M/S. DEEPIKA A. MEHTA, MUMBAI v. THE ACIT C.C.31,

ITA 3177/MUM/2008 | 2002-2003
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 317719914 RSA 2008
Assessee PAN ABNPM8231D
Bench Mumbai
Appeal Number ITA 3177/MUM/2008
Duration Of Justice 3 year(s) 2 month(s) 21 day(s)
Appellant M/S. DEEPIKA A. MEHTA, MUMBAI
Respondent THE ACIT C.C.31,
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted K
Tribunal Order Date 29-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2002-2003
Appeal Filed On 08-05-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH MUMBAI BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER A ND SMT. ASHA VIJAYRAGHAVAN JUDICIAL MEMBER ITA NO. 3177/MUM./2008 (ASSESSMENT YEAR : 2002-03 ) DATE OF HEARING 7.7.2011 SMT. DEEPIKA A. MEHTA MADHULI DR. AANNIE BESANT ROAD MUMBAI 400 018 PAN ABNPM8231D .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-23 MUMBAI .... RESPONDENT ASSESSEE BY : MR. VIJAY MEHTA REVENUE BY : DR. P. DANIEL O R D E R PER J. SUDHAKAR REDDY A.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 31 ST MARCH 2008 PASSED BY THE COMMISSIONER (APPEALS)-V MUMBAI FOR ASSESSMENT YEAR 2002-03. 2. FACTS AS BROUGHT OUT IN PARA-2 OF THE COMMISSIONER (APPEALS)S ORDER IS REPRODUCED BELOW:- THE APPELLANT IS A NOTIFIED PERSON UNDER THE SPECIA L COURT ACT 1992 (TRIAL OF OFFENCES RELATING TO TRANSACTION IN SECUR ITIES). SHE BELONGS TO THE HARSHAD S. MEHTA GROUP OF ASSESSEE. ALL HER ASS ETS INCLUDING BANK ACCOUNTS WERE ATTACHED IN 1992 AND VESTED WITH THE CUSTODIAN SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 2 APPOINTED UNDER THE SAID ACT. THE APPELLANT DID NOT FILE HER RETURN OF INCOME WITHIN THE TIME SPECIFIED UNDER SECTION 139 OF THE ACT AND THE ASSESSING OFFICER THEREFORE ISSUED NOTICE UNDER S ECTION 148 OF THE ACT REQUIRING HER TO FILE HER RETURN WITHIN 30 DAYS OF RECEIPT OF NOTICE. IN RESPONSE APPELLANT FILED LETTER DTD. 31.7.2006 EXP RESSING HER INABILITY TO FILE HER RETURN. IT WAS SUBMITTED BEFORE THE A.O . THAT DESPITE HER REPEATED REQUEST THE CUSTODIAN AND THE BANKS HAD NO T SUPPLIED HER WITH DETAILS WHICH WERE REQUIRED FOR DRAWING THE BO OKS OF ACCOUNT AND FILING HER RETURN. SHE THEREFORE IT WAS SUBMITTED WAS NEITHER ABLE TO COMPLETE HER BOOKS NOR FILE HER RETURN. THE SUBMISS ION MADE BEFORE THE ASSESSING OFFICER HAS BEEN REPRODUCED ON PAGE-1 TO 6 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER THEN ISSUED A DETAILED QUESTIONNAIRE UNDER SECTION 142(1) ASKING THE APPEL LANT TO FILE DETAILS IN PARTICULAR FORMAT. THE REQUISITION MADE BY THE A .O. UNDER SECTION 142(1) HAS BEEN REPRODUCED FROM PAGES-7 TO 10 OF TH E ASSESSMENT ORDER. THE A.O. THEN CALLED FOR INFORMATION FROM TH E CUSTODIAN WHO REFUSED REFERRING TO SPL COURTS ORDER TO THE EFFECT THAT THE CUSTODIAN WAS NOT AN AGENT OF THE NOTIFIED PERSONS AND WAS TH EREFORE NOT BOUND TO COMPLY WITH THE INFORMATION CALLED FOR UNDER SEC TION 133(6) OF THE ACT. IT WAS COMMUNICATED TO THE A.O. THAT THE DETAI LS CALLED FOR SHOULD BE OBTAINED FROM THE NOTIFIED PERSONS ONLY. THE A.O . THEREFORE HAD NO OPTION BUT TO COMPLETE THE ASSESSMENT UNDER SECTION 144 OF THE ACT. THE A.O. OBTAINED A COPY OF THE BANK STATEMENT FOR CURRENT ACCOUNT NO.I-305 WITH THE STATE BANK OF MYSORE. THE A.O. FO UND THAT THE TOTAL CREDIT IN THE BANK ACCOUNT WAS ` 6 65 41 445. HE CALCULATED THE AMOUNT OF INTEREST IN RESPECT OF BANK ACCOUNT WITH STATE BANK OF MYSORE ON ESTIMATE BASIS @ 11.1% FOLLOWING THE ASSE SSMENT ORDER OF EARLIER YEARS. SIMILAR ESTIMATE WAS MADE IN RESPECT OF INTEREST INCOME FOR THE ACCOUNT WITH ORIENTAL BANK OF COMMERCE AND ANDHRA BANK FORT BRANCH. IN RESPECT OF STATE BANK OF MYSORE OU T OF TOTAL DEPOSIT OF ` 6 65 41 445 ` .17 14 836 WAS TAXED AS INTEREST INCOME. IN THE ABSENCE OF ANY DETAILS THE BALANCE AMOUNT OF ` 6 48 26 609 WAS TREATED AS UNEXPLAINED DEPOSITS UNDER THE HEAD SUS PENSE ACCOUNT AND TREATED AS INCOME UNDER SECTION 68 OF THE ACT. IN THE RESULT UNDER-MENTIONED AMOUNTS WERE ASSESSED AS INCOME FOR THE YEAR UNDER APPEAL. NATURE OF INCOME AMOUNT ------------------- --------- (I) INTEREST INCOME ` 61 86 641 (II) SUSPENSE ACCOUNT U/S 68 ` 6 48 26 609 3. IN APPEAL THE FIRST APPELLATE AUTHORITY GRANTED PA RT RELIEF. THE ADDITION MADE UNDER SECTION 68 OF THE INCOME TAX ACT 1961 ( FOR SHORT 'THE ACT' ) WAS RESTRICTED TO ` 2 76 745 ONLY. THE BALANCE ADDITION WAS DELETED. O N THE ISSUE OF DETERMINATION OF LONG TERM CAPITAL GAINS THE CO MMISSIONER (APPEALS) SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 3 UPHELD THE ORDER OF THE ASSESSING OFFICER WHEREIN T HE DATE OF ACQUISITION OF SOME OF THE SHARES WERE TAKEN AS 8 TH JUNE 1992. ON THE CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST PAYABLE ON CAPITAL BORROWED DEPRECIATION ETC. THE COMMISSIONER (APPEALS) HELD THAT AN AMOUNT OF ` 98 60 318 BE TREATED AS RELATING TO INVESTMENT INCOME OF WHICH IS EXEMPT F ROM TAX AND HENCE THE EXPENDITURE IS NOT ALLOWABLE IN TERMS OF SECTION 14 A OF THE ACT. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL ON TH E FOLLOWING GROUNDS:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS IN PASSING THE ORDER U/S 250 PARTLY ALLOWING THE APPEAL FILED BY T HE APPELLANT. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN NOT COMPLYING WITH THE PRINCIPLES OF NATURAL JUSTICE. T HE ORDER PASSED THEREFORE IS INVALID AND INCORRECT. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T THE NOTICES ISSUED BY THE ASSESSING OFFICER ARE INVALID AND HEN CE THE ASSESSMENT ORDER U/S 143(3) R/W SEC. 147 WAS ALSO VOID AB INIT IO. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE CALCULATION OF LONG TERM CAPITAL GAIN AMOUNTING TO ` 1 76 52 369 AS AGAINST DECLARED BY THE APPELLANT AT ` 1 63 23 106. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO ` 44 94 771. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED CREDIT ENTRIES IN THE BANK ACCOUNT AMOUNTING TO ` 2 76 745. 4. BEFORE US LEARNED COUNSEL MR. VIJAY MEHTA APPEAR ING ON BEHALF OF THE ASSESSEE SUBMITS THAT GROUNDS NO.1 AND 2 ARE GENERAL IN NATURE AND REQUIRE NO SEPARATE ARGUMENT. 5. ON GROUND NO.3 LEARNED COUNSEL TOOK THIS BENCH THR OUGH THE REASONS OF RE-OPENING WHICH ARE AT PAGES-88 AND 89 OF ASSE SSEES PAPER BOOK AND SUBMITS THAT THE RE-OPENING IS BAD-IN-LAW. ACCORDIN G TO HIM THE ASSESSEE BEING A FAMILY MEMBER OF HARSHAD MEHTA IT DOES NOT MEAN THAT THE ASSESSEE HAS INCOME WHICH HAS ESCAPED ASSESSMENT. S ECONDLY POSSESSION OF LARGE QUANTITY OF SECURITIES ACCORDING TO HIM ALSO DOES NOT CALL FOR ANY RE- SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 4 OPENING AS HOLDING OF LARGE QUANTITY OF SECURITIES DOES NOT NECESSARILY MEAN THAT THE ASSESSEE HAS INCOME WHICH HAS ESCAPED ASS ESSMENT. THIRDLY LEARNED COUNSEL SUBMITS THAT THE ASSESSMENTS CANNOT BE RE-OPENED MERELY BECAUSE THE ASSESSEE HAS TAXABLE INCOME IN EARLIER YEARS. HE RELIED ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN RA MKRISHNA RAMNATH V/S ITO (1969) 77 ITR 995 (BOM.) WHEREIN IT IS LAID D OWN THAT THE INFORMATION WHICH RELATES TO A SUBSEQUENT YEAR COULD NOT BE SA ID TO BE A PRIMA-FACIE REASON TO BELIEVE THAT INCOME OF THE ASSESSMENT YEA R HAS ESCAPED. RELIANCE WAS ALSO PLACED ON CIRCULAR NO.440 DATED 15 TH NOVEMBER 1995 WHEREIN IT IS HELD THAT INCOME OF EARLIER YEAR DOES NOT MEAN ESCA PEMENT OF INCOME OF OTHER YEARS. RELIANCE WAS ALSO PLACED ON THE JUDGME NT OF HONBLE JURISDICTIONAL HIGH COURT IN PRASAD S. JOSHI V/S IT O (2010) 324 ITR 154 (BOM.) FOR THE PROPOSITION THAT EVEN IN A CASE WHER E RETURN OF INCOME HAS BEEN PROCESSED UNDER SECTION 143(1) THE ASSESSING OFFICER SHOULD HAVE REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSE SSMENT. THUS HE SUBMITS THAT THE RE-OPENING IS BAD-IN-LAW. 6. ON GROUND NO.4 THE LEARNED COUNSEL SUBMITS THAT WH ILE COMPUTING LONG TERM CAPITAL GAINS THE ASSESSING OFFICER HAS WRONGLY TAKEN THE DATE OF ACQUISITION OF SHARES AS ON 8 TH JUNE 1992 I.E. THE DATE OF NOTIFICATION UNDER THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TR ANSACTIONS IN SECURITIES) ACT 1992 (HEREIN AFTER FOR SHORT SPECIAL COURT ) INSTEAD OF THE ACTUAL DATE OF PURCHASE REPRESENTED BY THE CONTRACT NOTES. HE S UBMITS THAT THE CONTRACT NOTES EVIDENCING PURCHASE OF SHARES WERE PRODUCED B EFORE THE ASSESSING OFFICER AND THE SAME WERE ACCEPTED IN THE REMAND RE PORT. THAT AS PER CIRCULAR NO.704 DATED 28 TH APRIL 1995 THE DATE OF ACQUISITION HAS TO BE RECKONED AS PER THE CONTRACT NOTES EVIDENCING THE P URCHASE OF SHARES. THE ASSESSING OFFICER HAS ACCEPTED THE COST OF ACQUISIT ION AS PER CONTRACT NOTES BUT WHEREAS WHEN IT COMES TO THE DATE OF ACQUISIT ION THE CONTRACT NOTE HAS NOT BEEN ACCEPTED. THUS HE PRAYED THAT THE INCOME FROM LONG TERM CAPITAL GAINS HAS TO BE ACCEPTED AS DECLARED BY ASSESSEE. SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 5 7. ON GROUND NO.5 LEARNED COUNSEL SUBMITS THAT THE AS SESSEE HAD BORROWED FUNDS FROM HARSHAD S. MEHTA AND FUNDS WER E INVESTED FOR EARNING INCOME. HE SUBMITS THAT THE CLAIM WAS DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE COMMISSIONER (APPEALS) ON THE GROUND THAT THERE IS NO BUSINESS ACTIVITY OF THE ASSESSEE AND HENCE THE Q UESTION OF ALLOWING BUSINESS EXPENDITURE DOES NOT ARISE. THE OTHER REAS ONS FOR DISALLOWANCE WERE (I) THE ASSETS OF THE ASSESSEE WERE ATTACHED BY THE CUSTODIAN AND HENCE THE ASSESSEE IS NOT IN A POSITION TO CARRY O UT ANY BUSINESS; (II) INTEREST PAYABLE AS WELL AS RECEIVABLE ARE THE SUBJ ECT MATTER OF DISPUTE BEFORE THE SPECIAL COURT. HE SUBMITS THAT EXISTENCE OF BUSINESS OF A NOTIFIED ENTITY IS ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 17 TH NOVEMBER 2008 FOR ASSESSMENT YEAR 2004-05. HE ALS O SUBMITS THAT IN THE CASE OF SISTER CONCERN THE TRIBUNAL HAS ON EA RLIER CIRCUMSTANCES ACCEPTED EXISTENCE OF BUSINESS. IT IS FURTHER ARGUE D THAT THE INTEREST LIABILITY EXISTED EVEN PRIOR TO NOTIFICATION AND THE CLAIM OF EXPENSES MADE BY THE ASSESSEE FOR ASSESSMENT YEAR 1990-91 WAS ALLOWED. H E FURTHER SUBMITS THAT EVEN AS PER THE PROVISIONS OF SPECIAL COURTS ACT A ND THE ORDER IN APPLICATION NO.155 OF 1994 DATED 7 TH JUNE 1994 PASSED BY THE SPECIAL COURT THE EXISTING LIABILITY HAS TO BE SEEN. LEARNED COUNSEL CONTENDS THAT THE ASSESSEE ACQUIRED ASSETS OUT OF THE LOAN TAKEN FROM NOTIFIED ENTITIES AND ALL THESE WERE UNDER THE CONTROL OF CUSTODIAN. HAD THERE BEEN NO LOAN TAKEN THERE WOULD NOT HAVE BEEN ANY INTEREST INCOME WHICH WAS S UBJECT TO TAX BY THE ASSESSING OFFICER. THE INTEREST INCOME AND INTEREST EXPENDITURE ACCORDING TO COUNSEL HAVE DIRECT NEXUS AND THE DEPARTMENT CANNO T ACCEPT ONE PART AND IGNORE THE OTHER. HE ALSO DREW THE ATTENTION TO THE AFFIDAVIT FILED BY THE CUSTODIAN BEFORE THE SPECIAL COURT WHEREIN IT WAS SUBMITTED THAT THE FUNDS BELONGING TO LATE HARSHAD S. MEHTA WERE DIVERTED T O THE ASSESSEE FOR MAKING VARIOUS INVESTMENTS AND THAT THESE FUNDS WER E LIABLE TO INTEREST. MERE FACT THAT THE SPECIAL COURT HAS NOT PASSED ANY ORDER ACCORDING TO COUNSEL CANNOT BE A REASON TO DISALLOW THE INTERES T EXPENDITURE. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 6 DCIT V/S GRAND WOOD WORKS ITA NO.3613 TO 3615/MUM. /1994 ORDER DATED 11 TH AUGUST 1999; AND ACIT V/S SHRI BAI VELBAI KANJI JADHAVJI ITA NO.636 1/MUM./2004 ORDER DATED 11 TH APRIL 2008. 8. ON GROUND NO.6 LEARNED COUNSEL SUBMITS THAT IN THE REMAND PROCEEDINGS THE ASSESSEE HAS EXPLAINED ALL ENTRIES IN THE BANK ACCOUNT AND THAT THE AMOUNT OF ` 2 76 745 REPRESENTED DIVIDEND INCOME. IT IS SUBMI TTED THAT THIS FACT IS EVIDENT FROM THE DOCUMENTS PLACED ON RECORD AND THE CORRESPONDENCE FROM THE CUSTODIAN AND THE ENTRIES H AVE BEEN EXPLAINED. 9. AN ADDITIONAL GROUND OF APPEAL WAS ALSO FILED ON TH E LEVY OF INTEREST UNDER SECTION 234A 234B AND 234C OF THE ACT. LEARN ED COUNSEL RELIED UPON THE DECISION IN GROWMORE LEASING & INVESTMENT LTD. V/S DCIT ORDER DATED 30 TH DECEMBER 2009 AND ARGUED THAT LEVY OF INTEREST IS BAD-IN-LAW FOR THE REASON THAT THE ASSESSEE IS A NOTIFIED ENTITY. 10. LEARNED SPECIAL COUNSEL DR. P. DANIAL ON THE OTHE R HAND SUBMITS THE ASSESSEE HAD HUGE STOCK OF SHARES AND WAS IN POSSES SION OF LARGE QUANTITY OF SECURITIES AND IT IS BEYOND ANYBODYS COMPREHENSION TO THINK THAT THE ASSESSEE HAS NO TAXABLE INCOME. HE SUBMITS THAT THE ASSESSEE DID NOT FILE RETURN OF INCOME DESPITE ISSUE OF NOTICE UNDER SECT ION 148 OF THE ACT. INCOME WAS OFFERED ONLY BY WAY OF LETTERS. HE SUBMITS THAT THE ASSESSEE HAD INTEREST INCOME ON FIXED DEPOSIT TO THE TUNE OF ` 61 86 000 AN HAS BEEN ASSESSED AT A FIGURE OF ` 7 10 00 000. REFERRING TO THE REASONS OF RE-OPENIN G HE SUBMITS THAT POSSESSION OF LARGE QUANTITY OF FIXED DEPOSIT AND SECURITIES WOULD DEFINITELY GIVE THE ASSESSING OFFICER A REASON TO B ELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. HAVING MORE THAN ` 3 00 00 000 OF INCOME AND NOT FILING RETURN OF INCOME IS A GOOD GROUND FOR ISSUE OF NOTICE ASKING THE ASSESSEE TO FILE RETURN OF INCOME. HE POINTS OUT TH AT NO GROUND WAS TAKEN BEFORE THE COMMISSIONER (APPEALS) CHALLENGING THE R E-OPENING AND THIS IS A FRESH GROUND TAKEN BEFORE THIS BENCH. SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 7 11. ON THE ISSUE OF CAPITAL GAINS THE LEARNED SPECIAL COUNSEL SUBMITS THAT THE CONTRACT NOTES REFERRED TO BY THE ASSESSEE ARE FROM THE SISTER CONCERNS AND FROM THE CLOSE RELATIVES AND HENCE NOT RELIAB LE. HE POINTS OUT THAT THE HUSBAND WIFE BROTHER-IN-LAW SISTER-IN-LAW ETC. ARE FROM DIFFERENT ENTITIES AND EACH GAVE CONTRACT NOTES. UNDER THESE CIRCUMSTA NCES THE ASSESSING OFFICER WANTED INDEPENDENT EVIDENCE FOR THE PURPOSE OF DETERMINATION OF DATE OF ACQUISITION. IN THE ABSENCE OF SUCH INDEPEN DENT EVIDENCE THE SPECIAL COUNSEL SUBMITS THAT THE DATE OF NOTIFICATION WAS R IGHTLY TAKEN AT THE DATE OF ACQUISITION. 12. ON THE CLAIM OF INTEREST SPECIAL COUNSEL SUBMITS T HAT THE ASSESSEE HAS NOT FILED RETURN OF INCOME AND UNDER THESE CIRCUMST ANCES NO CLAIM FOR EXPENDITURE CAN BE ALLOWED AS PER THE JUDGMENT OF H ON'BLE SUPREME COURT IN GOETZ (INDIA) LTD. V/S CIT (2006) 284 ITR 323 (SC) . HE SUBMITS THAT THE CLAIM HAS BEEN MADE AT THE APPELLATE STAGE AND HEN CE CANNOT BE ALLOWED. 13. ON THE ISSUE OF ADDITION UNDER SECTION 68 THE SPEC IAL COUNSEL SUBMITS THAT NO EVIDENCE WAS FURNISHED EITHER BEFORE THE AS SESSING OFFICER OR BEFORE THE COMMISSIONER (APPEALS) AND HENCE THE ADDITION . 14. ON THE ISSUE OF LEVY OF INTEREST UNDER SECTION 234A 234B AND 234C THE SPECIAL COUNSEL THOUGH NOT LEAVING HIS GROUND ULTIMATELY SUBMITS THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOU R OF THE ASSESSEE IN IDENTICAL SITUATION IN OTHER CASES. 15. IN REPLY THE LEARNED COUNSEL SUBMITS THAT THE ASSE SSEE HAD IN A DETAILED LETTER EXPLAINED TO THE ASSESSING OFFICER THE REASONS FOR NOT BEING ABLE TO FURNISH THE RETURN OF INCOME. HE VEHEMENTLY CONTENDED THAT THE REASONS FOR RE-OPENING CANNOT BE SUPPLEMENTED OR SU PPORTED BY ANY EXTRANEOUS MATERIAL. HE SUBMITS THAT THE REASON SHO ULD HAVE A LIVE LINK WITH THE ESCAPEMENT OF INCOME. SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 8 16. ON THE ISSUE OF CONTRACT NOTES LEARNED COUNSEL SUB MITS THAT THE REVENUE HAS BEEN CONSISTENTLY ACCEPTING CONTRACT NO TES AND THE ASSESSMENTS ARE PASSED BASED ON THESE CONTRACT NOTE S ONLY. THE COST OF PURCHASE IS NOT DISPUTED AND THE SHORT POINT IS THE DATE OF ACQUISITION. 17. ON THE ISSUE OF INTEREST SUPPLEMENTARY CLAIM WAS M ADE BEFORE THE ASSESSING OFFICER BY WAY OF A LETTER. HE REFERRED T O PARA-2 / PAGE-5 OF THE ASSESSMENT ORDER. 18. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAP ERS ON RECORD AS WELL AS THE CASE LAWS CITED BEFORE US WE HOLD AS FOLLOWS:- 19. ON THE ISSUE OF RE-OPENING WE FIND THAT THE ASSESS ING OFFICER HAS CLEARLY OBSERVED THAT THE ASSESSEE IS IN POSSESSION OF LARGE QUANTITY SECURITIES. HE ALSO OBSERVED THAT FROM THE ASSESSME NT RECORDS IT CAN BE SEEN THAT THE ASSESSEE IS THE OWNER OF SEVERAL ASSE TS ON WHICH INCOME ACCRUES EVERY YEAR. IN OUR CONSIDERED OPINION THES E TWO OBSERVATIONS OF THE ASSESSING OFFICER ARE SUFFICIENT REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT. THESE TWO REASONS HAVE A LIVE LINK WITH THE ESCAPEMENT OF INCOME AND IT CANNOT BE SAID THAT THE REASONS ARE N OT BASED ON THE RELEVANT MATERIAL. WHEN THE ASSESSEE HAS LARGE QUANTITY OF S ECURITIES AND WHEN SHE HAS OTHER ASSETS ON WHICH INCOME ACCRUES IT CANNOT BE SAID THAT THE BELIEF DRAWN BY THE ASSESSING OFFICER IS NOT A BONAFIDE BE LIEF AND THAT THE REASONS ARE VAGUE OR SUSPICIOUS. IT IS TRUE THAT BEFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 THE ASSESSING OFFICER OUGHT TO HAVE A REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. IN OUR OPINION IT C ANNOT BE SAID THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR RE-OP ENING THE ASSESSMENT ARE NOT IN CONFORMITY WITH THE PRINCIPLES LAID DOWN BY THE COURTS. MERELY BECAUSE THE ASSESSEE HAD SOME DIFFICULTIES IN FILING OF RET URN OF INCOME IT CANNOT BE SAID THAT THE NOTICE ISSUED UNDER SECTION 148 IS B AD-IN-LAW. THE INTEREST INCOME ITSELF IS MORE THAN ` 60 00 000 AND THE ASSESSEE ALSO HAD INCOME SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 9 FROM CAPITAL GAINS. CONSEQUENTLY WE REJECTED THE C ONTENTION OF THE ASSESSEE AND UPHOLD THE RE-OPENING. 20. COMING TO GROUND NO.4 WHICH IS ON THE ISSUE OF COM PUTATION OF LONG TERM CAPITAL GAINS WE ARE OF THE CONSIDERED OPINIO N THAT THE DATE OF ACQUISITION SHOULD BE AS PER THE CONTRACT NOTES FOR THE REASONS THAT THE ASSESSING OFFICER HAS TAKEN THE COST OF ACQUISITION OF SHARES BASED ON THESE VERY CONTRACT NOTES. ONE PART OF THE CONTRACT NOTE CANNOT BE ACCEPTED AND THE OTHER PART REJECTED. IT IS WELL KNOWN THAT THE PRICE OF SHARES ARE FLUCTUATING AND THE COST OF ACQUISITION OF A PARTIC ULAR DATE WOULD NOT DEFINITELY BE THE SAME AS ON ANOTHER DATE. THE REVE NUE CANNOT TAKE CONTRADICTORY STANDS. IN VIEW OF THE ABOVE DISCUSSI ONS WE SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER TO DETERMINE THE LONG TERM CAPITAL GAINS BY TAKING INTO CONSIDERATION THE DATE OF ACQUISITIO N MENTIONED IN THE CONTRACT NOTES. THIS GROUND IS THUS ALLOWED FOR STATISTICA L PURPOSES. 21. THE NEXT ISSUE IS ALLOWABILITY OF INTEREST EXPENDIT URE OF ` 44 94 771. THE ASSESSEE IN THIS CASE HAS MADE A CLAIM BEFORE THE ASSESSING OFFICER BY WAY OF A LETTER. THE ASSESSEE IN THIS CASE HAS NOT FILED A RETURN OF INCOME. THE ASSESSING OFFICER BASED ON HIS INFORMATION ARR IVED AT A PARTICULAR FIGURE AS INCOME. WHEN THE ASSESSING OFFICER DETERMINED IN COME IN OUR OPINION HE IS DUTY BOUND TO TAKE INTO CONSIDERATION ALL REV ENUE AS WELL AS COSTS. IF ONLY INCOME IS TAKEN INTO ACCOUNT AND EXPENDITURE I GNORED THEN WHAT HAPPENS IS THAT GROSS RECEIPTS ARE TAXED AND THIS W OULD BE INCORRECT. WHEN RETURN OF INCOME IS NOT FILED THE QUESTION OF THE ASSESSEE DECLARING A CERTAIN AMOUNT AS RECEIPT AND CLAIMING CERTAIN DEDUCTION DO ES NOT ARISE. THE ASSESSING OFFICER IN OUR OPINION IS DUTY BOUND TO CORRECTLY ASSESSEE THE INCOME BY TAKING INTO CONSIDERATION THE EXPENDITUR E. THE JUDGMENT OF THE HON'BLE SUPREME COURT IN GOETZ (INDIA) LTD. (SUPRA) IS APPLICABLE WHEN THE ASSESSEE FILES A RETURN OF INCOME AND THEREAFTER MA KES CERTAIN FURTHER CLAIM BY WAY OF A LETTER. AS POINTED OUT IN THIS CASE TH ERE IS NO RETURN OF INCOME AND IT IS A CASE OF THE ASSESSING OFFICER ISSUING H IS BEST JUDGMENT TO SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 10 DETERMINE THE CORRECT PAYABLE INCOME OF THE ASSESSE E. AS THE ISSUE HAS NOT BEEN DECIDED ON MERIT WE ADMIT THIS CLAIM OF THE A SSESSEE AND SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER TO ADJUDICA TE THE SAME ON MERIT. 22. THE NEXT GROUND RELATES TO AN ADDITION OF ` 2 76 745. THE ASSESSEE HAS BEEN ABLE TO DEMONSTRATE BEFORE US BY WAY OF PAPER BOOK THAT THIS AMOUNT IS NOTHING BUT DIVIDEND RECEIVED FROM MTC LTD. GUJ ARAT AMBUJA AND OTHER COMPANIES. CONSEQUENTLY WE DELETE THE ADDITION MAD E UNDER SECTION 68. 23. THE LAST GROUND IS ON THE LEVY OF INTEREST UNDER SE CTION 234A 234B AND 234C. AS AGREED BY BOTH THE PARTIES THIS ISSUE STA NDS COVERED BY THE DECISION OF THE TRIBUNAL IN ORION TRAVELS P. LTD. V /S DCIT ITA NO.6888/MUM./2008 ORDER DATED 30 TH DECEMBER 2009 WHEREIN IT HAS BEEN HELD AS UNDER:- 23. AS REGARDS THE LAST GROUND NO.9 REGARDING THE LEVY OF INTEREST UNDER SECTION 234A AND 234C THE ASSESSEE IS A NOTI FIED PERSON UNDER THE SPECIAL COURT (TRIAL OF OFFENCES RELATING TO TR ANSACTIONS IN SECURITIES) ACT 1992 AND ALL ITS ASSETS INCLUDING BANK ACCOUNTS WERE ATTACHED AND VESTED IN THE HANDS OF THE CUSTODIAN A PPOINTED UNDER THE SAID ACT. FROM THE DATE OF FUNCTIONING OF THE C OURT I.E. 1.6.1992 THE DISTRIBUTION OF MONIES IN CASE OF NOTIFIED PERS ON WILL BE DECIDED BY THE SPECIAL COURT. THE TAXES DO NOT HAVE THE PRIORI TY IN SETTLEMENT. EVEN IF A NOTIFIED PERSON HAD WANTED TO PAY THE ADV ANCE TAX IT WAS NOT WITHIN HIS CONTROL TO DO SO. HE HAS TO MAKE AN APPL ICATION TO THE CUSTODIAN AND ONLY HE CAN PERMIT PAYMENT OF ADVANCE TAX AFTER OBTAINING APPROVAL FROM THE SPECIAL COURT. THE SPEC IAL COURT IN ITS RULING HAS OBSERVED AS UNDER:- WHERE A NOTIFIED PARTY IS PREVENTED BY REASON OF NOTIFICATION FROM DOING THINGS WHICH ARE REQUIRED TO BE DONE BY HIM UNDER OTHER ACTS OR CONTRACTS. IN SUCH CASES IF THE PROVISION OF THE SPECIAL COURTS ACT PREVENTS A NOTIFIED PARTY FROM DOING THAT THING THEN BY REASO N OF THIS LEGAL DISABILITY NO PENALTY OR INTEREST CAN B E LEVIED ON THAT PARTY. THUS NO PENALTY OR INTEREST CAN BE LEVIED ON THAT PARTY. THUS NO PENALTY OR INTEREST CAN BE I MPOSED FOR NON-FULFILLMENT OF AN ACT WHICH A NOTIFIED PART Y IS PREVENTED FROM DOING BY REASON OF THE SPECIAL COURT ACT. IN SUCH CASES EVEN THOUGH THE PROVISIONS OF SOME O THER ACT OR CONTRACT LAY DOWN CONSEQUENCES FOR NON- PERFORMANCE THE PROVISIONS OF THE SPECIAL COURTS A CT WILL PREVAIL. THIS IS BECAUSE IN SUCH CASES THERE WOULD BE A CONFLICT BETWEEN THE PROVISIONS OF THE SPECIAL COUR TS ACT SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 11 AND THAT OTHER LAW AND / OR CONTRACT. IN CASES OF S UCH CONFLICT THE PROVISIONS OF THE SPECIAL COURT ACT M UST PREVAIL. TO TAKE AN EXAMPLE UNDER SECTION 234B OF THE ACT EVERY ASSESSEE IS LIABLE TO PAY ADVANCE TAX. A LL PARTIES WERE NOTIFIED BETWEEN JUNE 1992 TO AUGUST 1 992. ALL OF THEM WOULD BE LIABLE TO ADVANCE TAXES FOR TH E FINANCIAL YEAR ENDING MARCH 1993 AND FOR THE SUBSE QUENT YEARS. HOWEVER AS SEEN EARLIER TAXES ONLY UPTO ASSESSMENT YEAR 1992-93 CAN BE PAID IN PRIORITY. TH ESE WOULD HAVE TO RANK AS ORDINARY DEBTS UNDER SECTION 11(2)(C). THIS THEREFORE CAN ONLY BE RELEASED AFT ER THE ENTIRE DISTRIBUTION HAS TAKEN PLACE. EVEN IF THE NO TIFIED PARTY WERE TO MAKE AN APPLICATION TO THIS COURT TO PAY THE ADVANCE TAX THE COURT WOULD REFUSE IT. THUS MONIE S FOR PAYMENT OF ADVANCE TAX HAVE NOT BEEN RELEASED. THUS A NOTIFIED PARTY HAS BEEN PREVENTED FROM PAYING ADVAN CE TAX. THUS UNDER THE SPECIAL COURTS ACT THERE IS A LEGAL DISABILITY TO PAY ADVANCE TAX. YET UNDER THE I.T. A CT THERE IS A COMPULSION OF THE SPECIAL COURTS ACT AND THE I .T. ACT. THE PROVISIONS OF THE SPECIAL COURT ACT MUST PREVAI L. UNDER THE I.T. ACT IF ADVANCE TAX IS NOT PAID FOR SUCH NON-PAYMENT INTEREST CAN BE LEVIED. THIS OBVIOUSLY ON THE FOOTING THAT THE ASSESSEE IS IN DEFAULT. HOWEVER A NOTIFIED PARTY HAS BEEN PREVENTED BY LAW FROM PAYING ADVANC E TAX. HE IS NOT A DEFAULTING PARTY. HE NEITHER HAS N OT PAID ADVANCE TAX BECAUSE OF LEGAL RESTRAINT ON HIM. THE LAW HAS PREVENTED HIM FROM PAYING ADVANCE TAX. IN MY VI EW IN SUCH CASES I.E. WHERE THERE IS A CONFLICT BETW EEN THE PROVISIONS OF THE SPECIAL COURTS ACT AND SOME OTHER ACT / CONTRACT THE CONTRARY PROVISIONS MUST NECESSARILY GIVE WAY. IF THERE IS THIS LEGAL DISABILITY THEN THERE IS NO QUESTION OF THE NOTIFIED PARTY BEING FOISTED WITH T HE LIABILITY TO PAY INTEREST AND/OR PENALTY. 24. IN THE BACKDROP OF THE ABOVE IT WAS IMPOSSIBLE FOR THE ASSESSEE TO HAVE PAID THE ADVANCE TAX EVEN IF HE HAD WANTED TO. IT IS A WELL KNOWN LEGAL DICTUM LEX NON COGITAD IMOSSIBILIA (L AW CANNOT COMPEL YOU TO DO THE IMPOSSIBLE). ASSESSEE CANNOT T HEREFORE BE FOISTED WITH INTEREST LIABILITY UNDER SECTION 234A 234B AND 234C. INTEREST UNDER SECTION 234B AND 234C ARE DIRECTLY R ELATED TO PAYMENT OF ADVANCE TAX AND HENCE IS NOT LEVIABLE ON NOTIFIE D PERSONS. EVEN THOUGH LEVY OF INTEREST UNDER SECTION 234A IS REALL Y ON THE DELAY OF FILING THE RETURN WHICH IS A DEFAULT COMMITTED BY T HE ASSESSEE THE QUANTIFICATION OF THE SAME DEPENDS ON THE ADVANCE T AX PAID WHICH IN THIS CASE IS NOT WITHIN THE CONTROL OF THE ASSESSE E. HENCE INTEREST UNDER SECTION 234A CANNOT ALSO BE LEVIED IN THE CAS E OF A PERSON A NOTIFIED PERSON UNDER THE SPECIAL COURT (TRIAL OF O FFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT 1992 AND ALL ITS ASSETS INCLUDING BANK ACCOUNT WERE ATTACHED AND VESTED IN THE HANDS OF TH E CUSTODIAN APPOINTED UNDER THE SAID ACT. SMT. DEEPIKA A. MEHTA ITA NO.3177/M./2008 12 25. THE CO-ORDINATE BENCH IN THE CASE OF DIVINE HOL DINGS P. LTD. V/S DCIT IN ITA NO.180/MUM./2000 DT. 26.6.2001 HAS H ELD THAT CIT(A) IS RIGHT IN ADMITTING THE APPEAL OF THE NOTIFIED PE RSON EVEN THOUGH THE TAX ON THE RETURNED INCOME HAS NOT BEEN PAID BY HIM . IN COMING TO THIS CONCLUSION THEY HAD RELIED ON THE ABOVE PASSAG E OF THE SPECIAL COURT. 26. IN THE CIRCUMSTANCES WE DIRECT THAT INTEREST U NDER SECTION 234A 234B AND 234C SHOULD NOT BE LEVIED ON THE ASS ESSEE FOR THE A.Y. UNDER APPEAL. 24. RESPECTFULLY FOLLOWING THE AFORESAID FINDINGS OF TH E TRIBUNAL WE ALLOW THE GROUND RAISED BY THE ASSESSEE. 25. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.7.2011 SD/- ASHA VIJAYRAGHAVAN JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI DATED: 29.7.2011 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A) MUMBAI CONCERNED; (4) THE CIT MUMBAI CITY CONCERNED; (5) THE DR K BENCH ITAT MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT MUMBAI BENCHES MUMBAI