DEEPIKA A, MEHTA, MUMBAI V. DCIT CC 23, MUMBAI

ITA 1888/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2495 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 17-06-2016
• Assessment Year: 1991-1992
• Appeal Filed On: 20-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Keywords: Unexplained investment; Search and seizure; Principle of natural justice; Cost of acquisition
• Section: 234B; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI B.R.BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 SMT. DEEPIKA A . MEHTA . , 32, MADHULI, DR. A.B.ROAD, WORLI, MUMBAI- 400018. PAN:- ABNPM8231D VS. THE DY. CIT CENTRAL CIRCLE - 23 , AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. DHARMESH SHAH & DHAVAL SHAH RESPONDENT BY : SHRI. DR. P. DANIEL. DATE OF HEARIN G: 17/06 /2016 DATE OF PRONOUNCEMENT: 20/07/201 6 O R D E R PER RAM LAL NEGI, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AG AINST ORDER DATED 18/01/2012 PASSED BY THE LD. CIT(APPEALS)-40, MUMBA I FOR THE ASSESSMENT YEAR 1991-92. 2. BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT/ ASSESSEE IS THE RELATIVE OF LATE SHRI. HARSHAD S. MEHTA INVOLVED IN THE SECURITIES S CAM. A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT) WAS CARRIED OUT AT THE PREMISED OF THE APPELLANT/ASSESSEE ON 27/09/ 1990. DURING THE COURSE OF SEARCH A LARGE NUMBER OF DOCUMENTS WERE SEIZED. A SECOND SEARCH AND SEIZURE OPERATION WAS ALSO CARRIED OUT AT THE APPEL LANTS PREMISES ON 28/02/1992. DURING THE COURSE OF SECOND SEARCH ALSO A LARGE NUMBER OF DOCUMENTS AND VALUABLES WERE SEIZED. SINCE THE APPE LLANT/ ASSESSEE HAD NOT 2 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION WITHIN A PRESCRIBED TIME, NOTICE U/S 148 WAS ISSUED BY THE A O ON 20.05.92. IN REPLY TO WHICH, THE ASSESSEE FURNISHED CERTAIN DETAILS, HOWE VER, NO RETURN OF INCOME WAS FILED. ULTIMATELY, ASSESSMENT WAS COMPLETED U/ S 144/143(3) R.W.S. 147 OF THE ACT ON 24/03/1994 DETERMINING THE TOTAL INCOME AT RS. 5,86,15,634/-. 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEF ORE THE LD. CIT(A). THE CIT(A) VIDE ORDER DATED 26/02/2003 GRANTED PARTIAL RELIEF TO THE ASSESSEE. FEELING AGGRIEVED BY THE SAID ORDER, THE ASSESSEE F ILED SECOND APPEAL BEFORE THE ITAT. THE ITAT AFTER HEARING THE PARTIES, CONSIDERE D IT FIT TO SET ASIDE THE MATTER BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE IS SUES AFRESH AFTER ADMITTING THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE. THE ORD ER UNDER CHALLENGE HAS BEEN PASSED BY THE LD. CIT(A) IN COMPLIANCE OF ORDE R DATED 31/03/2006 PASSED IN BY THE ITAT IN ITA NO. 2804/M/04. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) ON THE FOLL OWING EFFECTIVE GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN LAW AND FACTS IN CONFIRMING VALIDITY OF THE ASSESSM ENT ORDER PASSED U/S. 147 OF THE ACT BY THE ASSESSING OFFICER. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE ASSES SING OFFICER HAS NOT COMPLIED WITH THE PRINCIPLES OF NATURAL JUSTICE EITHER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS OR DURING THE COURSE OF THE REMAND PROCEEDINGS. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT DETERMINING THE INCOME BASE D ON THE FINAL BOOKS OF ACCOUNT THEREBY CONFIRMING THE NET ACCRETI ON METHOD ADOPTED BY THE ASSESSING OFFICER FOR DETERMINATION OF THE TOTAL INCOME. THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS) OUGHT TO HAVE ACCEPTED BOOK RESULTS SHOWN BY THE APPELLANT. 