The ACIT, central Circle-1(2), Ahmedabad V. M/s. Manan Agro Pvt. Ltd, Ahmedabad

ITSSA 511/AHD/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0883 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-07-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-07-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 30-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SELLING OFF THEIR
• Keywords: Rejection of books of accounts; Recovery proceedings; Business income; Depreciation; Opportunity of being heard; Deemed to accrue or arise in india; Speculation loss; Set aside
• Section: 132; 139; 264; 13; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER I.T( SS) .A. Nos. 4 90, 264 & 275/Ahd/2019 ( नधा रण वष /Assess ment Yea rs : 2014-15, 2013-14 & 2012-13) S mt. Fa lg u ni Ra je sh M e ht a C/ o. S. A . Su kh ad ia , Ad vo cat e, L -3, Me gha la ya Av en ue, N ea r Sar d ar Pa te l Co lo n y, N ar an pu ra, Ah me da bad , Gu ja ra t - 38 00 14 बनाम/ V s . Dy . C I T Ce ntr al c irc le -1 (2) , Ah me da bad थायी ले खा सं./जीआइआर सं./P A N / G IR N o . : A E IP M 1 2 0 9 B (Appellant) . . (Respondent) & I.T( SS) .A. No. 51 1/Ahd/2019 ( नधा रण वष / Assess ment Ye ar : 2014-15) As stt . Co mmi s si on er of In co me- tax Ce ntr al c irc le -1 (2) , Ah me da bad बनाम/ V s . M / s. M an a n Ag ro Pvt . L td . 80 1, 8t h Fl oo r, M a ur ya n sh Ela nz a, P ari kh H os pit al , Sh ya mal C ha r Ra st a, Ah me da bad थायी ले खा सं./जीआइआर सं./P A N / G IR N o . : A A H C M 7 5 1 5 Q (Appellant) . . (Respondent) Assessee by : Shri Dipen Shukhadia, A.R. Revenue by : Shri Vijay Kumar Jaiswal, CIT. DR D a t e o f H e a r i n g 02/07/2024 D a t e o f P r o n o u n c e m e n t 22/07/2024 ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 2 – O R D E R PER BENCH: The three appeals in IT(SS) A Nos. 490, 264 & 275/Ahd/2019 are filed b y the asse ssee against the order of the Co mmissioner of Inco me Tax (App eal)-7, Ah medabad, (in short ‘the CI T( A) ’) f or A.Ys. 2014-15, 2013-14 & 2012-13 respectively. The separate orders of the CIT(A) for A.Y. 12-13 & A.Y. 2013-14 are both dated 12.02.2019 while the order of the CIT( A) for the A.Y. 2014-15 is dated 31.07.2019. Th e appeal in ITA No.511/Ahd/2019 in the case of M/s. Manan Agr o Pvt. Ltd. is filed b y the Revenue against the order of CIT( A)-11, Ah medabad dated 29.08.2019. The i ssue involved in all these 4 appeals are interlinked and commo n. Therefore , these appeals were heard together and are being disposed of vide this co mmon order. 2. We will take appeal in IT( SS) A No. 490/Ahd/2019 as the lead case. IT(SS )A No. 490/Ahd/2019 (A.Y. 2014-15) 3. The assessee has raised the following grounds in this appeal: “1. The Ld. CIT(A) has erred in not appreciating the submission as abstracted by him in his appeal order page 4 to 8 para 3.1 therefore, inter alia erred in confirming the addition as per page 32, para 5.11 of the appeal order and therefore, the addition confirmed may please be deleted. ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 3 – 2. That, Ld. CIT(A) has also erred in not given any finding in respect of rejecting of books of account without pointing out any specific default in books of accounts by the A.O. 3. The Ld. CIT (A) has erred in upholding the addition u/s 41(1)(a) in respect of outstanding of NSEL that of Rs. 97,83,77,378/- without any actual remission or cessation of liability. 4. The Ld. CIT (A) has erred in not appreciating the facts the litigation is going on in the court and appellant has not denied to pay the outstanding and amount is revered from the auction proceedings of the immovable properties of the appellant even after order passed by the A. Ο. 5. The Ld. CIT(A) has erred in upholding the disallowance of Business Loss that of Rs. 25355143/- 6. The Ld. CIT(A) has erred in not allowing the deprecation loss of Rs. 135033/-. 7. Ld. CIT(A) has erred in facts and/or in law in not appreciating the facts that, the appellant has execute the transaction of sale and purchase of Castor seed as per terms entered with NSEL and godwon delivery received and given through godown controlled and managed by NSEL as per terms of agreement entered into with NSEL. And Value Added Tax is also paid or received on such transaction and duly reflected in VAT return filed by the appellant.” 4. In the course of hearing, Shri Dipen Shukhadia, Ld. AR for the assessee did not press Grounds No. 1, 2, 4 & 7. Therefore, these grounds are dismissed. Before, we take up grounds taken up and argued by the assessee, it will be relevant to discuss the facts of the case as the assessee is allegedly one of the perpetuator of NSEL scam. Facts of the case 5. The assessee is proprietor of M/s. Swastik Overseas Corporation and was engaged in trading in agro products on the platform of National Spot Exchange Limited (‘NSEL’). A survey was conducted at the premises of M/s. Swastik Overseas Corporation on 22.08.2013 and, thereafter, a search ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 4 – operation under Section 132 of the Act was carried out at the residential premises of the Directors as well as godowns of M/s. Swastik Overseas Corporation & M/s. Manan Agro P. Ltd. on 03.09.2013. The return of income for A.Y. 2014-15 was filed by the assessee on 22.08.2015 declaring Nil income, whereas, the assessment was completed under Section 153B(1)(b) r.w.s. 144 of the Act on 09.03.2016 at total income of Rs.97,85,12,411/-. 6. As per assessment order, the platform of NSEL was misused by the assessee by carrying out fraudulent transactions. The working of NSEL as well as the trading mechanism has been discussed in detail by the AO in the assessment order. In this scheme of trading the entire quantity of specific commodity was maintained by 1 or 2 persons only, who had the monopoly over trading in that specific commodity. The assessee was trading in castor seeds through the platform of NSEL. The mechanism of trading of NSEL was explained in the assessment order as under: “5.3 The borrowers and lenders entered into a pair of contracts for every deal. First, there was a T+3 day contract that mandated that within two days of signing it, the Investor will lend the money and the borrower will hand over a warehouse receipt. Simultaneously, they entered into a T+36 day contract, which said 35 days after cutting the deal, the borrower will pay back a pre-agreed amount and get back the receipt. The difference between the money lent and paid back captured the interest return. The money borrowed was rarely paid back after 36 days. On the contract's expiry, the borrower just paid the interest to the lender and the two parties would roll over the positions by entering into a new but similar contract. This would go on for months. This was similar to the now banned badla finance, once the lifeline of stock markets. 5.4 As discussed above, conceptually, NSEL was set up as an online trading platform for a number of commodities and each commodity has its delivery locations at NSEL designated warehouses/accredited godowns. The trading in NSEL was a physical delivery based trading to which the seller has to physically deliver the commodities offered by him for trading through NSEL. The seller has ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 5 – to deposit the commodities at the designated warehouses where the quantity and the quality is ensured and then allowed to be traded in the exchange. As per information available at the website, NSEL is having 79 accredited godowns/designated warehouses all over India.” 7. M/s. Swastik Overseas Corporation became the registered member of NSEL in the year 2011 and started trading of castor seeds through the platform of NSEL. For the purpose of trading, NSEL had maintained a Settlement Account with HDFC Bank in the name of M/s. Swastik Overseas Corporation, wherein 3% to 5% of the value of the transaction was kept as margin money which was released after transaction was over. In the course of search operation, statement of Shri Rajesh B. Mehta, husband of the assessee and power of attorney holder of M/s. Swastik Overseas Corporation was recorded under Section 132(4) of the Act on 11.09.2013, wherein he stated that no actual or physical delivery of goods in the transaction was done through NSEL. All sale transactions done on T+3 trade contract were being settled by way of purchase of T+36 and that all the transactions were on paper only. The entire turnover as disclosed by the assessee was found to be only paper turnover. The assessee was unable to produce any documentary evidence for purchase or sale transactions, transport bills, vouchers etc. and only the ledger account maintained in Tally was produced in support. Therefore, the AO treated the turnover of the assessee as paper turnover and rejected the books of accounts of the assessee under Section 145(3) of the Act. 8. The AO has referred to systemic and pre-meditated fraud committed on the platform of NSEL in the commodity market and unearthing of fraud to the extent of around Rs.5600 crores; as NSEL had failed to pay its ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 6 – investors in commodity pair contracts after 31 st July, 2013. It was found that NSEL neither had the money nor stocks to pay them back. At the instance of one of the investors of NSEL, a criminal case was registered inter alia against all the defaulters of NSEL and investigation was conducted by the EOW, Mumbai Police. The assessee was also one of the defaulter of NSEL and was charge-sheeted by various investigation agencies. It was found that the assessee had embezzled funds of Rs.97,83,77,378/- by siphoning of funds through NSEL platform. The assessee had also given an undertaking to NSEL on 01.08.2013 acknowledging this default and conditions of the settlement of such dues were also mentioned therein. 