill discounting charges was Rs.46,14,869/-. When questioned about the same, the assessee denied these transactions and accordingly requested the AO to supply the materials on which the AO was placing reliance. The assessee further submitted that it is aware of certain transactions entered by M/s HSM with RCFTL and accordingly requested the AO to allow inspection of the material. The AO noticed that the assessee was aware of the transactions. He also observed that, even though the funds were provided by M/s HSM, the deal was concluded in the name of the assessee company. Accordingly, the AO assessed the bill discounting charges of Rs.46,14,869/- as income of the assessee. 21.1 Before Ld CIT(A), the assessee submitted affidavit dated 09-01-1996 obtained from Late Shri Harshad S Mehta, wherein he confirmed that the transactions with RCFTL were accounted in the books of M/s HSM. The Ld CIT(A) did not consider the said affidavit on the reasoning that it is filed much after completion of the assessment. He also took the view that the assessee could not substantiate its explanations through the books of accounts and other evidences. He also took cognizance of the observation 55 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management of the AO that the transactions have been entered in the name of the assessee herein. Accordingly, he confirmed the addition. 21.2 We heard the parties on this issue and perused the record. We notice that there is no dispute between the parties that the funds were provided by M/s HSM to M/s RCFTL for discounting the bills of Rs.15 crores and Rs.11 crores. In the normal course, the related income by way of bill discounting charges shall belong to the person who has provided the funds. Despite knowing this fact, the AO has preferred to assess the said income in the hands of the assessee only for the reason that the deal was concluded in the name of the assessee. It is pertinent to note that the AO did not bring on record any material to show that the deal was indeed concluded in the name of the assessee. We notice that the AO did not supply the information collected by him from RCFTL to the assessee, even though the assessee had asked for the same. Thus, it is a case of making addition on the basis of material collected behind the back of the assessee. Hence, the observation of the AO that the deal was concluded in the name of the assessee is liable to be rejected, in the absence of any material to support the same. 21.3 On the contrary, the assessee has submitted that it was a commercial transaction between M/s HSM and M/s RCFTL. In support of the same, the assessee has furnished ledger account copies as available in the books of M/s HSM, wherein the transactions of lending were duly accounted for. The ld A.R also submitted that M/s HSM has issued the deal slips and they were part of seized material. Another important point brought to our notice by Ld A.R is that the AO has computed the income of M/s HSM on the basis of seized materials, wherein he has already assessed income arising out of the above transactions. We notice that late Shri Harshad S Mehta has also confirmed the above facts in his affidavit, 56 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management but the Ld CIT(A) did not consider the same. In view of the overwhelming evidence produced by the assessee, we are of the view that the tax authorities are not justified in assessing the bill discounting charges in the hands of the assessee, when they are aware that the assessee has not provided funds.Further, the addition has been made on the basis of materials,collected behind its back and not provided to the assessee. 21.4. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of bill discounting charges of Rs.46,14,869/-. 22. The modified ground No.13 of the assessee is related to the addition of money market profit of Rs.3,16,04,500/- instead of loss of (-) Rs.26,48,250/-. 22.1. During the course of assessment proceedings, the AO noticed that the assessee-company has carried out “money market operations” during the year under consideration. As per the ledger account seized at the time of search conducted on 28-02-1992, there was a profit of Rs.3.16 crores from money market operations. However, in the final profit and loss account for the year ending 31.3.1992, the assessee has shown loss of Rs.26,48,250/-. The AO noticed that there was net loss because of the reason that the assessee has incurred a loss of Rs. 4.32 crores in the month of March, 1992, i.e., subsequent to the date of search. Since the assessee had declared profit prior to the date of search and loss subsequently, the AO did not accept the loss declared by the assessee subsequent to the date of search. Accordingly, heassessed the profit from money market operations at Rs. 3.16 crores as per the ledger account found during the course of search. 57 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 22.2. In the appellate proceedings, the Ld.CIT(A) noticed that the assessee has incurred loss in the month of March, 1992, by entering into transactions with M/s. Harshad SMehta, a broking firm of the group, whose proprietor was Shri Shri Harshad S Mehta and he was also the Chairman of the assessee-company. Further, the Ld.CIT(A) noticed that there was no movement of funds in connection with these transactions and there was no delivery of securities also. He also observed that there is a high variation between purchase price and sale price of securities. He further observed that the trades have been reversed on the same day. He also observed that those prices did not match with Bhav copy of Bombay Stock Exchange. Accordingly, he took the view that the AO was justified in rejecting the loss declared by the assessee and accordingly, he confirmed the assessment of Rs.3.16 crores noted in the ledger account seized at the time of search. It appears that both the tax authorities have taken the view that the losses incurred by the assessee in March, 1992 in money market operations may be bogus one. 22.3 We heard the parties and perused the record. It is the submission of Ld A.R that the ledger account relating to money market operations found at the time of search was an incomplete document and hence the AO should not have placed reliance entirely on that document. We notice that the regular books of accounts were submitted before Ld CIT(A), but he did not examine though the direction of ITAT to Ld CIT(A) in the first round of proceedings was to decide the issues after considering the books of accounts. The Ld A.R submitted that the ledger account seized during the course of search was incomplete only is further proved by the fact that the following entries of profit have been omitted in the ledger account found at the time of search:- 58 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management It can be noticed that these profits have been earned from money market operations prior to the date of search. Hence there is merit in the contentions of the assessee that the said ledger account of money market transactions was incomplete. 22.4 We noticed that the Ld CIT(A) has made certain observations in order to support his view that the loss declared by the assessee in March, 1992 was bogus one. In this regard, the ld A.R submitted that the Ld CIT(A) has made those observations without properly appreciating the manner of operation of money market transactions. He submitted that the Ld CIT(A) has observed that there is no movement of funds and no delivery of securities. However, the fact remains that the transactions undertaken by the assessee were without delivery only and they would be squared off before the delivery date. The Ld CIT(A) has also observed that the contracts entered in March, 1992 have been reversed on the same date which is factually incorrect. In support of this contention, the Ld A.R cited certain instances, wherein the purchase date and sale date were found to be different. With regard to the observation on non-movement of funds, the Ld A.R submitted that the all the transactions are carried out with M/s HSM only and the assessee was having running account with that broker. Accordingly, there was no requirement for the assessee to make payments on completion of the transactions. With regard the market price quoted in the Bhav register of BSE, the Ld A.R submitted that the said Bhav register 59 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management pertained to Debentures, while the assessee has dealt in “Bonds”. Admittedly, the debentures are different from Bonds and hence the Ld CIT(A) was not justified in referring to the rates of Debentures to take adverse view against the assessee. The ld A.R further submitted that the observation of the Ld CIT(A) that there is huge variation in the purchase and sale of bonds is not borne out of record. He submitted that the transactions were undertaken at market rates and with unrelated third parties. The Ld A.R also brought to our notice the prices at which transaction had taken place and some of the prices are also mentioned in the table extracted in the subsequent paragraphs. A perusal of the same would show that the observations made Ld CIT(A) on this point is without appreciation of correct facts. Accordingly, we are of the view that various observations made by Ld CIT(A) do not justify the disallowance of loss declared by the assessee in the month of March, 1992. 22.5 We shall now advert to the loss incurred in the month of March, 1992. The assessee has incurred loss in the following money market transactionsin the month of March, 1992. We notice that the tax authorities have taken the view that the assessee has transacted with its group concern M/s HSM and accordingly, the loss booked in March, 1992 may be bogus one. The Ld A.R submitted that the above said view of the tax authorities is not correct. He submitted that the 60 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management assessee has transacted through the broking firm M/s HSM. In these types of transactions, they are entered between two parties through the broker, i.e.,when the assessee has purchased/ sold the bonds through M/s HSM, there will be a corresponding seller/buyer in respect of each of the transactions undertaken by the assessee. In support of this submission, the Ld A.R furnished following table to show that there was corresponding buyer/seller in respect of each transaction: - 61 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 22.6 A perusal of the transactions undertaken by the assessee in the month of March, 1992 would show that the assessee has purchased and sold the bonds through M/s HSM and for each of the transaction; there was corresponding seller/buyer. It was submitted that the corresponding seller/buyer was an unrelated third party. Thus, we notice that the assessee has undertaken the transactions of purchase and sale of bonds in the open market only. The Ld A.R also submitted that it is not the case that the transactions entered prior to the searchby the assessee have always resulted in profits only. There were certain transactions in which the assessee had also incurred losses. In the securities and money market transactions, the instances of incurring of losses or making of profits are routine affair. Accordingly, merely because the transactions entered into by the assessee in the month of March, 1992 have resulted into loss, the same cannot be considered to be bogus in nature. Hence they could not have rejected the loss without bringing any material on record to show that the said loss was an orchestrated/arranged one. 62 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Accordingly, it has to be held that the tax authorities have rejected the loss incurred in March, 1992 only on surmises and conjectures only, which is not permitted under the Act. 22.7 We further notice that the assessee has addressed every observations made by Ld CIT(A). The Ld A.R submitted that the transactions of purchases and sales of the assessee are supported by the contract notes. Accordingly, under these set of facts, we are of the view that the Ld CIT(A) was not justified in confirming the addition made by the AO. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to accept the loss from money market transactions declared by the assessee. 23. The Ground no.14 urged by the assessee is related to the addition of Rs.6,94,520/- pertaining to interest income from 13% NLC Bonds. 23.1 The facts relating to this case are that the AO noted that the assessee had purchased 13% NLC bonds having face value of Rs.5.00 Crores from M/s Canfina on 22-02-1992 and they were registered in the name of the assessee by the order of Special Court. The AO calculated interest accrued on such bonds up to the end of the financial year i.e. for a period of 39 days from 22-02-1992 to 31.03.1992, which worked out to Rs.6,94,520/-. The AO assessed the same as income of the assessee. 23.2 Before Ld CIT(A), the assessee did not press this ground and accordingly, he dismissed the same. 23.3 The Ld A.R submitted that the bonds were not delivered to the assessee and hence they were not registered in the name of the assessee as on 31.3.1992. Subsequent to search operations, there was no certainty that the assessee would get the bonds itself. When the receipt of security itself is in doubt, the AO was not justified in assessing the accrued 63 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management interest. When it was pointed out that the assessee did not press this issue before Ld CIT(A), the Ld A.R submitted that there is no estoppels against the law. Hence the assessee could contest this addition. He submitted that the income cannot be said to accrue, when the principal amount itself was doubtful of recovery. 23.4 The Ld D.R, however, submitted that the assessee cannot take a different stand before the Tribunal, after having decided not to press this issue before Ld CIT(A). In any case, the above said bond has been registered in the name of the assessee subsequently as per the order passed by the Special Court. The assessee has also been paid interest amount from the date of purchase also. Accordingly, the Ld D.R submitted that the assessing officer has rightly assessed the interest income. 23.5 We heard rival contentions on this issue and perused the record. Even though there was uncertainty about the receipt of bonds and the interest income in the initial period of search, it is stated that the assessee has received interest as well as got the bonds. Accordingly, we are of the view that the accrued interest income computed by the assessing officer needs to be sustained. Accordingly, we uphold the assessment of interest income of Rs.6,94,520/-. 24. The ground no.15 urged by the assessee has already been disposed of along with ground no.5 of the revenue. 25. The Ground no.16 urged by the assessee is related to the disallowance of claim of interest expenses. The assessee did not make claim for deduction of interest expenses before the AO. 25.1 Before Ld CIT(A), the assessee claimed deduction of interest expenses of Rs.9,85,73,047/-. The Ld CIT(A) noticed following facts:- 64 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management (a) The assessee has not quantified the interest expenditure, but seeking relief without quantifying the amount. (b) The assessee has made this claim following similar claims made by the group entities. The facts prevailing in the cases groupentities are that (i) their purchases were funded by three brokerage firms of the group, viz., M/S HSM, M/s ASM and M/s JHM. (ii) However, there was no written agreement between those group entities and the brokerage firms for payment of interest. (iii) The group entities have not paid any interest in any of the years. However, interest deduction was claimed on accrual basis, while some brokerage firms have been following cash basis of accounting and accordingly did not offer any interest income. (iv)The interest amount has not been quantified and was provisional. (c) Even though, in other cases, the Tribunal has followed the decision of Hon‟ble Supreme Court in the case of Ashwin Mehta Vs. Custodian reported in (2007)(2SCC 385) and held that the claim of interest is allowable, yet the identical claim for deduction of interest expenditure in this case, needs to be examined as per the provisions of the law. (d) There is no detailed discussion on this issue in the order passed by ITAT as to whether the interest expenses can be allowed against (i) business income, (ii) Capital gains and (iii) dividends. Hence, the claim of the assessee is examined independently. 65 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management (e) The interest expenditure cannot be allowed against income from capital gains. The interest expenditure cannot be allowed against dividend income, unless it is shown that it was incurred solely for earning dividend income. (f)Since the income of the assessee includes profit from share trading and share speculation, it would be entitled for deduction of some part of interest expenditure. However, the unaudited Balance sheet filed by the assessee shows the assessee was having investment of Rs.69.43 crores and inventories (share trading stock) is shown at Rs.44.60 crores as on 31.3.1992. Hence, the interest expenditure attributable to business operations is allowable as deduction. However, the assessee has neither quantified the interest expenditure claim in its submissions or in its books of accounts. Accordingly, the Ld CIT(A) rejected the claim for deduction of interest expenditure. 25.2 The Ld A.R submitted that the one of the family members of the group, viz., Smt Pratima Hitesh Mehta had also claimed deduction of interest expenditure in assessment year 1992-93 and the Ld CIT(A) had rejected the said claim on identical reasoning. However, the Tribunal, vide its order dated 26.10.2023 passed in ITA No.416 and 1180/Mum/2023 has allowed the claim of the assessee. Further, the above said decision of the ITAT was followed by other co-ordinate benches in the following cases:- (a) Jyoti H Mehta vs. ACIT and vice versa (ITA No.436 and 1186/Mum/2023 dated 27-10-2023 relating to AY 1993-94). (b) Deepika A Mehta vs. ACIT and vice versa (ITA No.379 and 1178/Mum/2023 dated 05-04-2024 relating to AY 1992-93). 66 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 25.3 The Ld D.R, on the contrary, submitted that the assessee has not given any details relating to interest expenditure. He further submitted that the interest expenditure should be restricted to that portion, which is attributable to business income. 25.4 We heard the parties on this issue and perused the record. We notice that the co-ordinate bench has held in the case of Pratima Hitesh Mehta (supra) that interest expenditure is allowable as deduction. The relevant portion of the decision rendered by the co-ordinate bench is extracted below:- “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 as the taxpayer was engaged in selling shares in the stock market and the dividend income had accrued as a by-product, the Hon'ble jurisdictional High Court by placing reliance upon the aforesaid decision of the Hon'ble Supreme Court in Seth R. Dalmia (supra), upheld the allowance of finance expenditure as deduction under section 57(iii) of the Act against the income by way of dividends, finance charges and interest which were shown as income from other sources by the taxpayer. Therefore, respectfully following the aforesaid decision of the Hon'ble Supreme Court in Seth R. Dalmia (supra), we are of the considered view that the assessee is entitled to claim a deduction of interest expenditure under section 57 of the Act 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. 67 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management Accordingly, the AO is directed to allow the interest expenditure claimed by the assessee under section 57 of the Act. As a result, ground No. 3 raised in assessee's appeal is allowed, while ground No. 2 and 3 raised in Revenue's appeal is dismissed.” 25.5 The interest expenditure claim is allowed u/s 36(1)(iii) of the Act, which states that the amount of interest paid in respect of capital borrowed for the purposes of business is allowable as deduction. Hence, what is required to be seen is that whether the capital was borrowed for the purposes of business or not?. Earning of income out of the said capital may not be relevant. Accordingly, if it is accepted that the capital was borrowed for the purposes of business, then the interest payable on the said capital is allowable as deduction. 25.6 In the instant case, the assessee has claimed for deduction of interest expenditure before Ld CIT(A). According to Ld CIT(A), the assessee did not furnish the details of interest expenditure and did not show how it was quantified. However, the Ld CIT(A) also accepts that the assessee is following mercantile system of accounting. In fact, we have seen that the AO has assessed accrued interest on an investment made by the assessee. Hence, the interest expenditure is allowable as deduction under mercantile system of accounting under accrual basis. The other discussions made by Ld CIT(A) with regard to deduction of interest expenditure claim against income from Capital gains and Other sources may not be relevant, since it is seen that the assessee has not claimed deduction against those income. Thus, in effect, the only effective deficiency pointed out by the Ld CIT(A) is the lack of details relating to interest expenditure claim. There should not be any dispute that the onus is placed upon the assessee to furnish the details of expenditure claimed by it. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and restore the same to the file of the AO for the limited purpose of examining the quantification and related details 68 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management of interest expenditure claimed by the assessee, who shall examine the same in the light of discussions made supra. 26. The Ground no.17 urged by the assessee is related to the observation of the Ld CIT(A) in directing the AO that the total income should not be assessed lower than the surrender made by Shri Harshad S Mehta u/s 132(4) of the Act. 26.1 During the course of search proceedings, Shri Harshad S Mehta had submitted a letter dated 02-05-1992 to the DDIT (Investigation), wherein he had made disclosure of RS.100 crores u/s 132(4) of the Act on behalf of himself, his family members and group entities. The assessing officer apportioned the above said amount of Rs.100 crores between all the assessees of the group for assessment years 1991-92 and 1992-93 in proportion to the Advance tax paid by them for each of the above said two assessment years and accordingly assessed the income so apportioned in the hands of all assessees of the group in both the years mentioned above. During the year under consideration, the AO assessed a sum of Rs.10.92 crores on this account. 26.2 However, the contention of the assessee is that the above said surrender of Rs.100 crores was made by Shri Harshad S Mehta under peculiar and unique circumstances in order to buy peace from the department, i.e., the books of accounts of all the assessees group were incomplete and hence he could not furnish break-up details of income of all the group members. Accordingly, it was contended that the above said amount of Rs.100 crores included income declared on the basis of advance tax paid by all the assessees. The Ld CIT(A) agreed with the above said submissions of the assessee and accordingly deleted the addition of Rs.10.92 crores, but with a rider that the total income of the assessee shall 69 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management not be assessed lower than the above said income. The assessee is aggrieved by the direction so given by Ld CIT(A). 26.3 We heard the parties and perused the record. We notice that identical kind of addition made in the hands of other assessees of the group has been deleted by the co-ordinate benches.In the case of Smt Deepika A Mehta vs. DCIT (ITA Nos. 379 & 1178/Mum/2023 dated 05-04- 2024 relating to AY 1992-93), identical addition was deleted following the decision rendered by another co-ordinate bench in the case of Cascade Holding P Ltd in ITA No.1414/M/2019 decided on 09-04-2021. The relevant discussions made by the Tribunal in the case of Deepika A Mehta (supra) are extracted below:- “7. The third ground of appeal is with regarding addition based on disclosure made by Harshad S. Mehta. In a statement recorded u/s 132(4), Harshad S. Mehta made a disclosure of Rs.100 crores on behalf of whole group which includes the present Assessee. We find that on the basis of same disclosure statement of Harshad S Mehta, proportionate additions were made in the hands of different constituents of the group. In the case of M/s. Cascade Holding Pvt. Ltd. in ITA No. 1414/M/2019 decided on 9.4.2021 the Coordinate Bench deleted the addition based on disclosure statement holding as under: \"26. We have heard the rival submissions of both the parties and perused the material on record. The undisputed facts are that Shri Harshad Mehta made a composite disclosure of Rs.100 crores for the entire group consequent to search action. We note that the breakup of the said disclosure was not available before the AO and he proportionately calculated the amount relating to the assessee at Rs.33,60,000/-. Now we note that the co- ordinate bench of the Tribunal in the first round of litigation has admitted the books of accounts as an additional evidence and restored the matter back to the file of the Ld. CIT(A) to 70 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management 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 cannot be added to the income of the assessee. The case of the assessee also is squarely covered by the decision of the co- ordinate 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, respectfully, following the decision of the co-ordinate bench of the Tribunal, set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition. The ground no. 6 is allowed.\" In the instant case, since, we have accepted the books of account of Assessee, the addition based on disclosure statement of Harshad S. Mahta is liable to be deleted for parity of reasons. Hence, ground no.3 of the appeal is allowed.” 26.4 The facts prevailing in the instant case being identical with the above said decisions rendered by the co-ordinate benches, we modify the order passed by Ld CIT(A) on this issue and direct the AO to delete this 71 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management addition even if the total income ultimately computed by him turns out to be less than Rs.10.92 crores. 27. The ground no.18 urged by the assessee is related to the incorrect computation of interest u/s 234B of the Act. 27.1 The only claim of the assessee is that the AO should have deducted “tax deductible at source” while computing interest u/s 234B of the Act. We notice that identical claim has been allowed by the Tribunal in the assessee‟s owncase in Asst. year 1991-92 in ITA No.259/M/2019. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to compute interest u/s 234B of the Act after deducting tax deductible at source. 28. The assessee has raised an additional grounds of appeal, wherein it is stated that the Ld CIT(A) ought to have assessed following income under various heads derived by the assessee based on actual transactions duly reflected in the books of accounts:- a. Business loss - Rs.3,64,30,126/- b. Income from capital gains - Rs.1,83,60,885/- c. Income from other sources - Rs. 78,15,274/- 28.1 We heard the parties on this issue and perused the record. We direct the AO to compute total income by considering the above said items of income declared by the assessee. It is pertinent to note that the business loss mentioned above has been computed by the assessee after considering the loss incurred in money market operations in the month of March, 1992. The AO had disallowed the said loss and the Ld CIT(A) had also confirmed the same. The assessee had challenged the said disallowance in ground no.13 (supra) and we have decided the same in 72 ITA Nos. 453 & 1125/Mum/2023 Growmore Research and Assets Management favour of the assessee. Accordingly, we direct the AO to compute total income of the assessee after taking into account above cited income. 29. In the result, both the appeals are treated as partly allowed. Order pronounced in the open court on 21-01-2025 Sd/- Sd/- [ANIKESH BANERJEE] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 21-01-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, “G” Bench, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai "