RANGNATH SOMANI, MUMBAI V. ADDL CIT RG 12(1), MUMBAI

ITA 3090/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100938 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 19-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: NARAYAN ATAL
• Keywords: Capital asset; Gift; Cost of acquisition; Reasonable cause
• Section: 273B; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , J UDICIAL MEMBER ITA NO. 945 / MUM/20 1 2 ( ASSESSMENT YEAR : 20 08 - 09 ) ACIT - 12(1), MUMBAI - 400020 VS. SHRI RANGNATH BASUDEV SOMANI, 2 N D FLOOR, SHREENIWAS HOUSE, HAZARIMAL SOMANI MARG, FORT, MUMBAI - 400001 PAN NO. : A A BPS 8102 L ( / APPELLANT ) .. ( / RESPONDENT ) AND CROSS OBJECTION NO. 25 / MUM/20 1 3 (ARISING OUT OF ITA NO.945/MUM/2012) ( ASSESSMENT YEAR :2008 - 09 ) SHRI RANGNATH BASUDEV SOMANI, 2 ND FLOOR, SHREENIWAS HOUSE, HAZARIMAL SOMANI MARG, FORT, MUMBAI - 40000 1 VS. ACIT - 12(1), MUMBAI - 400020 PAN NO. : A ABPS 8102 L ( / APPELLANT ) .. ( / RESPONDENT ) AND ITA NO. 1039 / MUM/20 12 ( ASSESSMENT YEAR :2008 - 09 ) SHRI RANGNATH SOMANI, 2 ND FLOOR, SHREENIWAS HOUSE, HAZARIMAL SOMANI MARG, FORT, MUMBAI - 400 001 VS. ACIT - 12(1), MUMBAI - 400020 PAN NO. : A ABPS 8102 L ( / APPELLANT ) .. ( / RESPONDENT ) AND ITA NO. 3090/ MUM/20 1 3 ( ASSESSMENT YEAR :200 7 - 08 ) SHRI RANGNATH SOMANI, 2 ND FLOOR, SHREENIWAS HOUSE, HAZARIMAL SOMANI MARG, FORT, MUMBAI - 400001 VS. ACIT - 12(1), MUMBAI - 400020 PAN NO. : A ABPS 8102 L ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY : SHRI SANTOSH KUMAR & SHRI LOVE KUMAR ASSESSEE BY : SHRI NARAYAN ATAL ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 2 DATE OF HEARING : 14 TH MAY, 201 5 DATE OF PRONOUNCEMENT 31 ST AUGUST , 2015 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER THIS ORDER SHALL GOVERN THE DISPOSAL OF ITA NO. 945/MUM/2012 WHICH HAS BEEN FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2008 - 09 , AGAINST WHICH THE ASSESSEE HAS FILED CR OSS OBJECTION I.E. CO.NO.25/MUM/2013 AND ITA NOS.1039/MUM/12 & 3090/MUM/2013 FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR S 2008 - 09 & 2007 - 08 . 2 . OUT OF ALL THE APPEALS, ONE APPEAL I.E. ITA NO. 1039/MUM/2012, WHICH HAS BEEN FILED BY THE ASSESSEE FOR ASSESS MENT YEAR 2008 - 09, IS BARRED BY 32 DAYS, FOR WHICH ASSESSEE HAS FILED AN AFFIDAVIT FOR CONDONATION OF DELAY. AFTER CONSIDERING THE AFFIDAVIT FILED IN THIS REGARD, WE CODONE THE DELAY OF 32 DAYS IN FILING THE APPEAL. 3. BEING SIMILAR ISSUES INVOLVED IN ALL THESE CASES , THE SAME ARE TAKEN ALTOGETHER FOR DISPOSAL BY THIS COMMON ORDER . FOR THE SAKE OF CONVENIENCE, WE TAKE INTO CONSIDERING THE FACTS M ENTIONED IN ITA NO.945/MUM/2012 , WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - I) ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING TH E 'ADDITION MADE BY THE A.O. U/ S. 48 OF THE I T. ACT, 1961 AND NOT APPRECIATING THE FACT THAT THE DECISION IN THE CASE CIT VS. SHAKUNTALA KANTILAL 190 ITR 56 OF HON'BLE BOMBAY HIG H COURT WAS OVERRULED BY THE HON 'BLE BOMBAY HIGH COURT ITSELF IN THE CASE OF CIT VS. ROSHAN BABOO MOHD. HUSSIAN MERCHANT (275 ITR 321) (BOMBAY), IN THE LIGHT OF THE APEX COURT JUDGMENTS IN THE CASES OF V.S.M.R. ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 3 JAGDISHCHANDRA VS. CIT (1997) (227 ITR 240), ARUNCHALAM (R.M.) VS. CIT (1997) (227 ITR 222) AND CIT VS. ATTILI N. RAO (2001) (252 ITR 880). (II) THE EXPENDITURE CANNOT BE HELD WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF CAPITAL ASSETS. THESE EXPENSES ARE MORE IN THE NATURE OF ENHANCEM ENT OF THE VALUE OF THE ASSETS WHICH WERE TRANSFERRED AND HENCE CANNOT BE REGARDED AS EXPENDITURE WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF ASSETS AS REQUIRED BY THE PROVISIONS OF SECTION 48 OF THE I T. ACT, 1961. (III) ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) IS INDISCRIMINATE AND INCONSISTENT IN ITS ORDER WHILE DELETING THE ADDITION MADE U/ S. 48 OF THE I T. ACT, 1961. (IV) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ' 4. AGAINST WHICH THE ASSESSEE HAS FILED CROSS OBJECTION I.E. CO NO.25/MUM/2013 WITH THE FOLLOWING GROUNDS : - 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 23, MUMBAI [HEREAFTER REFERRED TO AS T HE CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 32,00,000 / - CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE SAME IS NOT INCURRED IN CONNECTION WITH THE TRANSFER OF SHARES. YOUR RESPONDENT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AMOUNT IS ALLOWABLE AS DEDUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 2 . THE LEARNED CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 51,05,000 / - CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE SAME IS NOT INCURRED IN CONNECTION WITH THE TRANSFER OF SHARES. YOUR RESPONDENT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AMOUNT IS ALLOWABLE AS DEDUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 3 . THE LEARNED CIT(A) ER RED IN CONFIRMING THE DISALLOWANCE OF RS. 2,50,00,000 / - CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 4 DETAILS OF SETTLEMENT BY WAY OF CONSENT TERMS ETC. HAVE NOT BEEN FILED IN RESPECT OF THE SAID PAYMENT. YOUR RESPONDENT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AMOUNT HAS BEEN PAID FOR REMOVING THE ENCUMBRANCE ON THE SHARES AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 4 . THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 4,50,000 / - AND RS. 36,35,000 / - BEING LEGAL FEES CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE SAME ARE NOT INCURRED IN CONNECTION WITH THE TRANSFER OF SHARES. YOUR RESPONDENT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AMOUNT IS ALLOWABLE AS DEDUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDU CTION. 5. THE ASSESSEE IN ITS APPEAL I.E . ITA NO.1039 /MUM/2012 (AY 2008 - 09) HAS TAKEN THE FOLLOWING GROUNDS : - 1. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 23, MUMBAI [HEREAFTER REFERRED TO AS THE CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 32,00,0001 - CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE SAME IS NOT INCURRED IN CONNECTION WITH THE TRANSFER OF SHARES. YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE AMOUNT IS ALLOWABLE AS DEDUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 51,05,0 00 / - CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE ION TERM ARLLI!L9AINS ON THE GROUND THAT THE SAME IS NOT INCURRED IN CONNECTION WITH TRANSFER OF SHARES. YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW TH E AMOUNT IS ALLOWABLE AS DEDUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 3 . THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 2,50 ,00,000/ - CLAIME D AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 5 DETAILS OF SETTLEMENT BY WAY OF CONSENT TERMS ETC. HAVE NOT BEEN FILED IN RESPECT OF THE SAID PAYMENT. . YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND IN LAW THE AMOUNT HAS BEEN PAID FOR REMOVING THE ENCUMBRANCE ON THE SHARES AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 4 . THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 4,50,000 / - AND RS. 36,35,000 / - BEING LEGAL FEES CLAIMED AS DEDUCTION U/S. 48 OF THE ACT WHILE COMPUTING THE LONG TERM CAPITAL GAINS ON THE GROUND THAT THE SAME ARE NOT INCURRED IN CONNECTION WITH THE TRANSFER OF SHARES. YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIRCUMS TANCES OF THE CASE AND IN LAW THE AMOUNT IS ALLOWABLE AS DEDUCTION EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT AND THEREFORE THE ACIT MAY BE DIRECTED TO ALLOW THE SAID DEDUCTION. 6. THE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 (I.E. ITA NO. 3090/MUM/2013 ) HAS COME WITH FOLLOWING GROUNDS : - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 21, MUMBAI (HEREINAFTER REFERRED TO AS CIT(A) ERRED IN CONFIRMING THE PENALTY OF RS.1,30,000/ - LEVIED BY THE ADDL. CIT U/S.271E OF TH E INCOME TAX ACT, 1961. YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE PENALTY U/S.271E IS NOT LEVIABLE AND OUGHT TO BE CANCELLED. 7 . CONCISE FACTS OF THE CASE ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S SHREE MU KUND CONSTRUCTION & ENGINEERING CORPORATION AND IS IN THE BUSINESS OF DEALING IN SHARES AND SECURITIES AND COMMISSION AGENTS. THE PROMOTERS OF SHREENIWAS COTTON MILLS LTD. (IN LIQUIDATION) WERE THE MEMBERS OF SOMANI FAMILY OF WHICH THE ASSESSEE IS ONE OF T HE CONSTITUENTS. THE FATHER OF THE ASSESSEE LATE BASUDEV SOMANI WAS ONE OF THE DIRECTORS OF THE COMPANY. T HE ASSESSEE WAS ALSO LOOKING AFTER THE DAY - TO - DAY AFFAIRS OF THE COMPANY ALONG WITH OTHER FAMILY MEMBERS AND ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 6 WAS THE CONSTITUTED ATTORNEY OF THE COMPA NY. THE SAID COMPANY WENT INTO LIQUIDATION ON 25 - 7 - 1984 SUBSEQUENT TO THE PROLONGED STRIKE BY THE ENTIRE TEXTILE INDUSTRY WORKERS IN 1981 WHICH WAS LED BY LATE DR. DATTA SAMANT AND WHICH CONTINUED UPTO 18 MONTHS THEREBY CRIPPLING THE ENTIRE TEXTILE INDUSTR Y. IN 1994, THE ASSESSEE ALONG WITH THE OTHER CONSTITUENT MEMBERS OF THE FAMILY FILED A SCHEME U/S.391 OF THE COMPANIES ACT, 1956 FOR REVIVAL OF THE COMPANY AND ALSO TO TAKE THE COMPANY OUT OF LIQUIDATION. AN MOU WAS ENTERED I NTO WITH M/S VALLABH THAKKAR, VA SUDEV NAVANI, BAKULESH SHAH AND PARASMAL LODHA FOR THE PURPOSE OF FUNDING THE SCHEME. PURSUANT TO THE MOU SHARES HELD BY THE ASSESSEE WERE DEPOSITED IN ESCROW ACCOUNT WITH M/S KANGA & CO., SOLICITORS & ADVOCATES. HOWEVER, AFTER THE SAID SCHEME WAS APPROV ED BY THE SHARE HOLDERS AND VARIOUS CLASSES OF CREDITORS, THE SCHEME WAS TURNED DOWN BY THE HONBLE BOMBAY HIGH COURT AND EVEN THE SLP FILED IN THE HONBLE SUPREME COURT IN 1995 WAS NOT ADMITTED. THEREAFTER EFFORTS WERE CONTINUOUSLY MADE TO REVIVE THE COMP ANY AND AGAIN IN 2004 SCHEME U/S.319 OF THE COMPANIES ACT W AS PROPOUNDED WITH M/S LODHA BUILDERS PVT. LTD. AS THE SPONSORS TO THE SCHEME. HOWEVER, AGAIN THE SCHEME WAS REJECTED BY THE HONBLE BOMBAY HIGH COURT AND ULTIMATELY SHARES WERE SOLD TO AN ENTITY B ELONGING TO LODHA GROUP AFTER REMOVING THE VARIOUS ENCUMBRANCES ON THE SHARES WHICH WERE CREATED DURING THE PERIOD BETWEEN 1994 TO 2007 FOR THE PURPOSE OF REVIVAL OF THE COMPANY. SUBSEQUENTLY SETTLEMENTS WERE REACHED WITH VARIOUS PARTIES AND ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 7 ACCORDINGLY TH E AMOUNTS WERE PAID TO THEM SO THAT THE SHARES COULD BE SOLD TO LODHA FREE OF ENCUMBRANCES. FOLLOWING CONSENT TERMS WERE FILED BEFORE THE HONBLE BOMBAY HIGH COURT: - A) CONSENT TERMS WITH MEGHAL HOMES PVT. LD. (BAKULESH THAKKAR) B) CONSENT TERMS WITH PARAS MAL LODHA. THEREAFTER THE ASSESSEE HAD OFFERED LONG TERM CAPITAL GAIN OF RS,8,14,49,664/ - ON SALE OF SHARES AND FURNISHED THE FOLLOWING IN COMPUTATION OF LONG TERM CAPITAL GAINS : - INCOME FROM CAPITAL GAINS LONG TERM CAPITAL GAIN - AS PER STATEMENT RS. 50,92,98,310 LESS : EXPENSES/DEDUCTIONS RS.15,12,02,146 LESS : INVESTMENT U/S.54F RS.27,66,46,500 RS.8,14,49,664 8. THE AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS REGARDING LONG TERM CAPITAL GAINS AND TO JUSTIFY ALLOWABILITY OF DEDUCTION OF EXPENDIT URE AT RS.15,12,02,146/ - CLAIMED. THE ASSESSEE HA D SOLD 8042 SHARES OF M/S SHREENIVAS COTTON MILLS LIMITED FOR FULL VALUE OF CONSIDERATION OF RS.50,92,98,310/ - . FROM THIS FULL VALUE OF CONSIDERATION, ASSESSEE HA D REDUCED AN AMOUNT OF RS. 15,12,06,146/ - ON A CCOUNT OF EXPENDITURE IN RELATION TO TRANSFER/COST OF PERFECTION OF TITLE/COST OF IMPROVEMENT. IN RESPONSE TO OPPORTUNITY TO FURNISH EXPLANATION OF SUCH EXPENDITURE , THE DETAILS OF EXPENDITURE CLAIMED WAS FURNISHED AS FOLLOWS : - I) MR. ANAND AGARWAL RS. 4 ,00,00,000/ - THIS AMOUNT IS PAID I PAYABLE IN RESPECT OF CONSULTANCY SERVICES PROVIDED AND TO FACILITATE THE SALE OF SHARES TO M/S. ADINATH ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 8 BUILDERS PVT. LTD. OUT OF THE SUM OF RS. 4,00,00,000/ - , AN AMOUNT OF RS. 1,75,00,000/ - HAS BEEN PAID ON 07.02.2008 D ATE AND THE BALANCE IS PAYABLE TO HIM. WE ENCLOSE HEREWITH COPY OF LETTER AND INVOICE RECEIVED FROM MR. ANAND AGARWAL - ANNEXURE' L' II) M/S. HANSRAJ JAISWAL & M/S. SAI CONSTRUCTIONS RS.32,00,000/ - AN ADVANCE OF RS. 10,00,000/ - WAS RECEIVED FROM THEM P URSUANT TO AN UNDERSTANDING MADE WITH RESPECT TO THE RIGHTS 1 PREFERENCE TO BE GIVEN TO THEM FOR SALE OF SCRAP OF SNCM AS AND WHEN IT COMES OUT OF LIQUIDATION. HOWEVER, SINCE THE SCHEME FOR REVIVAL FILED BY THE ASSESSEE BECAME FRUSTRATED, A COMPENSATION OF RS.42,00,000/ - WAS PAID TO THEM FOR CANCELLATION OF THE MOU. WE ENCLOSE HEREWITH COPY OF MOU. - ANNEXURE '2 ' III) M/S. SESHAN HOUSING AND AREA DEVELOPMENT ENGINEERING PVT. LTD. (SESHAN) RS. 2,30,00,000/ - : AN ADVANCE OF RS. 3,20,00,000/ - WAS RECEIVED FROM THEM PURSUANT TO AN UNDERSTANDING (MOU) MADE WITH RESPECT TO THE RIGHTS / PREFERENCE TO BE GIVEN TO THEM FOR SALE OF SHARES ON THE HAPPENING OF CERTAIN EVENTUALITIES. HOWEVER, SINCE THE MOU BECAME FRUSTRATED, A COMPENSATION OF RS. 5,50,00,000/ - WAS P AID TO THEM FOR CANCELLATION OF THE MOU. WE ENCLOSE HEREWITH COPIES OF THE MOU AND THE LETTER CANCELLING THE SAID MOU. - ANNEXURE '3 TO 3(II) IV) MR. VIJAY RAHATE RS. 51,05,000/ - : THE AMOUNT WAS PAID / PAYABLE TO HIM FOR MUSTERING THE SUPPORT OF EX - WO RKERS OF SNCM AND TO FOLLOW UP WITH RASHTRIYA MILL MAZDOOR SANGH, THE TEXTILE WORKERS UNION, TO SUPPORT THE SCHEME FOR REVIVAL. WE ENCLOSE HEREWITH COPY OF THE MOU MADE WITH HIM. - ANNEXURE '4 ' V) M/S. MEGHAL HOMES / MR. V.D .NAVANI / MR. PARASMAL LODHA - RS. 6,25,00,000/ - : AN MO U WAS ENTERED INTO WITH THEM IN 1994 FOR SPONSORING THE SCHEME FOR REVIVAL OF SNCM. THESE AMOUNTS WERE PAID TO THEM TO WITHDRAW THE SUITS FILED BY THEM IN THE HIGH COURT CLAIMING CERTAIN RIGHTS UNDER THE 1994 MOU . THE DETAILS OF PAYMENTS MADE TO THEM ARE AS UNDER: V I) M/S. MEGHAL HOMES PVT. LTD. RS. 3,25,00,000 / - II) MR. PARASMAL LODHA & ANR. RS. 50,00,000 / - III) MR. VASUDEV NAVANI RS. 2,50,00,000 / - ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 9 IV) MR. ASPI CHINOY & CO. RS. 3,25,00,000/ - THIS AMOUNT WAS PAID TO THEM FOR APPEARING IN VARIOUS COURT CASES PERTAINING TO SNCM ON BEHALF OF ASSESSEE. VII) M/S. M. DHRUVA & CO., ADVOCATES & SOLICITORS RS.36,35,000/ - : THIS AMOUNT HAS BEEN PAID TO THEM FOR REPRESENTATION AND BEING ADVOCATES FOR MATTERS RELATING TO SNCM IN VARIOUS COURTS. COPY OF BILL ENCLOSED. -ANNEXURE '5' VIII) LEGAL AND OTHER EXPENSES OF RS.1,33,12,146/ - THESE ARE LEGAL EXPENSES PAID/PAYABLE TO VARIOUS ENTITIES INCLUDING THE EX - WORKERS OF SNCM IN RESPECT OF VARIOUS MATTERS RELATING TO THE SCHEME OF COMPROMISE FOR REVIVAL OF SNCM. HOWEVER, THE AO BEING PARTLY CONVINCED WITH THE AFORESAID EXPLANATION OF THE ASSESSEE , ALLOWED RS.1,33,12,146/ - ON ACCOUNT OF LEGAL AND OTHER EXPENSES AND RS.1,75,00,000/ - ON ACCOUNT OF TRANSFER OF CAPITAL AS SET AND AFTER DEDUCTING THE SAME OUT OF THE TOTAL EXPENSES CLAIMED OF RS.15,12,02,146/ - , THE REST OF THE AMOUNT I.E. RS.12,03,90,000/ - WAS DISALLOWED BY THE AO. 9 . AGAINST THE DISALLOWANCE MADE BY THE AO, THE ASSESSEE APPROACHED BEFORE THE CIT(A) AND THE CIT(A) IN THE O RDER IMPUGNED HAS UPHELD THE ADDITION S SO MADE OF RS.2,25,00,000/ - ON ACCOUNT OF PAYMENT TO MR. ANAND AGARWAL , RS.32,00,000/ - ON ACCOUNT OF PAYMENT MADE TO MR. HANSRAJ & M/S SAI CONSTRUCTIONS , RS. 51,05,000/ - ON ACCOUNT OF PAYMENT MADE TO MR. VIJAY RAHATE, RS.2,50, 00, 000/ - ON ACCOUNT OF PAYMENT MADE TO MR. VASUDEV NAVANI, RS.4,50,000/ - & RS.36,35,000/ - ON ACCOUNT OF PAYMENTS MADE TO MR. ASPI CHINOY & CO. AND M/S M .DHURVA & CO., ADVOCATES AND SOLICITORS, AND, THUS, TOTAL DISALLOWANCE CONFIRMED BY THE ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 10 CIT(A) W AS AT RS. 5 , 98 , 90 , 000 / - . HOWEVER, THE CIT(A) ALLOWED THE EXPENDITURE CLAIMED ON ACCOUNT OF PAYMENTS MADE TO M/S SESHAN HOUSING AND AREA DEVELOPMENT ENGINEERING PVT. LTD.(SESHAN) RS.2,30,00,000/ - AND PAYMENTS MADE TO M/S MEGHAL HOMES/MR. PARASMAL LODHA AMOUN TING TO RS. 3,75,00,000/ - , TOTALING TO RS. 6,05,00,000 / - . 10. NOW, THE REVENUE IS IN FURTHER APPEAL AGAINST THE ADDITIONS DELETED BY THE CIT(A) AND THE ASSESSEE IS IN APPEAL AGAINST THE CONFIRMATION OF DISALLOWANCE MADE BY THE AO. 11. LD. DR SHRI SANTOSH KUM AR ALONG WITH SHRI LOVE KUMAR, BOTH APPEARED ON BEHALF OF THE REVENUE AND CONTENDED THAT AS PER SECTION 48 , THE DEDUCTION FROM CAPITAL GAINS WOULD BE ALLOWED IN CASE WHERE EXPENDITURE IS INCURRED WHOLLY OR EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OR IT IS IN THE COST OF ACQUISITION OF THE ASSET AND COST OF IMPROVEMENT THERETO. THEREFORE, THE AO HAS RIGHTLY MADE THE DISALLOWANCE AFTER GOING THROUGH THE MATERIAL EVIDENCE ON RECORD. HOWEVER, THE CIT(A) HAS NOT CONSIDERED THE FACT THAT THE EXPENDITURE CLAIME D BY THE ASSESSEE CANNOT BE HELD WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF CAPITAL ASSETS. THE EXPENSES ARE MORE IN THE NATURE OF ENHANCEMENT OF THE VALUE OF THE ASSETS WHICH WERE TRANSFER RED AND, HENCE, CANNOT BE REGARDED AS EXPENDITURE WH OLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF ASSETS AS REQUIRED BY THE ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 11 PROVISIONS OF SECTION 48 OF THE ACT. THEREFORE, THE CIT(A) HAS COMMITTED GROSS ERROR IN DELETING THE ADDITIONS MADE U/S.48 OF THE ACT. 12. SHRI NARAYAN ATAL, LD AR, IN OPPUGN ATION TO THE AFORESAID PROPONEMENTS MADE BY THE LD. DR, CONTENDED THAT THE DEDUCTIONS CLAIMED BY THE ASSESSEE ARE FULLY ALLOWABLE EITHER UNDER CLAUSE (I) OR CLAUSE (II) OF SECTION 48 OF THE ACT ON ACCOUNT OF EXPENDITURE INCURRED IN CONNECTION WITH SUCH TRA NSFER AND/OR THE COST OF IMPROVEMENT OR PERFECTION OF TITLE OF THE SHARES SOLD BY THE ASSESSEE. HE FURTHER TARGETING ORDER OF THE AO, CONTENDED THAT THE ENTIRE EXPENDITURE HAS BEEN INCURRED TO REMOVE THE ENCUMBRANCES ON THE SHARES ON ACCOUNT OF VARIOUS AG REEMENTS/UNDERSTANDING ENTERED INTO IN THE PAST WITH VARIOUS PARTIES WITH WHOM THE SETTLEMENT WAS REACHED AND AMOUNTS PAID , SO AS TO MAKE THE SHARES FREE FROM ANY ENCUMBRANCES AND THE TITLE ACCEPTABLE TO THE PURCHASER OF THE SHARES. THE AMOUNT PAID HAS T HUS BEEN EXPENDED AS COST OF IMPROVEMENT AS CONTEMPLATED IN SECTION 48(II) OF THE ACT. LD. AR FURTHER PLACED RELIANCE OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHAKUNTALA KANTILAL, 190 ITR 56, WHEREIN IT HAS BEEN HELD THAT ANY AMOUNT OF PAYMENT WH ICH IS ABSOLUTELY NECESSARY TO EFFECT THE TRANSFER WILL BE EXPENDITURE COVERED BY SECTION 48. IN OTHER WORDS, ONLY SUCH EXPENDITURE IS ALLOWABLE, WITHOUT INCURRING OF WHICH, THE TRANSFER CANNOT BE EFFECTED. THEREFORE, THE ADDITIONS SO MADE BY THE AO AND CO NFIRMED BY THE CIT(A) DESERVE TO BE DELETED. ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 12 13. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE SUBMISSIONS ADVANCED AT THE HANDS OF LD. DR OF THE REVENUE AND LD. AR APPEARING ON BEHALF OF THE ASSESSEE. THE CENTRIPETAL ISSUE THAT REALLY WARRANTS TO BE D WELLED UPON IS AS TO WHETHER THE DEDUCTIONS CLAIMED BY THE ASSESSEE SHOULD BE ALLOWED U/S.48 OF THE ACT. IN ORDER TO APPRECIATE THE PRESENT DISPUTE IN ITS CORRECT PERSPECTIVE, IT IS NECESSARY TO CONSIDER THE MEANING OF THE TERM COST OF ACQUISITION AND COST OF IMPROVEMENT AS PROVIDED U/S 55 OF THE ACT . SECTIONS 48 & 55 OF THE ACT ARE AS UNDER : - MODE OF COMPUTATION 48. THE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS SHALL BE COMPUTED, BY DEDUCTING FROM THE FULL VALUE OF THE CONSIDERATION RECEIVE D OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET THE FOLLOWING AMOUNTS, NAMELY : (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER; (II) THE COST OF ACQUISITION OF THE ASSET AND THE COST OF ANY IMPROVEMEN T THERETO: PROVIDED THAT IN THE CASE OF AN ASSESSEE, WHO IS A NON - RESIDENT, CAPITAL GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET BEING SHARES IN, OR DEBENTURES OF, AN INDIAN COMPANY SHALL BE COMPUTED BY CONVERTING THE COST OF ACQUISITION, EXPENDIT URE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE CAPITAL ASSET INTO THE SAME FOREIGN CURRENCY AS WAS INITIALLY UTILISED IN THE PURCHASE OF T HE SHARES OR DEBENTURES, AND THE CAPITAL GAINS SO COMPUTED IN SUCH FOREIGN CURRENCY SHALL BE RECONVERTED INTO INDIAN CURRENCY, SO, HOWEVER, THAT THE AFORESAID MANNER OF COMPUTATION OF CAPITAL GAINS SHALL BE APPLICABLE IN RESPECT OF CAPITAL GAINS ACCRUING O R ARISING FROM EVERY REINVESTMENT THEREAFTER IN, AND SALE OF, SHARES IN, OR DEBENTURES OF, AN INDIAN COMPANY : PROVIDED FURTHER THAT WHERE LONG - TERM CAPITAL GAIN ARISES FROM THE TRANSFER OF A LONG - TERM CAPITAL ASSET, OTHER THAN CAPITAL GAIN ARISING TO A NON - RESIDENT FROM THE TRANSFER OF SHARES IN, OR DEBENTURES OF, AN INDIAN COMPANY REFERRED TO IN THE FIRST PROVISO, THE PROVISIONS OF CLAUSE (II) SHALL HAVE EFFECT AS IF FOR THE WORDS COST OF ACQUISITION AND COST OF ANY IMPROVEMENT, THE WORDS INDEXED COST OF ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 13 ACQUISITION AND INDEXED COST OF ANY IMPROVEMENT HAD RESPECTIVELY BEEN SUBSTITUTED: [PROVIDED ALSO THAT NOTHING CONTAINED IN THE SECOND PROVISO SHALL APPLY TO THE LONG - TERM CAPITAL GAIN ARISING FROM THE TRANSFER OF A LONG - TERM CAPITAL ASSET BEING BOND OR DEBENTURE OTHER THAN CAPITAL INDEXED BONDS ISSUED BY THE GOVERNMENT :] [PROVIDED ALSO THAT WHERE SHARES, DEBENTURES OR WARRANTS REFERRED TO IN THE PROVISO TO CLAUSE (III) OF SECTION 47 ARE TRANSFERRED UNDER A GIFT OR AN IRREVOCABLE TRUST, THE MARKET VALUE ON THE DATE OF SUCH TRANSFER SHALL BE DEEMED TO BE THE FULL VALUE OF CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER FOR THE PURPOSES OF THIS SECTION :] [PROVIDED ALSO THAT NO DEDUCTION SHALL BE ALLOWED IN COMPUTING THE INCO ME CHARGEABLE UNDER THE HEAD CAPITAL GAINS IN RESPECT OF ANY SUM PAID ON ACCOUNT OF SECURITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE (NO. 2) ACT, 2004.] SECTION 55 READS AS UNDER: - MEANING OF COST OF IMPROVEMENT AND COST OF ACQUISITION . (1) FOR THE PURPOSES OF SECTIONS 48 AND 49, (A) .. (B) COST OF ANY IMPROVEMENT, (1) IN RELATION TO A CAPITAL ASSET BEING GOODWILL OF A BUSINESS OR A RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY O N ANY BUSINESS] SHALL BE TAKEN TO BE NIL ; AND (2) IN RELATION TO ANY OTHER CAPITAL ASSET, ] (I) WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE PREVIOUS OWNER OR THE ASSESSEE BEFORE THE [1ST DAY OF APRIL, [1981], MEANS ALL EXPENDITURE OF A CAPI TAL NATURE INCURRED IN MAKING ANY ADDITIONS OR ALTERATIONS TO THE CAPITAL ASSET ON OR AFTER THE SAID DATE BY THE PREVIOUS OWNER OR THE ASSESSEE, AND (II) IN ANY OTHER CASE, MEANS ALL EXPENDITURE OF A CAPITAL NATURE INCURRED IN MAKING ANY ADDITIONS OR AL TERATIONS TO THE CAPITAL ASSET BY THE ASSESSEE AFTER IT BECAME HIS PROPERTY, AND, WHERE THE CAPITAL ASSET BECAME THE PROPERTY OF THE ASSESSEE BY ANY OF THE MODES SPECIFIED IN SUB - SECTION (1) OF SECTION 49, BY THE PREVIOUS OWNER, BUT DOES NOT INCLUDE ANY EXPENDITURE WHICH IS DEDUCTIBLE IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD INTEREST ON SECURITIES, INCOME FROM HOUSE PROPERTY, PROFITS AND GAINS OF ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 14 BUSINESS OR PROFESSION, OR INCOME FROM OTHER SOURCES, AND THE EXPRESSION IMPROVEMENT SHALL BE CONSTRUED ACCORDINGLY. (2) FOR THE PURPOSES OF SECTIONS 48 AND 49, COST OF ACQUISITION, (A) IN RELATION TO A CAPITAL ASSET, BEING GOODWILL OF A BUSINESS OR A TRADE MARK OR BRAND NAME ASSOCIATED WITH A BUSINESS OR A RIGHT TO MANUFACTURE, PROD UCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS, TENANCY RIGHTS, STAGE CARRIAGE PERMITS OR LOOM HOURS, (I) IN THE CASE OF ACQUISITION OF SUCH ASSET BY THE ASSESSEE BY PURCHASE FROM A PREVIOUS OWNER, MEANS THE AMOUNT OF THE PURCHAS E PRICE ; AND (II) IN ANY OTHER CASE NOT BEING A CASE FALLING UNDER SUB - CLAUSES (I) TO (IV) OF SUB - SECTION (1) OF SECTION 49, SHALL BE TAKEN TO BE NIL ; 14 . FROM THE AFORESAID PROVISIONS OF SECTION 48 OF THE INCOME TAX ACT, WE FIND THAT WHILE COMPUT ING THE INCOME FROM LONG TERM CAPITAL GAINS, THE INDEXED COST OF ACQUISITION AND INDEX ED COST OF IMPROVEMENT INCLUDING ANY EXPENDITURE INCURRED IN CONNECTION WITH THE TRANSFER IS TO BE DEDUCTED FROM THE SALE CONSIDERATION. THE TERM COST OF ACQUISITION IS DEFINED U/S 55 (1)(C ) OF THE ACT WHICH TALKS ABOUT THE COST TO BE ADOPTED IN THE HANDS OF THE ASSESSEE IN RELATION TO THE ASSET(S) ACQUIRED BY THE ASSESSEE VIDE DIFFERENT MODES OF ACQUISITION. THE COST OF ANY IMPROVEMENT TO THE CAPITAL ASSET IS DEFIN ED U/S 55(1)(B) OF THE ACT AS EXPENDITURE INCURRED AFTER THE ACQUISITION OF ASSETS BEING CAPITAL IN NATURE INCLUDING THE COST OF ANY ADDITIONS / OR ALTERATIONS MADE TO THE CAPITAL ASSET AFTER ITS ACQUISITION. 15. THE CASE OF THE REVENUE IS THAT THE ADDI TIONS SO MADE BY THE AO SHOULD NOT BE DELETED BY THE CIT(A). WE FIND THAT THE PAYMENT MADE TO M/S SESHAN HOUSING AND AREA DEVELOPMENT ENGINEERING PVT. LTD.(SESHAN) OF RS.2,30,00,000/ - WAS RELATING TO DAMAGES PAID IN RELATION ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 15 TO AN MOU ENTERED INTO EARLIER, WHICH FELL THROUGH CONSEQUENT TO WHICH DAMAGES WERE PAID BY THE ASSESSEE. THE MOU BETWEEN THE ASSESSEE AND SESHAN HOUSING DATED 15 - 5 - 2006 AND SUPPLEMENTARY MOU DATED 5 - 12 - 2007, INDICATE THAT THE SOMANIS HAD AGREED TO SELL TO SESHAN HOUSING 51% OR MORE OF SHAREHOLDING OF SHREENIWAS COTTON MILLS LTD. (IN LIQUIDATION) FOR THE AMOUNT AGREED UPON ON THE TERMS AND CONDITIONS SPECIFIED IN THE MOU AND SOME SHARES WERE KEPT IN ESCROW WITH M/S KANGA & CO. WITH SIGNED SHARE TRANSFER FORMS AND IRREVOCABLE POWER OF ATT ORNEY IN FAVOUR OF SESHAN HOUSING. THE SUPPLEMENTARY MOU STATED INTER ALIA THAT ON TERMINATION OF THE MOU THE SOMANIS SHALL PAY TO SESHAN HOUSING A CERTAIN AMOUNT IN FULL AND FINAL SETTLEMENT AGAINST WHICH SESHAN HOUSING WILL RETURN THE ORIGINALS OF THE A DDENDUM, MOU AND ALL POWER OF ATTORNEYS TO THE ESCROW AGENT WHO IN TURN WILL RETURN THE SAME TO THE SOMANIS. VIDE LETTER DATED 7 - 2 - 2008, IT WAS STATED THAT AMOUNTS OF RS.5.5 CRORES WAS PAID BY THE SOMANIS TO THE ESCROW AGENT IN FULL AND FINAL SETTLEMENT AG AINST THE RECEIPT OF THE MOU, POWER OF ATTORNEYS, ADDENDUM LYING WITH THE ESCROW AGENT. IT IS TRUE THAT THE TRANSFER IN QUESTION WAS NOT POSSIBLE IF THE PAYMENT IN QUESTION HAD NOT BEEN MADE AND THIS POSITION HAS NOT BEEN DENIED BY THE DEPARTMENT. UNDISPUT EDLY, IN ANY TRANSFER LIKE ONE UNDER CONSIDERATION, SOME TRANSFER PAYMENT/CHARGES IS INEVITABLE. SINCE THE ASSESSEE WAS REQUIRED TO MAKE PAYMENTS TO REMOVE SUCH ENCUMBRANCE, THEREFORE, THE CIT(A) HAS RIGHTLY, INTER ALIA , DELETED THE ADDITION SO MADE RELYI NG ON THE DECISION OF ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 16 HONBLE BOMBAY HIGH COURT IN THE CASE OF SHAKUNTALA KANTILAL (SUPRA), WHEREIN IT WAS HELD THAT THE EXPRESSION IN CONNECTION WITH SUCH TRANSFER IS WIDER THAN THE EXPRESSION FOR THE TRANSFER. ANY AMOUNT PAID WHICH IS ABSOLUTELY NECE SSARY TO EFFECT THE TRANSFER IS AN ADMISSIBLE EXPENDITURE WITHIN THE MEANING OF SECTION 48(1) OF THE ACT. IT IS VIABLE THAT THE TRANSFER OF THE CAPITAL ASSET ITSELF COULD NOT HAVE COME ABOUT IN THE ABSENCE OF SUCH PAYMENT, IRRESPECTIVE OF THE NOMENCLATURE BEING GIVEN TO SUCH PAYMENT. IT IS DEFINITELY AN ALLOWABLE EXPENDITURE INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER AND THIS PAYMENT HAS RIGHTLY BEEN CONSIDERED AS COST OF IMPROVEMENT, WHILE COMPUTING THE INCOME FROM CA PITAL GAINS IN ACCORDANCE WITH SECTION 48(1) OF THE ACT. THEREFORE, THERE IS NO QUESTION OF ANY INTERFERENCE IN THE FINDINGS OF THE CIT(A) IN THIS REGARD. 16. INSOFAR AS THE PAYMENT OF RS.3,75,00,000/ - MADE TO M/S MEGHAL HOMES AND MR. PARASMAL LODHA IS CO NCERNED, THE SAME WERE STATED TO BE PAID FOR WITHDRAWAL OF THEIR SUITS, WHICH ENABLED THE ASSESSEE TO GO AHEAD WITH THE TRANSFER OF SHARES. IN THE CASE OF M/S MEGHAL HOMES AND MR. PARASMAL LODHA, CONSENT TERMS WERE FILED, WHICH WERE ALSO PLACED BEFORE THE HONBLE HIGH COURT. THE SAID PARTIES HAD RAISED OBJECTIONS TO THE PRESENT TRANSFER AND AGREED TO WITHDRAW THEIR OBJECTIONS ONLY ON RECEIPT OF COMPENSATION/DAMAGES, AND THUS THE ASSESSEE WAS REQUIRED TO PAY MONEYS TO REMOVE SUCH ENCUMBRANCE. IT CANNOT BE SA ID TO BE AN EXPENDITURE WITHOUT INCURRENCE OF WITH THE TRANSFER COULD NOT HAVE BEEN ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 17 EFFECTED. WE, THUS, ARE OF THE OPINION, THAT THE CIT(A) HAS NOT COMMITTED ANY ERROR OF LAW IN DELETING THE ADDITION IN QUESTION. ACCORDINGLY, IT WOULD BE CONDIGN TO UPHOLD THE FINDINGS RECORDED BY THE CIT(A) UPTO THE EXTENT OF THE GROUNDS RAISED BY THE REVENUE IN THE APPEAL BEFORE US. CO NO.25/MUM/2013 (AY : 2008 - 09) 17. IN THE FIRST GROUND OF THE CROSS OBJECTION, THE ASSESSEE IS AGGRIEVED BY THE DISALLOWANCE CONFIRMED BY TH E CIT(A) MADE U/S.48 OF THE ACT OF RS.32,00,000/ - . IN REGARD TO THIS, THE CIT(A) HELD THAT THE PAYMENT OF RS.32,00,000/ - WAS MADE TO MR. HANSRAJ JAISWAL & M/S SAI CONSTRUCTION ON ACCOUNT OF DAMAGES PAID FOR CANCELLATION OF MOU REGARDING SALE OF SCRAP AND D OES NOT HAVE ANY CONNECTION WITH THE SALE OF CAPITAL ASSET I.E. SHARES OF SHREENIWAS COTTON MILLS LTD. AND THE SAME CANNOT BE SAID TO BE AN EXPENDITURE WITHOUT INCURRENCE OF WHICH THE TRANSFER COULD NOT HAVE BEEN EFFECTED. ACCORDINGLY WE SEE NO REASON TO INTERFERE IN THE FINDINGS OF THE CIT(A) IN THIS REGARD. 18. IN REGARD TO GROUND NO.2, THE CIT(A) HELD THAT THE PAYMENT OF RS.51,05,000/ - MADE TO MR. VIJAY RAHATE FOR MUSTERING SUPPORT OF EX - FOLLOW UP WITH THE TEXTILE WORKERS UNION. THE SAME WERE MADE FOR G ETTING SUPPORT FOR THE REVIVAL SCHEME AND NOT FOR TRANSFER OF THE SHARES AND CONFIRMED THE ACTION OF THE AO. HENCE, IN OUR OPINION, THE SAME COULD NOT BE ALLOWED IN ABSENCE OF ANY TRANSFER. 19. REGARDING GROUND NO.3, THE CIT(A) CONFIRMED THE ACTION OF THE AO WITH REGARD TO THE PAYMENT MADE TO MR. V.D.NAVANI ON THE PLEA THAT NO ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 18 DETAILS BY WAY OF CONSENT TERMS ETC. HAD BEEN FILED. THEREFORE, THE CIT(A) IS JUST AND PROPER TO AGREE WITH THE ACTION OF AO, WHICH DOES NOT CALL FOR OUR INTERFERENCE. 20. IN GROUND NO.4, THE ASSESSEE IS AGGRIEVED FOR DISALLOWANCE MADE ON ACCOUNT OF LEGAL FEES. THE CIT(A) HAS UPHELD THE ACTION OF THE AO. ON PERUSAL OF THE RECORD, WE FIND THAT THE ASSESSEE HAD TO FACE LONG TIME LITIGATION AND DISPUTE FOR SAVING THE ASSET AND PERFECTIO N OF TITLE. ALL THE DISPUTES SHOULD NOT HAVE BEEN SETTLED WITHOUT LEGAL SUPPORT AND REPRESENTATIVE. IT IS IN CONSEQUENCE OF THE SETTLEMENT OF ISSUES THAT THE ASSESSEE HAD BEEN ABLE TO SALE THE SHARES IN QUESTION AT A CONSIDERABLE PRICE. HENCE, UNDER THE CI RCUMSTANCES, THE ENTIRE FEES PAID FOR LEGAL AND PROFESSIONAL SERVICES CANNOT BE SAID TO BE ONLY THE REVENUE OUTGOING; CERTAIN PART OF THE EXPENDITURE INCURRED ON LEGAL AND PROFESSIONAL SERVICES, IN OUR VIEW, ATTRIBUTABLE TOWARDS THE COST OF IMPROVEMENT/PER FECTION OF TITLE OF THE ASSETS. WE, THEREFORE, DEEM IT PROPER TO RESTRICT THE DISALLOWANCE UNDER THIS HEAD TO 50% OF THE TOTAL DISALLOWANCE MADE BY THE AO OF RS. 4 0 ,85,000/ - . 21. ACCORDINGLY, THE UPSHOT OF THE AFORESAID OBSERVATION WOULD BE TO ALLOW THE CRO SS OBJECTION OF THE ASSESSEE PARTLY IN THE MANNER INDICATED ABOVE. ITA NO.1039/MUM/2012 (AY : 2008 - 09) 22. WE HAVE ALREADY DECIDED THE VERY SAME GROUNDS AS HAVE BEEN RAISED IN THIS APPEAL WHILE DECIDING THE CROSS OBJECTION OF THE ASSESSEE ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 19 AND WE DO NOT FIND ANY DIFFERENT RAISED BY THE ASSESSEE OTHER THAN THE GROUNDS RAISED IN THE CROSS OBJECTION. THEREFORE, NO SEPARATE ADJUDICATION IS REQUIRED FOR THIS APPEAL AND ACCORDINGLY THIS APPEAL HAS BECOME INFRUCTUOUS. ITA NO.3090/MUM/2013 (AY : 2007 - 08) 23. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE PENALTY IMPOSED OF RS.1,30,000/ - U/S.271E OF THE ACT. THE AO OBSERVED THAT THE ASSESSEE HAS REPAID LOAN AGGREGATING TO RS.1,55,000/ - TO THESE PARTIES OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK D RAFT. THE MODE OF PAYMENT OF THESE LOAN IS BY CASH WHICH IN CONTRAVENTION OF SECTION 269T OF THE ACT AND LEVIED PENALTY. IN APPEAL, THE CIT(A) HAS UPHELD THE SAME. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 24. LD.AR HAS SUBMITTED THAT THE REPAYMEN TS IN CASH HAVE BEEN MADE TO THOSE PERSONS, WHO ARE FAMILY MEMBERS OF THE ASSESSEE AND THEY ARE REGULARLY ASSESSED TO TAX AND THE TRANSACTION WAS PURELY IN THE NATURE OF FINANCIAL HELP. THEREFORE, PENALTY SHOULD NOT BE LEVIED. LD. DR RELIED ON THE ORDERS O F THE AUTHORITIES BELOW. 25. AFTER CONSIDERING THE SUBMISSIONS OF LEARNED COUNSEL FOR THE PARTIES ON EITHER SIDE AND ON GOING THROUGH THE RECORDS, WE FIND THAT PROVISIONS OF SECTION 273B PROVIDE THAT NOTW ITHSTANDING ANYTHING CONTAINED IN THE PROVISIONS OF SECTION 271E OF THE ACT, NO PENALTY SHALL BE IMPOSABLE ON THE PERSON OR THE ASSESSEE, AS THE CASE MAY BE, FOR ANY FAILURE REFERRED TO IN THE SAID PROVIS ION IF HE PROVES THAT THERE WAS REASONABLE CAUSE FOR ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 20 SUCH FAILURE. SO FAR AS THE PAYMENT OF RS. 25,000/ - PAID BY ASSESSEE TO HIMSELF I.E. FROM ONE ACCOUNT TO ANOTHER ACCOUNT IS CONCERNED, NO PENALTY U/S.271E IS ATTRACTED TO THE SAID TRANSACTION. HOWEVER, IN RESPECT OF REMAINING TRANSACTIONS, IT HAS BEEN ARGUED BY THE LD. AR THE PAYMENTS WERE REPAID TO THE FAMILY MEMBERS OF THE ASSESSEE, WHICH IS PURELY IN THE NATURE OF FINANCIAL HELP . HOWEVER, NEITHER BEFORE THE LD. CIT(A) NOR BEFORE US THE LD. AR SUBSTANTIA TED WITH ANY EVIDENCE REGARDING ANY REASONABLE CAUSE NECESSITATING THE MODE OF PAYMENT BY CASH I.E. OTHER THAN THE BANKING CHANNEL. T HE CIT(A) UPHELD THE LEVY OF PENALTY , ESPECIALLY WHEN THERE WAS NOTHING TO SUGGEST THAT THERE WAS ANY REASONABLE CAUSE FOR THE ASSESSEE TO MAKE REPAYMENT OF LOAN IN CASH. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN THERE IS NO MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). A MERE V ERBAL SUBMISSION WITHOUT ANY SUBSTANTIVE EVIDENCE TO BACK IT CANNOT BE CONSIDERED SUFFICIENT TO PROVE THE ASSESSEE'S CASE THAT THE MONEY WAS URGENTLY REQUIRED BY THE PAYEES . IN THESE CIRCUMSTANCES, WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT THE ASSE SSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE ASSESSEE WAS PREVENTED BY SUFFICIENT AND REASONABLE CAUSE FOR NOT COMPLYING THE PROVISIONS OF SECTION 269T OF THE ACT . IN VIEW OF THE ABOVE FINDINGS, THE PENALTY IN RELATION TO PAYMENT BY WAY OF ACCOUNTING EN TRY TO THE ASSESSEE HIMSELF IS ORDERED TO BE DELETED AND THE PENALTY IN RELATION TO THE OTHER TRANSACTIONS IS AFFIRMED. THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO S . 945 & 1039/12 CO NO.25/13 & ITA NO.3090/13 21 26 . IN THE RESULT, APPEAL OF THE REVENUE (I.E.ITA NO.945/MUM/2012) IS DISMISSED , CROSS OB JECTION OF THE ASSESSEE I.E. CO. NO.25/MUM/2013 ALONG WITH APPEAL I.E. ITA NO.1039/MUM/2012 ARE ALLOWED IN PART AND APPEAL OF THE ASSESSEE I.E. ITA NO.3090/MUM/2013 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST AUG., 201 5 . SD / - ( R.C.SHARMA ) SD/ - ( SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED 31/08 /2015 PKM , . / PS COPY OF THE ORDER FORWARDED TO : BY ORDER , (ASSTT. REGISTRAR) ITAT , MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//