3 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD THAT DETERMINATION OF TOTAL INCOME OF APPELLAN T BY CONSIDERING NET ACCRETION TO VARIOUS ASSETS AS UNDER IS WHOLLY ERRONEOUS AND UNSUSTAINABLE. PARTICULARS AMOUNT S (RS.) NET ACCRETION TO THE OTHER ASSETS (-) 2,62,08,695 NET ACCRETION TO SHAREHOLDING 8,21,46,991 DECLARATION BY LATE SHRI HARSHAD S. MEHTA 25,00,000 TOTAL .... 5,84,38,296 ADD: PERSONAL EXPENSES 1, 77,338 TOTAL NET ACCRETION TO THE NON-REVENUE ACCOUNTS 5,86,15,634 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE CORRE CT QUANTITY OF PURCHASE AND SALE OF SHARES SHOULD BE ADOPTED AS PE R THE BOOKS OF ACCOUNTS WHILE DETERMINING THE INCOME BASED ON THE NET ACCRETION METHOD ADOPTED BY THE ASSESSING OFFICER. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DETERMINATION OF THE SHAREHOLDINGS OF THE APPELLANT IN ANNEXURE A-1 BASE D ON THE SEIZED DATA OF THE BROKERS. 7. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DETERMINATION OF UNACCOUNTED INVESTMENTS AS PER ANNEXURE A-3 OF THE ASSESSMENT O RDER AT RS. 4,83,90,783/- ON THE BASIS OF THE INFORMATION COLLE CTED FROM VARIOUS COMPANIES ALLEGEDLY SHOWING THE SHAREHOLDING OF THE APPELLANT WITHOUT APPRECIATING THAT THE COPIES OF THE SAID LE TTERS/INFORMATION WAS NEITHER PROVIDED TO THE APPELLANT DURING ASSESS MENT PROCEEDINGS NOR DURING REMAND PROCEEDINGS. 8. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE VALUE OF THE UNA CCOUNTED 4 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 INVESTMENT AS PER ANNEXURE A-3 BASED ON THE AVERAGE OF THE MARKET RATES AS ON 1.4.1990 AND 31.3.1991 WITHOUT APPRECIA TING THAT THE VALUE OF INVESTMENTS OUGHT TO HAVE BEEN DETERMINED AT THE COST OF ACQUISITION BASED ON THE DATES OF PURCHASE. 9. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE CLAIMED BY THE APPE LLANT. 10. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF DEDUCTION OF OTHER EXPENSES CLAIMED BY THE APPELLANT IN THE BOOKS OF A CCOUNT. 11. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN LAW AND IN FACTS IN NOT GRANTING DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE INCOME OF THE APPELLANT. 12. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) OUGHT TO HAVE HELD THAT THE ALTERNATE WORKING OF THE TOTAL I NCOME AS GIVEN BELOW, AS WHOLLY ERRONEOUS AND UNSUSTAINABLE. PARTICULARS AMOUNT (RS.) REVENUE RECEIPTS AS PER SEIZED BOOKS 44,02,103 ADDITIONAL INCOME BEING PART OF RS.100 CRORES DECLARATION 2,29,97,000 TOTAL ......... 2,73,99,103 LESS: EXPENSES 40,55 7 TOTAL INCOME AS PER REVENUE ACCOUNTS 2,73,58,546 13. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE LEVY OF INTEREST U/S. 234A, 234B AND 234C OF THE ACT. 5 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 4. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE GROUNDS RAISED IN THE PRESENT APPEAL ARE IDENTICAL TO THE GROUNDS RAISED IN THE CASE OF HITESH S. MEHTA, ITA NO 8023/M/2011 DECIDED ON 04.12.2013 BY THE MUMBAI TRIBUNAL. THEREFORE, THE PRESENT APPEAL IS S QUARELY COVERED BY THE ORDER PASSED BY THE ITAT MUMBAI IN CASE HITESH S. M EHTA (SUPRA). ON THE OTHER HAND THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE FINDINGS OF THE AUTHORITY BELOW, SUBMITTED THAT THERE IS NO INF IRMITY IN THE ORDER PASSED BY THE LD. LD. CIT(A). 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT ASSESSEE DOES NOT WANT TO PRESS GROUND NO. 1 OF THE APPEAL. HENCE , WE DISMISS GROUND NO.1 OF THE APPEAL AS NOT PRESSED. 6. AS REGARDS GROUND NO. 2 THE LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE IDENTICAL GROUND RAISED IN CASE OF HITESH S. ME HTA (SUPRA) WAS NOT ADJUDICATED BY THE ITAT BEING GENERAL IN NATURE, TH EREFORE, THE SAME DOES NOT NEED SEPARATE ADJUDICATION. ACCORDINGLY, THE SAME I S NOT ADJUDICATED. 7. THE LD. SUBMITTED THAT THE GROUND NO.3 OF THE A PPEAL IS COVERED BY THE ORDER OF ITAT IN THE CASE OF HITESH S. MEHTA (SUPRA ). IN THE SAID CASE THE LD. CIT(A) HAD CONFIRMED THE NET ACCRETION METHOD ADOPT ED BY THE AO FOR DETERMINING THE TOTAL INCOME REJECTING THE FINAL BO OKS OF ACCOUNT PRODUCED DURING THE APPELLATE PROCEEDINGS BY THE ASSESSEE. T HE ITAT ISSUE DIRECTION TO THE LD. CIT(A) TO COMPUTE THE INCOME AS PER BOOKS O F ACCOUNTS HOLDING AS UNDER ., WE DO NOT FIND ANY REASON WHY THE LD. CIT(A) SHOULD HAVE REJECTED THE BOOK RESULTS. AS THE ADMISSION OF THE BOOKS OF ACCOUNT HAVE ATTAINED FINALITY BY THE DECISION OF THE TRIBU NAL, THE LD. CIT(A) 6 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 IS DIRECTED TO COMPUTE THE INCOME AS PER BOOKS OF A CCOUNT. GROUND NO 3 IS ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE PRESENT CASE ALSO, THE LD. CIT(A) FOLLOW ING ITS EARLIER FINDING ON THE SAME ISSUE IN THE CASE OF SHRI. HITESH S. MEHTA FOR A.Y. 1991-92, HAS REJECTED THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE FINDING OF THE CO-ORDINATE GIVEN IN T HE CASE OF HITESH S. MEHTA (SUPRA), DIRECT THE LD. CIT(A) TO COMPUTE THE INCOM E OF THE ASSESSEE AS PER BOOKS OF ACCOUNTS. GROUND NO. 3 IS ACCORDINGLY ALL OWED FOR STATISTICAL PURPOSE. 9. GROUND NO. 4, 5 & 6 PERTAIN TO DETERMINATION OF THE TOTAL INCOME BY CONSIDERING NET ACCRETION TO VARIOUS ASSETS. THE CO -ORDINATE BENCH IN THE CASE OF SHRI. HITESH S. MEHTA (SUPRA) HAS ALLOWED THE CO RRESPONDING IDENTICAL GROUNDS HOLDING AS UNDER: 11. AS WE HAVE DIRECTED THE LD. CIT(A) TO COMPUTE T HE TAXABLE INCOME AS PER BOOKS OF ACCOUNT OF THE ASSESSEE QUA IN GROUND NO. 3, ADDITIONS CONTESTED FOR GROUND NO. 4, 5, & 6 ARE DE LETED. GROUND NO 4 TO 6 ARE ACCORDINGLY ALLOWED. 10. SINCE, WE HAVE DIRECTED THE LD. CIT(A) ALLOW ) TO COMPUTE THE TAXABLE INCOME AS PER BOOKS OF ACCOUNT OF THE ASSESSEE, WE DELETE THE ADDITIONS CONTESTED VIDE GROUND NO 4, 5 & 6 OF THIS APPEAL. GROUND NO. 4, 5 & 6 ARE ACCORDINGLY ALLOWED. 11. GROUND NO. 7 IS ALSO IDENTICAL TO THE CORRESPO NDING GROUND NO. 7 RAISED IN THE CASE OF HITESH S. MEHTA (SUPRA). THE CO-ORDINAT E BENCH HAS ALLOWED THE GROUND NO.7 OF THE APPEAL HOLDING AS UNDER:- ONE OF THE BASIC PRINCIPLES OF NATURAL JUSTICE IS THAT NO EVIDENCE COLLECTED BEHIND THE BACK OF THE ASSESSEE COULD BE USED AGAINST THE ASSESSEE UNLESS AN OPPORTUNITY IS GIVEN TO THE ASSESSEE 7 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 TO REBUT THE SAME. AS THE REVENUE AUTHORITIES HAVE GROSSLY ERRED IN RELYING UPON THE EVIDENCES COLLECTED BEHIND THE BAC K OF THE ASSESSEE, THE ADDITIONS BASED ON SUCH MATERIALS DES ERVES TO BE DELETED. WE, ACCORDINGLY REVERSE THE FINDINGS OF TH E LD CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 3,79,42 ,133/-WHICH HAVE BEEN MADE ON THE BASIS OF THE INFORMATION COLLECTED FROM VARIOUS COMPANIES BEHIND THE BACK OF THE ASSESSEE. THIS GRO UND OF APPEAL IS ACCORDINGLY ALLOWED. 12. THE QUESTION AS TO WHETHER ANY INVESTMENT IS D ISCLOSED IN THE BOOKS OR NOT CAN BE ANSWERED ONLY AFTER EXAMINING THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN THE EARLIER PARAGRAPHS, WE HAVE DIRECT ED THE LD CIT(A) TO DETERMINE INCOME OF THE ASSESSEE ON THE BASIS OF BO OKS OF ACCOUNT. SINCE THE AO HAS DETERMINED CERTAIN INVESTMENTS AS UNDISCLOS ED INVESTMENTS ON THE BASIS OF MATERIAL COLLECTED BY HIM AND SINCE THEY W ERE NOT COMPARED WITH THE BOOKS OF ACCOUNTS AND THE ASSESSEE WAS NOT PROVIDED WITH THE OPPORTUNITY TO EXPLAIN HER CASE, WE SET ASIDE THIS ISSUE TO THE FI LE OF LD. CIT(A) WITH THE DIRECTION TO CAUSE COMPARE THE ALLEGED UNDISCLOSED INVESTMENTS WITH THE BOOKS OF ACCOUNT. THE LD. CIT (A) MAY GET A REMAND REPOR T FROM AO IN THIS REGARD. IF ANY INVESTMENT IS FOUND NOT RECORDED IN THE BOOKS O F ACCOUNT, TO SEEK EXPLANATION FROM THE ASSESSEE AND TAKE APPROPRIATE DECISION AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 13. SINCE, GROUND NO. 8 OF THE APPEAL IS CONSEQUENT IAL TO THE FINDING OF THE GROUND NO. 7 OF THE APPEAL, THE SAME IS ALSO ALLOWE D. 14. GROUND NO. 9 PERTAINS TO CONFIRMATION OF DISALL OWANCE OF DEDUCTION ON ACCOUNT OF INTEREST EXPENDITURE CLAIM BY THE APPELL ANT. AS URGED BY THE LD. COUNSEL FOR THE ASSESSEE, IDENTICAL ISSUE HAS ALSO BEEN DEALT BY THE CO-ORDINATE 8 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 BENCH IN CASE OF SHRI. HITESH S. MEHTA, ITA NO 9158 /M/2010 FOR THE ASSESSMENT YEAR 1996-97 VIDE ORDER DATED 29.11.2013 . FOLLOWING THE DECISION RENDERED IN THE SAID CASE, THE CO-ORDINATE BENCH RE STORED THIS GROUND OF APPEAL BACK TO THE FILE OF THE ASSESSING OFFICER TO FOLLOW THE DIRECTION OF THE TRIBUNAL IN A.Y. 2005-06 AND 2006-07. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCHES, WE RESTORE THIS GROUND OF APPE AL BACK TO THE FILE OF THE AO TO FOLLOW THE DIRECTION OF THE TRIBUNAL PASSED I N ITA NO. 9158/M/2010 (SUPRA). GROUND NO. 9 IS ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSE. 15. GROUND NO. 10 OF THIS APPEAL IS ALSO IDENTICAL TO THE GROUND NO. 10 IN THE CASE OF HITESH S. MEHTA (SUPRA). THE CO-ORDINATE BE NCH HAS ALLOWED THIS GROUND OF APPEAL HOLDING AS UNDER: 20. AS WE HAVE DIRECTED THE CIT(A) TO COMPUTE THE I NCOME AS PER BOOKS OF ACCOUNT OF THE ASSESSEE, ALL THE EXPENSES DEBITED IN THE BOOKS OF ACCOUNT WILL AUTOMATICALLY BE ALLOWED BY T HE AO AS PER OUR FINDINGS GIVEN IN GROUND NO. 3 OF THIS ORDER. GROUN D NO. 10 IS ACCORDINGLY ALLOWED. 16. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDI NATE BENCH PASSED IN HITESH S. MEHTA (SUPRA), WE HAVE DIRECTED THE LD. CIT(A) TO COMPUTE THE INCOME AS PER BOOKS OF ACCOUNTS WHILE ALLOWING GROUND NO 3 OF THIS APPEAL. HENCE, WE ALLOW GROUND NO. 10 OF THE APPEAL. 17. GRIEVANCE RAISED VIDE GROUND NO. 11 & 12 ARE C ONSEQUENTIAL TO OUR FINDINGS GIVEN FOR GROUND NO. 3 OF THIS APPEAL. AS WE HAVE DIRECTED THE AO TO COMPUTE THE INCOME AS PER THE BOOKS OF ACCOUNT OF T HE ASSESSEE, THESE ISSUES WILL BE DECIDED A FRESH. GROUND NO. 11 & 12 ARE ACC ORDINGLY ALLOWED. 9 ITA NO 1888/MUM/2012 ASSESSMENT YEAR: 1991-92 18. GROUND NO. 13 RELATES TO THE CHARGEABILITY OF I NTEREST U/S 234A, 234B AND 234C OF THE ACT. LEVY OF INTEREST IS MANDATORY BUT CONSEQUENTIAL. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JULY, 2016 SD/- SD/- ( B.R.BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED: 20/07/2016 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. !' , $ !'% , / DR, ITAT, MUMBAI 6. &' ( / GUARD FILE. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA