GROWMORE RESEARCH & ASSETS MANAGEMENT LTD., MUMBAI V. DCIT, CC 4 (3), MUMBAI

ITA 259/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3507 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 1996-1997
• Appeal Filed On: 18-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Keywords: Reopening of assessment; Rejection of books of accounts; Depreciation; Additional evidence; Procedural lapse; Assessment record; Reassessment proceedings; TDS; Set aside; Liquidation; Capital Gains
• Section: 234B; 14A; 13; 22; 147; 148

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.259/M/2019 ASSESSMENT YEAR: 1996-97 M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD., 32, MADHULI APRT., 3 RD FLOOR, DR. ANNIE BESANT ROAD, WORLI, MUMBAI 400 018 PAN: AAACG4936C VS. DCIT, CENT. CIR.-4(3), ROOM NO.1921, 19 TH FLOOR, AIR INDIA BLDG., NARIMAN POINT, MUMBAI 400021 (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI DHARMESH SHAH, A.R. SHRI DHAVAL SHAH, A.R. REVENUE BY : DR. P. DANIEL, D.R. DATE OF HEARING : 20.01.2021 DATE OF PRONOUNCEMENT : 09.04.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 12.11.2018 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 1996-97. 2. THE ISSUE RAISED IN GROUND NO.1 IS AGAINST THE O RDER OF LD. CIT(A) UPHOLDING THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT AS MADE BY THE AO. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE DID NOT FILE ANY RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR. THE AO, ON ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 2 THE BASIS OF HIS BELIEF THAT ASSESSEE HAS SUBSTANTI AL INCOME DURING THE YEAR UNDER CONSIDERATION, REOPENED ASSES SMENT UNDER SECTION 147 OF THE ACT BY ISSUING NOTICE UNDE R SECTION 148 OF THE ACT DATED 29.07.1998 WHICH WAS SERVED ON TH E ASSESSEE ON 03.09.1998. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSEE REQUESTED THE AO TO SUPPLY THE COPY OF REASONS RECORDED UNDER SECTION 148(2) OF THE ACT VIDE LETTE R DATED 24.08.1998 AND LETTER DATED 22.02.2001. HOWEVER, TH E AO DID NOT PROVIDE A COPY OF THE REASON RECORDED TO THE AS SESSEE EVEN AFTER THE COMPLETION OF REASSESSMENT PROCEEDINGS. EVEN THEREAFTER, THE ASSESSEE REQUESTED TO THE AO ON NUM BER OF OCCASIONS TO SUPPLY REASON BUT TO NO AVAIL. THE LD CIT(A) AFFIRMED THE ORDER OF AO ON JURISDICTIONAL ISSUE OF RE-OPENING OF ASSESSMENT. 4. THE LD AR SUBMITS BEFORE THE BENCH THAT THE ASS ESSEE HAS CHALLENGED THE JURISDICTION OF THE AO ON THE GROUND THAT NO REASONS AS RECORDED UNDER SECTION 148(2) OF THE ACT WERE SUPPLIED TO THE ASSESSEE AND THEREFORE THE REASSESS MENT PROCEEDINGS ARE NULL AND VOID. THE LD. AR RELIED U PON THE FOLLOWING DECISIONS: A. RINA S. MEHTA V. DCIT [ITA NO. 3120/MUM/2015] DATED 17.07.2019 B. ITO V. PALLAVI VIJ'EN JHAVERI & VICE-VERSA [IT A NO. 5998/MUM/2017 & CO NO. 225/MUM/2018] DATED 17.12.2019 C. CIT V. VIDESH SANCHAR NIGAM LTD [340 ITR 66 (BO M.)] D. CIT V. IDBI LTD [76 TAXANN.COM 227 (BOM.)] E. PCIT V. V. RAMAIAH [103 TAXMANN.COM 202 (SC)]. THE LD. A.R., THEREFORE, SUBMITS THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCHES I N THE CASES OF RELATED PARTIES AS STATED ABOVE AND THEREFORE, THE REASSESSMENT PROCEEDINGS MAY KINDLY BE QUASHED. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 3 5. THE LD. D.R., ON THE OTHER HAND, STRONGLY OPPOSE D THE ARGUMENTS OF THE LD. A.R. BY SUBMITTING THAT SINCE THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOME IT IS NOT OBLIGA TORY ON THE PART OF THE AO TO SUPPLY THE COPY OF THE REASONS AS THE PRE-CONDITION TO SUPPLY THE REASONS RECORDED IS THAT THE ASSESSE E MUST FILE THE RETURN OF INCOME IN COMPLIANCE TO NOTICE UNDER SECT ION 148 OF THE ACT . 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE DECISIONS OF THE COORDINATE BE NCHES AS REFERRED TO BY THE LD. A.R. AS STATED HEREINABOVE P ARTICULARLY RINA S. MEHTA VS. DCIT (SUPRA), IT HAS BEEN HELD TH AT REASSESSMENT PROCEEDINGS ARE NULL AND VOID WHERE TH E COPY OF THE REASONS RECORDED UNDER SECTION 148(2) ARE NOT S UPPLIED. THE RELEVANT FINDINGS OF THE CO-ORDINATE BENCH OF THE T RIBUNAL ARE AS UNDER: 13. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PART IES AND PERUSED THE MATERIAL ON RECORD INCLUDING THE VARIOUS CITATIONS BY THE RI VAL PARTIES. WE OBSERVE THAT IN THIS CASE THE ASSESSEE HAS NOT FILED ANY RETURN OF INCOM E DESPITE THE ISSUE OF NOTICE UNDER SECTION 148 DUE TO THE FACT THAT ALL THE RECO RDS OF THE ASSESSEE WERE SEIZED BY THE VARIOUS GOVERNMENT AGENCIES AND ASSESSEE WAS NOT HAVING ANY ACCESS TO SUCH RECORDS AT THE RELEVANT POINT OF TIME. THIS FA CT WAS BROUGHT TO THE NOTICE OF THE AO. THEREAFTER, THE ASSESSEE REQUESTED BY VARIO US LETTERS DATED 19.04.1999, PARA 5, 02.03.2001 PARA 9, DURING COURSE OF THE ASS ESSMENT PROCEEDINGS TO SUPPLY THE REASONS BUT AO DID NOT SUPPLY ANY REASONS RECOR DED FOR RE-OPENING. EVEN AFTER COMPLETION OF THE ASSESSMENT, THE ASSESSEE AGAIN RE QUESTED VIDE LETTER DATED 30.05.2018 AND 01.05.2019 TO SUPPLY COPY OF REASONS BUT SOME WERE NOT SUPPLIED TO THE ASSESSEE. IN OUR OPINION, ONCE IT HAS ESTABL ISHED THAT ASSESSEE HAS NOT BEEN SUPPLIED COPY OF REASONS RECORDED, THEN THE REASSES SMENT PROCEEDINGS AS WELL AS THE ASSESSMENT FRAMED AS A RESULT THEREOF ARE INVAL ID. THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. IDBI LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT WHERE THE REASONS RECORDED ARE NOT SUPPLIED TO THE ASSESSEE, THE ORDER OF REAS SESSMENT WOULD BE WITHOUT JURISDICTION. THE HONBLE BOMBAY HIGH COURT WHILE P ASSING THE DECISION FOLLOWED THE EARLIER ORDER IN THE CASE OF CIT VS. VIDESH SAN CHAR NIGAM LTD. (SUPRA). THE CASE OF THE ASSESSEE IS ALSO COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 4 CASE OF PR. CIT VS. JAGAT TALKIES DISTRIBUTORS (SUP RA) WHEREIN IT HAS BEEN HELD THAT FAILURE TO PROVIDE COPY OF REASONS RECORDED IS NOT A PROCEDURAL LAPSE AND SUCH FAILURE RENDERS THE NOTICE AND CONSEQUENT PROCEEDIN GS AS VOID AB INITIO. THE HONBLE APEX COURT IN THE CASE OF PR CIT VS V. RAMAIH (SUPR A) HELD THAT NON COMMUNICATION OF REASONS RECORDED FOR RE-ASSESSMENT TO THE ASSESS EE DID NOT AMOUNT TO MERE PROCEDURAL LAPSE AND IS A FATAL LAPSE AND GOES TO T HE ROOTS OF THE CASE. THE DECISION RELIED UPON BY THE LD. D.R. IN THE CASE OF DCIT VS. ZUARI ESTATE DEVELOPMENT & INVESTMENT CO. LTD. (SUPRA) WAS PERUSED AND FOUND T O BE DISTINGUISHABLE ON FACTS. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS AS STATED HEREINABOVE QUASH THE REASSESSMENT PROCEEDINGS AND THE CONSEQUENT ORDER P ASSED BY THE AO. SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE ON ADDITION AL GROUND RAISED, THE MAIN GROUND RAISED BY THE ASSESSEE NEED NOT BE ADJUDICATED. 7. SINCE THE FACTS BEFORE US ARE SIMILAR VIS--VIS FACTS BEFORE THE COORDINATE BENCH IN THE ABOVE DECISION, WE ARE , THEREFORE, INCLINED TO HOLD THE PROCEEDINGS UNDER SECTION 147 R.W.S. 148 OF THE ACT AS INVALID. THE GROUND NO.1 IS ALLOWED. 8. THE ISSUE RAISED IN THE 2 ND GROUND OF APPEAL IS AGAINST THE ORDER OF LD CIT(A) NOT ACCEPTING THE BOOKS OF ACCOU NTS AS ADDITIONAL EVIDENCES. 9.THE FACTS IN BRIEF ARE THAT IN THE ASSESSMENT FRA MED BY THE AO THE ADDITIONS WERE MADE ON ESTIMATED BASIS IN RESP ECT OF DIVIDEND , DEBENTURE INTEREST AND INTEREST ON PSU B ONDS. DURING THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER, CERTAIN DETAILS AND INFORMATION WERE CALLED FROM THE APPELLANT. THE APPELLANT IS A NOTIFIED ENTITY U/S 3(2) OF THE SPECIAL COURT (TR IAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT 1992 (T ORTS ACT) AND WAS NOTIFIED ON 08.06.1992 ON AND FROM WHICH DATE A LL THE ASSETS OF THE APPELLANT GOT SIMULTANEOUSLY ATTACHED AND CAME UNDER THE CONTROL AND MANAGEMENT OF THE CUSTODIAN A ND HON'BLE SPECIAL COURT. THE ATTACHED ASSETS COULD BE DEALT WITH U/S 3(4) OF THE TORTS ACT ONLY UNDER THE ORDERS OF HON'BLE SPECIAL ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 5 COURT AND THEREFORE EVER SINCE THE NOTIFICATION, TH E APPELLANT HAS NOT UNDERTAKEN ANY TRANSACTION OR BUSINESS. WHATEV ER TRANSACTIONS THAT HAVE TAKEN PLACE DURING THE RELEV ANT PERIOD WERE UNDER THE ORDERS OF HON'BLE SPECIAL COURT OR U NDER THE DIRECTIONS AND INSTRUCTIONS GIVEN BY THE CUSTODIAN. THE THIRD PARTIES VIZ. COMPANIES AND BANKS WERE ALSO INTERACT ING ONLY WITH THE CUSTODIAN ON ALL MATTERS PERTAINING TO THE ASSE TS OF THE APPELLANTS. DURING THE RELEVANT PERIOD, THE APPELLA NT WAS AGGRIEVED THAT THE CUSTODIAN, BANKS AND COMPANIES W ERE NOT PROVIDING THE INFORMATION TO THE APPELLANT REGULARL Y BECAUSE OF WHICH IT COULD NOT DRAW ITS BOOKS OF ACCOUNT AND MA KE STATUTORY COMPLIANCE. IT ALSO DID NOT HAVE THE RECORDS AND T HE STAFF TO MEET THE QUERIES RAISED BY THE AO TO MAKE FULL AND PROPER COMPLIANCE. IT WAS STATED THAT THE TRIBUNAL IN A NU MBER OF ORDERS HAS TAKEN NOTE OF THE AFORESAID PECULIAR CIR CUMSTANCES GOVERNING THE APPELLANT AND GRANTED SUBSTANTIAL REL IEF IN NUMBER OF CASES IN FORM OF CONDONATION OF DELAY, WAIVER OF PENALTIES AND ORDERED RE-ASSESSMENT IN SEVERAL CASES AFTER CONSID ERING THE DIFFICULTIES AND CIRCUMSTANCES OF THE APPELLANT. IT WAS SUBMITTED THAT SINCE THE APPELLANT WAS FACING SEVERAL DIFFICU LTIES ALL THE DETAILS COULD NOT BE SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, NO SOONER THE APPELLANT WAS A BLE TO COMPILE THE DETAILS AND OBTAINED/RECEIVED THESE DET AILS FROM THE CUSTODIAN, THE SAME WERE INCORPORATED IN THE BOOKS OF ACCOUNT AND PRESENTED BEFORE THE APPELLATE AUTHORITY WITH T HE PRAYER TO ADMIT THE SAME. 10. HOWEVER, THE LD. CIT (A) HAS REJECTED THESE BO OKS OF ACCOUNTS BY STATING THAT THE SAID BOOKS OF ACCOUNT ARE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 6 INADMISSIBLE U/R 46A OF THE RULES. AT THE SAME TIME , IT HAS BEEN STATED BY HIM AT PARA 3.1.9, PAGE 12 OF HIS ORDER T HAT THE BOOKS OF ACCOUNT HAVE BEEN EXAMINED AND HAVE BEEN FOUND T O BE UNRELIABLE. IT IS OBSERVED BY THE LD. CIT(A) THAT THE ASSESSEE HAS NOT BEEN ABLE TO SATISFACTORILY RECONCILE THE BALAN CES AS PER OLD BOOKS AND THE REVISED BOOKS OF ACCOUNT SUBMITTED BY THE ASSESSEE. 11. IT IS SUBMITTED BEFORE US THAT THE BOOKS OF AC COUNT ORIGINALLY SUBMITTED BEFORE LD. CIT(A) HAVE BEEN SU BSEQUENTLY REVISED TO ACCOUNT FOR CERTAIN TRANSACTIONS WHICH W ERE NOT INCORPORATED EARLIER. IT WAS SUBMITTED THAT THE BOO KS OF ACCOUNT WHICH WERE PLACED ON RECORD EARLIER HAD TO BE REVIS ED FOR THE REASON THAT CERTAIN TRANSACTIONS AND INVESTMENTS IN PSU BONDS TREATED AS OWN INVESTMENTS BY THE APPELLANT WERE SU BSEQUENTLY HELD BY THE HON'BLE SUPREME COURT AS NOT CONSTITUTI NG PROPERTY OF M/S. HARSHAD S. MEHTA OR THE APPELLANT AND THAT SUCH ASSETS TO BE USED TO LIQUIDATE THE LIABILITIES TO SBI/NHB. THUS, THE OWNERSHIP OF THE ABOVE ASSETS WAS RETROSPECTIVELY T AKEN AWAY FROM THE APPELLANT AND CONFERRED ON TO SBI. IT WAS THEREFORE SUBMITTED THAT APPELLANT BECAME DUTY-BOUND TO COMPL Y WITH THE ORDERS PASSED BY HON'BLE SUPREME COURT AND TO GIVE FULL EFFECT TO THE SAME SINCE THE CUSTODIAN DEBITED THE BANK AC COUNTS OF THE APPELLANT AND HANDED OVER THE PROCEEDS AND INCO MES EARNED ON ABOVE PSU BONDS TO SBI. THEREFORE, AFTER THE VER DICT OF THE HON'BLE SUPREME COURT APPELLANT COULD NOT HAVE SHOW N THESE INVESTMENTS AS ITS OWN ASSETS AND ACCORDINGLY THE T RANSACTION REFLECTING INVESTMENTS AND SUBSEQUENT INCOME EARNED ON THESE INVESTMENTS HAD TO BE COMPULSORILY REVERSED FOLLOWI NG THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 7 MERCANTILE SYSTEM OF ACCOUNTING AND TO GIVE EFFECT TO THE ORDER OF HON'BLE SUPREME COURT. CONSEQUENTLY, THE ENTRIES M ADE IN THE BOOKS OF ACCOUNT HAD TO BE REMOVED AND NECESSARY AD JUSTMENT HAD TO BE DONE IN VARIOUS LEDGER ACCOUNTS ON ACCOUN T OF THE RELEVANT TRANSACTIONS IN REGARD TO SUCH PSU BONDS. FURTHER, A RECONCILIATION BETWEEN THE ENTRIES MADE IN THE OLD BOOKS OF ACCOUNT AND THE REVISED BOOKS OF ACCOUNT WAS ALSO F URNISHED TO THE LD. CIT(A). 12. IT WAS ARGUED BEFORE US THAT THE INCOME FR OM VARIOUS OTHER SOURCES ASSESSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) HAVE BEEN DETERMINED ON THE BASIS OF THE BANK STATEMENTS AND THE ENTRIES IN THE BOOKS OF ACCOUNT SUBMITTED BY THE APPELLANT. DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE APPELLANT HAD POINTED OUT THAT THE INTEREST ON TERM DEPOSITS ASSESSED BY THE ASSESSING OFFICER OF RS.3,03,18,467 /- WAS INCORRECT IN AS MUCH AS THE CORRECT AMOUNT OF INTER EST INCOME AS PER THE BOOKS OF ACCOUNTS WAS RS.4,31,46,771/-. IT WAS THEREFORE SUBMITTED BEFORE THE LD. CIT (A) THAT THE INCOME FROM TERM DEPOSIT ACTUALLY EARNED BY THE APPELLANT WAS M ORE THAN THE INCOME ASSESSED BY THE ASSESSING OFFICER AND HENCE THE CORRECT INCOME MAY BE BROUGHT TO TAX. ACCEPTING THE SUBMISS IONS OF THE APPELLANT, THE LD. CIT(A) ENHANCED THE INCOME OF TH E APPELLANT BY AN AMOUNT OF RS.1,28,28,304/- AND DIRECTED THE A O TO ADOPT THE INCOME FROM TERM DEPOSITS AS REFLECTED IN THE B OOKS OF ACCOUNT SUBMITTED BY THE APPELLANT. 13. THE LD. A.R. THEREFORE SUBMITTED THAT THE LD. CIT (A) HAS BLOWN HOT AND COLD AS PER HIS CONVENIENCE AS THE BO OKS HAVE BEEN REJECTED WHEN HE WANTED TO ESTIMATE HIGHER INC OME OF THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 8 APPELLANT AND THESE VERY BOOKS HAVE BEEN ACCEPTED W HEN THE INCOME SHOWN IN THE BOOKS WAS HIGHER THAN THE INCOM E DETERMINED BY THE ASSESSING OFFICER. 14. THE LD. A.R. THEREFORE CONTENDED THAT THE REJ ECTION OF BOOKS OF ACCOUNTS HAVE BEEN MADE WITHOUT ANY COGENT REASO NS AND WITHOUT POINTING OUT ANY ACTUAL DEFECTS IN THE BOOK S OF ACCOUNT. HE ALSO POINTED OUT THAT THE CO-ORDINATE BENCH OF T HE TRIBUNAL IN AT LEAST 3 OF ITS FOLLOWING ORDERS HAS FRAMED GUIDE LINES FOR THE AO TO BE FOLLOWED WHEN MATTERS ARE SET ASIDE WHEREIN I T IS DIRECTED THAT THE BOOKS OF ACCOUNTS DRAWN WITH GREAT DIFFICU LTY AND DESPITE ADVERSE CIRCUMSTANCES SHOULD NOT BE REJECTE D ON FLIMSY GROUNDS. I. ORDER DATED 13.12.2007 PASSED IN THE CASE OF SMT JYOTI HARSHAD MEHTA FOR AY 1994-95. II. ORDER DATED 02.01.2008 IN THE CASE OF LATE SHRI HARSHAD S. MEHTA FOR AY 1989- 90. III. ORDER DATED 21.03.2014 PASSED IN THE CASE OF S MT JYOTI MEHTA FOR AY 1992-93. THAT IN VIEW OF ABOVE, EVEN IN THE APPELLANT'S CASE THE REJECTION OF BOOKS OF ACCOUNT IS ON FLIMSY GROUNDS AND THEREFORE NOT JUSTIFIED. 15. THE LD. A.R. ALSO SUBMITTED THAT ON THE SIMILA R BASIS, THE ASSESSING OFFICER HAS REJECTED BOOKS OF ACCOUNT IN THE PAST, IN CASE OF SEVERAL OTHER ENTITIES RELATED TO THE APPEL LANT WHICH HAVE BEEN DECIDED BY THE COORDINATE BENCHES IN FAVOUR OF THOSE ENTITIES. THE LD AR PLACED RELIANCE ON DECISION OF MUMBAI TRIBUNAL IN THE CASE OF HITESH S. MEHTA V. ACIT [IT A NO. 5190/MUM/2017] DATED 31.08.2020 [PG NO. 196-219 OF PB NO. 3] WHEREIN THE TRIBUNAL UNDER SIMILAR FACTS HELD AS UNDER: '7. ON APPRAISAL OF THE ORDER OF THE AO, WE NOWHERE FIND THAT THE AO HAS DEALT WITH THE EACH AND EVERY EXPLANATION GIVEN BY THE ASSESSE E. MOREOVER, THE CASE OF THE ASSESSEE IS QUITE DIFFERENT FROM THE CASE OF SHRI H ARSHAD MEHTA WHO IS THE BROKER. THE CASE OF THE ASSESSEE IS INDEPENDENTLY LIABLE TO BE EXAMINED AND COMPARISON IF ANY WITH THE CASE OF THE SHRI HARSHAD MEHTA IS NOT JUSTIFIABLE SPECIFICALLY IN THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 9 CIRCUMSTANCES WHEN THE FACT AND FIGURE ARE QUITE DI FFERENT. MOREOVER, THE CIT(A) HAS OBSERVED THAT THE ASSESSEE DID NOT FILE THE BOOKS O F ACCOUNT WHEREAS THE BOOKS OF ACCOUNT WERE FILED PAGE NO. 264-265 OF THE PAPER BO OK. UNDER THESE CIRCUMSTANCES, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION OF LD. CIT(A) ON THE ISSUE REJECTION OF BOOKS OF ACCOUNTS AND HENCE WE SET ASIDE THE FINDIN G OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE.' IT WAS SUBMITTED THAT THE FACTS IN THE ABOVE CITED CASE AND THE FINDINGS OF AO ARE SIMILAR TO THE FACTS IN THE PRES ENT CASE AND HENCE RAYED THAT THE BOOKS OF ACCOUNTS OF THE APPEL LANT OUGHT TO HAVE BEEN ACCEPTED AS ADMISSIBLE EVIDENCE AND THE I NCOME OUGHT TO HAVE BEEN DETERMINED ON THE BASIS OF THESE BOOKS OF ACCOUNT. 16. THE LD. D.R., ON THE OTHER HAND, RELIED HEAVILY ON THE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT THE BOOKS O F ACCOUNTS WHICH WERE NOT FILED BEFORE THE AO AND NOR LD. CIT (A) IN THE FIRST ROUND OF LITIGATION BUT FILED BEFORE THE TRIB UNAL FOR THE FIRST TIME, THEREFORE CANNOT BE RELIED UPON AND WERE RIGH TLY REJECTED BY THE AUTHORITIES BELOW. 17. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT DIVIDEND AND INTEREST INCOME W ERE DETERMINED BY THE AO ON THE BASIS OF BANK STATEMENT S AND DIVIDEND WARRANTS FILED BY THE ASSESSEE AND THE SAI D INCOMES WERE DULY ACCOUNTED FOR BY THE ASSESSEE IN THE BOOK S OF ACCOUNTS. WE ALSO NOTE THAT IN VIEW OF SUCH MASSIV E SEARCH ON THE ASSESSEE, THE BOOKS OF ACCOUNTS COULD NOT BE PR ODUCED BEFORE THE AO IN THE FIRST ROUND OF LITIGATION BECA USE THESE BOOKS COULD NOT BE COMPLETED UNTIL THE INFORMATION AND DO CUMENTS RELATING TO THE TRANSACTIONS OF THE ASSESSEE LYING WITH CUSTODIAN WERE MADE AVAILABLE TO THE ASSESSEE. WE NOTE THAT THESE BOOKS ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 10 WERE FILED AS ADDITIONAL EVIDENCES FOR THE FIRST TI ME BEFORE THE TRIBUNAL IN THE FIRST ROUND AND TRIBUNAL AFTER ADMI TTING THE SAME RESTORED THE MATTER TO THE FILE OF THE LD. CIT (A) WITH THE DIRECTION TO DECIDE THE APPEAL OF THE ASSESSEE AFRE SH. HOWEVER, WE NOTE THAT LD. CIT(A) HAS DISREGARDED THE BOOKS O F ACCOUNTS FILED BY THE ASSESSEE WITHOUT EVEN POINTING A SINGL E DEFECT FOR THE SAID REJECTION. IN OUR OPINION, THE REJECTION OF B OOKS OF ACCOUNTS BY THE REVENUE AUTHORITIES IS NOT CORRECT IN VIEW O F THE FACT THAT THE RELATED EVIDENCES SUCH AS CONTRACT NOTES, DIVID END, WARRANTS AND THE BANK STATEMENTS AND OTHER RELEVANT EVIDENCE S WERE ACCEPTED WHICH WERE USED TO COMPLETE THE BOOKS OF A CCOUNTS. IN OUR OPINION THE BOOKS OF ACCOUNTS CONSTITUTE AN IMP ORTANT PIECE OF EVIDENCE AND THEREFORE WE ARE NOT IN AGREEMENT W ITH THE CONCLUSION DRAWN BY THE LD. CIT(A) ON THIS ISSUE TH AT TOO WITHOUT POINTING OUT ANY DEFECTS AND DEFICIENCY IN THE BOOKS OF ACCOUNTS. WE ALSO NOTE THAT THE BOOKS OF ACCOUNTS WERE ALSO REJECTED IN THE CASES OF THE RELATED ENTITIES. WE NOTE THAT IN ONE OF THE RELATED ENTITIES M/S. HITESH S. MEHTA VS. AC IT (SUPRA), THE CO-ORDINATE BENCH OF THE TRIBUNAL UNDER SIMILAR CIR CUMSTANCES HAS HELD THE REJECTION OF BOOKS OF ACCOUNTS AS INVA LID AND INCORRECT AND ACCORDINGLY DECIDED THE ISSUE IN FAVO UR OF THE ASSESSEE. ACCORDINGLY, FOLLOWING THE SAID DECISION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL WE ALSO HOLD THAT TH ERE IS NO REASON FOR REJECTING THE BOOKS OF ACCOUNTS AS BOTH THE AUTHORITIES BELOW HAVE FAILED TO GIVE THE REASONS F OR REJECTION OF BOOKS OF ACCOUNTS. ACCORDINGLY, WE ALLOW THIS GROU ND IN FAVOUR OF THE ASSESSEE. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 11 18. IN GROUND NO.3, THE ASSESSEE APPELLANT HAS CHAL LENGED DETERMINATION OF DIVIDEND INCOME AT RS. 1,59,34,304 /-AS AGAINST THE INCOME OF RS. 1,42,46,585/- AS PER THE BOOKS OF ACCOUNTS OF THE APPELLANT. 19. AS SEEN FROM THE ORDERS OF THE AUTHORITIES BELO W, THE ASSESSING OFFICER HAD DETERMINED THE DIVIDEND INCOM E OF THE APPELLANT AT RS.1,19,93,751/- ON THE BASIS OF THE E NTRIES IN THE BANK STATEMENT OF THE APPELLANT FOR THE PERIOD. SIN CE THE SAID DIVIDEND INCOME DEPOSITED IN THE BANK ACCOUNT WERE NET OF TDS, THE ASSESSING OFFICER GROSSED UP THE SAID DIVIDEND AMOUNT AT RS.1,59,34,304/- AND THE SAME BEING HIGHER THAN SHO WN BY THE APPELLANT, BROUGHT THE SAME TO TAX AS DIVIDEND INCO ME. THE SAID ADDITION WAS UPHELD BY THE LD. CIT(A) IN HIS ORDER. 20.IT WAS ARGUED BY LD. AR THAT THE ASSESSING OFFIC ER HAD PICKED UP CERTAIN FIGURES FROM THE BANK STATEMENT AND TREA TING THE SAME AS DIVIDEND INCOME GROSSED UP THE SAME TO ARRI VE AT THE DIVIDEND INCOME OF THE APPELLANT FOR THE YEAR AT RS.1,59,34,304/-. IT WAS SUBMITTED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS, REPEATED REQUESTS WERE MADE BY THE APPELLANT TO DIRECT THE ASSESSING OFFICER TO PROVID E FOR THE BREAK UP OF THE DIVIDEND INCOME DETERMINED BY THE ASSESSI NG OFFICER. HOWEVER, THE LD. CIT(A) FAILED TO ACCEPT THE SAID R EQUEST AND CONCLUDED THAT IN ABSENCE OF ANY EVIDENCE BEING SUB MITTED BY THE APPELLANT, THE DIVIDEND INCOME DETERMINED BY TH E ASSESSING OFFICER WAS CORRECT. THE LD. AR ALSO STATED THAT TH E LEDGER ACCOUNTS SUBMITTED BY THE APPELLANT BEFORE THE APPE LLATE AUTHORITY CLEARLY REFLECTED THE ENTRIES CONSTITUTIN G THE DIVIDEND ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 12 INCOME AND THE SAME CAN BE CORRELATED WITH THE BANK STATEMENTS. IT WAS ALSO ARGUED THAT APART FROM THE FACT THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD THE FIG URES ADOPTED FOR DETERMINING THE DIVIDEND INCOME, SUCH FIGURES A DOPTED BY THE ASSESSING OFFICER MAY BE SUFFERING FROM SEVERAL ERRORS IN AS MUCH AS IT WAS QUITE POSSIBLE THAT THE ASSESSING OF FICER MAY HAVE CONSIDERED THE DIVIDEND INCOME WHICH MAY BE BE LOW THE LIMIT ATTRACTING TDS AND THAT EVEN SUCH INCOME WOUL D HAVE BEEN GROSSED UP BY THE ASSESSING OFFICER WHILE ESTIMATIN G THE DIVIDEND INCOME IN THE HANDS OF THE APPELLANT. FURT HER, HE BROUGHT TO OUR NOTICE THAT THE TDS WAS DEDUCTED BY DIFFERENT COMPANIES AT DIFFERENT RATES WHICH COULD BE ONE OF THE CAUSE FOR DIFFERENCE IN THE DIVIDEND INCOME. HE THEREFORE SUB MITTED THAT THE SAID DIVIDEND ESTIMATED BY THE ASSESSING OFFICE R ARBITRARILY AND WITHOUT EXPLAINING THE BASIS CANNOT BE SUSTAINE D. 21. AFTER HEARING BOTH THE PARTIES, WE FIND FORCE IN THE ARGUMENTS OF THE LD. AR. IT IS NOTICED THAT THE BRE AK UP OF THE DIVIDEND INCOME HAS NOT BEEN BROUGHT ON RECORD BY T HE ASSESSING OFFICER. EVEN THOUGH REQUEST WERE MADE BY THE APPELLANT BEFORE THE LD. CIT(A), SUCH BREAK UP WAS NOT PROVIDED BY THE AUTHORITIES. IT IS ALSO NOTICED THAT THE TDS HAS BEEN DEDUCTED BY DIFFERENT COMPANIES AT DIFFERENT RATES AND HENCE IT CANNOT BE ASCERTAINED WHETHER THE GROSSING UP OF TH E DIVIDEND INCOME HAS BEEN RIGHTLY MADE BY THE ASSESSING OFFIC ER. IN OUR OPINION, IF THE ASSESSING OFFICER WANTED TO ASCERTA IN THE CORRECT AMOUNT OF DIVIDEND, HE COULD HAVE VERY WELL WRITTEN TO THE COMPANIES FROM WHOM THE DIVIDEND INCOME HAS BEEN EA RNED BY THE APPELLANT AND OBTAINED THE SAID DETAILS. HE COU LD HAVE AT THE LEAST, DETERMINED THE DIVIDEND DECLARED BY THE COMP ANIES, WHICH ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 13 INFORMATION IS AVAILABLE IN THE PUBLIC DOMAIN AND C OULD HAVE CALCULATED THE DIVIDEND ON THE HOLDING OF THE APPEL LANT. HOWEVER, BY NO STRETCH OF IMAGINATION, SUCH ARBITRARY METHOD OF SELECTIVELY IDENTIFYING THE ENTRIES IN THE BANK STA TEMENT TO BE THE DIVIDEND INCOME AND GROSSING UP THE SAME BE ACCEPTA BLE AS THE CORRECT MANNER OF DETERMINATION OF INCOME. WE ALSO BELIEVE THAT NO FRUITFUL PURPOSE WOULD BE SERVED BY DIRECTING TH E ASSESSING OFFICER TO WRITE TO COMPANIES NOW, AFTER A SPAN OF 25 YEARS, AND GET THE CORRECT INFORMATION PERTAINING TO THE DIVID END INCOME EARNED FOR THE YEAR UNDER APPEAL AS COMPANIES MAY N OT HAVE RETAINED SUCH INFORMATION PERTAINING TO THE PERIOD 25 YEARS AGO. IN ANY CASE, WE HAVE ADJUDICATED THE GROUND RELATIN G TO ADMISSION OF THE BOOKS OF ACCOUNTS IN FAVOUR OF THE APPELLANT AND HELD THAT THE INCOME OF THE APPELLANT BE DECIDE D ON THE BASIS OF THE SAID BOOKS OF ACCOUNTS. IN ABSENCE OF ANY DIRECT EVIDENCE BEING BROUGHT ON RECORD TO SUGGEST THAT TH E INCOME FROM DIVIDEND EARNED BY THE APPELLANT WAS HIGHER TH AN WHAT WAS SHOWN AND OFFERED IN THE BOOKS OF ACCOUNT, THE SAID ESTIMATION OF INCOME BY THE ASSESSING OFFICER CANNOT BE SUSTAI NED AND THE ASSESSING OFFICER IS DIRECTED TO TAKE THE DIVIDEND INCOME AT RS.1,42,46,588/- AS REFLECTED IN THE BOOKS OF ACCOU NT SUBMITTED BY THE APPELLANT. CONSEQUENTLY GROUND NO. 3 IS ALLO WED. 22. THE ISSUE RAISED IN GROUND NO.4 IS AGAINST THE CONF IRMATION OF ESTIMATED ADDITION OF RS.15,93,430/- BEING PROPO RTIONATE 10% OF THE GROSSED UP DIVIDEND INCOME FROM UNREGISTERED SALE HOLDING. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 14 23. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUB MITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH OF THE TRIBUNAL I N THE CASES OF RELATED ENTITIES BY THE COORDINATE BENCHES WHEREIN IT HAS BEEN HELD THAT DIVIDEND EARNED ON UNREGISTERED SHAREHOLD INGS CANNOT BE BROUGHT TO TAX. THE LD. A.R. SUBMITTED THAT THE SAID DECISIONS OF THE CO-ORDINATE BENCH OF THE TRIBUNAL HAVE BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT. THE LD. A .R. SPECIFICALLY RELIED ON THE DECISION OF CIT VS. AATU R HOLDING PVT. LTD. ITA NO.2214 OF 2006 DATED 12.03.2008 WHEREIN T HE HONBLE BOMBAY HIGH COURT HAS AFFIRMED THE VIEW OF THE TRIB UNAL THAT NO ADDITION CAN BE MADE ON THE ESTIMATED DIVIDEND O N UNREGISTERED HOLDING HELD BY THE ASSESSEE. THE LD. A.R. ALSO SUBMITTED THAT THE ISSUE HAS TRAVELLED UP TO HONBL E SUPREME COURT IN ONE OF THE RELATED ENTITIES AND THE HONBL E SUPREME COURT HAS DISMISSED THE SLP FILED BY THE REVENUE IN THE CASE OF CIT VS. PALLAVI HOLDING PVT. LTD. (SLP) CC NO.2992 OF 2008 DATED 01.08.2011. THE LD. A.R. BROUGHT BEFORE THE BENCH THAT IN VIEW OF THESE FACTS AND RATIO LAID DOWN BY THE VARIOUS J UDICIAL FORUMS AS STATED HEREINABOVE ,THE GROUND RAISED BY THE ASS ESSEE MAY KINDLY BE ALLOWED. 24. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF AUTHORITIES BELOW. 25. WE HAVE PERUSED THE FACTS OF THE CASE AS WELL A S THE DECISIONS CITED BY THE LD. A.R. AND ALSO CONSIDERED THE RIVAL SUBMISSIONS AND CONTENTIONS. WE FIND THAT THIS ISS UE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 15 CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF CI T VS. AATUR HOLDINGS PVT. LTD. (SUPRA) WHICH HAS BEEN AFFIRMED BY THE HONBLE JURISDICTIONAL HIGH COURT BY HOLDING THAT N O ADDITION CAN BE MADE ON ACCOUNT OF ESTIMATED DIVIDEND ON UNR EGISTERED SHARE HOLDING HELD BY THE ASSESSEE. SIMILARLY, WE NOTE THAT IN SIMILAR ISSUE IN THE CASE OF CIT VS. PALLAVI HOLDIN GS PVT. LTD. (SUPRA) THE HON'BLE APEX COURT HAS DISMISSED THE SL P FILED BY THE REVENUE. IN VIEW OF THESE FACTS, WE ARE INCLIN ED TO SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION. GROUND NO. 4 IS ALLOWED. 26. THE ISSUE RAISED IN GROUND NO.5 IS AGAINST THE CONFIRMATION OF ADDITION OF RS.73,21,909/- BY LD. CIT(A) AS MADE BY THE AO TOWARDS DEBENTURE INTEREST BY GROSSING UP THE SAME ON THE BASIS OF BANK STATEMENT AS AGAINST THE INCOME OF RS.29,82 ,234/- AS PER THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 27. THE FACTS IN BRIEF ARE THAT THE AO, ON THE BASI S OF BANK STATEMENT FURNISHED BY THE ASSESSEE, GROSSED UP INT EREST ON DEBENTURE RECEIVED BY THE ASSESSEE ON THE GROUND TH AT THE AMOUNT SHOWN IN THE BANK STATEMENT ARE NET OF TDS. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) AFFIRMED THE O RDER OF AO. 28. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, W E NOTE THAT AO ON THE BASIS OF BANK STATEMENT HAS GROSSED UP TH E INTEREST ON DEBENTURE CALCULATING THE SAME AT RS.73,21,909/- WHEREAS AS PER THE BOOKS OF ACCOUNTS THE DEBENTURE INTEREST COMES TO RS.29,82,234/-. BOTH THE PARTIES BEFORE US AGREED THAT THE ISSUE IN THIS GROUND IS SIMILAR TO THE ISSUE RELATI NG TO ESTIMATION ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 16 OF DIVIDEND INCOME RAISED IN GROUND NO, 3 AND THE ARGUMENTS RAISED IN THE SAID GROUND RELATING TO ADDITION ON A CCOUNT OF DIVIDEND INCOME WOULD, MUTATIS MUTANDIS, APPLY TO T HE ISSUE RELATING TO ADDITION ON ACCOUNT OF DEBENTURE INTERE ST INCOME RAISED IN THIS GROUND AS WELL.HENCE, RELYING ON OUR FINDINGS IN RESPECT OF ADDITION ON ACCOUNT OF DIVIDEND INCOME R AISED IN THE GROUND NO. 3, WE DIRECT THE ASSESSING OFFICER TO DE LETE THE ADDITION ON ACCOUNT ESTIMATED DEBENTURE INTEREST OF RS.73,21,909/- AND ADOPT THE INCOME SHOWN BY THE AP PELLANT AT RS.29,82,234/- AS PER THE BOOKS OF ACCOUNT. 29. THE ISSUE RAISED IN GROUND NO.6 IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.18,29,41,410/- ON ACCOUNT OF INTEREST ON PSU BONDS. 30. THE FACTS IN BRIEF ARE THAT THE AO, ON THE BASI S OF BANK STATEMENTS AND BANK BOOK PROVIDED BY THE ASSESSEE D URING THE ASSESSMENT PROCEEDINGS, OBSERVED THAT THE NET INTER EST ON PSU BONDS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE AFTER TDS WAS RS.13,77,00,000/-. THE AO ACCORDINGLY GROSSED UP THE SAID INTEREST AND DETERMINED THE INTEREST ON PSU BONDS A T RS.18,29,41,410/- AND ADDED THE SAME TO INCOME OF THE APPELLANT. THE APPELLANT SUBMITTED THAT THERE ARE CERTAIN NEW DEVELOPMENTS ON THIS ISSUE POST ASSESSMENT BECAUSE OF WHICH THE SAID ADDITION LONGER STANDS JUSTIFIED. THE APPE LLANT SUBMITTED BEFORE THE LD. CIT(A) THAT HONBLE SUPREM E COURT HAS PASSED AN ORDER DATED 01.11.2002 PURSUANT TO WHICH CERTAIN SECURITIES WORTH RS.258 CRORES, WHICH INCLUDED 17% NTPC BONDS OF FACE VALUE OF RS.81 CRORES BELONGING TO THE ASSE SSEE, HAVE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 17 BEEN HELD TO BE THE PROPERTY OF STATE BANK OF INDIA AND ACCORDINGLY COMPLYING WITH THE SAID DIRECTION OF TH E HONBLE SUPREME COURT, THE CUSTODIAN RELEASED THE APPROPRIA TE AMOUNT OF SECURITIES TO STATE BANK OF INDIA. THE ASSESSEE CONTENDED THAT SAID INTEREST OF RS.18,29,41,410/- ON THESE 17 % NTPC BONDS CAN NOT BE TAXED IN HAND OF THE APPELLANT IN LIGHT OF THE DECISION OF THE HONBLE APEX COURT. HOWEVER, THE L D. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY UPHOLDING T HE ORDER OF AO BY OBSERVING THAT THERE IS NO INFIRMITY IN THE O RDER OF AO AS THE SAID INTEREST HAS TO BE TAXED IN THE HANDS OF T HE ASSESSEE. 31. DURING THE COURSE OF HEARING, THE LD. A.R. SUBM ITTED THAT ON 03.02.1992, THE APPELLANT HAD PURCHASED 17% NTPC BONDS HAVING FACE VALUE OF RS. 81 CRORES AT A PRICE OF RS . 80.64 CRORES THROUGH THE BROKER, M/S. HARSHAD S. MEHTA (HSM). TH E LD. AR SUBMITTED THAT IN THE COURSE OF THE APPLICATION MAD E BY THE CUSTODIAN, THE HON'BLE SPECIAL COURT VIDE ITS ORDER IN MA NO. 280 OF 1993 DATED 10.06.1994 ACCEPTED THE OWNERSHIP OF THE ASSETS IN THE HANDS OF THE APPELLANT. HOWEVER, THE MATTER WAS SUBSEQUENTLY TAKEN UP BEFORE THE HON'BLE SUPREME CO URT BY S.B.I. WHO URGED THAT THE SUBJECT BONDS ALONG WITH SEVERAL OTHER ASSETS WHICH WERE FOUND IN THE CUSTODY OF NHB AND F ORMING PART OF A PACKET OF SECURITIES DELIVERED BY SHRI HARSHAD MEHTA TO NHB MAY BE DECLARED TO BE THE PROPERTY OF S.B.I. TO ASSIST THE PROCESS OF RECOVERY, S.B.I. WANTED TO MAKE FROM SHR I HARSHAD MEHTA. THE HON'BLE SUPREME COURT GRANTED THE AFORES AID PRAYERS MADE BY SBI AND CONFERRED THE OWNERSHIP OF THE SUBJECT BONDS AND OTHER ASSETS BY DECLARING THEM TO BE THE PROPERTIES OF SBI. THE AR, REFERRED TO THE ORDER OF THE HON'BLE S UPREME COURT ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 18 IN I.A. NO. 4 OF 2002 DATED 01.11.2002 WHEREIN THE PRAYERS NO. A(I) TO (IV) WERE ALLOWED IN TERMS OF APPLICATION F OR DIRECTION WHEREIN IT WAS HELD THAT THE SECURITIES ALONG WITH ALL ACCRUALS THEREON HANDED OVER BY HSM TO NHB IN MARCH, 1992 VA LUING AT RS. 258 CRORES DOES NOT CONSTITUTE PROPERTY OF HSM AND THE APPELLANT. THE LIST OF THESE SECURITIES WAS FILED BEFORE HONBLE SUPREME COURT IN ANNEXURE R-1 COLLY, AS COPY OF WHICH IS ALSO FILED BEFORE US. IT WAS THEREFORE SUBMITTED THAT T HE ENTIRE PACKET OF SECURITIES WORTH RS. 258 CRORES WHICH INCLUDES SECURITIES BEING NTPC BONDS WORTH RS, 80.64 CRORES ACCOUNTED F OR BY THE ASSESSEE AS ITS OWN INVESTMENTS WAS HELD TO BE THE INVESTMENT NOT CONSTITUTING PROPERTY OF HSM AND THAT SHOULD BE APPROPRIATED TOWARDS LIQUIDATION OF THE LIABILITY T O SBI/NHB. MORE SPECIFICALLY, IT WAS HELD THAT THE CUSTODIAN A ND THE APPELLANT (BEING RESPONDENT NO. 3) HAVE NO RIGHT, TITLE OR INTEREST IN RESPECT OF THE SECURITIES IN VIEW OF TH E FACT THAT HSM HAD CEASED TO HAVE ANY RIGHT, TITLE OR INTEREST IN THEM. THE LD. A.R., THEREFORE, CONTENDED THAT IN TERMS OF THE AFO RESAID DECISION OF THE HON'BLE SUPREME COURT, IT IS CATEGORICALLY P ROVED THAT THE SAID SECURITIES DO NOT BELONG TO THE APPELLANT AND THAT ANY RETURNS OR INCOME EARNED ON THE SAID SECURITIES SIN CE 1992 CANNOT BE BROUGHT TO TAX AS INCOME OF THE APPELLANT . HE POINTED OUT THAT IN TERMS OF THE AFORESAID ORDER, SEVERAL P AYMENTS WERE ALSO MADE BY THE CUSTODIAN FROM THE ACCOUNT OF THE APPELLANT TOWARDS REPAYMENT OF THE INTEREST EARNED FOR SEVERA L YEARS IN THE PAST. THE COPIES OF CORRESPONDENCES MADE BY THE C USTODIAN IN RESPECT OF THESE BONDS ARE FILED BEFORE US AT PAGE 163-173 OF PB NO. 2. THE AR SUBMITTED THAT BY VIRTUE OF THE ORDER PASSED BY HON'BLE SUPREME COURT, THE INCOMES EARNED ON ACCOUN T OF THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 19 SUBJECT BONDS IS LIABLE TO BE TAXED IN THE HAND OF SBI AND IN FACT SBI BEING THE MOST RESPECTABLE BANK WOULD HAVE OFFERED THE INTEREST EARNED ON THE SUBJECT NTPC BONDS TO TAX. I N VIEW OF THE ABOVE, THE SAID INTEREST PAID TO THE APPELLANT ON T HE NTPC BONDS CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE APPELL ANT. 32. IN ANY CASE, WITHOUT PREJUDICE, LD. A.R. SUBMIT TED THAT THE FIGURE ADOPTED BY THE ASSESSING OFFICER IS ALSO FAC TUALLY INCORRECT. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ONCE AGAIN OBTAINED THE FIGURES FROM THE BANK ACCOUNT AN D GROSSED THE FIGURE ON ACCOUNT OF TDS DEDUCTED FROM THE INTE REST. THIS THEREFORE SHOWS THAT AGAIN THE INTEREST HAS BEEN DE TERMINED ON ESTIMATED BASIS, WHICH IS FACTUALLY AND LEGALLY INC ORRECT. HE ALSO STRONGLY CONTENDED THAT THE APPELLANT IS IN FACT EN TITLED TO A DIRECTION TO THE AO TO GIVE EFFECT TO THE ORDER OF HON'BLE SUPREME COURT IN RESPECT OF ALL THE YEARS FOR WHICH SUCH IN TEREST INCOME HAS BEEN TAXED IN THE HANDS OF THE APPELLANT CONTRA RY TO THE FINDINGS OF HONBLE SUPREME COURT. 33. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDER OF AO AND LD. CIT(A) AND ARGUED THAT THE INTEREST ON PSU BONDS WAS LIGHTLY TAXED BY THE AO AS THE SAME WAS ARISING FRO M THE BANK STATEMENT OF THE APPELLANT AND THAT THE SAME WAS AL SO RECEIVED BY THE APPELLANT. 34. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT APPELLANT HAD PURCHASED NTPC VII ISSUE BONDS 19 92 ON 03.02.1992 HAVING FACE VALUE OF RS.81 CRORES AT A P RICE OF RS.80.64 CRORES THROUGH BROKER M/S. HARSHAD S. MEHT A. WE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 20 ALSO NOTE THAT THE HONBLE SPECIAL COURT VIDE ITS O RDER IN MA NO.280 OF 1993 DATED 10.06.1994 ACCEPTED THE OWNERS HIP OF THE ASSETS IN THE HANDS OF THE ASSESSEE. THEREAFTER, T HE MATTER WAS TAKEN TO HONBLE SUPREME COURT OF INDIA BY STATE BA NK OF INDIA URGING THE APEX COURT THAT THE SAID NTPC BONDS ALON G WITH OTHER ASSETS WHICH WERE FOUND IN THE CUSTODY OF NHB AND FORMING PART OF A PACKET OF SECURITIES DELIVERED BY M/S. HSM TO NHB BE DECLARED AS PROPERTY OF STATE BANK OF INDIA SO THAT RECOVERY COULD BE MADE FROM HSM. WE FURTHER FIND T HAT HONBLE SUPREME COURT IN I.A. NO.4 OF 2002 DATED 01.11.2002 ALLOWED THE PRAYERS NO. A(I) TO (IV) IN TERMS OF APPLICATIO N FOR DIRECTION. THE COPY OF SAID ORDER OF THE HON'BLE SUPREME COURT IS ENCLOSED AT PAGE 145 OF PB NO. 2. THE RELEVANT EXTRACT OF TH E PRAYERS IN THE APPLICATION FOR DIRECTION [PAGE 148-162 OF PB N O. 2] ARE REPRODUCED BELOW : PRAYER (A) THE APPLICANT THEREFORE PRAY THAT THIS HON'BLE COURT BE PLEASED TO ORDER AND DIRECT/DECLARE I) THAT THE SAID SECURITIES ALONGWITH ALL A CCRUALS THEREON HANDED OVER BY THE LATE HARSHAD S. MEHTA TO THE SAID OFFICERS OF N ATIONAL HOUSING BANK IN MARCH 1992 HAVING THEN THE AGGREGATE VALUE OF RS. 2 58 CRORES LIST WHEREOF IS ANNEXED HERETO AS ANNEXURE 'R-1 COLLY' DOES NOT CON STITUTE THE PROPERTY OF HSM AND SHOULD BE APPROPRIATED TOWARDS LIQUIDATION OF HIS LIABILITY TO SBI/NHB II) THAT THE CUSTODIAN, RESPONDENT NO. 3 HER ETO, HAD AND HAS NO RIGHT, TITLE OR INTEREST TO IN RESPECT OF THE SAID SECURIT IES IN VIEW OF THE FACT THAT THE SAID LATE HSM HAD CEASED TO HAVE ANY RIGHT, TITLE O R INTERESTS THEREIN AND IN VIEW OF THE FACT THAT THE SAID SECURITIES DID NOT T HEN BELONG TO THE LATE HSM. III) THAT THE SAID SECURITIES NOT CONSTITUTI NG THE PROPERTY OF THE LATE HSM AND NOT BELONGING TO THE LATE HSM COULD NOT AND SHO ULD NOT HAVE BEEN HANDED OVER TO THE CUSTODIAN. IV) THAT THE SAID SECURITIES AND ALL ACCRUALS THEREON AND THE LIQUIDATED PROCEEDS THEREOF SHOULD BE HANDED OVER TO SBI IN VI EW OF THE SETTLEMENT ARRIVED AT BETWEEN THE SAID PARTIES.' ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 21 35. FROM THE CONCLUDING PARA OF THE ORDER OF HONBL E SUPREME COURT, WE FIND THAT IN TERMS OF THE HONBLE SUPREME COURT ORDER, ALL THE SECURITIES WORTH OF RS.258 CRORES WHICH INC LUDED THE NTPC BONDS WORTH RS.80.64 CRORES RELATING TO THE AS SESSEE WERE HELD TO BE NOT PROPERTY OF M/S. HARSHAD S. METHA AN D FURTHER DIRECTED THAT THESE MAY BE APPROPRIATED TOWARDS PAY MENT OF LIABILITY TO STATE BANK OF INDIA AND ALSO IT WAS SP ECIFICALLY HELD THAT CUSTODIAN AS WELL AS THE ASSESSEE HAD AND HAVE NO RIGHT, TITLE OR INTEREST IN RESPECT OF THESE SECURITIES. THEREFORE, THERE IS A MERIT IN THE CONTENTIONS OF THE LD. A.R. THAT SIN CE THE OWNERSHIP OF NTPC BONDS IS NOT BELONGING TO THE ASS ESSEE, THE INTEREST INCOME ACCRUING THERE FROM SAID SECURITIES CAN NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE. WE HAVE ALSO PERUSED PAGE 89-105 OF THE PB NO.2 WHEREIN THE APPELLANT HA S FILED THE COPY OF THE ANNEXURE R-L COLLY REFERRED TO BY THE H ON'BLE SUPREME COURT IN ITS ORDER. OUR ATTENTION WAS DRAWN TO THE SECURITIES REFERRED TO ABOVE BEING PART OF THE SAID ANNEXURE R-L COLLY REFLECTING THE 17% NTPC BONDS WHICH IS SUBJEC T MATTER OF PRESENT DISPUTE BEFORE US. THIS THEREFORE SHOWS THA T THE FINDINGS OF HON'BLE SUPREME COURT WERE SQUARELY APPLICABLE T O THE FACTS OF THE PRESENT CASE THEREBY CLEARLY ESTABLISHING TH AT THE SAID BONDS WERE NOT THE PROPERTY OF THE APPELLANT AND TH AT THE INTEREST INCOME PERTAINING TO THE SAID BONDS CANNOT BE BROUGHT TO TAX IN THE HANDS OF THE APPELLANT. WE ALSO CONSC IOUS OF THE FACT THAT THE SAID INTEREST PERTAINING TO THE PAST PERIOD HAS BEEN REPAID BY CUSTODIAN TO SBI WHICH FORTIFIES THE FACT S AND CONTENTIONS RAISED BY THE APPELLANT. IT IS FOR THI S REASON, WE ARE NOT IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE L D. CIT(A) AND ARE INCLINED TO SET ASIDE THE FINDING OF THE FI RST APPELLATE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 22 AUTHORITY ON THIS ISSUE AND DIRECT THE AO TO DELETE THE SAID ADDITION OF RS.18,29,41,410/-. GROUND NO. 6 IS ALL OWED. 36. THE ISSUE RAISED IN GROUND NO.7 IS AGAINST THE CONFIRMATION OF ADDITION OF RS.4,97,760/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF LONG TERM CAPITAL GAIN ON SALE OF 2000 S HARES OF M/S. RELIANCE INDUSTRIES. 37. THE FACTS IN BRIEF ARE THAT THE AO ON THE BASIS OF INFORMATION CALLED FOR FROM M/S. RELIANCE INDUSTRIE S LTD. CAME TO CONCLUSION THAT APPELLANT HAS SOLD 31,000 EQUITY SHARES OF THE SAID COMPANY WHEREAS THE APPELLANT HAS CLAIMED TO HAVE SOLD ONLY 29000 EQUITY SHARES. THE AO THUS CALCULA TED THE CAPITAL GAIN ON 2000 EQUITY SHARES OF M/S. RELIANCE INDUSTRIES LTD. AT RS.4,97,760/- AND ADDED THE SAME TO THE IN COME OF THE ASSESSEE. 38. DURING THE APPELLATE PROCEEDINGS, THE APPELLANT SUBMITTED BEFORE THE LD. CIT(A) THAT SINCE THE APPELLANT IS A NOTIFIED ENTITY AND THE DETAILS OF INCOME EARNED BY IT INCLUDING PU RCHASE AND SALE OF SHARES ARE PROVIDED BY THE CUSTODIAN BASED ON WHICH INCOME WAS OFFERED TO TAX. THE LD. A.R. SUBMITTED BEFORE THE LD. CIT(A) THAT 29000 SHARES OF M/S. RELIANCE INDUS TRIES LTD. HAVE BEEN SOLD AND THAT THE AO HAS CALCULATED THE C APITAL GAIN ON 31,000 EQUITY SHARES ON THE BASIS OF INFORMATION GATHERED FROM M/S. RELIANCE INDUSTRIES LTD. THE LD. CIT(A) DIRECTED THE AO AGAIN TO VERIFY THE ISSUE ON THE BASIS OF DETAIL S AS FURNISHED BY THE CUSTODIAN AND ALSO EVALUATE THE SAME IN THE LIGHT OF THE INFORMATION GATHERED BY THE AO FROM M/S. RELIANCE I NDUSTRIES LTD AND COMPUTE THE LONG TERM CAPITAL GAIN ACCORDIN GLY. THE LD. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 23 CIT(A) ALSO DIRECTED THE AO TO ALLOW THE CARRY FORW ARD OF LONG TERM CAPITAL LOSS SO DETERMINED AFTER ALLOWING THE SET OFF OF LONG TERM CAPITAL GAIN ON SALE OF SHARES OF M/S. RELIANC E INDUSTRIES LTD. SINCE THE LD. CIT(A), INSTEAD OF DELETING THE SAID ADDITION, GAVE DIRECTIONS TO AO FOR VERIFICATION, THE APPELLA NT HAS CHALLENGED THE ISSUE BEFORE US. 39. THE LD. A.R. EXPLAINED THE FACTS AND PLEADED TH AT ONLY 29,000 SHARES WERE SOLD AND THEREFORE THE ADDITION ON ACCOUNT OF 2000 SHARES OF M/S. RELIANCE INDUSTRIES LTD. MAY KINDLY BE DELETED. 40. LD. D.R. ON THE OTHER HAND, RELIED UPON FINDING S OF AO AND LD. CIT(A). 41. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE CONTRACT NOTES AND OTHER DETAI LS AS PLACED BEFORE US, WE NOTE THAT APPELLANT HAS SOLD 29,000 E QUITY SHARES OF M/S. RELIANCE INDUSTRIES LTD. WE HAVE ALSO EXAM INED THE BANK STATEMENT OF THE APPELLANT WHEREIN THE CONSIDE RATION QUA 29000 EQUITY SHARES APPEARED. WE ALSO TAKE NOTE OF THE LETTER DATED 31.07.1995 OF CUSTODIAN CONFIRMING THAT ASSES SEE HAS SOLD 29000 EQUITY SHARES. FURTHER, WE OBSERVE THAT AO HAS NOT PROVIDED THE COPY OF LETTER RECEIVED FROM M/S. RELI ANCE INDUSTRIES LTD. TO THE ASSESSEE WHICH SHOWED THAT A SSESSEE HAS SOLD 31,000 EQUITY SHARES OF M/S. RELIANCE INDUSTRI ES LTD. ON THE CONTRARY, FROM THE LETTER OF CUSTODIAN, IT IS F OUND THAT 31,000 SHARES OF M/S. RELIANCE INDUSTRIES LTD. SOLD WERE T HAT OF THE RELATED ENTITY AND NOT OF THE ASSESSEE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE ACTION OF THE AO CAN NOT BE SUST AINED AS THE EVIDENCES GATHERED BY THE AO CAN NOT BE USED AGAINS T THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 24 ASSESSEE BEHIND ITS BACK WITHOUT CONFRONTING THE SA ME TO THE ASSESSEE. ACCORDINGLY, WE ARE INCLINED TO DIRECT T HE AO TO DELETE THE ADDITION OF RS.4,97,760/-. GROUND NO. 7 OF AP PEAL IS ALLOWED. 42. THE ISSUE RAISED IN GROUND NO.8 IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF DEPRECIATION AND OTHER EXPENSES BY LD. CIT(A) AND ALSO RESTRICTING THE DEDUCTION TO THE EXTENT OF RS.1,00,000/- ONLY. 43. THE FACTS IN BRIEF ARE THAT AO REJECTED THE CLA IM OF THE ASSESSEE IN RESPECT OF ITS VARIOUS EXPENSES AS WELL AS DEPRECATION ON FIXED ASSETS ON THE GROUND THAT THE OPERATION OF THE ASSESSEE HAS COMPLETELY CEASED AS THE ASSESSEE IS A NOTIFIED ENTITY AND ALL THE DECISIONS ARE TAKEN BY THE CUSTO DIAN. THE LD. CIT(A) IN THE APPELLATE PROCEEDING PARTLY ALLOWED T HE APPEAL OF THE ASSESSEE BY DIRECTING THAT THE CLAIM OF THE ASS ESSEE IS TO BE ALLOWED TO THE EXTENT OF RS.1,00,000/-. 44. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS A NOTIFIED ENT ITY W.E.F. 08.06.1992 AND POST THAT DATE OF THE DECISIONS INCL UDING THAT PG BANKING , ISSUE OF SALE AND PURCHASE OF SECURITIES, PAYMENT OF TAXES ETC. WERE TAKEN BY THE CUSTODIAN. THE LD. A. R. SUBMITTED BEFORE THE BENCH THAT EXPENSES SO INCURRED COMPRISE OF PRIMARILY ELECTRICITY EXPENSES OF THE PREMISES OWN ED BY THE ASSESSEE, CERTAIN MAINTENANCE CHARGES PERTAINING TO THE PROPERTY, BANK CHARGES AND INTEREST ON LOANS RECEIV ED. AFTER EXAMINING ALL THE ASPECT OF THE ISSUE, WE ARE OF TH E VIEW THAT THESE EXPENSES WERE NECESSARY TO BE INCURRED BY THE ASSESSEE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 25 FOR THE PURPOSE OF RUNNING AND PRESERVING ITS ASSET S AND THEREFORE THESE EXPENSES ARE NECESSARILY TO BE ALLO WED. MOREOVER, THE ISSUE IS SQUARELY COVERED BY THE DECI SION OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASES OF RELA TED ENTITIES. IN THE FOLLOWING CASES, THE CO-ORDINATE BENCHES OF THE TRIBUNAL HAVE ALLOWED THE SIMILAR CLAIM: A. DCIT V. ORION TRAVELS PVT. LTD. [I TA NO. 5035, 5036/MUM/2002] DATED 23.09.2005. B. DCIT V. ORION TRAVELS PVT. LTD. [I TA NO. 4087, 4088/MUM/2002] DATED 21.03.2006. 45. SINCE THE FACTS BEFORE US ARE SIMILAR TO ONE AS INVOLVED IN THE AFORESAID CASES BEFORE THE CO-ORDINATE BENCHES OF THE TRIBUNAL, WE ARE THEREFORE INCLINED TO SET ASIDE TH E ORDER OF LD. CIT(A) AND DIRECT THE AO TO ALLOW THESE EXPENSES AN D DEPRECIATION AS CLAIMED BY THE ASSESSEE. GROUND NO .8 IS ALLOWED. 46. IN THE GROUND NO. 9 , THE ASSESSEE HAS CHALLENG ED THE ORDER OF LD. CIT(A) ENHANCING THE INCOME BY MAKING AN ADD ITION OF RS. 1,28,28,304/- ON ACCOUNT OF INTEREST ON TERM DEPOSI T. 47. THE FACTS IN BRIEF ARE THAT LD. CIT(A) NOTED DU RING APPELLATE PROCEEDINGS THAT AO HAS MADE AN ADDITION OF RS.3,03 ,18,467/- ON ACCOUNT OF INTEREST INCOME FROM TERM DEPOSITS. HOWEVER, AS PER THE BOOKS OF ACCOUNTS FILED BY THE ASSESSEE, TH E SAID INCOME WAS RS.4,31,46,771/- FROM TERM DEPOSIT AND HAS ALSO CLAIMED THE CORRESPONDING TDS. ACCORDINGLY, LD. CIT(A) MAD E AN ADDITION OF RS.1,28,28,304/- TO THE INCOME OF THE A SSESSEE AS INCOME FROM TERM DEPOSITS. THE ASSESSEE HAS CHALLE NGED THE SAID ADDITION ON THE GROUND THAT IF THE BOOKS OF TH E ASSESSEE ARE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 26 REJECTED, THE INCOME FROM THE TERM DEPOSIT CANNOT B E ASSESSED BASED ON THESE BOOKS. 48. SINCE WE HAVE REVERSED THE FINDINGS ON THE ISSU E OF REJECTION OF BOOKS OF ACCOUNT BY THE LD CIT(A) AND ALLOWED THE GROUND RAISED IN FAVOUR OF THE ASSESSEE, THIS GROUN D RAISED BY THE ASSESSEE BECOMES INFRUCTUOUS AND IS DISMISSED. ACCORDINGLY GROUND NO. 9 IS DISMISSED. 49. THE ISSUE RAISED IN GROUND NO.10 IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE LEVY OF INTEREST UNDER SECTIO N 234A, 234B & 234C OF THE ACT THEREBY UPHOLDING THE ORDER OF AO . 50. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT ISSUE IS COVERED AGAINST TH E ASSESSEE BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF DIVINE HOLDING PVT. LTD. IN APPEAL NO.3334 OF 2010 ORDER DATED 07.03.2012. APPEAL NO.3334 OF 2010 ORDER DATED 07 .03.2012 WHEREIN IT HAS BEEN DECIDED BY THE HONBLE BOMBAY H IGH COURT THAT INTEREST UNDER SECTION 234A, 3234B AND 234C IS MANDATORY TO BE CHARGED AND ACCORDINGLY THE GROUND BY THE ASS ESSEE IS DISMISSED FOLLOWING THE JURISDICTIONAL HIGH COURT D ECISION. GROUND NO. 10 IS DISMISSED. 51. THE ISSUE RAISED IN GROUND NO.11 IS AGAINST THE ORDER OF LD. CIT(A) NOT EXCLUDING THE INCOME WHICH IS SUBJECT TO PREVISIONS OF TDS BEFORE LEVYING INTEREST AS UNDER SECTION 234A, 234B & 234C OF THE ACT. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 27 52. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS A RECURRING ISSUE OVER THE YEARS AND THE CO- ORDINATE BENCHES OF THE TRIBUNAL HAVE CONSISTENTLY HELD THAT INTEREST SHOULD BE COMPUTED BY THE AO IN CONSONANCE WITH THE JUDICIAL PRECEDENTS REFERRED TO IN THE RESPECTIVE O RDERS. THE LD. A.R. SUBMITTED THAT THE AO HAS NOT BEEN FOLLOWING A ND ABIDING BY THE ORDERS OF THE HIGHER AUTHORITIES AND WRONGLY LEVYING HIGHER INTEREST ON ALL INCOMES OF THE ASSESSEE. TH E LD. A.R. SUBMITTED THAT IN THIS CASE ALSO THE AO SHOULD BE D IRECTED TO COMPUTE THE INTEREST IN TERMS OF THE FOLLOWING DECI SIONS: A. GROWMORE LEASING & INVESTMENTS LTD. V. DCIT [I TA NO. 1219/MUM/2017 AND OTHERS] FOR A.Y. 2012-13 AND OTHERS DATED 27.12.201 7. B. SUDHIR S. MEHTA V. DCIT [ITA NO. 7147/MUM/2018 ] FOR A.Y. 2014-15 DATED 3.11.2020. C. HARSH ESTATES PVT. LTD. V. DCIT [ITA NO. 6957/ MUM/2018 AND OTHERS] FOR A.Y. 2013-14 TO A.Y. 2015-16 DATED 15.09.2020. 53. AFTER PERUSING THE FACTS ON RECORDS AND RESPECT FULLY FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES I N THE CASE OF RELATED ENTITIES AS STATED ABOVE, WE DIRECT THE AO TO COMPUTE THE INTEREST U/S 234A, 234B AND 234C OF THE ACT AFTER T AKING INTO ACCOUNT THE TDS DEDUCTIBLE AT SOURCE ON THE INCOME ASSESSED WHICH WERE SUBJECT THE PROVISIONS OF TAX DEDUCTION AT SOURCE. THE GROUND NO. 11 IS ALLOWED FOR STATISTICAL PURPOS ES. 54. THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GR OUNDS ALSO: 1. WHETHER IN FACTS AND CIRCUMSTANCES OF T HE CASE, THE LD. ASSESSING OFFICER AND LD. CIT(A) OUGHT TO HAVE GRANTED DEDU CTION OF INTEREST EXPENDITURE OF RS. 18,69,05,605/- IN THE HANDS OF THE ASSESSEE. 2. WHETHER IN FACTS AND CIRCUMSTANCES OF TH E CASE, THE LD. ASSESSING OFFICER AND LD. CIT(A) OUGHT TO HAVE GRANTED CAPITALIZATION OF INTEREST EXPENSES ATTRIBUTABLE TO SHARES AND SECURITIES WHICH IS NOT ALLOWABLE U/S 57 (III) OF THE ACT. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 28 55. THE LD. A.R. SUBMITTED BEFORE THE BENCH THAT IN THE FIRST ROUND OF LITIGATION THE ASSESSEE HAS CHALLENGED THE ORDER OF LD CIT(A) DATED 12.11.2018 PARTLY CONFIRMING THE ORDE R OF AO DATED 30.03.2001. IT IS SUBMITTED THAT THE ADDITIO NAL GROUNDS ARE BEING RAISED AS THE SAME WERE INADVERTENTLY NO T TAKEN AT THE TIME OF FILING THE APPEAL AGAINST THE ORDER OF LD. CIT(A). THE LD. A.R. SUBMITTED THAT THE ISSUES RAISED IN THE ADDITI ONAL GROUNDS OF APPEAL ARE EMANATING OUT OF THE RECORDS BEFORE THE AUTHORITIES BELOW AND NO NEW FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. THE LD. A.R. THEREFORE REQUESTED THAT THE SAME MAY KINDLY BE ADMITTED AND DECIDED IN THE INTEREST OF J USTICE AND EQUITY. IN DEFENCE OF HIS ARGUMENTS, THE LD. A.R. RELIED ON THE FOLLOWING THREE DECISIONS: 1. NATIONAL THERMAL POWER COMPANY LTD. VS. CIT 229 ITR 383 (SC) 2. JUTE CORPORATION OF INDIA LTD. VS. CIT 187 ITR 6 88 (SC) 3. AHMEDABAD ELECTRICITY COMPANY LTD. VS. CIT 199 I TR 359 (BOM.) THE LD. A.R., THEREFORE, PRAYED THAT THE GROUND MA Y KINDLY BE ADMITTED AND ADJUDICATED. 56. THE LD. D.R., ON THE OTHER HAND, STRONGLY OPPOS ED THE ADMISSION OF ADDITIONAL GROUNDS RAISED AT THIS STAG E BY RAISING DOUBTS ABOUT THE INTENTION OF THE ASSESSEE. THE LD . D.R. SUBMITTED THAT THE ASSESSEE HAS NEITHER RAISED THIS GROUND IN THE FIRST ROUND OF LITIGATION NOR AT THE TIME OF FI LING THIS APPEAL BEFORE THE TRIBUNAL. THE LD. D.R. SUBMITTED THAT O NLY THE LEGAL ISSUE CAN BE ALLOWED TO BE RAISED AT THIS STAGE AND NOT THE FACTUAL ISSUE AS HAS BEEN RAISED BY THE ASSESSEE. THEREFORE, THE ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 29 LD. D.R. PRAYED THAT THE ADDITIONAL GROUND MAY KIND LY BE DISMISSED. 57. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ISSUE RAISED B Y THE ASSESSEE ARE ARISING OUT OF THE ASSESSMENT RECORDS BEFORE TH E AUTHORITIES BELOW AND DOES NOT REQUIRE ANY VERIFICATION OF FACT S OR ANY FRESH MATERIAL BEING BROUGHT ON RECORD. THE ASSESSEE IS VERY WELL WITHIN ITS RIGHT TO RAISE THESE ISSUES BEFORE THE T RIBUNAL AND ACCORDINGLY WE ARE INCLINED TO ADMIT THE ADDITIONAL GROUND FOR ADJUDICATION BEFORE US FOLLOWING THE RATIO LAID IN THE ABOVE DECISIONS. 58. THE ISSUE RAISED IN THE 1 ST ADDITIONAL GROUND IS AGAINST THE ORDER OF CIT(A) NOT ALLOWING INTEREST ON BORROWED F UNDS TO THE ASSESSEE. 59. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELL ANT HAD PURCHASED SHARES AND SECURITIES OUT OF THE CREDIT G IVEN BY THE BROKERAGE FIRMS. SUBSEQUENT TO THE NOTIFICATION OF THE APPELLANT AND THE BROKERS AS NOTIFIED ENTITIES, THE LIABILITY TOWARDS THE PURCHASE OF THESE SHARES COULD NOT BE PAID AS THE E NTIRE AFFAIRS WERE THEN CONTROLLED BY CUSTODIAN APPOINTED UNDER T HE SPECIAL COURTS ACT. SUBSEQUENTLY, THE SAID SHARES AND SECUR ITIES WERE LIQUIDATED AND THE FUNDS WERE INVESTED IN THE TERM DEPOSITS UNDER THE ORDERS OF HON'BLE SPECIAL COURT. ON THESE AMOUNTS PAYABLE BY THE APPELLANT, THE INTEREST PAYABLE TO T HE BROKERAGE FIRMS HAS BEEN CALCULATED. THE SAID INTEREST HAS BE EN CLAIMED BY ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 30 THE APPELLANT IN PAST YEARS AND THE SAME HAS BEEN A LLOWED TO THEM. 60. THE LD AR SUBMITTED THAT THIS ISSUE IS A RECURR ING ISSUE IN THE CASE OF THE ASSESSEE AS WELL AS MANY OF ITS REL ATED ENTITIES SINCE SEVERAL YEARS. THE COORDINATE BENCHES HAVE B EEN DECIDING THIS ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THA T THE SAID INTEREST PAYABLE TO THE BROKERAGE FIRMS IS AN ALLOW ABLE DEDUCTION. SOME OF THE CASES IN WHICH SUCH FINDI NGS HAVE BEEN GIVEN ARE AS BELOW: A. HARSH ESTATES PVT. LTD. VS. DCIT (ITA NO.6957/MUM/2018) DATED 15.09.2020 B. SUDHIR S. MEHTA VS. DCIT (ITA NO.7147/M/2018) DATED 13.11.2020 C. GROWMORE LEASING & INVESTMENT LTD. VS. DCIT (6092/M/2018) & ORS. DATED 16.12.2020. 61. THUS, IT IS SUBMITTED THAT DEDUCTION OF INTERES T EXPENDITURE MAY BE GRANTED TO THE ASSESSEE. IT IS SUBMITTED TH AT THE INTEREST EXPENDITURE SHOULD HAVE BEEN ALLOWED AT LEAST TO TH E EXTENT OF GROSS TOTAL INCOME EARNED BY THE ASSESSEE. 62. WE HAVE PERUSED THE FACTS OF THE CASE INCLUDING THE DECISIONS CITED ABOVE AND FOUND THE ISSUE TO BE SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE. WE, THEREFORE, RESPECTFU LLY FOLLOWING THE DECISIONS OF THE COORDINATE BENCHES SET ASIDE T HE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE INTEREST 63. IN ADDITIONAL GROUND NO.2, THE ASSESSEE HAS CHA LLENGED THE DECISION OF THE AO AND LD. CIT(A) IN NOT GRANTING C APITALIZATION OF INTEREST EXPENSES ATTRIBUTABLE TO SHARES AND SEC URITIES WHICH IS NOT ALLOWABLE UNDER SECTION 57(III) OF THE ACT. ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 31 64. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAVE I NCURRED INTEREST ON THE PURCHASE OF SHARES AND SECURITIES. THE LD. AR SUBMITTED THAT TO THE EXTENT THE INTEREST EXPENDITU RE IS NOT ALLOWABLE AS DEDUCTION U/S 57(III) OF THE ACT , THE SAME SHOULD BE ALLOWED TO BE CAPITALIZED IN THE COST OF SHARES AND SECURITIES. 65. WE HAVE PERUSED THE FACTS ON RECORDS AND NOTE T HAT IN THE FOREGOING PARAS, THE INTEREST EXPENDITURE HAS BEEN ALLOWED BY US IN TOTAL AND NO DISALLOWANCE SURVIVED. THE DIVIDEND AND INTEREST INCOME AS WELL AS CAPITAL GAINS, IF ANY, EARNED BY THE APPELLANT WERE TAXABLE DURING A.Y. 1992-93 AND HENCE THE DISA LLOWANCE INVOKING S. 14A IS NOT APPLICABLE. IN LIGHT OF THE SAME, SINCE THERE IS NO DISALLOWANCE CALLED FOR, THE QUESTION O F CAPITALIZATION DOES NOT ARISE. THE ADDITIONAL GROUND NO. 2 IS DISM ISSED. 66. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 09.04.2021. SD/- SD/- ( AMARJIT SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 09.04.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER ITA NO.259/M/2019 & ORS. M/S. GROWMORE RESEARCH & ASSETS MANAGEMENT LTD. 32 DY/ASS TT. REGISTRAR, ITAT, MUMBAI.