9. In the course of assessment, the AO found that the assessee had shown NSEL account pay out of Rs.40,85,89,843/- in the data of tally found from the premises of the assessee during search operation. However, as per letter dated 01.08.2013 to NSEL, the assessee had confirmed the amount payable of Rs.97 crores to the Exchange. On the other hand, as per audited balance sheet on 31.03.2014, outstanding of NSEL was shown at Rs.1,05,29,64,415/- in spite of the fact that no sale-purchase transaction was undertaken after the search operation. 10. In the course of statement recorded during search, Shri Rajesh B Mehta had admitted that from the transactions with NSEL, amount of Rs.98 Crores (approx.) was withdrawn from the Settlement Account of NSEL. The utilization of the amount so withdrawn was explained in the statement as under: (i) Stock with Swastik Overseas Corporation - Rs.8 Crores, (ii) Margin money with NSEL - Rs.15 Crores, ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 7 – (iii) Loans and advances given - Rs.37 Crores, & (iv) Loans given to group concern (M/s Manan Agro P Ltd.) - Rs.37 Crores. According to the AO, the assessee had not shown Rs. 57 crores (97.83-40.85) as payable to NSEL till the time the NSEL scam came into light. The AO held that the assessee had defaulted in payment/commitment to NSEL which tantamount to cessation of liability under Section 41(1)(a) of the Act. Therefore, the embezzled amount of Rs.97,83,77,378/- was added in the hands of the assessee under Section 41(1)(a) of the Act on substantive basis. Further, loan given to the group concern M/s. Manan Agro P vt. Ltd. out of the embezzled amount was also added in the hands of M/s. Manan Agro Pvt. Ltd. on protective basis. The AO also held that since the entire business was based on paper transactions, no business loss or depreciation was allowable and eligible for carry forward. The past year brought forward losses were also held as not admissible. The addition of Rs.97,83,77,378/- made by the AO on account of cessation of liability was confirmed by the Ld. CIT(A). Submission of the assessee and the Revenue 11. Shri Dipen Shukhadia, the Ld. AR of the assessee contended that provision of Section 41(1)(a) of the Act is applicable in respect of trading liability only. He contended that the AO had not brought on record that the amount Rs.97,83,77,378/- as added u/s 41(1)(a) in assessment order was allowed as deduction in the current or in any past year. Until and unless this condition is fulfilled no disallowance under Section 41(1)(a) can be made. He submitted that the AO had held in the assessment order that the ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 8 – transaction of the assessee through NSEL was paper transaction and accordingly he had not allowed the loss incurred by the assessee. In essence, the AO had indirectly held that the liability outstanding to NSEL was not a trading liability. Under the circumstances there was no question of applicability of section 41(1)(a) of the Act. He further submitted that the assessee had not written off any liability in her books of accounts. Further that NSEL was recovering the money from the assessee by selling off their properties and that so far more than ₹24 crores (approx.) was recovered by MPID court on behalf of NSEL. As the recovery proceeding was still going on, there was no case of any cession or remission of the liability of the NSEL as held by the AO. The Ld. AR further submitted that the losses claimed by the assessee in the current year as well as in the past years were disallowed by the AO. These losses were on account of the trading liability and due to disallowance of losses the trading liability was not allowed in full. For this reason also no disallowance u/s 41(1)(a) could have been made. Therefore, the addition as mad e by the AO was not correct. He further submitted that AO was also not correct in disallowing the loss as well as the depreciation. 12. Per contra, Ld. CIT-DR submitted that the outstanding of NSEL in the balance sheet as on 31.03.2024 was Rs.105.29 Crores whereas as per the agreement between the assessee and NSEL dated 24.01.2014, the parties had agreed for an amount of Rs.77.08 Crores only. Thus, the liability to the extent of difference of Rs.28.21 Crores no longer existed and, therefore, there was no dispute regarding cessation of liability to this extent. He further submitted that there was nothing on record to establish that the amounts recovered from the assessee were linked to the trading liability of the ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 9 – assessee. He contended that the recovery of the amount from the assessee was towards the embezzled funds. The Ld. CIR-DR also pointed out that the Ld. CIT(A) had also given a finding that the amount as added by the AO, if not taxable as deemed income u/s 41(1)(a), then it was liable to be treated as income u/s 28(iv) of the Act. Findings & Order 13. We have given a thoughtful consideration to the rival submissions. As the addition has been made in this case u/s 41(1)(a) of the Act, it will be relevant to reproduce the provisions of this section: Profits chargeable to tax. 41. (1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subsequently during any previous year,— (a) the first-mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or In the present case the trading liability of the assessee has been treated as deemed profit u/s 41(1)(a) on the ground that the liability has ceased to exist. In order to attract the provision of section 41(1)(a) of the Act, the following conditions are required to be satisfied: (i) The liability should have been earlier allowed as deduction, & (ii) There is actual remission or cessation of liability during the year. ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 10 – 14. At the outset, it is found from the assessment order that the AO is not sure about the quantum of the trading liability that has ceased to exist during the year. He has quoted various figures of the liability viz. liability of Rs.40.85 crores appearing in the seized books of accounts, liability of ₹105.29 crores in the audited balance sheet, acknowledgement of amount payable to NSEL on 01.08.2013 being ₹97 crores etc. He has finally treated the embezzlement amount of ₹97.83 crores as the liability that has ceased to exist during the year. The AO has, however, not given any cogent reason as to why the embezzled amount of Rs.97.83 Crores should be treated as cessation of liability. From the manner of utilization of the embezzled account as explained by Shri Rajesh B. Mehta, as discussed in Para 10 earlier, the entire amount couldn’t have been treated as cessation of liability, as part of it was lying as stock and margin money with NSEL. Further, considering the settlement agreement dated 24.01.2014, wherein liability to the extent of Rs.77.08 Crores was acknowledged by the assessee, the addition of Rs.97.83 Crores as made by the AO in the current year on account of cessation of liability cannot be held as correct. This amount may be considered as cessation of liability in the future years depending upon the subsequent developments but certainly cannot be held as extinguished in the current year. 15. There is no dispute to the fact that in the audited balance sheet as on 31.03.2014 the outstanding of NSEL was shown at Rs.1,05,29,64,415/-. The assessee has filed a copy of the Settlement agreement between NSEL, M/s. Swastik Overseas Corporation and eight confirming parties dated 24.01.2014. As per Para 2.1 of this agreement, M/s. Swastik Overseas ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 11 – Corporation had to pay Rs.77.08 Crores only to NSEL. When the liability of Rs.77.08 crore only was acknowledged in the Settlement agreement dated 24.01.2014, the assessee has not explained as to why liability of Rs.105.29 crores in respect of NSEL was shown in the balance sheet as on 31.03.2014. Thus, there can be no dispute to the fact that the liability to the extent of difference amount of Rs.28.21 Crores (105.29-77.08) had extinguished during the year and, therefore, the AO was correct in treating the trading liability to the extent of Rs.28.21 Crores as cessation of liability under Section 41(1) of the Act. Accordingly, the addition as made by the AO is confirmed to the extent of Rs.28.21 crores only. This will, however, be subject to further verifications as discussed in subsequent paras. 16. As already discussed earlier, in order to invoke the provision of Section 41(1) of the Act, one has to first satisfy the condition that the amount was allowed as deduction either in the current year or in any of the past years. It is found that this aspect was not examined by the AO and not commented upon in the course of assessment. Further, by disallowing the losses of the current year as well as of the past years, the claim for trading liability might not have been allowed in full. Therefore, the matter is set aside to the file of the AO to verify whether this trading liability, which is held as cessation or remission in the current year, was allowed as deduction in the current year or in the past years. The matter may be decided by the AO after allowing a reasonable opportunity of being heard to the assessee. In the result the ground taken by the assessee is allowed in part. ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 12 – 17. Regarding contention of the Revenue that the embezzled amount of Rs.97.83 crore was taxable under section 28(iv), if not under section 41(1) of the Act, we do not find any merit in the argument. Neither the AO nor the Ld. CIT(A) had invoked the provision of section 28(iv) the Act. It was only a comment in the passing by the Ld. CIT(A) and there was no application of mind to invoke the provision of this section. The said section stipulates that value of any benefit or perquisite, whether convertible into money or not, arising from business, shall be chargeable to tax. The Revenue has not demonstrated as to how the embezzled funds can be considered as benefit or perquisite to the assessee when the recovery proceedings are still going on. Therefore, the argument as taken by the Revenue is rejected. 18. The next grievance of the assessee is regarding disallowance of business loss of Rs.2,53,55,143/- and depreciation of Rs.1,35,033/-. As regarding disallowance of loss, the AO was right in holding that the loss was not eligible for carry forward as the return was not filed within the due date. However, the AO has not given any reason for disallowing the loss as well as the depreciation. The business loss was eligible for set off with the business income as determined by the AO as well as with income from other heads of income. The AO has not disputed the correctness of the loss and depreciation as claimed by the assessee. The contention of the AO is that this loss was incurred in the process of paper transactions and without actual delivery. If so, the AO should have examined as to whether this loss was in the nature of speculation loss and given a specific finding in this regard. The matter is, therefore, set aside to the AO with a direction to examine the nature of loss incurred by the assessee in the current year and, thereafter, give ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 13 – specific finding about the admissibility and set off of the loss. The depreciation claim of the assessee is directed to be allowed and also held as eligible for set off and carry forward as per the provisions of the Act. The grounds taken by the assessee are allowed for statistical purposes. 19. In the result, appeal preferred by the assessee is allowed in part. IT(SS )A No. 264/Ahd/2019 (A.Y. 2013-14) 20. The assessee has taken following grounds of appeal: “1. The Ld. CIT(A) has erred in not appreciating the submission a abstracted by him in his appeal order page 2 to 5 para 3 and 3.1 therefore, inter alia erred in confirming the addition as per page 25, para 5.6 of the appeal order and therefore, the addition confirmed may please be deleted. 2. That, Ld. CIT(A) has also erred in not given any finding in respect of rejecting of books of account without pointing out any specific default in books of accounts by the A.O. 3. The Ld. CIT(A) has erred in upholding the disallowance of Business Loss that of Rs. 8,57,78,996/-. 4. Ld. CIT(A) has erred in facts and / or in law in not appreciating the facts that, the appellant has execute the transaction of sale and purchase of Castor seed as per terms entered with NSEL and godwon delivery received and given through godown controlled and managed by NSEL as per terms of agreement entered into with NSEL. And Value Added Tax is also paid or received on such transaction and duly reflected in VAT return filed by the appellant. 5. Ld. CIT(A) has also erred in not appreciating the facts, that the appellant has also other expenses related to the castor seed business and loss of the said business ought to be allowed. 6. Ld. CIT(A) has also erred on facts as well as law, that not appreciating the facts that assessed income in para 9 as Rs. 41,45,451 is already covered under the disallowance of business loss of Rs. 8,57,78,996/-, made by him. And again A05 451 added income from STCG thamade by ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 14 – 42,61,154) Rs. 41,45,451 +Rs. 1,35,788 in personal books) So has added Rs. 41,45,451 in the income twice. 7. Ld. CIT(A) has also erred in not appreciating the facts that A.O. has erred in not giving set in not appreci35788 in personal books ( Included in 42,61,154) as well as income from other sources Rs.319577/- as against the current year business income.” 21. The Ld. AR has pressed Ground Nos. 3, 6 & 7 only in this year. Therefore, the Ground No. 1, 2, 4 & 5 as taken by the assessee are dismissed. 22. Ground No.3 pertains to disallowance of business loss of Rs.8,57,78,996/-. This issue is pari passu with the facts as discussed in IT(SS) A No . 490/Ahd/2019 for A.Y. 2014-15. In this year also, the AO had disallowed the loss only for the reas on that the business was based on paper transaction. In consonance with the issue as taken in IT(SS )A No.490/Ahd/2019, the ma tter is set aside to the file of the AO to carr y ou t the verification as directed in the said order and thereafter, decide the matter on t he me rits of the case. The gr ound is allowed for statistical purpose. 23. Ground Nos. 6 & 7 pertain to addition of Rs.42,61,451/- separately made b y the AO on accou nt of inco me fro m Short Ter m Capital Gain ( ‘S TCG’). The Ld. AR explained that STC G of Rs.42,45,451/- was alread y included in the net loss of Rs.8,57,78,996/- as per P &L account. However, this a mount was again added by the AO and was a part of addition of Rs.42,61,154/- under the head ‘income fro m STCG’ a s made b y the AO. Theref ore, there was double disallowance on this account. ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 15 – 24. We have carefull y considered the facts of the case. As per co mputation of inco me , the assessee has shown business loss of Rs.8,97,89,524/-. Ho wever, the AO has taken figure o f business loss as per P& L account, which was Rs.8,57,78,996/- and this a mount included STC G on mutual f und of Rs.41,45,451/-. This STC G on mutual fund was also part of inco me f ro m S TCG Rs.42,61,154/-, which was separately added b y the AO. Thus, the contention of the assessee tha t STC G on mutu al fund of Rs.41,45,451/- was taxed twice, is found to be correct. Accordingly, the AO is also directed to reduce the a mount of Rs.41,45,451/- fro m ‘inco me f ro m S TCG’, which was alread y part of net loss as per P&L account Rs.8,5 7,78,996/-. Accordingly, this ground of assessee is allowed. 25. The next ground is in respect of not allowing set off of STC G of Rs .1,35,788/- in personal books as well as i nco me fro m other source Rs.3,19,577/- with the business loss. This issue is identical with the issue a s discussed in I T(SS) A No.490/Ahd/2019. Therefore, the ma tter is set aside to the file of the AO to first ve rif y the nature of business loss and thereafter decide the matter of set off of S TC G and other income with the business loss in accordance with the provisions of the Act . The grounds taken by the assessee are allowed for statistical purposes. ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 16 – 26. In the result, the appeal of the as sessee is allowed for statistical purpose. IT(SS )A No. 2754/Ahd/2019 (A.Y. 2012-13) 27. The assessee has t aken the following grounds of appeal: “1. The Ld. CIT(A) has erred in not appreciating the submission as abstracted by him in his appeal order page 2 to4 para 3 and 3.1 therefore, inter alia erred in confirming the addition as per page 23, para 5.6 of the appeal order and therefore, the addition confirmed may please be deleted. 2. That, Ld. CIT(A) has also erred in not given any finding in respect of rejecting of books of account without pointing out any specific default in books of accounts by the A.O. 3. The Ld. CIT(A) has erred in upholding the disallowance of Business Loss that of Rs. 37,49,166/- 4. Ld. CIT(A) has erred in facts and / or in law in not appreciating the facts that, the appellant has execute the transaction of sale and purchase of Castor seed as per terms entered with NSEL and godwon delivery received and given through godown controlled and managed by NSEL as per terms of agreement entered into with NSEL. And Value Added Tax is also paid or received on such transaction and duly reflected in VAT return filed by the appellant. 5. Ld. CIT(A) has also erred in not appreciating the facts, that the appellant has also other expenses related to the castor seed business and loss of the said business ought to be allowed.” 28. The only ground pressed by the asse ssee in this appeal was disallowance of business loss of Rs.37,49,166/-. As the issue is pari passu with the issue as discussed in IT( SS)A No. 490/Ahd/2019, the matter is set aside to the AO to car r y out the verification as directed in the said order and thereafter decide the matter in respect of ad missibility and set off of the loss. ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 17 – 29. In the result, appeal of the assessee is allowed for statistical purposes. IT(SS )A No. 511/Ahd/2019 (Revenue’s appeal for A.Y. 2014-15) 30. This appeal has been filed by the Revenue and the following grounds have been taken in this appeal: “1. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in deleting protective addition of Rs 42,00,00,177/- made in the hands of assessee. 2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the AO 3 It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 31. In this case, protective addition of Rs.42,06,00,177/- was made . It was fo und that out of total embezzled a mount of Rs.97.83 Crores by M/s. S wastik Overseas Corporation, an a mount of Rs.42.0 6 Crores was tran sferred to M/s. Manan Agro Pvt. Ltd. The AO was given the following reasons for this addition: “ 7 . 3 I t i s c l e a r f r o m t h e a b o v e , t h a t e n t i r e g a m u t o f t r a n s a c t i o n w e r e n o t r e a l b u t i n s t i t u t i o n a l i z e d s h a p e o f t r a n s ac t i o n w a s g i v e n t o o b t a i n f u n d s f r o m t h e i n v e s t o r s o n s h o r t t e r m b as i s b y M / s . S w a s t i k O v e r s e a s C o r p o r a t i o n a n d s u b s e q u e n t l y s a m e w e r e r e a c h e d t o g r o u p c o n c e r n s o f S w a s t i k O v e r s e a s C o r p o r a t i o n in c l u d i n g t h e a s s e s s e e c o m p a n y . T h u s , o u t o f s c a m a m o u n t o f R s . 97 , 8 3 , 7 7 , 3 7 8 / - , R s . 4 2 , 0 0 , 0 0 , 1 7 7 / - ( 7 9 , 2 2 , 4 0 , 5 2 9 - 3 7 , 2 1 , 3 9 , 8 5 2 )/ - w a s t r a n s f e r r e d t o t h e h a n d o f t h e a s s e s s e e c o m p a n y a n d r e m a i n e d u n e x pl a i n e d . F u r t h e r , a s t h e a s s e s s e e h a s n e i t h e r f i l e d t h e r e t ur n u / s 1 3 9 & 1 5 3 A n o r f u r n i s h e d a n y r e p l y e v e n a f t e r g i v i n g v a r i o u s op p o r t u n i t i e s , a m o u n t o f R s . R s . 4 2 , 0 6 , 0 0 , 1 7 7 / - i s a d d e d t o t h e i n co m e o f t h e a s s e s s e e o n p r o t e c t i v e b a s i s a s a m o u n t o f R s . 9 7 , 8 3, 7 7 , 3 7 8 / - h a s a l r e a d y b e e n a d d e d o n s u b s t a n t i v e b a s i s i n c a s e o f S m t . F a l g u n i R . ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 18 – M e h t a p r o p o f M / s . S w a s t i k O v e r s e a s C o r p o r a t i o n . Pe n a l t y u / s . 2 7 1 A A B i s i n i t i a t e d . ” 32. The CI T( A) has deleted the addition for the reason that substantive addition of Rs.97,83,77,378/- made in the hands of S mt . Falguni R. Mehta, Proprietor of M/s. S wastik Overseas Corporation was confir med b y the Ld. CI T(A)-7, Ah medabad. 33. We have considered the rival sub mi ssions and the fac ts of the case. It is fo und that the AO had given not any basis for addition of Rs.42.06 Crores in the hands of the assessee. When the source of R s.42.06 crores re ceived by the a ssessee is acknowledged from M/s S wastik Overseas Corporation in the assessment order and there is not dispute to this fact, this source can’t be treated as unexplained. As discussed earlier in IT(SS )A No.490/Ahd/2019, Shri Rajesh B. Mehta, power o f attorne y holder of M/s. Swastik Overseas Corporation had stated that the e mbezzle ment a mount of Rs.98 Crores fro m the transactions with NSEL was transferred to different entities. As per his state ment, only a loan of Rs.37 Crores was given to M/s. Manan Agro Pvt. Ltd., a group concern. This is the onl y evidence brought on record in respect of the addition in the case of the present assessee. The AO has not explained as to f ro m wher e the figure of Rs.42,06,00,177/- was taken. In t he absence of any basis and concrete reasoning by the AO, the addition as made by the AO cannot be sustained. Further the addition in this case was made only on protective basis. Though, we have hel d that the substantive addition of Rs.97.83 Crores as made in the case of ITA No.490/Ahd/2019 & 3 Ors. (Smt. Falguni Rajesh Mehta & Anr.) - 19 – S mt . Falguni R. Mehta was not proper and have sustained only part of the addition, we do not find any reason to tinker with the decision of Ld. C IT( A) in respect of protective addition in the case of the assess ee. There fore, the order of the Ld. CIT( A) is confir med and the appeal of the Rev enue is dismissed. 34. In the result, appeal of the Revenue is dismissed. 35. In the final result, appeal of the assessee in IT(SS) A Nos. 490/Ahd/2019 is a llowed in part and the appeals in I T( SS)A Nos. 264 & 275/Ahd/2019 are allowe d for statistical purposes, whereas, Revenue’s appeal in IT(SS)A No .511/Ahd/2019 is dismissed. This Order is pronounced in the Open Court on 22/07/2024 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 22/07/2024 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय $त$न ध, आयकर अपील'य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड- फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad