Hitesh Shantilal Mehta Vs DCIT (ITAT Mumbai)
Summary: The Mumbai Bench “H” of the Income Tax Appellate Tribunal, comprising Judicial Member Shri Vikas Awasthy and Accountant Member Shri Amarjit Singh, partly allowed the appeal of Hitesh Shantilal Mehta for statistical purposes in relation to assessment year 1993-94. The appeal challenged the order of CIT(A)-52, Mumbai, dated 8 September 2022, involving rejection of books of account, disallowance of interest expenditure amounting to ₹2,46,71,575, an addition of ₹21,241 arising from a difference in ledger balances, levy of interest under Section 220, non-adjustment of tax deducted at source against outstanding demand, and charging of interest under Section 234B of the Income Tax Act, 1961. The assessee did not press the ground challenging rejection of books of account, and the Tribunal accordingly dismissed that ground.
Regarding the substantial interest expenditure disallowance, the assessee contended that the liability had accrued on investments made in shares and securities through broker firms associated with the Harshad S. Mehta Group. The Assessing Officer had disallowed the claim despite the assessee relying upon earlier Tribunal decisions involving Dr. Pratima H. Mehta and the assessee’s own case for assessment year 2012-13. The Department maintained that the claimed interest represented a mere book entry and would never actually be paid. The Tribunal examined its earlier composite order dated 27 December 2017 involving the assessee and Sudhir S. Mehta. In that decision, the coordinate bench had directed allowance of accrued interest calculated at 12% per annum, subject to disallowance of proportionate interest attributable to investments in shares and verification of interest quantification. Finding the relevant facts substantially similar, the Tribunal allowed the interest-disallowance ground for statistical purposes on the same terms, requiring verification rather than granting an unconditional deduction.
The Tribunal also restored the addition of ₹21,241 to the Assessing Officer for adjudication on merits because the assessee disputed the alleged concession attributed to his authorised representative. It declined to resolve the controversy over whether such a concession had actually been made and instead directed fresh consideration. As regards interest under Section 220, the assessee alleged calculation errors, and the Department did not object to restoration. The Tribunal directed the Assessing Officer to recalculate the interest after considering the assessee’s objections. Similarly, the issues concerning adjustment of TDS relating to subsequent years and interest under Section 234B were restored for recalculation after considering the assessee’s objections. Consequently, grounds two to six were allowed for statistical purposes, while the first ground stood dismissed as not pressed. The Tribunal concluded that the assessee’s appeal was partly allowed for statistical purposes, without finally determining the disputed interest deduction, ledger difference or recalculated demand.
Cases Discussed
- Hitesh Shantilal Mehta v. Deputy Commissioner of Income Tax, ITA No. 4430/Mum/2017, AY 2012-13, order dated 27 December 2017 (ITAT Mumbai). The Tribunal relied on the treatment of the accrued-interest deduction in the assessee’s earlier assessment-year proceedings. The earlier ruling permitted the claim subject to verification and quantification. This is a separate proceeding from the principal appeal.
- Sudhir S. Mehta, ITA No. 5799/Mum/2015, AY 2009-10, order dated 27 December 2017 (ITAT Mumbai). The coordinate bench had directed allowance of accrued interest calculated at 12% per annum, subject to proportionate disallowance relating to investment in shares and verification of the interest computation. The present Tribunal adopted the same approach because the relevant facts were similar.
Full Text of the Order of ITAT Mumbai
This appeal by the Assessee is directed against the order of Commissioner of Income Tax (Appeals)-52, Mumbai (hereinafter referred to as “the CIT(A)”) dated 08.09.2022, for the assessment year 1993-94.
2. Shri Dharmesh Shah appearing on behalf of the assessee submitted at the outset that he is not pressing ground no. 1 of appeal. In respect of ground no. 2, the Ld. Authorised Representative (AR) submits that the assessee had created a provision in respect of interest liability. This liability had accrued on account of investment made in shares and securities through various broker firms of Harshad S. Mehta Group. The assessee had brought to the notice of Assessing Officer (AO) that similar addition in past has been deleted by the Tribunal in the case of Dr. Pratima H. Mehta, one of the family members of the assessee. The AO brushed aside the decision cited by the assessee and disallowed interest expenses. The Ld. AR submitted that in assessee’s own case in ITA No.4430/Mum/2017 for assessment year 2012-13, the Tribunal vide order dated 27.12.2017 has allowed the claim of assessee subject to verification and interest quantification.
2.1 The Ld. AR submitted that in ground no. 3 of appeal, the assessee assailed addition of Rs.21,241/- on account of difference in ledger balance as compared with the books of Late Harshad S. Mehta. The AO has erred in stating that the assessee has agreed for the addition. In First Appellant Proceedings, the assessee raised objection to the observation of AO. The CIT(A) rejected the ground stating that the assessee should have filed rectification application before the AO.
2.2 The Ld. AR submitted that ground no. 4 of appeal, the assessee has assailed levy of interest u/s 220 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) and in ground no. 5 of appeal, the grievance of assessee is that the TDS made on income for subsequent years was not adjusted against the demand for the year under consideration. In ground no. 6 of appeal, the assessee has assailed charging of interest u/s 234B of the Act. He submitted that ground no. 4, 5 and 6 of appeal can be restored back to the AO as there are calculation errors while adjudicating the said issues. The AO while making the addition has failed to consider the payments.
3. Per contra, Dr. P. Daniel representing the Department vehemently defended the impugned order. The Ld. Counsel for the Department submits that the interest expenses claimed by the assessee is merely a book entry. The said expenditure will never be paid. He further submits that as regard ground no. 3, the AO had made addition on the basis of concession allowed by the AR of assessee. On other issues raised in appeal, the Ld. Counsel supported the findings of CIT(A).
4. We have heard the submissions made by rival sides and have examined the orders of authorities below. In ground no. 1 of appeal, the assessee has assailed rejection of books of account. The Ld. AR stated at Bar that he is not pressing ground no. 1. In view of the statement made by Ld. AR of the assessee, ground no. 1 of appeal is dismissed as not pressed.
5. In ground no. 2 of appeal, the assessee has assailed disallowance of interest expenses Rs.2,46,71,575/-. The contention of the assessee is that similar ground has been decided by the Tribunal in assessee’s own case in ITA No.4430/Mum/2017 (supra). We find that the Tribunal while adjudicating this issue in assessee’s appeal for AY 2012-13 has observed that the ground is similar to ground no. 1 raised in the case of Sudhir S. Mehta in ITA No.5799/Mum/2015 for AY 2009-10, both sides have agreed that whatever view has been taken in the case of Sudhir S. Mehta may be taken in the case of assesse. The appeal in the case of Sudhir S. Mehta for AY 2009-10 and the appeal of assessee for AY 2012-13 were decided by the Tribunal vide composite order dated 27.12.2017. The Co-ordinate Bench while deciding the issue of liability of interest expenses in the case of Sudhir S. Mehta concluded as under:
“16. In view of our aforesaid discussion we set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said interest accrued and calculated at 12% per annum amounting to Rs.2,64,72,208/- after disallowing proportionate interest in respect of the investment in shares amounting to Rs.3,51,176/- after verifying the calculation of the interest quantification.”
Since, facts germane to the addition on account of disallowance of interest expenses in the impugned AY are similar, ground no. 2 of appeal is allowed for statistical purpose, in same terms.
6. In ground no. 3 of appeal, the assessee has assailed addition of Rs.21,241/- on account of difference in ledger balance viz-a-viz books of Late Shri Harshad S. Mehta. The ground was dismissed by the AO on the alleged concession granted by the AR of the assessee. Before CIT(A) and the Tribunal, the Ld. AR of the assessee had contested that no such concession was granted before AO. Without delving further on the controversy of concession, we deem it appropriate to restore this issue back to the file of AO for deciding the issue on merits. Ground no. 3 of appeal is thus, allowed for statistical purpose.
7. In ground no. 4 of appeal, the assessee has assailed levy of interest u/s 220 of the Act. The Ld. AR stated that this issue can be restored back to the file of AO as there are calculation errors. The Ld. DR has not objected to the same. The ground no. 4 of appeal is restored to AO for recalculation, after considering objections of the assessee. Ground no. 4 of appeal is allowed for statistical purpose.
8. In respect of ground no. 5 and 6, the Ld. AR has made similar prayer of restoring back the file to the AO as there are calculation errors. Both grounds are restored to AO for recalculation after considering objections of the assessee. Thus, ground no. 5 and 6 of appeal are allowed for statistical purpose.
9. In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on Tuesday the 23rd day of May 2023.
