ITO WD 4(3)(1), MUMBAI V. OM MITRA SECURITIES LTD, MUMBAI

ITA 4639/MUM/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48703 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 09-07-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARIGOVIND SINGH
• Keywords: Capital asset

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI R.S.PADVEKAR (JM) AND SHRI RAJENDRA SI NGH(AM) ITA NO.4639/M/2008 ASSESSMENT YEAR 2003-04 THE ITO WARD 4(3)(1) M/S. OM MITRA SECURITIES LTD . ROOM NO.651, 6 TH FLOOR 26, GOBIND MAHAL, 86B N.S.ROAD AAYAKAR BHAVAN MARINE DRIVE, MUMBAI 400 002. M.K.ROAD, MUMBAI 400 020. PAN : AAACN0533H APPELLANT RESPONDENT REVENUE BY : SHRI HARI GOVIND SINGH ASSESSEE BY : SHRI VIJAY MEHTA O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 13.5.2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2003-04. THE REVE NUE IN THIS APPEAL HAS RAISED DISPUTES ON TWO DIFFERENT GROUNDS. 2. THE FIRST DISPUTE IS REGARDING DISALLOWANCE OF C LAIM OF DEDUCTION ON ACCOUNT OF LIQUIDATED CHARGES PAID BY THE ASSESSEE TO M/S. WEIZMANN HOMES LTD., (WHL). THE ASSESSEE WHO WAS ENGAGED IN THE BU SINESS OF BORROWING AND LENDING OF MONEY, FINANCIAL SERVICES AND TRADING IN SHARES AND SECURITIES HAD DURING THE YEAR GOT AMALGAMATED WITH ITSELF FOUR OT HER GROUP COMPANIES WHICH INCLUDED ABHIPALA LEASING & FINANCE LTD. (ALFL). TH E LATTER WHO WAS MAKING 2 INVESTMENT IN A PROPERTY UNDER CONSTRUCTION AT BAND RA KURLA COMPLEX HAD ENTERED INTO AN AGREEMENT DATED 14.2.2002 WITH THE WHL FOR SELLING OFFICE PREMISES IN THE SAID BUILDING. SUBSEQUENTLY ALFL WA S MERGED WITH THE ASSESSEE W.E.F. 1.4.2002 AS PER THE COURT ORDER DAT ED 21.3.2003 AND THEREFORE IT BECAME THE LIABILITY OF THE ASSESSEE TO PROVIDE THE OFFICE PREMISES TO WHL. IN TERMS OF THE AGREEMENT, A SUM OF RS.2 CRORES HAD BE EN RECEIVED BY ALFL AT THE TIME OF AGREEMENT AND FURTHER SUM OF RS.3.50 CRORES WAS TO BE PAID IN INSTALLMENTS OUT OF WHICH A SUM OF RS.50 LACS WAS T O BE PAID ON RECEIPT OF OCCUPANCY CERTIFICATE. THE ASSESSEE HOWEVER COULD N OT HONOUR THE COMMITMENT AS PER THE AGREEMENT TO PROVIDE OFFICE SPACE TO WHL WHO VIDE LETTER DATED 31.3.2003 CANCELLED THE AGREEMENT. CLAUSE 14 OF THE AGREEMENT PROVIDED THAT IN CASE THE VENDOR WAS NOT ABLE TO HANDOVER THE POS SESSION OF THE PREMISES ON OR BEFORE 31.7.2002, THE VENDOR SHALL REFUND THE AM OUNT FORTHWITH AND ALSO PAY LIQUIDATED DAMAGE @ 1.4% PER MONTH FROM THE DATE OF RECEIPT OF ADVANCE TILL REFUND OF THE ENTIRE AMOUNT TO WHL. THE ASSESSEE HA D PAID LIQUIDATED DAMAGES OF RS.59,58,458/- UNDER THE SAID PROVISIONS OF THE AGREEMENT WHICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING THE TOTAL INCO ME. THE AO AT THE TIME OF ASSESSMENT NOTED THAT THE AGREEMENT WHICH WAS ENTER ED ON STAMP PAPER OF RS.50 WAS NOT REGISTERED AND THE STAMP PAPER WAS AL SO NOT CARRYING THE NAMES OF THE PARTY WHO PURCHASED THE STAMP PAPER AND THE NAME OF THE STAMP VENDOR. AO ALSO NOTED THAT WHL WHO WAS A SISTER CON CERN OF THE ASSESSEE HAD ALSO NOT PAID THE TWO INSTALLMENTS OF RS.1 CRORE EA CH DUE ON 28.2.2002 AND 31.5.2002. THUS THE ASSESSEE WAS NOT REQUIRED TO P AY THE LIQUIDATED DAMAGES. AO ALSO OBSERVED THAT THE DAMAGES PAID RELATED TO A CQUISITION OF PROPERTY AND THEREFORE LOSS IF ANY WAS CAPITAL LOSS. HE THEREFOR E DISALLOWED THE CLAIM. 3 2.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND S UBMITTED BEFORE CIT(A) THAT THE LIQUIDATED DAMAGES PAID WERE OF THE NATURE OF INTEREST @1.4% PER MONTH ON THE ADVANCES RECEIVED BY THE ASSESSEE AND USED IN ITS BUSINESS. AS REGARDS THE REGISTRATION OF THE DOCUMENT, THE ASSES SEE SUBMITTED THAT IT WAS NOT NECESSARY THAT THE DOCUMENT SHOULD BE REGISTERE D PARTICULARLY WHEN THE TRANSACTION WAS WITH THE SISTER CONCERN. THE LIQUID ATED DAMAGES WERE THE CONTRACTUAL LIABILITY OF THE ASSESSEE AS PER THE AG REEMENT AND THE ASSESSEE HAVING ALREADY RECEIVED THE ADVANCE, THE NATURE OF THE DAMAGES WAS THAT OF INTEREST WHICH WAS ALLOWABLE AS DEDUCTION. CIT(A) W AS SATISFIED BY THE ARGUMENTS ADVANCED. IT WAS OBSERVED BY HIM THAT THE RE WAS NO DISPUTE REGARDING THE GENUINENESS OF ADVANCE PAYMENT WHICH HAD BEEN RECEIVED BY CHEQUE. THE AGREEMENT COULD NOT BE HELD INVALID ON LY ON THE GROUND THAT IT WAS NOT REGISTERED. CIT(A) ALSO OBSERVED THAT THE A GREEMENT WAS A CONTRACT BETWEEN THE TWO PARTIES WHICH COULD BE ORAL OR IN W RITING WITH OR WITHOUT REGISTRATION. THE AGREEMENT HAD ALREADY BEEN ENTERE D INTO WITH ALFL WHICH HAD GOT MERGED WITH THE ASSESSEE AND THEREFORE THE ASSE SSEE HAD TO HONOUR THE CONTRACT. THE LIQUIDATED DAMAGES AT THE RATE OF 1.4 % PER MONTH FIXED IN THE AGREEMENT PERFECTLY MATCHED WITH THE MARKET RATE OF INTEREST. THERE WAS NO MATERIAL PLACED ON RECORD BY THE AO THAT RATE OF 1. 4% P.M. PAID BY THE ASSESSEE WAS EXCESSIVE OR UNREASONABLE. FURTHER THE LIQUIDATED DAMAGES PAID BY THE ASSESSEE HAD BEEN ACCOUNTED BY WHL AND DECLA RED AS INCOME. CIT(A) THEREFORE HELD THAT THERE WAS NO TAX PLANNING OR AN Y TAX AVOIDANCE INVOLVED AND PAYMENT MADE BY THE ASSESSEE WAS ALLOWABLE AS D EDUCTION. ACCORDINGLY HE ALLOWED THE CLAIM AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4 2.2 BEFORE US THE LEARNED AR REITERATED THE SUBMISS IONS MADE BEFORE LOWER AUTHORITIES THAT THE LIQUIDATED DAMAGES PAID WAS OF THE NATURE OF INTEREST FOR ADVANCES RECEIVED BY THE ASSESSEE WHICH HAD BEEN US ED IN ITS BUSINESS. IT WAS POINTED OUT THAT THERE WAS NO TAX AVOIDANCE INVOLVE D IN THE DEAL AS THE ASSESSEE HAD HUGE BROUGHT FORWARD LOSSES AND THEREF ORE CLAIM OF LIQUIDATED DAMAGES COULD NOT BE WITH A VIEW TO AVOID ANY PAYME NT OF TAX. MOREOVER THE PAYMENT OF LIQUIDATED DAMAGES HAD BEEN SHOWN BY THE WHL AS ITS INCOME AND TAX HAD BEEN PAID ON THE SAME. HE REFERRED TO THE P ROFIT AND LOSS ACCOUNT OF WHL PLACED AT PAGE 6 OF THE PAPER BOOK IN WHICH IT HAD DECLARED INCOME OF RS.6.34 CRORES BEFORE TAX. INCOME ON ACCOUNT OF LIQ UIDATED DAMAGES OF RS.59,58,458/- HAD BEEN DECLARED WHICH WAS INCLUDED IN THE OTHER OPERATING INCOME SHOWN IN SCHEDULE 9 OF THE AUDITED ACCOUNT P LACED AT PAGE 7 OF THE PAPER BOOK. THERE WAS NO MATERIAL WITH THE REVENUE TO SHOW THAT THE ASSESSEE HAD USED ANY COLOURABLE DEVICE. EVEN IF THE ASSESSE E HAD NO AGREEMENT AND IT HAD MADE SIMPLE BORROWINGS, IT WOULD HAVE REQUIRED TO PAY THE SUM AS INTEREST ON BORROWINGS. NO CASE HAD BEEN MADE THAT MONEY HAD NOT BEEN USED BY THE ASSESSEE. HE REFERRED TO THE JUDGMENT OF HONBLE HI GH COURT OF MUMBAI IN CASE OF CIT VS MEHTA PVT. LTD. (174 TAXMAN 104) IN WHICH IT WAS HELD THAT JUDGMENT OF HONBLE SUPREME COURT IN CASE OF MCDOWELL AND CO . (154 ITR COULD BE APPLIED ONLY IF THERE WAS MATERIAL TO SHOW THAT THE TRANSACTION WAS OF COLOURABLE OR COLLUSIVE. THE LEARNED AR ALSO REFERR ED TO THE JUDGMENT OF HONBLE SUPREME COURT IN CASE OF PRAKASH COTTON MIL LS PVT. LTD. VS CIT (201 ITR 684) IN WHICH IT WAS HELD THAT IN ORDER TO UNDE RSTAND THE TRUE NATURE OF DAMAGES, PENALTY OR INTEREST, THE SCHEME OF THE PRO VISIONS UNDER WHICH THE PAYMENT HAD BEEN MADE SHOULD BE EXAMINED TO FIND OU T WHETHER THE SAME WAS PENAL IN NATURE OR COMPENSATORY AND IN CASE THE PAY MENT WAS COMPENSATORY, IT HAS TO BE ALLOWED. IN THIS CASE THE PAYMENT HAD BEE N MADE FOR USE OF MONEY 5 RECEIVED IN ADVANCE AND THEREFORE THE NATURE WAS CO MPENSATORY WHICH HAS TO BE ALLOWED AS DEDUCTION. THE LEARNED AR ALSO POINTE D OUT THAT IT WAS NOT A CASE OF LUMPSUM PAYMENT AS DAMAGES WITHOUT ANY RELA TION TO THE USE OF MONEY BY THE ASSESSEE WHICH COULD BE DISALLOWED. TH E PAYMENT IN THIS CASE WAS COMPENSATORY. RELIANCE WAS PLACED ON THE JUDGME NT OF HONBLE HIGH COURT OF KOLKATA IN CASE OF NEW CENTRAL JUTE MILLS LTD. V S CIT (136 ITR 742). THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF AO AND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE ORDER. 2.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY OF DEDUCTION ON ACCOUNT OF LIQUIDATED CHARGES OF RS.59,58,458/- PAID BY THE AS SESSEE TO A GROUP CONCERN NAMELY M/S. WHL. ANOTHER GROUP CONCERN OF THE ASSES SEE I.E. ALFL HAD EARLIER ENTERED INTO AN AGREEMENT WITH WHL FOR SELLING OFFI CE PREMISES IN THE PROPERTY BEING CONSTRUCTED BY IT AT BANDRA KURLA COMPLEX AS PER THE AGREEMENT DATED 14.2.2002. THE AGREEMENT PROVIDED FOR PAYMENT OF RS .2 CRORE BY WHL TO THE ALFL AT THE TIME OF AGREEMENT AND BALANCE AMOUNT OF RS.3.5 CRORES WAS TO BE PAID LATER IN INSTALLMENTS. IN TERMS OF THE CLAUSE 14 OF THE AGREEMENT, IN CASE ALFL WAS NOT ABLE TO HANDOVER THE POSSESSION OF THE PREMISES ON OR BEFORE 31.7.2002, IT WAS REQUIRED TO REFUND THE AMOUNT REC EIVED IN ADVANCE FORTH WITH THE LIQUIDATED DAMAGES @ 1.4% PER MONTH FROM THE DA TE OF ADVANCE TILL THE DATE OF REFUND. AFTER THE AGREEMENT, ALFL WAS MERGE D WITH THE ASSESSEE W.E.F. 1.4.2002 AND THEREFORE IT BECAME LIABILITY OF THE A SSESSEE TO HANDOVER THE BUSINESS PREMISES TO WHL AS PER TERMS AND CONDITION S OF THE AGREEMENT. THE ASSESSEE COULD NOT HONOUR THE COMMITMENT AS PER THE AGREEMENT TO PROVIDE THE OFFICE PREMISES TO WHL AND THEREFORE THE LATTER VIDE LETTER DATED 31.3.2003 CANCELLED THE AGREEMENT AND IN TERMS OF THE CLAUSE 14 OF THE AGREEMENT THE 6 ASSESSEE HAD TO PAY LIQUIDATED DAMAGES AMOUNTING TO RS.59,58,458/-. THE AO DID NOT ACCEPT THE GENUINENESS OF THE AGREEMENT ON THE GROUND THAT THE SAME WAS NOT REGISTERED AND THE STAMP PAPER USED ALSO DI D NOT MENTION THE NAME OF THE PARTY AND THE STAMP VENDOR. HE ALSO TOOK THE VI EW THAT LOSS ARISING ON ACCOUNT OF PAYMENT WAS A CAPITAL LOSS AS THE SAME R ELATED TO ACQUISITION OF PROPERTY. CIT(A) HAS NOT UPHELD THE VIEW TAKEN BY T HE AO. WE AGREE WITH THE FINDING OF THE CIT(A) THAT THE AGREEMENT COULD NOT BE REJECTED AS NON GENUINE ONLY ON THE GROUND THAT STAMP PAPER SAME DID NOT CO NTAIN THE NAME OF THE PARTIES. AN AGREEMENT COULD BE EVEN ON PLAN PAPER O R ORAL AND STILL COULD BE A GENUINE AGREEMENT. IN THIS CASE IN TERMS OF THE AGR EEMENT ADVANCE OF RS.2 CRORES HAD BEEN RECEIVED BY THE ASSESSEE BY CHEQUE AND THEREFORE IT COULD NOT BE SAID THAT THE AGREEMENT WAS NOT GENUINE. AGREEME NT CAN ALSO NOT BE CONSIDERED AS A DEVICE TO AVOID PAYMENT OF TAX AS I T HAS BEEN RIGHTLY POINTED OUT BY THE LEARNED AR THAT THE ASSESSEE HAD SUBSTAN TIAL CARRIED FORWARD LOSSES AND EVEN IF THE DEDUCTION ON ACCOUNT OF LIQUIDATED DAMAGES WAS NOT CLAIMED, INCOME COULD HAVE BEEN SET OFF BY THE LOSSES AND SO ME LOSSES WOULD HAVE STILL TO BE CARRIED FORWARD. MOREOVER, WHL BELONGED TO TH E HIGH INCOME GROUP HAVING PRE-TAX INCOME OF RS.6.34 CRORES IN THE RELE VANT YEAR AND HAD PAID THE TAX ON THE INCOME ON ACCOUNT OF LIQUIDATED DAMAGES RECEIVED BY IT. THERE IS NO MATERIAL PLACED ON RECORD TO SHOW THAT THE ASSESSEE HAS USED THE AGREEMENT AS A COLOURABLE DEVICE TO REDUCE THE TAX LIABILITY. THE ASSESSEE PAID LIQUIDATED DAMAGES @ 1.4% PER MONTH ON THE MONEY RECEIVED BY I T FROM WHL. CIT(A) HAS GIVEN A FINDING THAT RATE OF 1.4% PER MONTH MAT CHED WITH THE MARKET RATE OF INTEREST AT THE RELEVANT TIME. THIS FINDING HAS NOT BEEN CONTRAVERTED BEFORE US BY THE LEARNED DR. THEREFORE EVEN IF THERE WAS N O AGREEMENT AND THE ASSESSEE HAD RECEIVED THE MONEY AS ADVANCE FROM WHL , IT WOULD HAVE TO PAY 7 THE INTEREST @ 1.4% PER MONTH. WE THEREFORE UPHELD THE VIEW OF CIT(A) THAT THE AGREEMENT WAS GENUINE AND THAT NO COLORABLE DEV ICE WAS INVOLVED. 2.4 AS REGARDS, THE NATURE OF PAYMENT THE HONBLE SUPREME COURT IN CASE OF PRAKASH COTTON MILLS PVT. LTD. VS CIT (SUPRA) HAVE HELD THAT IN ORDER TO UNDERSTAND THE TRUE NATURE OF DAMAGES/ PENALTY/ INT EREST, THE RELEVANT PROVISIONS OF THE SCHEME UNDER WHICH PAYMENT HAD BE EN MADE HAS TO BE EXAMINED TO FIND OUT WHETHER THE PAYMENT WAS COMPEN SATORY OR PENAL IN NATURE. IN THIS CASE AS WE HAVE POINTED OUT EARLIER , THE PAYMENT WAS NOTHING BUT INTEREST AT THE MARKET RATE WHICH COULD ONLY TE RMED AS COMPENSATORY IN NATURE. IT IS NOT A CASE THAT THE ASSESSEE HAD RECE IVED LUMPSUM AMOUNT UNRELATED TO THE ADVANCE RECEIVED FOR CANCELLATION OF AGREEMENT IN WHICH CASE PROBABLY THERE WOULD HAVE BEEN DISPUTE WHETHER THE AMOUNT COULD BE ALLOWED AS DEDUCTION. IN THE PRESENT CASE IT IS A CASE OF C OMPENSATION AT THE MARKET RATE OF INTEREST. HOWEVER, THE DAMAGES WHICH WERE O F THE NATURE OF COMPENSATORY INTEREST CAN BE ALLOWED AS DEDUCTION O NLY IF THE ADVANCE RECEIVED BY THE ASSESSEE WAS USED IN THE BUSINESS. THE CASE OF THE ASSESSEE IS SIMILAR TO THE CASE OF NEW CENTRAL JUTE MILLS LTD. VS CIT ( SUPRA). IN THAT CASE, THE ASSESSEE HAD AGREED TO OBTAIN RELEASE OF THE LAND F ROM UP GOVERNMENT AND CONVEY IT BY A SPECIFIC TIME FAILING WHICH IT HAD A GREED TO REFUND THE SAME AND PAY DAMAGES OF RS.1 LAC AND INTEREST ON THE SUM OF RS.40 LACS RECEIVED AS ADVANCE FROM THE CONCERNED PARTY. THE ASSESSEE WAS UNABLE TO OBTAIN RELEASE OF THE LAND AND REFUNDED THE SUM OF RS.40 LACS AND PAID RS. 1 LAC AS DAMAGES AND RS.1,85,123/- AS INTEREST ON THE SUM OF RS.40 L ACS. THE HONBLE HIGH COURT HELD THAT DAMAGES OF RS. 1 LAC PAYABLE BY THE ASSES SEE RELATED TO CAPITAL ASSET AND SAME WAS NOT ALLOWABLE AS DEDUCTION. HOWEVER IT WAS HELD THAT THE INTEREST HAD BEEN PAID FOR USER OF THE MONEY AND IT HAD TO B E CONSIDERED AS FACILITATING 8 THE RUNNING OF THE BUSINESS AND THE INTEREST HAD TH EREFORE TO BE ALLOWED IF THE MONEY WAS UTILIZED FOR THE PURPOSE OF BUSINESS. AS THESE ASPECTS HAD NOT BEEN EXAMINED, THE HIGH COURT RESTORED THE MATTER TO THE TRIBUNAL FOR FRESH CONSIDERATION. IN THE PRESENT CASE ALSO IT HAS NOT BEEN EXAMINED WHETHER THE ADVANCE RECEIVED BY THE ASSESSEE HAD BEEN UTILIZED BY THE ASSESSEE IN THE BUSINESS OR DIVERTED FOR SOME NON BUSINESS PURPOSES . WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO THE F ILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF O BSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESS EE. 3. THE SECOND DISPUTE IS REGARDING ADDITION OF RS.1 ,05,092/- ON ACCOUNT OF DISCREPANCY IN SALE OF SHARES. THE AO NOTED THAT IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAD SHOWN THE VALUE OF SALE OF SHARES AND SECURITIES AT RS.2,81,54,471/- WHEREAS IN THE QUANTITATIVE DETAIL S GIVEN IN THE SCHEDULE P THE SALE VALUE HAD BEEN SHOWN AT RS.2,82,59,563/-. THERE WAS THUS DIFFERENCE OF RS.1,05,092/- WHICH THE AO ASKED THE ASSESSEE TO EXPLAIN. THE ASSESSEE EXPLAINED AS UNDER : IN THE ABOVE REGARD WE WISH TO INFORM YOU THAT WE HAD 3550 DEBENTURES OF BALMER LAWREI VAN LEER LIMITED. THE SAID DEBENTURES WERE ACQUIRED BY US PRIOR TO 1994-95 AT A COST OF RS.195605/-. THE FACE VALUE OF THE DEBENTURES WERE RS.50/- PER DEBENTURE AND THE SAME WAS REDEEMED BY THE COMPANY IN 3 INSTALLMENTS AT RS.16/- IN MARCH 2001 AND AT RS.16/ - AND RS.18 IN MARCH 2002. WHEN WE RECORDED THE REDEMPTION AMOUNT RECEIVED IN MARCH 2001 AT RS.16 FOR A VALUE OF RS.56800 (16 X 3550), WE HAD REDUCED OUR STOCK ON HAND BY RS.62,586.50 (195605 X 16/50) AND AGAIN WHEN THE BA LANCE WAS REDEEMED IN 2 INSTALLMENTS IN MARCH 2002, THE SALE INCOME OF RS .1,20,700/- WAS SHOWN AS SALE (3550 X 16 + 3550 X 18). HOWEVER, THE STOCK WA S REDUCED ONLY TO THE EXTENT OF RS.62,586.50 (195605 X 16/50) LEAVING A B ALANCE RS.70,432/- 9 (195605 X 18/50), WHICH TOO SHOULD HAVE BEEN REDUCE D FROM THE STOCK AS THE DEBENTURES HAD BEEN FULLY REDEEMED AT RS.18/- AS SH OWN ABOVE. THE SAID ERROR WAS RECTIFIED IN MARCH 2003 I.E. AS SESSMENT YEAR 2003-04 AS AN ITEM OF SALE WHEREIN THE FACTUAL POSITION THE SALE HAVE ALREADY BEEN RECORDED IN THE P & L IN ASSESSMENT YEAR 2002-03 IT SELF. THE ITEM WAS REFLECTED AS SALE IN THE NOTE TO THE ACCOUNTS SO AS TO ENSURE THAT THE QUANTITY IS TALLIED. REGARDING THE BALANCE AMOUNT OF RS.34,660/- (10509 2 70432), WE HAD 10 EQUITY SHARES OF ICICI LIMITED FOR RS.1360/-. IN THE MERGER OF ICICI LIMITED WITH ICICI BANK LIMITED, THE SAID 10 SHARES WERE CO NVERTED INTO 5 SHARES OF ICICI BANK LIMITED. CONSEQUENTLY, SO AS TO REFLECT THE QUANTITIES PROPERLY, WE HAD SHOWN AS IF 10 SHARES AT RS.1360/- AS SALE AND 5 SHARES OF ICICI BANK LIMITED AS PURCHASE. YOU SHOULD APPRECIATED IN ACTU AL PRACTICE, THERE IS NO SALE OF 10 ICICI LIMITED SHARES FOR RS.1360/-. THIS IS O NLY TO REFLECT THE REDUCTION IN NUMBER OF SHARES ON ACCOUNT OF AMALGAMATION OF THE 2 COMPANIES. REGARDING FURTHER BALANCE OF RS.33,300/- (RS.34,66 0 1360), AGAIN THE SAME WAS ON ACCOUNT OF RESTRUCTURING OF INDO GULF C ORPORATION LIMITED WHEREIN PART BUSINESS OF THE SAID COMPANY WAS TAKEN OVER BY HINDALCO AND THE EXISTING COMPANY WAS RENAMED AS INDO GULF FERTILIZERS LIMITE D. HENCE, SO AS TO REFLECT THE QUANTITATIVE DETAILS WE HAD SHOWN THE SALE VALU E OF RS.33,300/- AS SALE OF SHARES IN INDO GULF CORPORATION LIMITED, WHICH IN A CTUAL PRACTICE AS YOU WILL APPRECIATE, IS NOT A SALE. 3.1 THE AO HOWEVER OBSERVED THAT THE ASSESSEE HAD N OT SUBSTANTIATED THE TRANSACTIONS MENTIONED ABOVE WITH CONCLUSIVE EVIDEN CE. IN THE EARLIER YEARS THE ASSESSMENTS HAD BEEN MADE UNDER SECTION 143(1) AND THERE WERE NO SPECIFIC DETAILS AVAILABLE AND THIS CLAIM OF THE ASSESSEE WA S NOT SUPPORTED BY DETAILS AND EVIDENCE. THE AO THEREFORE ADDED THE SUM OF RS. 1,05,092/- TO THE TOTAL INCOME. IN APPEAL THE ASSESSEE REITERATED THE EARLI ER SUBMISSIONS THAT THE DISCREPANCY HAD ARISEN DUE TO ADJUSTMENT ENTRIES MA DE OR IN ORDER TO TALLY THE QUANTITATIVE DETAILS. CIT(A) ON PERUSAL OF DETAILS OBSERVED THAT THE EXPLANATION 10 OF THE ASSESSEE WAS CONVINCING. THE AO WAS NOT CORR ECT IN MAKING COMPARISON OF SALES WITH THE QUANTITATIVE DETAILS GIVEN IN THE SCHEDULE WHICH HAD ALSO INCLUDED SALE ON ACCOUNT OF ADJUSTMENT ENTRIES WHIC H DID NOT REPRESENT REAL SALE. HE THEREFORE DELETED THE ADDITION MADE BY THE AO AGGRIEVED BY WHICH THE REVENUE IS IN APPEAL. 3.2 BEFORE US THE LEARNED AR REITERATED THE SUBMISS IONS MADE BEFORE LOWER AUTHORITIES WHEREAS THE LEARNED DR PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 3.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADDITION OF RS. 1,05,092/- ON ACCOUNT OF DISCREPANCY IN SALE OF SHARES. IN THE PROFIT AND LO SS ACCOUNT THE ASSESSEE HAD SHOWN SALE OF SHARES AND SECURITIES AT RS.2,81,54,4 71/- WHEREAS IN THE QUANTITATIVE DETAILS GIVEN IN SCHEDULE P THE SALE V ALUE HAD BEEN SHOWN AT RS.2,82,59,563/-. THE DIFFERENCE OF RS.1,05,092/- W AS ADDED BY THE AO TO THE TOTAL INCOME. THE ASSESSEE EXPLAINED THAT IT HAS 35 50 DEBENTURES OF BALMER LAWREI VAN LEER LTD. WHICH WAS REDEEMED IN THREE IN STALLMENTS. AT THE TIME OF REDEMPTION OF THE DEBENTURE, THE FACE VALUE OF DEBE NTURE WAS REQUIRED TO BE REDUCED FROM THE STOCK WHICH HAD NOT BEEN DONE AT T HE TIME OF REDEMPTION. THE ASSESSEE THEREFORE IN THE QUANTITATIVE DETAILS SHOWED SALE OF DEBENTURE AT RS.70,432/- FOR THE PURPOSE OF QUANTITATIVE TALLY T HOUGH THERE WAS NO ACTUAL SALE. SIMILARLY THE ASSESSEE HELD 10 SHARES OF ICIC I LTD WHICH HAD BEEN CONVERTED INTO 5 SHARES OF ICICI BANK LTD. THE ASSE SSEE HAD THEREFORE TO DEDUCT 10 SHARES OF ICICI LTD WORTH RS.1360 FROM TH E QUANTITATIVE TALLY BY SHOWING THE SAME AS SALE WHEN THERE WAS ACTUALLY NO SALE. SIMILAR WAS THE POSITION IN RESPECT OF SHARES OF INDO GULF CORPORA TION LTD. WHICH HAD BEEN 11 TAKEN OVER BY HINDALCO AND THE ASSESSEE HAD TO MAKE ADJUSTMENT OF RS.33,300/- IN THE QUANTITATIVE TALLY. THE EXCESS S ALES SHOWN IN THE QUANTITATIVE TALLY WERE THEREFORE ON ACCOUNT OF ADJ USTMENT ENTRIES WHICH ACTUALLY DID NOT REPRESENT ANY SALE. CIT(A) HAS ACC EPTED THE CLAIM OF THE ASSESSEE. BEFORE US NO MATERIAL HAS BEEN PRODUCED T O POINT OUT ANY DISCREPANCY IN THE SUBMISSION MADE BY THE ASSESSEE BEFORE CIT(A). WE THEREFORE SEE NO INFIRMITY IN THE ORDER OF CIT(A) A LLOWING THE RELIEF TO THE ASSESSEE AND THE SAME IS THEREFORE UPHELD. 4. IN THE RESULT APPEAL OF THE REVENUE IS PARTLY AL LOWED FOR STATISTICAL PURPOSE. 5. ORDER WAS PRONOUNCED IN THE OPEN COURT 27.04.201 1. SD/- SD/- ( R.S. PADVEKAR ) (RAJEND RA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 27.04.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR C BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK