DCIT 2(1), MUMBAI V. BOI FINANCE LTD ( MERGED WITH BANK OF INDIA), MUMBAI

ITA 1899/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79065 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 1998-1999
• Appeal Filed On: 08-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: RAJNIKANT CHANIYAN
• Keywords: Income from undisclosed sources; Wholly owned subsidiary
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NO. 1899/MUM/2013 ( / ASSESSMENT YEAR: 1998-99) DY. CIT 2(1), AAYAKAR BHAVAN, ROOM NO. 561, 5 TH FLOOR, M. K. ROAD, MUMBAI-400 020 # VS. BOI FINANCE LTD. (MERGED WITH BANK OF INDIA) STAR HOUSE, PLOT NO. C-5, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 050 $ #'%' ./PAN/GIR NO. AAACB 2447 D ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI PITAMBAR DAS '($&)* / RESPONDENT BY : SHRI RAJNIKANT CHANIYAN + ,)- / DATE OF HEARING : 09.06.2014 ./0 )- / DATE OF PRONOUNCEMENT : 13.06.2014 '1# O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-4, MUMBAI (CIT(A) FOR SHO RT) DATED 05.12.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.144 R.W.S 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSES SMENT YEAR (A.Y.) 1998-99 VIDE ORDER DATED 28.11.2005. 2. THOUGH THE REVENUES APPEAL RAISES AS MANY AS FI VE GROUNDS, IT IN EFFECT RAISES A SINGLE ISSUE, I.E., WHETHER THERE HAS BEEN ANY UNDE RSTATEMENT OF INCOME BY THE ASSESSEE IN 2 ITA NO. 1899/MUM/2013 (A.Y. 1998-99) DY. CIT VS. BOI FINANCE LTD. RESPECT OF CERTIFICATE OF DEPOSITS HELD BY IT AND, IF SO, AT WHAT AMOUNT, HAVING BEEN WORKED OUT BY THE ASSESSING OFFICER (A.O.) AT RS.1, 84,43,633/-. 3. THE BACKGROUND FACTS LEADING TO THE CONTROVERSY INVOLVED IN THE PRESENT CASE IS THAT THE ASSESSEE, A WHOLLY OWNED SUBSIDIARY OF BAN K OF INDIA ENGAGED IN THE BUSINESS OF BANKING AND INVESTMENT ACTIVITY, DEPOSITED A SUM OF RS.31.02 CRORES WITH THE CUSTODIAN AS PER THE DIRECTIONS OF THE SPECIAL COURT (TRIAL O F OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT, 1992. THE SAME WERE HELD AS CERTIF ICATES OF DEPOSITS ISSUED BY THE NATIONALIZED BANKS, BEING STATE BANK OF HYDERABAD A ND SYNDICATE BANK, BY WAY OF DEBIT TO THE ASSESSEES OVERDRAFT ACCOUNT ON 10.04.1995, THE DETAILS OF WHICH AS UNDER: A) STATE BANK OF HYDERABAD CD FOR MATURITY VALUE OF RS.41.71 CRORES (DUE FOR MATURITY ON 23.08.97); B) STATE BANK OF HYDERABAD CD OF RS.33 LACS DUE TO 31.08.97; AND C) TERM DEPOSIT FOR RS.2,08,900/- (SYNDICATE BANK) THE TOTAL OF THE THREE DEPOSITS WORKED TO RS.42,09, 08,900/-, OF WHICH RS.65,627/- WAS TO BE PAID TO ONE, M/S. FAIR GROWTH FINANCIAL SERVICES LTD., SO THAT THE ASSESSEES NET RECEIPT WOULD WORK TO RS.42,08,43,633/-. THE ASSESSEE ACCOU NTING FOR ONLY RS.40.24 CR., THE BALANCE RS.184.44 LACS (RS.4208.44 LACS RS.4024 L ACS) WAS CONSIDERED AS UNACCOUNTED INCOME IN-AS-MUCH AS THE ASSESSEE, DESPITE AMPLE OP PORTUNITIES, FAILED TO EXPLAIN THE DIFFERENCE DURING THE ASSESSMENT PROCEEDINGS, SPECI FICALLY INITIATED TO BRING TO TAX THE SAID INCOME, AND THE ASSESSMENT COMPLETED EX PARTE U/S.144 OF THE ACT. IN THE APPELLATE PROCEEDINGS THE ASSESSEE SUBMITTED THAT IT HAD IN F ACT EXPLAINED (VIDE ITS LETTERS DATED 10.03.2000 AND 05.02.2001) THE ENTIRE TRANSACTION T O THE ASSESSING OFFICER (A.O.). FURTHER, IT FURNISHED A RECONCILIATION BETWEEN THE FIGURES OF THE INVESTMENT AS ORIGINALLY MADE AND THE INTEREST BOOKED THEREON AS WELL AS THE AMOUNT FINALLY REALIZED WITH THAT BOOKED IN ITS ACCOUNTS, SO THAT THERE WAS NO SUPPRE SSION OR UNDERSTATEMENT OF INCOME, AND STOOD ALLOWED RELIEF BY THE LD. CIT(A) ON THAT BASI S. AGGRIEVED, THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE CONTROVERSY IN THE INSTANT CASE AROSE, AS WE SEE IT, FROM NOTE 4 O F THE NOTES TO THE ACCOUNTS TO THE 3 ITA NO. 1899/MUM/2013 (A.Y. 1998-99) DY. CIT VS. BOI FINANCE LTD. ASSESSEES FINAL ACCOUNTS FOR THE YEARS ENDING 31.0 3.1997 AND 31.03.1998, WHICH READS AS UNDER: FAIRGROWTH FINANCIAL SERVICES LTD. (FFSL): IN THE MATTER OF FFSL, THE SUPREME COURT IN CIVIL A PPEAL NO. 1753/94 VIDE JUDGMENT DATED 19/3/97 HAVE UPHELD THE CONTENTION O F THE COMPANY AND HAVE DISMISSED THE APPLICATION FILED BY THE CUSTODI AN AND THE NOTIFIED PERSONS, FOR THE RETURN OF SECURITIES. PURSUANT TO AFORESAID JUDGMENT THE COMPANY GOT BACK BONDS WORTH RS.40 CRORES ALONGWITH THE DEPOSIT OF RS.31.02 CRORES AND INTEREST ACCRUED THEREON RS.9.2 2 CRORES ON 13/5/97. THE GUARANTEE OF RS.50 CRORES ISSUED IN FAVOUR OF THE C USTODIAN BY BANK OF INDIA ON BEHALF OF THE COMPANY STANDS RELEASED W.E. F. 13/5/97. ON THE BASIS THEREOF, IT WAS INFERRED BY THE A.O. T HAT THE ASSESSEE HAD REALIZED AND ACCOUNTED FOR RS.40.24 CR. (DEPOSITS FOR RS.31.02 C R. PLUS INTEREST ACCRUED THEREON UP TO 13.05.1997 AT RS.9.22 CR.), AS AGAINST THE MATURITY VALUE OF RS.42.09 CR., SO THAT THERE HAS BEEN A SHORTFALL IN ACCOUNTING FOR THE INCOME FOR T HE BALANCE AMOUNT OF RS.184.44 LACS, BEING ONLY BY WAY OF INTEREST INCOME. IN THIS REGAR D, WE FIRSTLY OBSERVE THAT THE ASSESSEE EXPLAINED THAT IT HAD IN FACT SOLD THE DEPOSITS PRE MATURELY IN THE SECONDARY MARKET, REALIZING A SUM OF RS.41,04,81,200/-, SO THAT THERE IS NO BASIS FOR ASSUMING THE ASSESSEE TO HAVE REALIZED A TOTAL OF RS.42.09 CR., AS ASSUMED B Y THE A.O. TWO, EVEN THOUGH THERE WAS A DISPUTE IN RELATION TO THE SAID DEPOSITS, THE SAM E RELATED TO THE RETURN OF THE SECURITIES HELD WITH THE CUSTODIAN AND IT DID NOT IMPACT THE A CCRUAL OF INCOME ARISING ON THE DEPOSITS, WHICH HAD BEEN ACCOUNTED FOR FROM YEAR TO YEAR. THE BOOK VALUE OF THE DEPOSITS, ACCORDINGLY, AS ON 31.03.1997 STOOD AT RS.40.16 CR. THE ASSESSEE HAVING REALIZED RS.41.05 CR. ON THE SALE OF THE SECURITIES (TO CANB ANK INVESTMENT MANAGEMENT SERVICES LTD. AND DARSHAW SECURITIES (P.) LTD.) DURING THE R ELEVANT PREVIOUS YEAR, I.E., IN THE MONTH OF MAY, 1997, THE EXCESS STANDS ACCOUNTED FOR AS INCOME FOR THE CURRENT YEAR, I.E., BY WAY OF INTEREST FOR THE PERIOD 01.04.1997 TO THE DATE OF SALE (RS.70.54 LACS) AND PROFIT ON SALE OF SECURITIES (RS.18.30 LACS), EVEN AS STAT ED VIDE ITS LETTER DATED 10.03.2000. ACCORDINGLY, WE FIND NO CASE OF SUPPRESSION OR UNDE RSTATEMENT OF INCOME HAVING BEEN MADE OUT BY THE REVENUE. THE TABULAR CHARTS AFORE-R EFERRED, FURNISHED BY THE ASSESSEE BEFORE AND REPRODUCED BY THE LD. CIT(A) IN HIS ORDE R, EXPLAIN THE STATED POSITION IN 4 ITA NO. 1899/MUM/2013 (A.Y. 1998-99) DY. CIT VS. BOI FINANCE LTD. GRAPHIC DETAIL. WE, ACCORDINGLY, FOR THE REASON/S S TATED, FINDING NO INFIRMITY THEREIN, UPHOLD THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 20 -3 ) 2) -45! ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 13, 2014 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + 6, MUMBAI; 7 DATED : 13.06.2014 # ROSHANI , SR. PS ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + 8- 9 : / THE CIT(A) 4. '' + 8- / CIT - CONCERNED 5. ;< ='->? ' >?0 + 6, / DR, ITAT, MUMBAI 6. = @A , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + 6, / ITAT, MUMBAI