TOPAZ HOLDINGS P. LTD, MUMBAI V. ACCC-31, MUMBAI

ITA 3048/MUM/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3952 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 03-08-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIAL SPECIAL
• Keywords: Rejection of books of accounts; Opportunity of being heard; Principle of natural justice
• Section: 142(1); 234B; 147; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , BEFORE SHRI C.N. PRASAD , JM AND SHRI RAJESH KUMAR , AM ./ I.T.A. NO 3048 /MUM/201 3 ( / ASSESSMENT YEAR: 200 3 - 04 ) M/S TOPA Z HOLDINGS PVT LTD, 32, MADHULI, DR. ANNIE BESANT ROAD, WORLI, MUMBAI - 400018 / VS. ASSTT.COMMISSIONER OF INCOME TAX CC - 31, ROOM NO. 4 0 9, 4 TH FLOOR, AYAKAR BHAVAN, M.K .ROAD, MUMBAI - 400020 ./ ./ PAN : AAACT5152F ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI DHAVAL SHAH /RESPONDENT BY : DR.P.DANIAL, SPECIAL COUNSEL / DATE OF HEARING : 01.02.2016 / DATE OF PRONOUNCEMENT : 26. 02.2016 / O R D E R PER RAJESH KUMAR, A. M: THIS APPEAL BY THE ASSESSEE IS DIREC TED AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS) - 37 , MUMBAI (HEREINA FTER CALLED AS THE C I T (A)) FOR ASSESSMENT YEAR 200 3 - 04 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN PASSING ORDER U/ S. 250 OF THE ACT. 2. THE LEARNED COM MISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN PASSING THE ORDER WITHOUT COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. 2 ITA NO. 3048 /MUM/201 3 3. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT NO I NCOME FROM ATTACHED ASSETS CAN BE ASSESSED IN THE HANDS OF THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT GRANTING RELIEF OF LIABILITY AMOUNTING TO RS. 2,86,72,678/ - , TOWARDS INTEREST EXPENDITURE CLAIMED BY THE APPELLANT. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE HELD THAT THE INTEREST EXPENSES TO THE EXTENT OF RS.2,032/ - NEED TO BE ALLOWED WHILE CALCULATING INCOME OF THE APPELLANT. 5. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CHARGING INTEREST U / S. 234A, 234B AND 234C OF THE ACT. 6. THE APPELLANT CRAVES LEAVE OF YOUR HONOUR TO ADD TO, ALTER, AMEND AND/ OR DELETE ALL OR ANY OF THE FOREGOING GROUNDS OF APPEAL WITH THE PERMISSION OF Y OUR HONOUR. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A NOTIFIED ENTITY AS PER THE PROVISIONS OF SPECIAL COURT (TORTS) ACT 1992 AS IT WAS INVOLVED IN THE SECURITIES SCAM, 1992. THE ASSESSEE DID NOT FILE ITS RETURN OF INCOME ON ITS OWN AND THE NOT ICE U/S 142(1) DATED 12.01.2004 AND 01.10.2005 WERE ALSO NOT COMPLIED WITH. THE ASSESSMENT WAS FRAMED U/S 144 OF THE ACT IN ABSENCE OF ANY INFORMATION FROM THE ASSESSEE SUCH AS BOOKS OF ACCOUNTS, INCOME AND EXPENDITURE AND BANK STATEMENTS ETC AT RS. 21,30, 000/ - VIDE ORDER DATED 24.03.2006. 3. AT THE OUTSET THE LD AR SUBMITTED BEFORE US THAT GROUND NO 1, 2 AND 3 ARE NOT PRESSED AND THEREFORE ARE DISMISSED AS NOT BEING PRESSED. 4. DURING THE APPEAL PROCEEDINGS THE MATTER WAS REMANDED TO AO FOR MAKING NE CESSARY VERIFICATION AS THE ASSESSMENT U/S 144 OF THE ACT WAS MADE EX - PARTE. DURING REMAND PROCEEDINGS THE REPRESENTATIVE OF THE 3 ITA NO. 3048 /MUM/201 3 ASSESSEE APPEARED BEFORE THE AO AND THE AO ACCEPTED THE DETAILS OF INCOME AND EXPENSES SHOWN IN THE COMPUTATION OF INCOME BUT MADE THE DISALLOWANCES OF RS. 2,86,72,678/ - FOR INTEREST EXPENSE AND RS. 15,000/ - FOR AUDIT FEE WHICH WAS CHALLENGED BEFORE THE CIT(A) VIDE GROUND NO 7. THE ASSESSEE HAD DEBITED RS. 2,86,72,678/ - AS INTEREST ON THE LOANS TAKEN FROM BROKERAGE FIRMS FOR M AKING INVESTMENTS INTO SHARES AND SECURITIES AND FDRS AND THUS , THE INTEREST PAYABLE ON THE SAID LOANS WAS CLAIMED AS DEDUCTIONS. THE DISALLOWANCE WAS MADE FOR THE REASONS THAT THERE WERE NO TERMS AND CONDITIONS TO PAY INTEREST TO CREDITORS , NO CLAIM WA S MADE IN THE BOOKS OF ACCOUNTS, INTEREST CLAIMED WAS CONTINGENT IN NATURE AND ISSUE OF PAYMENT OF INTEREST WAS SUB - JUDICE BEFORE SPECIAL COURT AND ABSENCE OF DIRECT NEXUS BETWEEN THE MONEY BORROWED AND TERM DEPOSITS. 5. THE LD CIT(A) ALSO DISMISSED THE A PPEAL OF THE ASSESSEE ON ISSUE OF INTEREST BY OBSERVING AS UNDER: - 6.3 I HAVE GONE THROUGH THE SUBMISSIONS OF THE LD AR. I FIND THAT THOUGH THERE IS NO EXPRESS DOCUMENTS EVIDENCING PAYMENT OF INTEREST OF THE BROKERAGE FIRMS, THE INTENTIONS OF THE PAR TIES WERE ALWAYS SO, THIS IS EVIDENCE FROM THE FACT THT IDENTICAL CLAIM WAS ALSO MADE DURING AY 1990 - 91 AND THE SAME WAS ALLOWED TO THE APPELLANT AND OTHER CONCERNS. THEN CLAIM MADE IN THE AFFIDAVIT OF CUSTODIAN IN MP NO.41 OF 1999 ALSO SUPPORTS THIS CLA IM. I ALSO AGREE WITH THE APPELLANT THAT THERE NEED NOT BE ANY WRITTEN AGREEMENT AND THAT THE ORAL AGREEMENT COUPLED WITH THE ACTIONS AND INTENTIONS OF THE PARTIES IS SUFFICIENT TO PROVE THE EXISTENCE OF THE LIABILITY. 6.4 FURTHER, THE RECORD ALSO SHOWS THAT THE DETAILS OF INTEREST EXPENSES WERE PROVIDED TO THE AO. IN FACT, THE ASSESSMENT ORDER ITSELF SHOWS THE BEAK - UP OF INTEREST PARTY - WISE AT 12 %. THE AR HAS FILED COPY OF ASSESSMENT ORDER IN THE CASE OF SHRI ASHWIN MEHTA TO SUPPORT THE CLAIM. FURTHER , IT IS NOTICED AND ALSO ADMITTED BY THE APPELLANT THAT THE DISPUTE WITH REGARD TO THE PAYMENT OF INTEREST TO THE PARTIES IS NOW RAISED BEFORE THE HONBLE COURT AND HENCE IRRESPECTIVE OF THE INTENTIONS , THE DECISION OF HONBLE SPECIAL COURT WOULD BE REL EVANT FACT FOR DETERMINING HE LIABILITY TO INTEREST. NO DECISION HAS BEEN RENDERED BY THE HONBLE COURT IN THIS REGARD SO 4 ITA NO. 3048 /MUM/201 3 FAR. SINCE THE DISPUTE IS PENDING WITH REGARD TO VERY EXISTENCE OF THE LIABILITY, IN MY OPINION IT CANNOT BE SAID THAT THE INTEREST L IABILITY IS AN ASCERTAINED LIABILITY FOR THE APPELLANT. THE AMOUNT OF INTEREST PAYABLE AS WELL AS RECEIVABLE BY VARIOUS PARTIES IS SUBJECT MATTER OF DISPUTE BEFORE THE HONBLE COURT IN MP NO.41 OF 1999 AND THE LIABILITY TO PAY INTEREST WOULD ACCRUE ONLY I F THE COURT SETTLES THE ISSUES. THE LIABILITY TO PAY INTEREST WILL NOT ARISE UNLESS AND UNTIL THE SUPREME COURT DECIDES THE ISSUES AS TO WHETHER THE APPELLANT IS LIABLE TO PAY INTEREST IN RESPECT OF THE PERIOD UNDER CONSIDERATION. IT IS, THEREFORE , HELD THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION IN RESPECT OF THE INTEREST CLAIMED TO BE PAYABLE TO THE BROKERAGE FIRMS TILL THE COURT DECIDES THE ISSUE. IN THE EVENT THE COURT DECIDES THAT THE APPELLANT IS LIABLE TO PAY INTEREST TO THE CREDITORS IN RELA TION TO THE YEAR UNDER APPEAL, THE APPELLANT WOULD BECOME ENTITLED TO CLAIM THE DEDUCTION AND IN SUCH CIRCUMSTANCES, THE AO MAY ALLOW THE DEDUCTION OF THE SAME DURING THE YEAR UNDER APPEAL. SINCE NO ORDER IS PASSED BY THE HONBLE SPECIAL COURT YET, THE APPELLANTS CLAIM IS THEREFORE REJECTED. THE APPEAL IS THEREFORE DISMISSED 6. THE AR SUBMITTED BEFORE US THAT THE ISSUE IN INVOLVED IN THE GROUND NO 4 QUA INTEREST ON LOANS TAKEN FROM VARIOUS BROKERAGE FIRMS FOR THE PURPOSE OF INVESTMENTS INTO SHARES AND SECURITIES WAS COVERED IN ITS FAVOUR BY DECISION OF THE TRIBUNAL IN ITS OWN CASE IN THE EARLIER IN ITA NO 2146/MUM/2013 DATED 18.06.2014 AY 2001 - 02 AND OTHER DECISIONS OF TRIBUNAL NAMELY (I) GROWMORE RESEARCH & MANAGEMENT LTD VS ACIT ITA NO 5137/MUM/2 012 DATED 05.03.2015 AY 2006 - 07, (II) EMINENT HOLDINGS VS ACIT ITA NO 2139/MUM/2013 DATED 18.06.2013 AY 2002 - 03 AND HITESH MEHTA VS DCIT ITA NO 7726/MUM/2010 DATED 26.04.2013 FOR AY 2005 - 06. THE LD COUNSEL PRAYED BEFORE US THAT IN VIEW OF THE DECISIONS A S REFERRED TO ABOVE , THE ISSUE OF INTEREST BE SET ASIDE TO THE FILE OF AO WITH SIMILAR DIRECTION AS TO CALCULATION OF INTEREST U/S 234A. 234B AND 234C AFTER TAKING INTO ACCOUNT THE AMOUNT OF TAX DEDUCTED AT SOURCE. THE LD DR OPPOSED THE ARGUMENTS OF THE L D AR AND RELIED HEAVILY ON THE ORDERS OF AUTHORITIES BELOW. 5 ITA NO. 3048 /MUM/201 3 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORDS. WE FIND THAT ISSUE INVOLVED IN THE GROUND NO 4 & 5 IS COVERED IN FAVOUR OF THE ASSESSEE BY DECISION OF THE TRIBU NAL IN ITS OWN CASE AND ALSO VARIOUS OTHER DECISIONS. IN THE CASE OF THE ASSESSEE ITSELF IN ITA NO 2146/MUM/2013 DATED 18.06.2014 AY 2001 - 02 AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVANT PARAS ARE REPRODUCED AS UNDER: - 2.1. GROUND NO.4 IS ABOUT DISALLOWANCE OF INTEREST EXPENDITURE OF RS.2,86,72,678/ - .BEFORE US,AR STATED THAT IDENTICAL ISSUE HAD COME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN ONE OF THE GROUP CASES I.E. IN THE CASE OF EMINENT HOLDINGS PVT.LTD. (ITA/8200/2010 D T. 12.02.2014), THAT MATTER WAS RESTORED BACK TO THE FILE OF THE FAA.DEPARTMENTAL REPRESENTATIVE(DR) LEFT TO THE ISSUE TO THE DISCRETION OF THE BENCH. 2.3.AFTER HEARING THE RIVAL CONTENTIONS,WE ARE OF THE OPINION THAT MATTER SHOULD BE REMANDED BACK TO TH E FILE OF THE FAA.WE FIND THAT WHILE DECIDING THE APPEAL IN THE CASE OF EMINENT HOLDINGS PVT.LTD.,FOR THE AY 2007 - 08(SUPRA),E BENCH OF TRIBUNAL HAS DECIDED THE ISSUE AS UNDER: 4. GROUND NOS. 4 & 5 ARE INTER - CONNECTED RELATING TO THE DISALLOWANCE OF INTE REST EXPENDITURE OF RS. 5,14,455/ - .IN THIS REGARD, AT THE OUTSET, LD COUNSEL MENTIONED THAT AN IDENTICAL ISSUE CAME UP FOR ADJUDICATION BEFORE THE ITAT, MUMBAI IN THE CASED OF HITESH S. MEHTA VS. DCIT VIDE ITA NO. 7726 & 7727/M/2010 DATED 26.04.2013, WHERE IN THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILES OF CIT(A) FOR ADJUDICATION OF THE ISSUE AFRESH BY ADJUDICATING THE RESPECTIVE GROUND RELATING TO THE REJECTION/RELIABILITY OF THE BOOKS OF ACCOUNT. PARA 5 FROM THE SAID ORDER OF THE TRIBUNAL (SUPRA) IS RELEV ANT IN THIS REGARD AND THE SAME READS AS UNDER: 5. GROUND NO.4 RELATES TO THE ACTION OF THE LD CIT(A) IN CONFIRMING THE LIABILITIES AMOUNTING TO RS. 11,24,99,052/ - AND RS. 12,61,36,245/ - RESPECTIVELY FOR THE AYS 2005 - 06 AND 2006 - 07 TOWARDS INTEREST EXPE NDITURE CLAIMED BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE FINDINGS GIVEN IN PARA 3.3 ABOVE IN RESPECT OF REJECTION/ RELIABILITY OF THE BOOKS OF ACCOUNTS AND THE 6 ITA NO. 3048 /MUM/201 3 PROPOSED ADJUDICATION OF THE LD CIT(A) IN VIEW OF THE SAID DIRECTION MAY HAVE DIRECT IM PACT ON THE ISSUE OF THE IMPUGNED LIABILITY, WE SET ASIDE THIS ISSUE TO THE FILES OF THE CIT(A) TO ADJUDICATE AFRESH ALONG WITH THE ADJUDICATION OF THE RESPECTIVE GROUND PERTAINING TO THE REJECTION/ RELIABILITY OF THE BOOKS OF ACCOUNTS. 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO/CIT(A). 6.WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL IN THE CASE OF HITESH S. MEHTA (SUPRA). WHETHER THE INTEREST LIABILITIES O F RS. 5,14,455/ - CONSTITUTES ASCERTAINED ONE OR NOT IS ALSO LINKED TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AS THE BOOKS OF ACCOUNT IS THE BASIS FOR COMPUTATION OF BOOK PROFITS U/S 115JA OF THE ACT. THIS IS COMMON ISSUE QUA THE ISSUE ADJUDICATED IN T HE CASE OF THE HITESH S. MEHTA (SUPRA) AND MATTER WAS SET ASIDE. RESPECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED IN GROUND NO.4 SHOULD BE SET ASIDE TO THE FILES OF THE CIT(A) FOR FRESH ADJUDICAT ION OF THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE DECISION IF ANY SHOULD BE TAKEN ONLY AFTER CONSIDERING THE DECISION IN THE CASE OF HITESH S MEHTA, (SUPRA). ACCORDINGLY, GROUND NOS. 4 & 5 ARE SET ASIDE. RESPEC TFULLY,FOLLOWING THE ABOVE ORDER,WE ARE RESTORING BACK THE MATTER TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.4 IS ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART. 3.NEXT GROUND OF APPEAL IS ABOUT LEVY OF INTEREST U/S. 234 OF THE ACT.BEFORE US, AR STATED THAT THE ASSESSEE WAS A NOTIFIED ENTITY,THAT THE PROVISIONS OF S. 234A, 234B AND 234C OF THE ACT WERE DEEMED TO HAVE COMPLIED WITH,THAT THE ASSETS WERE ALREADY IN ATTACHME NT OF THE CUSTODIAN APPOINTED UNDER THE PROVISIONS OF THE SPECIAL COURTS ACT,THAT THE TRIBUNAL IN THE CASE OF THE APPELLANT AND SEVERAL OTHER ENTITIES HAD HELD THE VIEW IN FAVOUR OF THE APPELLANT,THAT THE HONBLE BOMBAY HIGH 7 ITA NO. 3048 /MUM/201 3 COURT IN THE CASE OF DIVINE HOL DINGS PVT. LTD. AND CASCADE HOLDINGS PVT. LTD. HAD HELD THAT THE PROVISIONS OF SECTIONS 234A,234B AND 234C OF THE ACT WERE MANDATORY AND WERE APPLICABLE TO THE NOTIFIED ENTITIES ALSO,THAT THE ASSESSEE WAS IN THE PROCESS OF FILING AN APPEAL AGAINST THE SAID ORDER BEFORE THE HONBLE SUPREME COURT,THAT THE INCOME EARNED IN THE YEAR UNDER CONSIDERATION WAS SUBJECTED TO PROVISIONS OF TDS,THAT THE CHANGEABILITY OF THE SECTION 234A, 234B AND 234C OF THE ACT SHOULD BE AFTER CONSIDERING THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE ON THE INCOME ASSESSED. THE APPELLANT RELIES IN THIS REGARD ON THE FOLLOWING DECISIONS. HE RELIED UPON THE CASES OF MOTOROLA INC. V. DCIT [95 ITD 269 (DEL.(SB)], SEDCO FORES DRILLING CO. LTD. [264ITR 320],NGC NETWORK ASIA LLC [313 ITR 187] ,SUMMI T BHATACHARYA [ 300 ITR (AT) 347 (BOM)(SB)], VIJAL GOPAL JINDAL [ITA NO. 4333/DEL/2009] & EMILLO RUIZ BERDEJO [320 ITR 190 (BOM)].DR RELIED UPON THE CASES OF DEVINE HOLDINGS PVT. LTD. 3.1.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFOR E US.WE FIND THAT IN THE CASE OF DEVINE HOLDINGS PVT. LTD. HONBLE BOMBAY HIGH COURT HAS HELD THAT PROVISIONS OF SECTION 234A, 234B AND 234C WERE APPLICABLE TO THE NOTIFIED PERSON ALSO.THEREFORE, UPHOLDING THE ORDER OF THE FAA TO THAT EXTENT,WE HOLD THAT P ROVISIONS OF SECTION 234 OF THE ACT ARE APPLICABLE.AS FAR AS CALCULATION PART IS CONCERNED,WE FIND MERITS IN THE SUBMISSION MADE BY THE ASSESSEE.THEREFORE, WE ARE RESTORING BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION WHO WOULD DECIDE THE IS SUE AFTER CONSIDERING THE AMOUNT TAXED DEDUCTIBLE AT SOURCE ON THE INCOME ASSESSED AND AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.GROUND NO.5 IS ALLOWED IN PART IN FAVOUR OF THE ASSESSEE. THE TRIBUNAL IN THE CASE OF GROWMORE RESE ARCH & MANAGEMENT LTD VS ACIT ITA NO 5137/MUM/2012 DATED 05.03.2015 AY 2006 - 07 VIDE PARAS 5 & 6 HAS OBSERVED AND HAS HELD AS UNDER : 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WHILE DISPOSING THE GROUND RELATING TO THE DISALLOW ANCE OF INTEREST, WE FIND THAT THE LD. CIT(A) HAS FOLLOWED THE FINDINGS GIVEN IN THE CASE OF EMINENT HOLDINGS PVT. LTD. WE FIND THAT THE TRIBUNAL IN THE CASE OF EMINENT HOLDINGS IN ITA NOS. 2139, 2140 AND 8 ITA NO. 3048 /MUM/201 3 2141/MUM/2013 HAVE FOLLOWED THE DECISION OF THE TRI BUNAL GIVEN IN COMMON GROUP CASE OF HITESH S. MEHTA AT PARA 2.3 OF THE ORDER AND RESTORED THE MATTER TO THE FILE OF THE LD. CIT(A) FOR FRESH ADJUDICATION. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO - ORDINATE BENCH, WE RESTORE THIS ISSUE TO THE FILES OF T HE LD. CIT(A) FOR FRESH ADJUDICATION AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. BEFORE CLOSING THIS ISSUE, THE LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE LD. CIT(A) HAS HELD THAT THE ISSUE OF INTEREST EXPENDITURE IS PE NDING BEFORE THE HONBLE SPECIAL COURT. IT IS THE SAY OF THE LD. COUNSEL THAT THE PROCEEDINGS IN WHICH THE SAID ISSUE OF INTEREST WAS ISSUED BY THE CUSTODIAN HAVE BEEN ALREADY CONCLUDED WHICH FACT HAS ALREADY BEEN RECORDED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. WE, THEREFORE, DIRECT THE LD. CIT(A) TO CONSIDER THIS FACT WHILE DECIDING THE ISSUE AFRESH. THE LD. CIT(A) MAY ALSO DIRECT FOR THE TAXING OF INCOME IN THE HANDS OF THE RECIPIENT (FAMILY MEMBERS) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING FOLLOWED BY THEM AND AS PER THE PROVISIONS OF THE LAW. GROUND NO. 4 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. IN THE CASE OF EMINENT HOLDINGS VS ACIT ITA NO 2139/MUM/2013 DATED 18.06.2013 AY 2002 - 03 , THE TRIBUNAL VIDE PARAS 2.1 TO 3.1 HAS OBSERVED AND HELD AS UNDER: - 2.1.ASSESSEE - COMPANY,ENGAGED IN THE BUSINESS OF TRADING AND INVESTING IN SECURITIES,FILED ITS RETURN OF INCOME ON 22.04.2013.ASSESSING OFFICER (AO) PASSED AN ORDER U/S.144 R.W.S. 147 OF THE ACT ON 22.03.2006,DETERMINING THE INCOME OF THE ASSES SEE AT RS.18.83 LAKHS.DURING THE ASSESSMENT PROCEEDINGS, CERTAIN ADDITIONS WERE MADE BY THE AO AND SAME WERE CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AGAINST THE ORDER OF THE FAA, ASSESSEE HAS RAISED SIX GROUNDS OF APPEAL BEFORE US, AS STATED E ARLIER. 2.2.GROUND NO.4 IS ABOUT DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 5,14,455/ - .BEFORE US, AR STATED THAT IDENTICAL ISSUE HAD COME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY - 2007 - 08, THAT MATTER WAS RESTORED BACK TO THE FILE OF THE FAA. DEPARTMENTAL REPRESENTATIVE(DR) LEFT TO THE ISSUE TO THE DISCRETION OF THE BENCH. 9 ITA NO. 3048 /MUM/201 3 2.3.AFTER HEARING THE RIVAL CONTENTIONS,WE ARE OF THE OPINION THAT MATTER SHOULD BE REMANDED BACK TO THE FILE OF THE FAA.WE FIND THAT WHILE DECIDING T HE APPEAL FOR AY 2007 - 08 (ITA/8200/2010 DT. 12.02.2014) E BENCH OF TRIBUNAL HAS DECIDED THE ISSUE AS UNDER: 4. GROUND NOS. 4 & 5 ARE INTER - CONNECTED RELATING TO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS. 5,14,455/ - .IN THIS REGARD, AT THE OUTSET, LD COUNSEL MENTIONED THAT AN IDENTICAL ISSUE CAME UP FOR ADJUDICATION BEFORE THE ITAT, MUMBAI IN THE CASED OF HITESH S. MEHTA VS. DCIT VIDE ITA NO. 7726 & 7727/M/2010 DATED 26.04.2013, WHEREIN THE TRIBUNAL SET ASIDE THE ISSUE TO THE FILES OF CIT(A) FOR ADJUD ICATION OF THE ISSUE AFRESH BY ADJUDICATING THE RESPECTIVE GROUND RELATING TO THEREJECTION/RELIABILITY OF THE BOOKS OF ACCOUNT. PARA 5 FROM THE SAID ORDER OF THE TRIBUNAL (SUPRA) IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 5. GROUND NO.4 REL ATES TO THE ACTION OF THE LD CIT(A) IN CONFIRMING THE LIABILITIES AMOUNTING TO RS. 11,24,99,052/ - AND RS. 12,61,36,245/ - RESPECTIVELY FOR THE AYS 2005 - 06 AND 2006 - 07 TOWARDS INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT THE FIN DINGS GIVEN IN PARA 3.3 ABOVE IN RESPECT OF REJECTION/ RELIABILITY OF THE BOOKS OF ACCOUNTS AND THE PROPOSED ADJUDICATION OF THE LD CIT(A) IN VIEW OF THE SAID DIRECTION MAY HAVE DIRECT IMPACT ON THE ISSUE OF THE IMPUGNED LIABILITY, WE SET ASIDE THIS ISSUE TO THE FILES OF THE CIT(A) TO ADJUDICATE AFRESH ALONG WITH THE ADJUDICATION OF THE RESPECTIVE GROUND PERTAINING TO THE REJECTION/ RELIABILITY OF THE BOOKS OF ACCOUNTS. 5. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO/CIT(A). 6.WE HA VE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL IN THE CASE OF HITESH S. MEHTA (SUPRA). WHETHER THE INTEREST LIABILITIES OF RS. 5,14,455/ - CONSTITUTES ASCERTAINED ONE OR NOT IS ALSO LINKED TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNTS AS THE BOOKS OF ACCOUNT IS THE BASIS FOR COMPUTATION OF BOOK PROFITS U/S 115JA OF THE ACT. THIS IS COMMON ISSUE QUA THE ISSUE ADJUDICATED IN THE CASE OF THE HITESH S. MEHTA (SUPRA) 10 ITA NO. 3048 /MUM/201 3 AND MATTER WAS SET ASIDE. RESP ECTFULLY FOLLOWING THE SAID ORDER OF THE TRIBUNAL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE RAISED IN GROUND NO.4 SHOULD BE SET ASIDE TO THE FILES OF THE CIT(A) FOR FRESH ADJUDICATION OF THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE DECISION IF ANY SHOULD BE TAKEN ONLY AFTER CONSIDERING THE DECISION IN THE CASE OF HITESH S MEHTA, (SUPRA). ACCORDINGLY, GROUND NOS. 4 & 5 ARE SET ASIDE. RESPECTFULLY,FOLLOWING THE ABOVE ORDER,WE ARE RESTORING BACK THE MATTER TO THE FILE OF THE FAA FOR FRESH ADJUDICATION.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.4 IS ALLOWED IN FAVOUR OF THE ASSESSEE,IN PART. 3.NEXT GROUND OF APPEAL IS ABOUT LEVY OF INTEREST U/S. 234 OF THE ACT.BEFOR E US, AR STATED THAT THE ASSESSEE WAS A NOTIFIED ENTITY,THAT THE PROVISIONS OF S. 234A, 234B AND 234C OF THE ACT WERE DEEMED TO HAVE COMPLIED WITH,THAT THE ASSETS WERE ALREADY IN ATTACHMENT OF THE CUSTODIAN APPOINTED UNDER THE PROVISIONS OF THE SPECIAL COU RTS ACT,THAT THE TRIBUNAL IN THE CASE OF THE APPELLANT AND SEVERAL OTHER ENTITIES HAD HELD THE VIEW IN FAVOUR OF THE APPELLANT,THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIVINE HOLDINGS PVT. LTD. AND CASCADE HOLDINGS PVT. LTD. HAD HELD THAT THE PROV ISIONS OF SECTIONS 234A,234B AND 234C OF THE ACT WERE MANDATORY AND WERE APPLICABLE TO THE NOTIFIED ENTITIES ALSO,THAT THE ASSESSEE WAS IN THE PROCESS OF FILING AN APPEAL AGAINST THE SAID ORDER BEFORE THE HONBLE SUPREME COURT,THAT THE INCOME EARNED IN THE YEAR UNDER CONSIDERATION WAS SUBJECTED TO PROVISIONS OF TDS,THAT THE CHANGEABILITY OF THE SECTION 234A, 234B AND 234C OF THE ACT SHOULD BE AFTER CONSIDERING THE AMOUNT OF TAX DEDUCTIBLE AT SOURCE ON THE INCOME ASSESSED. THE APPELLANT RELIES IN THIS REGARD ON THE FOLLOWING DECISIONS. HE RELIED UPON THE CASES OF MOTOROLA INC. V. DCIT [95 ITD 269 (DEL.(SB)], SEDCO FORES DRILLING CO. LTD. [264 ITR 320],NGC NETWORK ASIA LLC [313 ITR 187] ,SUMMIT BHATACHARYA [ 300 ITR (AT) 347 (BOM)(SB)], VIJAL GOPAL JINDAL [ITA NO. 4333/DEL/2009] & EMILLO RUIZ BERDEJO [320 ITR 190 (BOM)].DR RELIED UPON THE CASES OF DEVINE HOLDINGS PVT. LTD. 11 ITA NO. 3048 /MUM/201 3 3.1.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF DEVINE HOLDINGS PVT. LTD. HONBLE B OMBAY HIGH COURT HAS HELD THAT PROVISIONS OF SECTION 234A, 234B AND 234C WERE APPLICABLE TO THE NOTIFIED PERSON ALSO.THEREFORE, UPHOLDING THE ORDER OF THE FAA TO THAT EXTENT,WE HOLD THAT PROVISIONS OF SECTION 234 OF THE ACT ARE APPLICABLE.AS FAR AS CALCULA TION PART IS CONCERNED,WE FIND MERITS IN THE SUBMISSION MADE BY THE ASSESSEE.THEREFORE, WE ARE RESTORING BACK THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION WHO WOULD DECIDE THE ISSUE AFTER CONSIDERING THE AMOUNT TAXED DEDUCTIBLE AT SOURCE ON THE I NCOME ASSESSED AND AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.GROUND NO.5 IS ALLOWED IN PART IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE FOR THE AY.2002 - 03 STANDS PARTLY ALLOWED. 8 . WE THEREFORE RESPECT FULLY FOLLOWING THE DECISIONS OF TRIBUNALS IN THE ASSESSEES OWN CASE AND ALSO VARIOUS OTHER DECISIONS AS STATED ABOVE RESTORE THE ISSUE BACK TO THE FILE OF THE CIT(A) FOR FRESH ADJU DI CATION AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE AND ALSO CALCULATE THE INTEREST U/S 234 OF THE ACT AFTER CONSIDERING THE TAX DEDUCTED AT SOURCE. 9 . IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH FEBRUARY , 201 6 SD SD ( C.N. PRASAD ) ( RAJESH KUMAR) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 26TH . 02 .201 6 SRL,SR.PS 12 ITA NO. 3048 /MUM/201 3 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI