DCIT (OSD) II CEN RG 7, MUMBAI V. DHANRAJ MILLS P.LTD, MUMBAI

ITA 4282/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75686 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 13-11-2013
• Assessment Year: 1989-1990
• Appeal Filed On: 21-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Assessee Lawyers: VIJAY C KOTHARI
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 4269/MUM/2012 ( / ASSESSMENT YEAR: 1991-92) DHANRAJ MILLS PRIVATE LIMITED C/O. R. G. AND SONS PVT. LTD., LAXMINARAYAN MANDIR, BAPUBHAI VASHI ROAD, VILE PARLE (W), MUMBAI-400 056 / VS. DY. CIT, OSD-II, CENTRAL RANGE-7, MUMBAI ! ./' ./PAN/GIR NO. AAACD 5580 D ( #$%& / ASSESSEE ) : ( ' /REVENUE ) & ./ I.T.A. NOS. 4281 TO 4285/MUM/2012 ( / ASSESSMENT YEAR: 1989-90, 89-90, 90-91, 90-91 & 91- 92) DY. CIT, OSD-II, CENTRAL RANGE-7, ROOM NO.414, 4 TH FLOOR, AAYAKAR BHAVAN, M. K. MARG, MUMBAI-400 020 / VS. DHANRAJ MILLS PVT. LTD. BLOCK NO.19, DHANRAJ MILL COMPOUND, SITARAM JADHAV MARG, LOWER PAREL, MUMBAI-400 013 ! ./' ./PAN/GIR NO. AAACD 5580 D ( ' /REVENUE ) : ( #$%& / ASSESSEE ) #$%& ( ) / ASSESSEE BY : SHRI VIJAY C. KOTHARI ' ( ) / REVENUE BY : DR. P. DANIEL * #'+ ( , / DATE OF HEARING : 11.12.2013 -./ ( , / DATE OF PRONOUNCEMENT : 10.03.2014 2 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. 0 / O R D E R PER SANJAY ARORA, A. M.: THIS IS A SET OF SIX APPEALS, I.E., APPEALS IN THE QUANTUM AS WELL AS THE PENALTY PROCEEDINGS BY THE REVENUE FOR THE ASSESSMENT YEARS (A.Y.) 1989-90 AND 1990-91, AND CROSS APPEALS FOR THE THIRD YEAR, I.E., A.Y. 1991-9 2. THE ISSUES ARISING IN THESE APPEALS BEING COMMON, THE SAME WERE TAKEN UP TOGETHER FOR H EARING, AND ARE BEING DECIDED PER A COMMON, CONSOLIDATED ORDER. 2. IT WOULD BE RELEVANT TO STATE THE BACKGROUND FAC TS OF THE CASE. THE ASSESSEE BEING INVOLVED IN THE SECURITY SCAM OF 1991, IS A NOTIFIE D PARTY (UNDER THE RELEVANT ACT, BEING THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TR ANSACTIONS IN SECURITIES ACT, 1992)). IT WAS FOUND TO HAVE INDULGED IN IRREGULAR TRANSACTION S THROUGH ANDHRA BANK AND BANK OF KARAD. SEVERAL ADDITIONS WERE MADE IN ASSESSMENT. T HE MATTER TRAVELLED TO THE TRIBUNAL, WHICH SET ASIDE THE ASSESSMENTS WITH DIRECTIONS ON MOST ISSUES. BOTH THE AUTHORITIES BELOW, I.E., THE ASSESSING AND THE FIRST APPELLATE AUTHORITY HAVING, HOWEVER, READ AND, THEREFORE, APPLIED THE SAID DIRECTIONS DIFFERENTLY, RESULTS IN THE PRESENT CONTROVERSY BEFORE US IN THE MAIN. THIS, THUS, IS THE SECOND ROUND BEF ORE THE TRIBUNAL. THE ORDER/S BY THE TRIBUNAL IN THE FIRST ROUND HAVING BEEN ACCEPTED BY BOTH THE PARTIES, THE SAME HAS ASSUMED FINALITY. THE SAME IS, THUS, BINDING ON THE REVENUE AS WELL AS ON US. OUR PURVIEW IN THE PRESENT PROCEEDINGS WOULD THUS BE LIMITED TO DETERM INE AS TO WHICH OF THE AUTHORITIES BELOW, IF SO, HAVE CORRECTLY APPLIED THE RELEVANT D IRECTION/S BY THE TRIBUNAL, I.E., IN THE FIRST ROUND. THERE IS NO QUESTION OF ITS INTERPRETATION, THOUGH THE SAME MAY BE REQUIRED TO BE EXPLAINED, AND WHICH WOULD ONLY BE IN ITS TERMS, ON THE BASIS OF A HOLISTIC READING THEREOF. WE SHALL PROCEED YEAR-WISE. REVENUES APPEALS IN QUANTUM PROCEEDINGS (FOR A.YS. 1989-90 AND 1990-91) 3.1 BOTH THE APPEALS RAISE A COMMON ISSUE, PROJECTE D BY THE REVENUE PER ITS GROUND NO.1, WHICH READS AS UNDER: 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.16,75,8 6,084/- (*). 3 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. [(*)RS.27,08,000/- FOR A.Y. 1990-91) BOTH THE ADDITIONS PERTAIN TO THE FUNDS RECEIVED BY THE ASSESSEE FROM, AS ALLEGED, UNDISCLOSED SOURCES. THE ASSESSEES BOOKS REFLECTED TRANSACTIONS IN BANK OF KARAD GOVERNMENT SECURITIES SALE AND PURCHASE A/C. ALL T HE TRANSACTIONS WERE CARRIED OVER AND TRANSFERRED TO THE LOAN ACCOUNT OF SHRI ABHAY D. NA ROTTAM, WHO WAS BEING INSTRUCTED BY ONE, M/S. CHAMPAKLAL DEVIDAS, IN COLLUSION WITH WHO M THE ASSESSEE WAS ALLEGED TO BE CONDUCTING THE BUSINESS IN SECURITIES, DIVERTING BA NK FUNDS FOR THE PURPOSE. THE ASSESSEES CLAIM WAS THAT THE BANK AS WELL AS M/S. CHAMPAKLAL DEVIDAS CHARGED IT INTEREST/FINANCE CHARGES. A SPECIAL COURT WAS SET U P (BY AN ACT OF PARLIAMENT) TO TRY OFFENCES RELATING TO THE SECURITIES TRANSACTIONS, A ND THE ASSESSEES CASE WAS ALSO TRIED THERE-UNDER. THE TRIBUNAL, HOWEVER, CONFIRMED THE D ISALLOWANCE OF THE FINANCE CHARGES, STATING THE SAME TO ONLY REPRESENT A LOSS INCURRED ON TRADING IN SECURITIES, AND FOR WHICH WE MAY REFER TO THE PARA 23 OF ITS COMBINED ORDER ( FOR A.YS. 1987-88 TO 1990-91) DATED 23.01.2007 (IN ITA NOS. 2204 TO 2207/MUM/1996/PB PG S. 123-134), THE SAME READING AS UNDER: 23. IT IS SUFFICE TO SAY THAT WE AGREE WITH THE FI NDING OF THE CIT(A) THAT BALANCING FIGURE REPRESENTED NOT FINANCE CHARGES BU T REPRESENTED THE LOSS INCURRED IN TRADING OF SECURITIES. IN VIEW OF THIS MATTER, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT. IN RESPECT OF THE ADDITIONS WITH REGARD TO THE SOUR CE OF FUNDS, IT FOUND MERIT IN THE ASSESSEES CLAIM THAT THE LIABILITY TO SHRI A. D. N AROTTAM HAS SINCE BEEN AFFIRMED BY THE SPECIAL COURT VIDE ITS ORDER DATED 26.03.2003 (IN M ISCELLANEOUS PETITION NO.51 OF 1998/PB PGS.19-20), WHOSE DIRECTIONS, REPRODUCED AS UNDER, STAND ALSO SET OUT AT PARA 29 OF ITS ORDER BY THE TRIBUNAL: 29. THE LD. C.A. HAS PRODUCED BEFORE US A COPY OF THE ORDER OF THE HONBLE SPECIAL COURT DATED 26.03.2003 IN RESPECT OF SHRI A . D. NAROTTAM. IN ITS ORDER, THE HONBLE COURT HAS HELD IN PARAGRAPH-2; IT HAS BEEN HELD AS FOLLOWS: 2. TAKING INTO CONSIDERATION, THE ADMISSION MADE IN TH E AFFIDAVIT AND THE STATEMENT MADE BY THE LEARNED COU NSEL IN COURT, THERE APPEARS NO DIFFICULTY IN PASSING DECREE IN FA VOUR OF CUSTODIAN REPRESENTING RESPONDENT NO. 2 (NOTIFIED P ARTY) FOR SUM 4 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. OF RS.71,75,81,049.54 FOR PRINCIPAL SUM. SO FAR AS INTEREST IS CONCERNED, IT IS KEPT OPEN AND WILL BE DECIDED ON T HE MERITS. ACCORDINGLY, IT DIRECTED AS UNDER: FOR A.Y. 1989-90 (IN ITA NO.2206/MUM/1996 DATED 23. 01.2007) 30. IN THE LIGHT OF THE JUDGMENT OF THE HONBLE SP ECIAL COURT AS MENTIONED ABOVE, IT IS NOT POSSIBLE FOR US TO ENDOR SE THE ADDITION OF RS.16,75,86,084/- AGITATED BY THE ASSESSEE IN THIS APPEAL. THIS ADDITION IS THEREFORE SET ASIDE. THE ISSUE IS REMITTED BACK TO THE ASSESSING AUTHORITY TO VERIFY THE DETAILS OF THE DISPUTED SUM AND THE DETA ILS PRESENTED BEFORE AND CONSIDERED BY THE HONBLE SPECIAL COURT. IF THE IDE NTITY OF THE AMOUNTS AND PARTICULARS ARE ESTABLISHED AS ARGUED BY THE ASSESS EE, THIS AMOUNT OF ADDITION IS TO BE FOUND PART OF THE AMOUNT PAYABLE TO SHRI A. D. NAROTTAM AND ACCORDINGLY THE ASSESSING OFFICER HAS TO DELETE THE SAID AMOUNT FROM THE COMPUTATION OF INCOME. THE MATTER IS REMITTED B ACK FOR THE PURPOSE OF VERIFICATION. THERE BEING NO CHANGE IN THE FACTS FOR THE FOLLOWIN G YEAR, I.E., A.Y. 1990-91 (IN ITA NO.2207/MUM/1996 DATED 23.01.2007), THE SAME DECISI ON WAS ADOPTED THEREFOR; ITS DIRECTIONS READING AS UNDER: 36. THE FIRST ISSUE TO BE CONSIDERED FOR THE ASSES SMENT YEAR 1990-91 IS THE ADDITION OF RS.27,08,000/- MADE BY THE ASSESSIN G AUTHORITY AS FUND RECEIVED FROM UNDISCLOSED SOURCE. THE ASSESSING AUT HORITY IS DIRECTED TO EXAMINE THIS ISSUE IN THE LIGHT OF THE DIRECTION GI VEN FOR THE ASSESSMENT YEAR 1989-90, IN RESPECT OF THE A/C WITH SHRI A. D. NARO TTAM. FURTHER, THE OUTSTANDING BALANCE OF SUNDRY CREDITORS AT THE END OF THE RELEVANT PREVIOUS YEAR IS VERY MUCH HIGHER THAN THE EARLIER OUTSTANDI NG BALANCE AND THE INCREASE IN THE CREDITORS ITSELF IS IN THE NATURE O F AN EXPLAINED SOURCE AND WE DO NOT FIND MUCH FORCE IN THE ARGUMENT OF THE REVEN UE ON THIS MATTER. THIS MATTER IS ANYHOW REMITTED BACK TO THE ASSESSING OFF ICER. AS SHALL BE READILY SEEN, THE TRIBUNALS DIRECTION FOR A.Y. 1989-90, BEING ITS PRINCIPAL FINDING, WOULD THUS OBTAIN FOR A.Y. 1990-91 AS WELL . 3.2 THE ASSESSING OFFICER (A.O.) CONFIRMED THE ADDI TION FOR BOTH THE YEARS, FINDING THAT THE CREDITS UNDER REFERENCE ARE NOT COMPRISED IN THE CLOSING BALANCE OF RS.71,75,81,049.54/- AS ON 31.03.1992 (PB/PGS.1-4, 9). THIS IS NOT IN DISPUTE; THE A.O. HAVING RENDERED THIS FINDING AFTER A STUDY OF THE A CCOUNT BALANCES AS WELL AS THE 5 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. MOVEMENT OF FUNDS THEREIN, TO FIND THAT THE OPENING BALANCE IN THE BANK OF KARAD GOVERNMENT SECURITIES PURCHASE AND SALE ACCOUNT AS ON 01.04.1990 WAS AT RS.19.62 CRORES (CREDIT). THERE WERE MANY TRANSACTIONS THERE AFTER, WHICH LED TO A DEBIT BALANCE OF RS.54.72 CR., AND WHICH WAS TRANSFERRED TO SHRI A. D. NAROTTAM LOAN ACCOUNT ON 31.03.1991. IT COULD NOT THEREFORE BE SAID THAT THE CREDIT BALANCE OF RS.71.76 CR. AS ON 31.03.1992, THE LIABILITY FOR WHICH WAS ADMITTED BE FORE THE SPECIAL COURT AND, ACCORDINGLY, SETTLED BY IT AT THE SAID SUM, SUBJECT TO INTEREST ON WHICH IT RESERVED ITS DECISION, CONSTITUTED OR BUILT-UP THE IMPUGNED SUM TO ANY EXTENT. THE LD. CIT(A), HOWEVER, DELETED THE ADDITION/S ON THE GROUND THAT THE SAME HAVING BEEN MADE ON THE BASIS OF THE NET INFLOW OF FUNDS IN THE SAID ACCOUN T DURING THE RELEVANT YEAR/S, THE TRANSACTIONS ARE DULY DISCLOSED IN ACCOUNTS, THE CL OSING BALANCE PER WHICH (AS ON THE CUT OFF DATE - 31.03.1992) HAS BEEN CONFIRMED AS THE AS SESSEES LIABILITY. THE FUNDS INFUSED PER THE SAID ACCOUNT THUS CAN ONLY BE REGARDED AS G ENUINE. FURTHER, CONSIDERING THE IMPUGNED TRANSACTIONS AS NOT REPRESENTING A GENUINE LIABILITY AND EXCLUDING THE SAME FROM THE LOAN ACCOUNT WOULD RESULT IN A CORRESPONDI NG CHANGE IN THE ACCOUNT BALANCE AS ON 31.03.1992, WHICH IS THE BASIS OF THE DECRETAL A MOUNT OF RS.71.76 CR. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE CASE OF THE PARTIES BEFORE US WAS MUCH THE SAME; EACH RELYING O N THE ORDER OF THE AUTHORITY BELOW AS FAVORABLE TO IT. IN OUR CONSIDERED VIEW, BOTH THE A SSESSING AND THE FIRST APPELLATE AUTHORITY HAVE FAILED TO APPRECIATE THE DECISION OF THE TRIBU NAL IN THE MATTER IN THE FIRST ROUND, I.E., IN THE RIGHT PERSPECTIVE. THE ADDITIONS ARE U/S.68, EFFECTED IN VIEW OF THE ASSESSEE BEING UNABLE TO SATISFACTORILY PROVE THE IMPUGNED CREDIT/ S AS TO ITS NATURE AND SOURCE. AS SUCH, EVEN IF THE AMOUNT/S IS SUBSEQUENTLY REPAID TO THE OSTENSIBLE CREDITOR, AND THE CREDIT NEUTRALIZED IN THE ASSESSEES BOOKS OF ACCOUNT, THE SAME WOULD NOT OPERATE TO REMOVE THE BASIS THAT LED TO THE AMOUNT BEING DEEMED AS HIS IN COME U/S.68 AND, THUS, CONSTITUTE A GROUND FOR ITS DELETION. MERELY BECAUSE THE AMOUNTS STAND REFLECTED IN THE LOAN ACCOUNT OF SHRI A. D. NAROTTAM IN THE ASSESSEES BOOKS WOULD, THEREFORE, BE NO REASON FOR THEIR DELETION, AS HELD BY THE LD. CIT(A). THE SAID REFLE CTION IS IN FACT NOT IN DISPUTE AND FORMS 6 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. THE VERY BASIS FOR ADDING THE AMOUNT/S UNDER REFERE NCE IN THE FIRST INSTANCE, A FACT OF WHICH THE TRIBUNAL WAS WELL AWARE AND DID NOT LOSE SIGHT OF. NO WONDER, THERE IS NO REFERENCE TO ITS ORDER BY THE LD. CIT(A). AT THE SA ME TIME, HOWEVER, THE ASSESSEE BRINGING TO THE NOTICE OF THE TRIBUNAL THAT IT HAS BEEN DIRE CTED TO PAY THE AMOUNT OUTSTANDING IN ITS ACCOUNTS AS ON THE CUT OFF DATE (31.03.1992), AND W HICH FORMS THE BASIS OF THE DECRETAL AMOUNT IN FAVOUR OF THE CUSTODIAN, REPRESENTING SHR I A. D. NAROTTAM, THE RESPONDENT NO. 2 BEFORE IT BY THE SPECIAL COURT, THE TRIBUNAL CAME TO THE CONCLUSION THAT IT COULD, THEREFORE, NO LONGER CONSIDER THE CREDITS IN THE SA ID ACCOUNT AS UNEXPLAINED; THE SAME HAVING BEEN FOUND TO REPRESENT AN ACTUAL LIABILITY OF THE ASSESSEE. THE ASSESSEE, HOWEVER, WAS REQUIRED TO ESTABLISH THE IDENTITY OF THE IMPUG NED CREDITS IN RELATION TO THE SAID ACCOUNT BY PRODUCING THEIR DETAILS, WHICH THE A.O. SHALL VERIFY. THE ASSESSEE ARGUED BEFORE IT (TRIBUNAL) THAT THE ENTRIES IN THE SAID A CCOUNT REPRESENT FUND RAISING TRANSACTIONS, BEING DONE THROUGH SHRI A. D. NAROTTAM AND, FURTHER , OF THE TRANSACTIONS BEING SUPPORTED BY ADVICES ISSUED BY THE BANK (BANK OF KARAD), WHIC H HAS ALSO DEBITED (CHARGED) INTEREST IN RESPECT OF THESE TRANSACTIONS, WITH THE TRANSACT IONS BEING DULY REFLECTED IN THE BANKS ACCOUNTS (REFER PARA 27 OF THE TRIBUNALS CONSOLIDA TED ORDER (SUPRA) FOR A.YS. 1987-88 TO 1990-91). ACCORDINGLY, SUBJECT TO ADDUCING THE NECE SSARY DETAILS AND THEIR VERIFICATION BY THE A.O., THE ADDITIONS STOOD DELETED VIDE PARA 30 OF ITS ORDER (SUPRA). THE A.O. IS ACCORDINGLY EQUALLY IN ERROR IN READING THE TRIBUNA LS DIRECTION AS REQUIRING HIM TO ASCERTAIN THE EXACT COMPOSITION OF THE BALANCE IN A CCOUNT AS ON 31.03.1992, I.E., RS.17.76 CR., REPRESENTING AN ADMITTED LIABILITY, AND EXCLUD ING ONLY THOSE SUMS AS REFERABLE THERETO. THE SAME, IT WOULD BE NOTED, WOULD ALSO BE INCONSIS TENT NOT ONLY WITH THE TRIBUNALS DIRECTION/S, BINDING ON HIM, BUT ALSO THE ASSESSMEN T (AS MADE) ITSELF. THIS IS AS THE ASSESSING AUTHORITY HAD TREATED THE SAID ACCOUNT AS A RUNNING ACCOUNT, ADDING ONLY THE INCREMENTAL FLOW OF FUNDS FOR THE YEAR AS UNEXPLAIN ED. NO VERIFICATION OF THE SORT REQUIRED, OF THE AMOUNTS IN QUESTION, I.E., WITH RE FERENCE TO THEIR GENESIS, WAS HOWEVER MADE IN THE SET ASIDE PROCEEDINGS, SO THAT THE SAID DIRECTION BY THE TRIBUNAL REMAINS TO BE COMPLIED WITH. THE PRIMARY ONUS THEREOF LIES ON THE ASSESSEE. ITS CLAIM THAT ALL THE ENTRIES, DEBIT OR CREDIT, COMPRISING THE IMPUGNED SUMS (REFE R PARA 4.5OF THE IMPUGNED ORDERS, I.E., 7 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. FOR BOTH THE YEARS) TO BE DULY VOUCHED, AS BY BANK ADVICES, AND REFLECTED IN THE BANKS STATEMENT, SHALL HOWEVER BE REQUIRED TO BE EXHIBITE D. THE MATTER ACCORDINGLY WOULD HAVE TO BE NECESSARILY RESTORED BACK TO THE FILE OF THE A.O. TO ENABLE THE ASSESSEE TO SATISFY THE CONDITION/S SUBJECT TO WHICH ONLY THE TRIBUNAL HAD DIRECTED THE A.O. TO DELETE THE SAID ADDITIONS PER PARA 30 OF ITS ORDER (SUPRA). THE A.O . SHALL DECIDE AFRESH, ISSUING DEFINITE FINDINGS OF FACT, AND AFTER ALLOWING THE ASSESSEE R EASONABLE OPPORTUNITY TO PRESENT ITS CASE BEFORE HIM. WE DECIDE ACCORDINGLY. REVENUES APPEALS IN THE PENALTY PROCEEDINGS (FOR A .YS. 1989-90 AND 1990-91) 5. THE ONLY AMOUNT ON WHICH THE PENALTY U/S.271(1)( C) HAS BEEN LEVIED IN THESE APPEALS IS FOR WHICH THE ADDITION HAD BEEN MADE IN THE SET ASIDE PROCEEDINGS, AND QUA WHICH THE REVENUE IS IN APPEAL BEFORE US IN THE SEC OND ROUND, I.E., IN THE QUANTUM PROCEEDINGS. WE HAVING RESTORED THE MATTER BACK TO THE FILE OF THE A.O. FOR NECESSARY VERIFICATION AND ADJUDICATION AFRESH IN THE QUANTUM PROCEEDINGS, THE PENALTY/S SHALL NOT SURVIVE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER/S , THOUGH FOR REASON/S DIFFERENT FROM THAT WHICH PREVAILED WITH THE LD. CIT(A). THE A.O. SHALL BE THOUGH AT LIBERTY TO, WHERE DEEMED FIT, INITIATE PENALTY PROCEEDINGS IN THE SET ASIDE PROCEEDINGS. WE DECIDE ACCORDINGLY. ASSESSEES APPEAL (FOR A.Y. 1991-92) 6.1 THE FIRST AND THE SOLE GROUND OF THE ASSESSEES APPEAL; IT NOT PRESSING ITS SECOND GROUND AS RAISED BEFORE US (WITH THE LD. AR MAKING AN ENDORSEMENT TO THAT EFFECT ON THE APPEAL MEMO), IS THE CONFIRMATION OF THE ADDITION T O INCOME IN THE SUM OF RS.13,23,45,918/-. THE SAME IN FACT IS COMPRISED OF THREE AMOUNTS, CREDITED IN THE BANK ACCOUNTS OF ONE, SHRI H. K. DALAL IN FEBRUARY & MAR CH, 1991. THE AMOUNTS HAVING BEEN DULY REFLECTED IN HIS REGULAR BOOKS OF ACCOUNT, AS CREDITS TO THE ASSESSEES LOAN ACCOUNT, THE SAME WERE ADDED AS THE ASSESSEES UNDISCLOSED I NCOME FOR THE RELEVANT YEAR IN THE FORM OF THE SAID ASSET/S. THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE A.O. IN THE FIRST ROUND TO VERIFY THE CORRECT SOURCE OF THE CRE DITS IN THE DEBTORS BANK ACCOUNTS; ITS 8 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. EXACT DIRECTIONS BEING AS UNDER (IN ITA NO.07/MUM/1 996 DATED 31.10.2007/PB PGS.135- 148): 9.3 AS A RESULT OF THE ABOVE DISCUSSION THE OTHER ISSUES RAISED IN THE OTHER GROUNDS OF APPEAL ARE ADJUDICATED AS UNDER: GR. NO. ISSUE RESULT 7. ADDITION OF RS.13,23,45,918/- ON ACCOUNT OF THE AMOUNT CREDITED BY SHRI H. K. DALAL IN HIS BOOKS OF ACCOUNT. REMITTED BACK TO THE FILE OF A.O. TO MAKE NECESSARY ENQUIRIES AS TO THE CORRECT SOURCE OF CREDITS OF RS.5,05,07,445 ON 14.02.1991; RS.5,08,89,703 ON 25.02.1991 AND RS.3,09,48,750/- ON 20.03.1991 IN HARESH K. DALALS BANK ACCOUNTS. 6.2 ENQUIRIES WERE MADE IN THE SET ASIDE PROCEEDING S, TO FIND THAT THE LOAN ACCOUNT IN THE NAME OF THE ASSESSEE AS APPEARING IN THE BOOKS OF SHRI H. K. DALAL STANDS SINCE VALIDATED BY THE SPECIAL COURT; IT DIRECTING HIM TO PAY THE ASSESSEE RS.1,10,28,525/-, I.E., THE BALANCE OUTSTANDING IN THE SAID ACCOUNT AS ON 2 4.12.1991. THERE BEING NO REFLECTION OF THESE SUMS IN THE ASSESSEES ACCOUNTS, NOR IT FURNI SHING ANY EXPLANATION IN RESPECT THEREOF, THE ADDITION WAS ACCORDINGLY CONFIRMED IN THE SECON D ROUND. NO IMPROVEMENT IN ITS CASE WAS MADE BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY. EXCLUDING THE SAID CREDITS (TO THE ASSESSEES ACCOUNT) IN HIS BOOKS (BY SHRI H . K. DALAL) WOULD RESULT IN, ON THE CONTRARY, A DEBIT BALANCE OF RS.12,13,17,393/- IN T HE ASSESSEES ACCOUNT, I.E., RECOVERABLE FROM THE ASSESSEE-APPELLANT, WHICH IS NOT THE CASE. THERE HAS BEEN, THUS, A WAIVER OF LIABILITY TO THE EXTENT OF RS.13.23 CR. IN FAVOUR O F THE ASSESSEE, WHICH IS LIABLE TO BE ASSESSED AS INCOME, ADVERTING TO SECTION 41(1) OF T HE ACT. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 7. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE FACTS ARE ADMITTED AND NOT IN DISPUTE. THE ADDITION HAS BEEN MADE WITH REFERENCE TO THE CREDITS DURING THE RELEVANT YEAR AS APPEARING IN THE ASSESS EES ACCOUNT IN THE BOOKS OF ACCOUNT OF ANOTHER, AND WHICH HAVE SINCE FOUND APPROVAL BY THE DESIGNATED COURT, CONFIRMING HIM TO BE THE ASSESSEES DEBTOR AND, FURTHER, REQUIRING HI M TO DISCHARGE THE DEBT BY PAYING THE 9 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. ASSESSEE THE AMOUNT OUTSTANDING PER HIS BOOKS OF AC COUNT AS ON A PARTICULAR DATE 24.12.1991 - THE ACCOUNT CONTINUING EVEN AFTER 31.0 3.1991. THE CREDITS BEING THUS CONFIRMED IN THE ASSESSEES FAVOUR, I.E., AS HAVING BEEN CORRECTLY RECORDED IN HIS ACCOUNTS BY SHRI H. K. DALAL, THE ASSESSEE WAS REQUIRED TO E XPLAIN THE NATURE AND SOURCE OF THE CORRESPONDING DEBT/S, REPRESENTING AN ASSET OR FUND S, AND WHICH IT FAILED TO. THE AMOUNT/S IS NOT REFLECTED IN THE ASSESSEES BOOKS, WHO HAVE NEVER CLAIMED THE SAME AS A TRADING LIABILITY. THE QUESTION OF IT BEING REMITTED AND, T HUS, INVOCATION OF SECTION 41(1), DOES NOT ARISE IN THE UNDISPUTED FACTS OF THE CASE. THROUGH THE REFERENCE TO THE EXCLUSION OF THE THREE CREDITS TO THE ASSESSEES ACCOUNT (AS MAINTAI NED BY SH. H.K. DALAL) BY THE LD. CIT(A), HE HAS THEREBY ONLY SOUGHT TO EMPHASIZE THA T DOING SO AN AMOUNT OF RS.1.10 CR. RECEIVABLE BY THE ASSESSEE (AS ON 24.12.1991) WOULD TRANSLATE INTO A LIABILITY OF RS.12.13 CR. TO SHRI H. K. DALAL, WHICH IS NON EXISTENT. THE HYPOTHETICAL EXAMPLE OR THE ASSUMED STATE OF AFFAIRS BY THE LD. CIT(A), IS ONLY BY WAY OF OR TO BRING HOME THE FACT OF THE OMISSION THERE BEING NO REFLECTION OF THESE AMOUN TS IN THE ASSESSEES BOOKS, LEADING TO THE SUPPRESSION OF THE ASSETS BY THE ASSESSEE TO TH AT EXTENT, AS ALSO TO SIGNIFY THE CORRESPONDENCE BETWEEN THE AMOUNT OF SUPPRESSION (R S.13.23 CR.) AND THE AMOUNT ACTUALLY RECEIVABLE BY THE ASSESSEE AS ON 24.12.199 1 (RS.1.10 CR.), AND WOULD NOT IN ANY MANNER LEAD TO OR RESULT IN AN ACTUAL EXCLUSION AND , THUS, A WAIVER OF ANY LIABILITY BY A CREDITOR IN THE ASSESSEES FAVOUR. A LOWER CREDIT B ALANCE (RS.1.10 CR.) IN THE ASSESSEES ACCOUNT AT A LATER DATE (24.12.1991), IN FACT ONLY IMPLIES OF IT AS HAVING BEEN ALREADY EXTENDED THE BENEFIT OF THE IMPUGNED CREDITS (AGGRE GATING TO RS.13.23 CR.) TO THE EXTENT OF THE DIFFERENCE (RS.12.13 CR.) THROUGH DEBITS TO ITS ACCOUNT, BY THAT DATE. REFERENCE TO SECTION 41(1) BY THE LD. CIT(A) IS, THUS, MISCONCEI VED. THE ASSESSEES RELIANCE BEFORE US IN RESPONSE ON TH E DECISION IN THE CASE OF CIT VS. XYLON HOLDINGS PVT. LTD. [2013] 90 DTR (BOM) 205, WHEREIN THE HONBLE JURISD ICTIONAL HIGH COURT, FOLLOWING ITS DECISION IN THE CASE OF MAHINDRA AND MAHINDRA LTD. VS. CIT [2003] 261 ITR 501 (BOM), HELD THAT THE WAIVER OF A LOAN, WHERE DEPLOYED FOR THE ACQUISITION OF A CAPITAL ASSET, WOULD NOT AMOUNT TO INCOME U/S.41(1), IS COMPLETELY MISPLACED. SHRI H. K. DALAL IS, FIRSTLY, NOT A CRED ITOR OF THE ASSESSEE BUT A DEBTOR. THE 10 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. WAIVER, IF AT ALL, COULD ONLY BE BY THE ASSESSEE . TWO, THERE IS IN FACT NO WAIVER OF ANY LOAN OR LIABILITY IN THE INSTANT CASE; THE DEBTOR BEING RATHER REQUIRED TO PAY THE ENTIRE SUM AS OUTSTANDING IN HIS BOOKS, WHICH IS INCLUSIVE OF THE THREE CREDITS UNDER REFERENCE, TO THE ASSESSEE. IN FACT, THE CREDIT TO THE ASSESSEES ACC OUNT IS ITSELF AN ADMISSION OF THE LIABILITY TO THE ASSESSEE. AS EXPLAINED HEREIN-BEFORE, THE DE BT TO THE ASSESSEE COMPANY BEING PROVED WITH REFERENCE TO THE DECISION BY A COURT OF LAW, THE SAME STOOD CONFIRMED AS THE ASSESSEES INCOME FOR THE RELEVANT YEAR; THE SAID A CCOUNT NOT APPEARING IN THE ASSESSEES BOOKS OF ACCOUNT NOR IT FURNISHING ANY EXPLANATION, MUCH LESS SATISFACTORY, AS TO THE NATURE AND SOURCE OF ITS RELEVANT ASSET/S IN THE FO RM OF A DEBT/S DUE TO IT. SECTION 69/69A/69B, AS THE CASE MAY BE, WOULD HAVE APPLICAT ION IN THE FACTS OF THE CASE. WE, ACCORDINGLY, FIND NO MERIT IN THE ASSESSEES CASE A ND UPHOLD THE ADDITION, MODIFYING THE IMPUGNED ORDER TO THE EXTENT IT ADVERTS TO OR DRAWS ON SECTION 41(1) OF THE ACT. WE DECIDE ACCORDINGLY. REVENUES APPEAL (FOR A.Y. 1991-92) 8. THE REVENUES APPEAL RAISES THREE GROUNDS, AS UN DER: 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.17,69,64,610/- . 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O RS.99,31,857/-. 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.14,25,87,483/- . THE SAME WERE THE SUBJECT MATTER OF ADJUDICATION BY THE TRIBUNAL IN THE FIRST ROUND; ITS DIRECTIONS IN THE MATTER BEING AS UNDER: 9.3 AS A RESULT OF THE ABOVE DISCUSSION THE OTHER ISSUES RAISED IN THE OTHER GROUNDS OF APPEAL ARE ADJUDICATED AS UNDER: GR. NO. ISSUE RESULT 2. ADDITIONS OF RS.64,21,500/- AND RS.17,69,64,610/- AS PROFITS ALLEGEDLY ARISING TO THE ASSESSEE REMITTED BACK TO THE FILE OF THE A.O. TO VERIFY WHETHER THE IDENTITY OF THE AMOUNTS FOR WHICH ADDITIONS HAVE BEEN 11 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. OUT OF THE SECURITY TRANSACTIONS MADE ARE THE SAME AS THOSE REFLECTED IN THE STATEMENT OF A. D. NAROTTAMS ACCOUNT IN ASSESSEES BOOKS OF ACCOUNT. 3. DISALLOWANCE OF FINANCE CHARGES PAYABLE TO SHRI A. D. NAROTTAM OF RS.6,43,45,952/- (*) REMITTED BACK TO THE FILE OF A.O. TO VERIFY WHETHER THE FINANCE CHARGES OF RS.6,43,45,952/- ARE REFLECTED IN THE STATEMENT OF A. D. NAROTTAMS ACCOUNT IN ASSESSEES BOOKS OF ACCOUNT. [(*) ADDITION MADE FOR RS.99,31,857/- ONLY IN THE S ECOND ROUND] 21. THE SECOND GROUND IN REVENUES APPEAL (SET OUT AT GROUNDS II(A) TO (F)) PERTAINS TO THE DELETION OF ADDITIONS MADE ON ACCOUNT OF PROFITS OF RS.14,25,87,483/- ARISING FROM THE SECURITY TRANSAC TIONS. IN VIEW OF THE FINDINGS RECORDED BY US WITH REFERENCE TO ASSESSEE S APPEAL, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIF Y WHETHER THE TRANSACTIONS OF SALE OF 11.5% 2010 CENTRAL SECURITIES HAS BEEN R ECORDED IN THE ACCOUNT OF SHRI A. D. NAROTTAM, FOR WHICH THE HONBLE SPECI AL COURT HAS DECREED THE ASSESSEE LIABLE TO PAY THE AMOUNT OF RS.71,75,8 1,049.54 TO SHRI A. D. NAROTTAM. IN CASE THE TRANSACTIONS ARE REFLECTED IN THE STATEMENT OF ACCOUNT, THE ASSESSING OFFICER HAS TO DELETE THE SAID PROFIT FROM THE COMPUTATION OF INCOME. THE MATTER IS ACCORDINGLY REMITTED BACK FOR VERIFICATION. 9. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. AS WOULD BE APPARENT FROM THE FOREGOING, EACH OF THE THREE ADDI TIONS RAISE, IN PRINCIPLE, THE SAME ISSUE, I.E., AS ARISING IN THE REVENUES APPEALS FO R A.YS. 1989-90 AND 1990-91, SO THAT WE SHALL PROCEED TOGETHER FOR ALL OF THEM. BOTH THE AU THORITIES BELOW HAVE FOLLOWED THEIR RESPECTIVE STANDS IN THE MATTER, WHICH STAND DELINE ATED BY US AT PARA 3.2 ABOVE. SO, HOWEVER, OUR DECISION WOULD HAVE TO BE BASED ON THE DIRECTION/S BY THE TRIBUNAL IN THE FIRST ROUND INASMUCH AS THE SAID ORDER HAS BECOME F INAL UPON ITS ACCEPTANCE BY BOTH THE PARTIES. IN THIS REGARD, CLEARLY, ALL THAT THE TRIB UNAL HAS REQUIRED THE ASSESSEE TO SHOW IN THE SET ASIDE PROCEEDINGS IS THAT THE AMOUNT/S UNDER RE FERENCE ARE REFLECTED IN THE LOAN ACCOUNT OF SHRI A. D. NAROTTAM IN ITS ACCOUNTS, AND , WHERE SO, NO ADDITION WOULD BE CALLED FOR. THE LD. CIT(A) HAS DIRECTED DELETION ON THE BASIS OF THE SAID FINDING/S, WITH IN FACT THE PRIMARY FACTS BEING NOT IN DISPUTE. HIS VA RIANCE WITH THE A.O. ARISES ONLY ON ACCOUNT OF THE LATTERS VIEW OF THE AMOUNT/S BEING ACTUALLY REQUIRED TO BE SHOWN TO BE A PART OF THE DECRETAL AMOUNT, A VIEW WHICH WE HAVE S INCE DISCOUNTENANCED (REFER PARA 4). 12 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. NO DOUBT, SO HAS ALSO BEEN THE VIEW ADOPTED BY THE LD. CIT(A); THE REFLECTION OF THE IMPUGNED AMOUNTS IN THE LOAN ACCOUNT OF SHRI A. D. NAROTTAM BEING IN FACT THE VERY BASIS FOR THE ADDITION U/S.68. SO HOWEVER, THE DIRECTIONS BY THE TRIBUNAL FOR THIS YEAR ARE AS APPARENT AT VARIANCE WITH THAT FOR THE EARLIER YEAR S, AND THE LD. CIT(A) HAS ONLY PROCEEDED IN TERMS THEREOF. THE REVENUE BEING UNABLE TO SHOW ANY INFIRMITY IN THE IMPUGNED ORDER, BEING BASED ON THE FACTUAL FINDINGS IN TERMS OF THE TRIBUNALS ORDER, WITH, RATHER, THE PRIMARY FACTS BEING NOT IN DISPUTE, WE HAVE NO HESI TATION IN UPHOLDING THE SAME. AS OBSERVED EARLIER, WE ARE CONSCIOUS OF THE DIVERGENC E IN THE TREATMENT BEING ACCORDED FOR THE CURRENT YEAR VIS--VIS THE EARLIER YEARS. SO, H OWEVER, AS EXPLAINED AT THE VERY OUTSET (PARA 2), THE PRESENT PROCEEDINGS ARISE OUT OF THE SET ASIDE PROCEEDINGS, SO THAT THE DIRECTIONS BY THE TRIBUNAL, HAVING SINCE ATTAINED F INALITY, SHALL OBTAIN, AND ARE BINDING ON ALL AUTHORITIES UPTO THE TRIBUNAL. WE ARE INCOMPETE NT TO IN THE PRESENT PROCEEDINGS TAKE ANY DIFFERENT VIEW ON THE MERITS, AND OUR PURVIEW I N THE PRESENT PROCEEDINGS IS LIMITED TO FOLLOWING THE ORDERS BY THE TRIBUNAL IN THE FIRST R OUND ON THEIR TERMS. WE DECIDE ACCORDINGLY. 10. THE RESULT OF THE APPEALS IS TABLED AS UNDER: ITA NO. A.Y. APPELLANT RESULT 4281/MUM/2012 1989-90 REVENUE DISMISSED 4282/MUM/2012 1989-90 REVENUE ALLOWED FOR STATISTIC AL PURPOSES 4283/MUM/2012 1990-91 REVENUE DISMISSED 4284/MUM/2012 1990-91 REVENUE ALLOWED FOR STATISTIC AL PURPOSES 4269/MUM/2012 1991-92 ASSESSEE DISMISSED 4285/MUM/2012 1991-92 REVENUE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 10, 201 4 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * + MUMBAI; 1# DATED : 10.03.2014 13 ITA NOS. 4269, 4281 TO 4285/MUM/2012 DHANRAJ MILLS PVT. LTD. '.#../ ROSHANI , SR. PS !' # $%&' (!'% / COPY OF THE ORDER FORWARDED TO : 1. !2 / THE APPELLANT 2. 3!2 / THE RESPONDENT 3. * 4 ( ) / THE CIT(A) 4. * 4 / CIT - CONCERNED 5. 7'89 3 #:$ , , :$/ , * + / DR, ITAT, MUMBAI 6. 9;% <+ / GUARD FILE !' ) / BY ORDER, */)+ , (DY./ASSTT. REGISTRAR) , * + / ITAT, MUMBAI