IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "G", MUMBAI
. .
^ . . [, ^ [, Û ¢
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER
AND SHRI VIVEK VARMA, JUDICIAL MEMBER
ITA No. : 3767/Mum/2013, (Assessment year: 2010-11)
DCIT, Central Circle - 44, Vs Shri Chimanlal K Mehta,
Room no. 656, 93 & 94, Koregaon Park,
6th Floor, Aayakar Bhavan, Pune -411 001
M K Road, .:PAN: AAFPM 0905 P
Mumbai -400 020
(Appellant) × (Respondent)
Appellant-assessee by : S/Shri H P Mahajani, S V Joshi,
Deepak Desai, Digant Mehta
Respondent-revenue by : Smt Abha Kala Chanda
Cross Objection (CO) 148/Mum/2014
Arising out of ITA No. : 3767/Mum/2013, AY 2010-11
Shri Chimanlal K Mehta, Vs ACIT, Central Circle - 44,
Koregaon Park, Pune -411 001 Room no. 656,
.:PAN: AAFPM 0905 P Mumbai -400 020
× (Respondent)
Cross Objector assessee by : S/Shri H P Mahajani, S V Joshi,
Deepak Desai, Digant Mehta
Respondent by : Smt Abha Kala Chanda
/Date of Hearing : 10-11-2014
/Date of Pronouncement : 26-12-2014
Sr. ITA/Cross Objection No. & Name of Vs Appeal by A.Y. CIT(A)'s
No. the Assessee Assessee or Order
Department Date
1 3777/Mum/2013- M/s Yerrowada DCIT, Department 2010-11 11.02.2013
Investment Ltd, Deepak Comples Off Cir.44,
Golf Course Road, Shastrinagar, Mum
Yerwada, Pune -411006
2 CO 150/Mum/2014- M/s Yerrowada ACIT, Assessee 2010-11 11.02.2013
Investment Ltd, 10-b Bakhtawar, CC-44
Nariman Point, Mumbai -400 021 Mum
.:PAN: AAACY 0186 C
3 3765/Mum/2013 Shri Deepak C ACIT, Department 2010-11 11.02.2013
Mehta, 93 & 94 Koregaon Park, Pune CC.44,
-411 001 Mum
4 CO 149/Mum/2014- Shri Deepak C ACIT, Assessee 2010-11 11.02.2013
Mehta, Gr. Floor, Kejriwal House, 7-N, CC-44
Gamadia Road, Mumbai -400 026 Mum
.:PAN: AAHPM 6688 F
5 3766/Mum/2013 Shri Shailesh C ACIT, Department 2010-11 11.02.2013
Mehta, 93 & 94 Koregaon Park, Pune CC.44,
-411 001 Mum
6 CO 159/Mum/2014- Shri Shailesh C ACIT, Assessee 2010-11 11.02.2013
Mehta, 93 SUM, Southman Road, CC-44
Koregaon Park, Pune -411 001 Mum
.:PAN: AAFPM 3448 R
7 3764/Mum/2013 Shri Ajay C ACIT, Department 2010-11 25.02.2013
Mehta, 93 & 94 Koregaon Park, Pune CC.44,
2 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
-411 001 Mum
8 CO 146/Mum/2014- Shri Ajay C ACIT, Assessee 2010-11 25.02.2013
Mehta, Ground Floor, Kejriwal House, CC-44
7-N, Gamadia Road, Mumbai -400026 Mum
.:PAN: AAFPM 3456 K
Appeals heard on 11.11.2014
Sr. ITA/Cross Objection No. & Name of Vs Appeal by A.Y. CIT(A)'s
No. the Assessee Assessee or Order
Department Date
1 3778/Mum/2013 - Shri Chimanlal K ACIT, Department 2009-10 11.02.2013
Mehta, 93 & 94, Koregaon Park, CC 44,
Pune -411 001 Mum
2 CO 147/Mum/2014- Shri Chimanlal ACIT, Assessee 2009-10 11.02.2013
K Mehta, Ground Floor, Kejriwal CC 44,
House, 7-N, Gamadia Road, Mum
Pune -411 026
.:PAN: AAFPM 0905 P
3 3779/Mum/2013 - Shri Ajay C DCIT, Department 2009-10 11.02.2013
Mehta, 93 & 94, Koregaon Park, CC 44,
Pune -411 001 Mum
4 CO 145/Mum/2014- Shri Ajay C ACIT, Assessee 2009-10 11.02.2013
Mehta, Ground Floor, Kejriwal House, CC 44,
7-N, Gamadia Road, Mum
Pune -411 026
.:PAN: AAFPM 3456 K
/Date of Hearing : 11-11-2014
/Date of Pronouncement : 26-12-2014
ORDER
^ [, Û : :
PER VIVEK VARMA, JM:
The appeals filed by the department & corresponding
Cross Objections filed by the assessee, as captioned above, have
been filed against the order of the CIT(A) 36, Mumbai, for
assessment year 2009-10 against the different orders of [all
dated 31.01.2012, except in the case of Shri Ajay C Mehta,
which is dated 25.02.2013], Mumbai and another two appeals of
the said Group & corresponding Cross Objections have been
filed against different orders of the CIT(A)-36, Mumbai,
commonly dated 11.02.2013 for assessment year 2009-10. As all
the appeals in these group, wherein the grounds raised are
common, therefore, they have been clubbed heard together and
3 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
are being disposed off by this consolidated order for the sake
convenience & brevity. We shall take-up ITA No.
3767/Mum/2013, as a lead appeal in this group, wherein, the
department has raised the following grounds:
ITA No. : 3767/Mum/2013 : Department Appeal :
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the ground
of limitation by holding that the C.D. was created on 28.3.2003,
falling beyond six years limitation period prescribed in section
153A(1) without verifying the authenticity and alleged date of
CD through forensic expert.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the basis of
surmises and presumptions without verifying the facts as
available on record.
3. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
35,47,00,000/- on account of unaccounted receipts due to
family arrangement ignoring the presumptions with regard to
the entries found in sized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
37,63,00,000/- on account of unaccounted payments due to
family arrangement ignoring the presumptions with regard to
the entries found in seized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the
assessment and deleting the additions by relying on the
additional evidence in the form of family agreements dated
March 2000 and 01.01.2003 but ignoring that these agreements
indicated financial transactions during the years covered u/s
153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary".
2. The facts are that there was a search action u/s 132(1) on
Deepak Group on 21.07.2009 and the instant assessment is a
consequence of the search.
3. Assessment proceedings, consequent to search were
initiated by the AO and the AO raised certain queries with regard
4 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
to certain loose papers, marked as Annexure-A-5, Loose Paper
bundle no. 9.
4. This paper had certain notings, which are as the following
abbreviations, used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand Mehta CKM
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments Ltd YIL
Page Query
No.
37 & Capital A/c. of all family members & their Groups shows amounts in
38 Lakhs mentioning Capital, Loans taken, current liabilities, Deficits,
Immovable Assets, Assets, Loans given & the Balance & further
mentions the cash received & cash paid. The amount shown in these
Capital Accounts appears to be in Lakhs. The Balance Sheets of the
Group concerns are reproduced as under:
DCM & Group
Capital 1000 Maryland 392
Other Liability 67 Gotri 17
(Tax on YIL)
DNL 647
Other 4
Stock (Other) 6
Balance 1
1067 1067
Cash Recd. + 1,187
Cash paid - 1,186
1
ACM & Group
Capital 2951 F.A. 82
Loan taken 411 Gotri 17
Current Liab. 416 Maryland 279
Loan to Oth 243
Curr. Assets 705
Balance 2452
3778 3778
Cash Recd. + 4,939
Cash paid - 2,499
2,440
+12
2,452
SCM & Group
Capital 806 Gotri 17
Loan taken 84 Bunglow 396
5 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
Deficit DFPCL-Sh 2,153
-WCCL-2200
-Others 753 2953
YIL TDR Sh. 94
Loans to Others 10
Loan to Smart 430
3843 3843
Cash Recd. + 668
Cash paid - 3,621
Deficit 2,953
CKM & Group
Capital 1,384 F.A. 77
Loan taken 2,924 Gotri 21
Curr. Liab. 2,924 YIL 2,682
Deficit 216 YIL (Stock) 325
Baroda 11
Inv. Shares-Oth. 305
3843 Stock Others 856
Jewellery 21
Loan to others 164
Curr. Assets-Oth 370
4,832 4,832
Cash Recd. + 3,547
Cash paid - 3,763
Deficit 216
YIL
Capital 2537 DFPCL Shares 597
Curr. Liab. 10 Loan to Others 35
Current Assets
-Others 19
-CKM 216
-SCM 753
Cash & Bank 927
Bal.
2,547 2,547
Cash Recd. + 1,896
Cash paid 969
Loan to CKM/SCM
Surplus 927
WCCL
Capital 72 F.A. 1
Loan Others 2,200 Loan to SCM 2,200
Curr. Liab. 308 Loan to Others 118
Curr. Assets-Oth. 29
Cash & Bk. Bal. 232
2,580 2,580
Cash Recd. + 2,448
Cash paid - 2,216
Surplus 232
Pl. reconcile the same with your Capital A/c., Balance
Sheet, & Wealth Tax Statements. In case of non
6 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
submission of details & explanation & reconciliation of
these transactions, pl. explain why your Capital A/c.
should not be taken as per these papers & the Cash
payments & Cash receipts should not be considered
outside the Books of A/c. & your income be deduced
accordingly? Further, pl. prove the genuineness,
creditworthiness & identity of the Loans taken & the
Current Liabilities. In case of failure to submit the
relevant details/evidences, the same would be treated
as income of the respective persons u/s 68 of the IT Act,
for the relevant year".
5. The AO sought explanation and decodification of the above
notings.
6. The assessee vide letter dated 26.11.2011, submitted,
"The paper contains Groupwise probable balance sheets. It
seems that this statement is prepared somewhere in March
2003. This group balance sheet are prepared to ascertain the
situation of assets and the abilities after giving effect to some
transactions in line with family arrangement thought by Shri
CKM at that time. Broadly speaking around 2003 Shri CKM had
thought of giving control of DFPCL to Shri SCM, and control of
Deepak Nitrite to Shri DCM, Shri ACM was to be given liquid
fund in the form of capital is and Shri CKM had decided to keep
all the real estate properties and liabilities related to the real
estate.
Now go give effect to the above decided family arrangement, it
was required to transfer/sell some of the assets from some
family members to other family members at market rate.
Following type of transactions would have a rise to take place
among all the family members.
1) Shri DCM group to retain shares of DNL in his fold and Shri
DCM group was required to transfer other assets such as
shares of DFPCL to Shri SCM group and shares of YIL to Shri
CKM group.
2) Shri ACM group was required to transfer all the shares of
DFPCL in favour of Shri SCM group, all the shares of DNL in
favour of Shri DCM group and all the shares of YIL to Shri
CKM group.
3) Shri SCM group was required to retain all the shares of
DFPCL group and transfer all the shares of DNL to Shri DCM
group and all the shares of YIL to "Shri CKM group.
4) Shri CKM group was required to retain all the shares of YIL
and was required to transfer all the shares of DFPCL to Shri
SCM group and transfer of the shares of DNL to Shri DCM
group.
Now we also wanted to know what will be the picture of assets
and Liabilities of all the abovementioned groups after the above
said family arrangement transaction will be executed.
Accordingly we have prepared probable balance sheets of all the
groups of Shri CKM and family assuming that the above said
family transactions will happen.
Thus you will see that in the balance sheet of Shri DCM group
DFPCL shares and YIL shares are removed and DNL shares are
7 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
retained. In Shri ACM group all shares of DFPCL and DNL and
YIL are removed. In Shri SCM group all shares of DNL and YIL
are removed but DFPCL shares (both fully paid and partly paid)
are kept. In Shri CKM all the shares of DFPCL and DNL are
remove and shares of YIL are kept or added/purchased from
other group.
In this process of buying and selling various assets as per the
family arrangement thinking, each group will be either required
to take loan to purchase the shares/assets at market value or
each group may have surplus funds, if no assets are to be
purchased and only sale of assets to happen. These
transactions will finally lead to surplus balances in some of the
group and deficit in the bank balances in other group.
On the basis of above expected transactions , we had drawn up
probable balance sheet GroupWise after giving effect to the
above set transactions to determine which group will remain
with surplus funds and which group will need funds so that
execution of the above set transaction takes place.
Thus you will see that all the probable balance sheets are
prepared accordingly.
We had decided the above said approach and to a large extent
we have implemented also but timing of implementation were
different for different assets/liabilities. Broadly all these entities
continue to have the assets mentioned and some liabilities have
been discharged. It will take time to consolidate the entities to
show you the present status which will reflect similar picture
among the family only but since these were protected balance
sheets more for M I S and due to different parameters
assessment at that time like market rate at which shares will be
purchased or sold, market rate at which property will be sold,
the timing of the discharging liability, etc. However we can bring
the books of accounts for verification of the position as of 2009
or 2011.
We have filed all the income tax returns and wealth tax returns
wherever required for all these years and the Department can
verify the same.
It will be gross injustice if projections and its implementation
planning papers of the entire family matching with each other's
obligations and rights are construed as transactions outside
books and treated as cash payment and cash receipt.
Since projections have been made based on purchase and sale
of probable value of assets and subsequently resulting in assets
creation or daily ability creation cannot be proved from this
papers. However as mentioned earlier the books of accounts
based on above approach will slow the loan/Liabilities, etc. for
your verification and need not be construed other way|.
7. The AO after considering the submissions of the assessee, came
to the view that the notings of "cash paid" and "cash received" have to
be read, as such, as there was actual cash transaction and he,
therefore, added Rs. 35,47,00,000/- "cash received" u/s 68 and Rs.
37,63,00,000/- "cash paid" as unaccounted payment.
8 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
8. Against this order of the AO, the assessee approached the
CIT(A), before whom, the assessee reiterated his submissions made on
the addition made before the AO. He further submitted
"On the issue of limitation the Authorized Representative submitted that
the addition has been made in the context and with reference to the
'family Arrangements'. He submitted that the first deed was in March,
2000 and the second one on January, 2003. Thus, the assessment
years relevant would be A.Y, 2000-01 and / or A.Y. 2003-04. Both these
years fall beyond the period of six years i.e. from A.Y.2004-05 to 2009-
10 for which the assessments u/s.153A could have been made & have
actually been made by the AO. He submitted that copies of both the
family agreements are part of the seized material.
He submitted that the AO has circumvented this difficulty and made the
addition in A.Y.2010-11 by observing that "Since the year or date has
not been specified in the seized document, it would be construed as if
the document & the entries there-on pertain to the year incidental to the
Search, viz.A.Y.2010-11".
The Authorized Representative submitted that there is no basis or factual
background for such a step and in fact no such addition was warranted
either in A.Y. 2010-11 or in any other year.
He further submitted that the workings of redistribution of assets as per
page Nos.37 & 38 which are the basis for the assessment have also
been drawn up prior to 31 March, 2003 as is apparent from the seized
CD 19.
He further submitted that CD No.2, on being opened showed another five
pages pertaining to group balance sheets. These five pages are the basis
for preparation of two pages Nos.37 & 38, the cause of addition in the
A.Y. 2010-11. These five pages have very clear headings as "BALANCE
SHEET AS ON 13/03/2003".
He submitted that information contained in the two pages i.e. 37 & 38
pertain to the period before 31/03/2003 and hence additions made
based on these two pages are time barred. To deal with the question of
limitation and, incidental thereto the merits of the case, the entire factual
conspectus of the matter has been examined by me. For this purpose the
submissions made by the Authorized Representative on the merits of the
matter are summarized below:
a. The Appellant is the father of, among others, Deepak (DCM)
(eldest son), Sailesh (SCM) and Ajay (ACM). He is the founder of the
Deepak Group of companies which include two listed companies Deepak
Fertilizers and Petrochemicals Corporation Ltd. (DFPCL) and Deepak
Nitrite Ltd. (DNL). The Group owns various assets and properties and
has been carrying on various businesses over the last several decades.
b. There were disputes within the family. The Appellant, who is
presently into his eighties, wanted to evolve a succession plan the aim of
which was peace and harmony in the family. He along with his wife
Mrs. Kanta Mehta desired to relinquish in favor of their sons, their
interests in the two listed companies DFPCL and DNL.
c. In order to preserve peace and harmony in the family and, with
a view to put an end to/prevent financial disputes and differences
between the Appellant-father and his aforesaid three sons, in March,
2000 or so the Appellant, his wife and three Sons entered into a family
agreement drafted by M/s. Udwadia, Udeshi and Bergis, Solicitors and
Advocates. The Authorized Representative submitted that 2000 Family
Agreement forms part of the seized material (Pages 13 to 26 of the Paper
Book).
9 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
d. The first Family agreement was entered into in March, 2000,
This agreement also forms part of the seized material.
e. Despite this Agreement the disputes did not die down
whereupon a fresh Family Agreement was drawn up by M/s. Udwadia,
Udeshi and Bergis, Solicitors, in January, 2003. This agreement also
forms part of the seized material (Pages 1 to 12 of the Paper book).
f. In terms of the 2003 Family agreement the Family shares in
DFPCL and DNL, which were notionally valued for this limited purpose,
were to be again divided equally among the three Sons in such a way
that each son was to receive assets of the value of Rs.53 crores.
This Agreement also envisaged inter se transfer of shares of DFPCL and
DNL and other family assets and liabilities to be retained by the
Appellant and his wife.
g. The 2003 Agreement also provided for further inter se
redistribution of other assets and liabilities between the family members.
h. The Authorized Representative explained that equal distribution
of the family assets among the four Groups meant redistribution of
assets involving various family members and their corporate entities.
This basically involved ensuring that control, assets, and liabilities of
specific entities were allotted to specific Group in the process ensuring
that there was financial equality.
i The Authorized Representative submitted towards this end, around
12th March, 2003 i.e. soon after the Family agreement was entered into
on 1st January, 2003, an exercise was undertaken where under
probable /required redistribution of financial assets was plotted. Since
this exercise involved as many as about 33 entities and financial assets
of large number and value and diverse nature, it was thought expedient
to plot in a separate accounting software used by appellant's office, the
probable /required redistribution in the form of memorandum ledger
accounts by recording memorandum journal entries etc. The idea was to
ensure that all proposed effects are properly captured and equitable and
culminate in desired results.
j. He submitted that accordingly, the proposed redistribution was plotted
on the Computer in Excel Format in great detail and the post-proposed
redistribution financials were drawn up.
k. A summary of the gross and net effect of this redistribution was also
noted at the end of the memorandum financials (Pages G - ito G -11 of
the box file).
l. This exercise showed that CKM Group would receive assets from
within group worth Rs. 3,547/- and would in turn have to give up assets
from within group worth Rs.3,763/. The net result of the redistribution
was to be deficit of Rs. 216/- payable by CKM Group. (Pages G-10 of Box
File No.1).
DCM Group would receive assets from within group worth Rs. 1,187/-
and would in turn have to give up assets from within group worth Rs.
1,186/-. The net result of the redistribution was to be surplus of Rs.1
receivable by DCM Group (Page G-7 of Box File No. 1).
Similarly, SCM Group would receive assets from within group worth Rs.
668/- and would in turn have to give up assets from within group worth
Rs. 3,621/-. The net result of the redistribution was to be deficit of Rs.
2,953/- payable by SCM Group (Page G-9 of Box File No. 1).
Similarly ACM Group would receive assets from within group worth Rs.
4,939/- and would in turn have to give up assets from within group
worth Rs. 2,499/-. The net result of the redistribution was to be surplus
of Rs. 2,440/- receivable by ACM Group (Page G-8 of Box File No. 1).
Similarly YIL would receive assets from within group worth Rs.1896 and
would in turn have to give up assets from within group worth Rs.969/-.
10 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
The net result of the redistribution was to be deficit of Rs. 927/- payable
by YIL(Page G-11 of Box File No. 1)
m. He took me through the Paper Book containing all the basic documents
starting from trial balance as on 13/03/2003, probable transactions in
detail to give effect to the 'Family Arrangement' & probable balance
sheets group wise on the basis of which additions have been made. The
AR clarifies that these are all part of the seized material available with
the AO.
He further clarified that the trial balance as on 13.03 .2003 on Tally
finally leads up to the audited accounts for the F.Y.20022003 for all
members of the Deepak Group which are available along with the returns
of income filed by all of them for A.Y.2003-04.
He explained that "Group wise probable Balance sheets as on
13/03/2003" which gives complete breakup & details of Liabilities and
Assets constituent wise have ultimately got converted & reduced into the
said two pages (37 & 38). He submitted that a comparison of extracts
from the said two pages (37 & 38) and Balance sheet as on 13/03/2003
(as available in CD No. 2".
9. Thus to prove his point on facts, the assessee, during the
appeal proceedings before the CIT(A), opened the two CDs, i.e. 2
& 19 and following the path arrived at the two pages, i.e. 37 &
38 and it was pointed out that the last date of creation of pages
on the CDs whose printouts were found from the loose papers as
well, was dated 28.03.2003.
10. The assessee also pointed out to the CIT(A), that the very
basis for addition, being the papers to be undated, lost its
credence. The assessee also submitted before the CIT(A) that the
use of the word `cash' was in fact loose assets, which were
transferred in and out of various entities, resulting and
consequent to the family arrangement.
11. The CIT(A), after considering the detailed submissions and
also, after taking into account inconsequential remand report
submitted by the AO, held,
"I have considered the facts of the case and perused the material
on record including the CD2 and CD 19 submitted during the
course of the hearing and opened by the representatives of the
Appellant in my presence.
On an examination of the material furnished by the Appellant during
the course of the hearing and on perusing the two CD I am of the
opinion that no new evidence is sought to be placed before me by the
Appellant. The entire material including that on the two CD forms part
of the seized material and was therefore with the AO when he passed
the order.
11 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
In the Remand Report the AO has not off ered any
comments in respect of assessment orders for A.Y.2010-11
without assigning any reason thereby suggesting that he had
nothing to say in the matter.
Beyond doubt CD 19 file having path name as 'copy
19\suresh\ohd\MyDocuments\data\MSODATA\EXCEL\INDBS
.XLS' contains same two pages as 37 & 38 copies of which have
been appended to the assessment order and which constitute the
basis for the impugned assessment.
CD No. 2, when opened showed another five pages
pertaining to group balance sheets. These five pages are the
basis for preparation of two pages No. 37 & 38. Relevant figures
on pages 37 & 38 perfectly match with the figures on 5 pages on
CD 2.
It is seen that these five pages have very clear headings as
"BALANCE SHEET AS ON 13/03/2003".
It is thus clear that two pages i.e. 37 & 38 are the summarized
version of five pages available on CD 2 and further that the
entire data contained therein pertains to the period before
31/03/2003
The AR has clarified that pages 37 & 38 represent probable
balance sheets drawn up in the context of Family agreement of
01/01/2003.
On an examination of the material on record it is quite clear
that there have been long standing disputes within the Mehta
family genesis of which goes beyond the year 2000. A series of
letters have been exchanged between the Appellant and his son
Sailesh wherein various claims and counter claims have been
raised.
The Appellant, who is into his eighties, as the head of the family
wanted to evolve a succession plan the aim of which was peace
and harmony in the family. He along with his wife Mrs. Kanta
Mehta desired to relinquish in favor of their sons, their interests
in the two listed companies DFPCL and DNL.
Since the 2000 Agreement did not result in settlement of
disputes a fresh Family Agreement was drawn up by M/s.
Udwadia, Udeshi and Bergis, Solicitors, in January, 2003.
Under this family agreement DCM would own and manage
DNL, SCM would own and manage DFPCL and ACM was to be
paid Cash of Rs. 53 crores being his share in the value of the
Family shares. For this purpose shares in DFPCL and
DNL, which were notionally valued and divided equally among
the three sons in such a way that each son was to receive
assets of the value of Rs 53 crores. The 2003 agreement
provided for various things including payment of specified
amounts and inter se redistribution of other assets and
liabilities between the family members as explained in detail by
the AR in his submissions.
As explained by the AR equal distribution of the family
assets among the four Groups meant redistribution of assets
involving various family members and their corporate entities.
This involved ensuring that control, assets, and liabilities of
specific entities were allotted to specific Group in the process
ensuring that there was financial equality.
An exercise of plotting probable /required redistribution of
financial assets as appearing on said pages 37 & 38 was
undertaken around 12th March, 2003 i.e. soon after the
Family agreement was entered into on 1st January 2003. Since
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this exercise involved as many as about 33 entities and
financial assets of large number and value and diverse nature,
the office of the Appellant thought expedient to plot in separate
accounting software. An elementary exercise of preparing
memorandum ledger accounts by recording memorandum
journal entries etc was utilized for this purpose. The CDs on
record also clearly establish the fact that the starting point of
this entire exercise was Balance sheets as on 13.03.2003 as
appearing in the books of account maintained by various group
entities.
The further fact which distinctly emerges from the seized
material/CD is that the components of the figures of CASH PAID
and CASH RECD as appearing at the end of these probable
balance sheets are in fact liquid assets in the form of loans,
liabilities, cash and bank balances etc.
The probable Balance sheet in the case of CKM Group as
appearing on page 37 & 38 reads as under:s
CKM & Group
Capital 1,384 F.A. 77
Loan taken 2,924 Gotri 21
Current Liab. 306 YIL 2,682
Deficit 216 YIL (Stock) 325
Baroda 11
Inv. Shares-Others 305
Stock Others 856
Jewellery 21
Loan to others 164
Current Assets-Other 370
4,832 4,832
Cash Recd. + 3,547
Cash paid - 3,763
Deficit 216
The AO has brought to tax Rs. 35.47 crores and Rs. 37.63 crores
as unexplained cash received and cash paid.
The breakup of the said two figures as available on CD2 is as
under:
CKM & Group
Particulars CD No.2 (Groupwise Bala- Two Pages 37 & 38
nce sheets as on 13.3.2003 (also in CD No. 19)
LIABILITIES:
Capital Account 1,384 1,384 1,384
Loan taken from Others 2,924 2,924 2,924
Current Liabilities 308 308
Loans taken
From Group 745 -
Whitehall 637 -
Current Liabilities
Group 2259 -
Calls payable 122 -
(Treated as Cash paid in 3763 3,763 3,763
Pages 37 & 38) 8379 8,379
ASSETS"
Fixed Assets
Fixed Assets 77 77
Gotri Bunglow 21 21
YIL Shares 2682 2682
YIL Shares (Stock) 325 325
Baroda Plot 11 11
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Investments in Shares
Others 305 305
Stock Others 856 856
Jewellery 21 21
Loan to Others 164 164
Current Assets Other 370 370
Loan given
To Group 960 --
Current Assets
Group
875 --
Cash and Bank Balance
1712 --
3547 3547 3547
8379 8379
It is thus clear that the so called CASH PAID
in fact is the total of the following
Loans taken
From Group 745
Whitehall 637
Current Liabilities
Group 2259
Calls payable 122
(Treated as Cash paid in Pages 37 & 38)
TOTAL 3763
637
Similarly the so called CASH RECD is in fact the total of the
following:
Loans taken
From Group 745
Whitehall 637
Current Liabilities
Group 2259
Calls payable 122
(Treated as Cash paid in Pages 37 & 38)
TOTAL 3763
637
In my opinion, it is beyond doubt that the words CASH PAID
and CASH RECD have been in fact used to refer to identified
liquid assets by way of loans taken, loans given, current
liabilities, and cash/bank balances which were proposed to be
redistributed pursuant to the Family Agreement. These words
do not represent hard cash received or hard cash paid as
ordinarily -conveyed by these words.
That the figures appearing on pages 37 and 38 are probable
balance sheets is obvious.
The purpose of entire balance sheets has also been satisfactorily
explained by the appellant; it has its genesis in the long standing
family disputes which are in fact still not settled.
The fact that these probable balance sheets have been drawn
up from the accounted balance sheets as on 13.03.2003 is also
clearly reflected in CD 2 (G-6 to G-1 1 of the Paper Book - Box File
No. 1).
There is also merit in the contention of the AR that though by
passing similar orders in the case of 5 group assessees,
the AO has brought to tax Rs.242,75,00,000/- as
unaccounted CASH, during search on 21.07.2009 no
unaccounted cash was found at any place - office or
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residence - across the Group. Similarly no accounted
investment or unaccounted expenditure was also found. This
lends further support to the contention of the appellant that
these are only probable or projected figures and not figures of
hard cash.
Another noteworthy fact which emerges on viewing CD 19
containing pages 37 & 38 is that the content there of was
created on 28.03.2003. The properties of this CD/file as
recorded in the computer at the time of its creation, which was
also demonstrated before me, appear as under:
There is therefore merit in the contention of the AR that this CD
was created on 28.03.2003 a date falling beyond six year
limitation period prescribed in section 153A(l) of the Act.
In my opinion the appeal merits being allowed both on grounds
of limitation and the ground that the figures are in any event
only probable balance sheets and do not reflect actual
transactions of CASH PAID AND CASH RECD. These probable
balance sheets were themselves based on balance sheets as on
13.03.2003 drawn up from the regular books of account
maintained by the appellant
Moreover the words CASH PAID AND CASH RECD do not in fact
reflect hard cash but identified and accounted liquid assets.
For all the reasons discussed hereinabove, the assessment is
annulled and ex consequential the sum of Rs. 73,10,00,000/-
added to the total income of the Appellant does not survive and
gets deleted".
12. The CIT(A), thus deleted the entire addition of Rs.
73,10,00,000/- made in the hands of the assessee, Mr. Chimanlal
Khimchand Mehta.
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13. Against this order of the CIT(A), the department has filed appeal
before the ITAT.
14. Before us, the DR submitted that the order of the CIT(A) suffered
from the basic foundation of truth that the papers, as relied upon by
the AO were undated and that there was an evidenced movement of
actual cash between the family members and entities.
15. The DR also submitted that the CIT(A)'s reliance has been on the
run of CDs, which depicted a certain date. The DR submitted that the
factual aspect of the actual notings of the CDs has not been verified.
The DR, on these submissions pleaded that the case should be
restored to the file of the AO for re-examining and readjudication after
examining the authenticity of the CDs.
16. On the other hand, the AR submitted that the entire basis of
additions made, as per facts and figures reproduced above in the
order, are certain looser papers, which as per hard copy were undated,
but when examined from the source, would result in, in the notings
made in the CDs, as made on 23.03.2003 and 28.03.2003. This was
done and on examined and rerun of the CDs by the CIT(A) himself,
which were found and seized by the search party on 21.07.2009. The
AR pointed out that seizure of CDs can be seen from the panchnamas
as prepared on 21.07.2009.
17. The AR further submitted that characterization of the word
`cash' used in the notings was nothing but loans taken and given,
current liabilities and bank balances to be distributed, as a result of
on family settlement. It is proved from the fact that actual movement
of assets and liabilities was done immediately and wherever any
liability arose in the form of capital gains, taxes were paid in
accordance with law, on those assets.
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18. The AR also submitted that even in the remand report, the AO
accepted the fact that this family distribution was done in the period
prior to the 153A period and that is why no comments were made.
19. The AR submitted that in the light of the above and complete
facts taken into consideration by the CIT(A), no infirmity can be seen.
The AR, therefore, submitted that the appeal as filed by the
department must be rejected.
20. We have perused the arguments from either side and have also
perused the material placed before us along with the orders of the
revenue authorities.
21. The following abbreviations, are used in the seized papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand Mehta CKM
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments Ltd YIL
22. The fact that papers and CDs were seized at the time of search
on 21.07.2007, is evidenced from the panchnama (APB Vol 3, Pg. 912).
It is also a fact that the hard copies of print out which were undated
were found in the loose papers, which, when examined by running the
CDs were found to be pertaining to 23.03.2003 and 28.03.2003, period
prior to the 153A proceedings.
23. On examination of the seized print out, it is seen that the
impugned CDs
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was in fact created on 28.03.2003. This means that seized hard copies
was nothing but the print out of the CD prepared on 28.03.2003,
therefore, the assumption of the AO that since the papers were
undated, and therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its legs and this
assumption falls. Hence addition cannot be sustained on this
arguments.
24. On the other hand, the submissions of the AR cannot be ignored
that all the assets and liabilities were distributed as per the family
arrangement immediately thereafter and wherever necessary, due
taxes had been paid.
25. Before us though the AR placed reliance on the decisions of P R
Metrani vs CIT- 287 ITR 209 (SC) and Surendra M Khandhar vs ACIT
321 ITR 254 (Bom). In our view both these decisions may not be
necessary, because, the question of rebuttal on the proposed addition
is not occasioned because the additions made by the AO, have been
based on notings on the CDs prepared on 28.03.2003, which we have
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held pertained to period prior to the search period assessments under
section 153A and, therefore cannot be sustained.
26. After perusing the entire material placed before us, we are of the
opinion that for tentative family settlement, the entire working was
done. In the process of working out the family settlement, the assessee
picked up the actual books figures as on 13.03.2003 of various entities
to arrive at reasonable distribution. Neither any income was received
nor accrued in favour of the assessee. The argument of the AO/DR
that there was actual movement of cash could not be substantiated by
the AO/DR, as not one currency note was found, which could be held
to be unaccounted. Even the fact that the figures taken by the
assessee for family distribution were from the actual books also could
not be negated by the AO or by the DR before us. The fact, that on
actual and final distribution of movable assets, as worked out, all
legitimate taxes had been paid by the various persons/entities has
also not been controverted by the DR/AO. This goes to prove that the
AO treaded on the path of suspicion and based his findings on
assumption.
27. We therefore sustain the findings of the CIT(A), wherein he has
demolished the entire case of the AO, both on merits and legality,
accepting the fact that the assessment framed by the AO is erroneous,
as the figures are based on the CDs seized by the department, which
clearly shows creation of the same on 28.03.2003, which is beyond the
limitation period, as prescribed in section 153A.
28. We also reject the GOA no. 6, wherein the department has
sought restoration of the case to the file of the AO, because of non
allowance of proper opportunity under Rule 46A. This has been
categorically rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any evidence, which
was not before the AO or was not in the seized material. Even in the
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course of hearing before us, the DR could not bring out or point out
any document, which could be said to be taken into consideration by
the CIT(A) and not considered by the AO.
29. We, therefore, reject the grounds as raised by the department
and consequentially dismiss the appeal as filed by the department.
30. In the result, Departmental appeal, as filed by the revenue
stands dismissed.
31. Now, we shall deal with remaining appeals, by following our lead
appeal in ITA No.3767/Mum/2013 as decided by us hereinabove of
this order filed by the department.
ITA No. : 3777/Mum/2013 : Department Appeal :
32. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the ground
of limitation by holding that the C.D. was created on 28.3.2003,
falling beyond six years limitation period prescribed in section
153A(1) without verifying the authenticity and alleged date of
CD through forensic expert.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the basis of
surmises and presumptions without verifying the facts as
available on record.
3. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
18,96,00,000/- on account of unaccounted receipts due to
family arrangement ignoring the presumptions with regard to
the entries found in sized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs. 9,69,00,000/-
on account of unaccounted payments due to family arrangement
ignoring the presumptions with regard to the entries found in
seized material as per provisions of Section 292C r.w.s. 132(4A)
of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the
assessment and deleting the additions by relying on the
additional evidence in the form of family agreements dated
March 2000 and 01.01.2003 but ignoring that these agreements
indicated financial transactions during the years covered u/s
153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
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violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary.
A copy of the order of the CIT(A), Mumbai was received in this
office on 15.3.2013. The limitation date for filing of appeal u/s
253(2) is 13.5.2013. However, the appeal should be filed
immediately".
33. The CIT(A) on consideration of the submissions as made by the
assessee along with the documents found seized, has observed:
"I have considered the facts of the case and
perused the material on record including the CD2
and CD19 submitted during the course of the
hearing and opened by the representatives of the
Appellant in my presence.
On an examination of the material furnished by the
Appellant during the course of the hearing and on
perusing the two CL) I am of the opinion that no new
evidence is sought to be placed before me by the
Appellant. The entire material including that on the two
CD forms part of the seized material and was therefore
with the AG when he passed the order.
In the Remand Report the AO has not off ered any
comments in respect of assessment orders for
A.Y.2010-11 without assigning any reason thereby
suggesting that he had nothing to say in the matter.
B e y o n d d o u b t C D 1 9 f il e h av i n g p a th n a m e as
' c o p y l 9 \ s u r e s h \ o h d \ My Documents\data\MSGDATA\EX
CEL\INDBS.XLS' contains same two pages as 37 & 38
copies of which have been appended to the assessment
order and which constitute the basis for the impugned
assessment.
CD No. 2, when opened showed another five pages
pertaining to group balance sheets. These five pages
are the basis for preparation of two pages No. 37 & 38.
Relevant figures on pages 37 & 38 perfectly match with
the figures on 5 pages on CD 2.
It is seen that these five pages have very clear headings
as "BALANCE SHEET AS.
It is thus clear that two pages i.e. 37 & 38 are the
summarized version of five pages available on CD 2
and further that the entire data contained therein
pertains to the period before 31/03/2003
The AR has clarified that pages 37 & 38 represent
probable balance sheets drawn up in the context of
Family agreement of 01/01/2003.
On an examination of the material on record it is
quite clear that there have been long standing
disputes within the Mehta family genesis of which goes
beyond the year 2000. A series of letters have been
exchanged between the Mr. CKM and his son Sailesh
wherein various claims and counter claims have been
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raised.
Mr. CKM, who is into his eighties, as the head of the
family wanted to evolve a succession plan the aim of
which was peace and harmony in the family. He along
with his wife Mrs. Kanta Mehta desired to relinquish in
favor of their sons, their interests in the two listed
companies DFPCL and DNL.
Since the 2000 Agreement did not result in
settlement of disputes a fresh Family Agreement
was drawn up by M/s. Udwadia, Udeshi and
Bergis, Solicitors, in January, 2003. Under this
family agreement DCM would own and manage DNL,
SCM would own and manage DFPCL and ACM was to
be paid Cash of Rs. 53 crores being his share in the
value of the Family shares. For this purpose
shares in DFPCL and DNL, which were notionally
valued and divided equally among the three sons in
such a way that each son was to receive assets of the
value of Rs.53 crores. The 2003 agreement provided
for various things including payment of specified
amounts and inter se redistribution of other assets and
liabilities between the family members as explained in
detail by the AR in his submissions.
As explained by the AR equal distribution of the
family assets among the four Groups meant
redistribution of assets involving various family members
and their corporate entities. This involved ensuring that
control, assets, and liabilities of specific entities were
allotted to specific Group in the process ensuring that
there was financial equality.
An exercise of plotting probable /required
redistribution of financial assets as appearing on
said pages 37 & 38 was undertaken around 12th March,
2003 i.e. soon after the Family agreement was entered
into on 1st January, 2003. Since this exercise involved
as many as about 33 entities and financial assets of
large number and value and diverse nature, the office
of the Appellant thought expedient to plot in separate
accounting software. An elementary exercise of
preparing memorandum ledger accounts by recording
memorandum journal entries etc was utilized for this
purpose. The CDs on record also clearly establish the
fact that the starting point of this entire exercise was
Balance sheets as on 13.03.2003 as appearing in the
books of account maintained by various group entities.
The further fact which distinctly emerges from the seized
material/CD is that the components of the figures of
CASH PAID and CASH RECD as appearing at the end
of these probable balance sheets are in fact liquid
assets in the form of loans, liabilities, cash and bank
balances etc. The probable Balance sheet in the case
of YIL as appearing on page 37 & 38 reads as under:
YIL
Capital 2537 DFPCL Shares 597
Curr. Liab. 10 Loan to Others 35
Current Assets
-Others 19
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-CKM 216
-SCM 753
Cash & Bank 927
Bal.
2,547 2,547
Cash Recd. + 1,896
Cash paid 969
Loan to CKM/SCM
Surplus 927
The AO has brought to tax Rs. 18.96 crores and
Rs. 9.69 crores as unexplained Cash received and
cash paid.
The break up of the said two f igures as available
on CD 2 is under:
YIL
Particulars CD No.2 (Groupwise Bala- Two Pages 37 & 38
nce sheets as on 13.3.2003 (also in CD No. 19)
LIABILITIES:
Capital Account 2,537 2,537
Current Liabilities 10 10
TOTAL 2,547 2,547
ASSETS :
Fixed Assets - -
Investments in
Shares 597 597
DFPCL 35 35
Loan to Others 19 19
Current Assets
Other 1,678
Loan given
To Group
170
Current Assets
Group 48
Cash and Bank
Balance
(Treated as Cash
Received in Pages
37 & 38)
1896 1896 1896
TOTAL 2,547 2,547
It is thus clear that the so called CASH PAID in
fact is the total of the following:
Loans given to CKM 216
Loans given to SCM 753
(Treated as Cash paid in
Pages 37 & 38)
TOTAL 969
Similarly the so called CASH RECD is in fact the
total of the following:
ASSETS:
Loan given
To Group 1678
Current Assets
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Group 170
Cash and Bank Balance 48
(Treated as Cash
received In Pages 37 &
38)
TOTAL 1896
The difference between Cash Received of 1896
and Cash Paid of 969 is 927 which is shown as
Deficit (Cash & Bank Balance) in Pages 37 & 38.
In my opinion, it is beyond doubt that the words CASH
PAID and CASH RECD have been in fact used to refer
to identified liquid assets by way of loans taken,
loans given, current liabilities, and cash/bank balances
which were proposed to be redistributed pursuant to the
Family Agreement. These words do not represent hard
cash received or hard cash paid as ordinarily conveyed
by these words.
That the figures appearing on pages 37 and 38 are
probable balance sheets is obvious.
The purpose of the entire exercise of preparing
memorandum probable balance sheets has also been
satisfactorily explained by the appellant; it has its
genesis in the long standing family disputes which are
in fact still not settled.
The fact that these probable balance sheets have been
drawn up from the accounted balance sheets as on
13.03.2003 is also clearly reflected in CD 2 (G-6 to G-11
of the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that
though by passing similar orders in the case of 5
group assessees, the AO has brought to tax
Rs.242,75,00,000/- as unaccounted CASH, during
search on 21.07.2009 no unaccounted cash was
found at any place - office or residence - across the
Group. Similarly no accounted investment or
unaccounted expenditure was also found. This lends
further support to the contention of the appellant that
these are only probable or projected figures and not
figures of hard cash.
Another noteworthy fact which emerges on viewing CD
19 containing pages 37 & 38 is that the content there
of was created on 28.03.2003. The properties of this
CD/file as recorded in the computer at the time of its
creation, which was also demonstrated before me,
appear as under:
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There is therefore merit in the contention of the AR
that this CD was created on 28.03.2003 a date
falling beyond six year limitation period prescribed in
section 153A(1) of the Act.
In my opinion the appeal merits being allowed both on
grounds of limitation and the ground that the figures
are in any event only probable balance sheets and
do not reflect actual transactions of CASH PAID AND
CASH RECD. These probable balance sheet were
themselves based on balance sheets as on 13.03.2003
drawn up from the regular books of account maintained
by the appellant. Moreover the words CASH PAID AND
CASH RECD do not in fact reflect hard cash but
identified and accounted liquid assets. For a ll the
reasons discussed hereinabove, the assessment is
annulled and ex consequentia the sum of
Rs.28,65,00,000/- added to the total income of the
Appellant does n o t s u r v i v e a n d g e ts d e l e te d " .
34. As the issues involved in the impugned appeal are common as
deliberated and decided by us hereinabove, in our order while
adjudicating the Department appeal in ITA No. 3767/Mum/2013 at
length. The relevant conclusive paras of our order read as under:
20. We have perused the arguments from either side and
have also perused the material placed before us along
with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized
papers:
S.no. Name Abbreviation
1 Mr. Chimanlal CKM
Khimchand Mehta
2 Mr. Deepak Chimanlal DCM
Mehta
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3 Mr. Sailesh Chimanlal SCM
Mehta
4 Mr. Ajay Chimanlal ACM
Mehta
5 M/s. Deepak Fertilizers DFPCL
& Petrochemicals
Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada YIL
Investments Ltd
22. The fact that papers and CDs were seized at the
time of search on 21.07.2007, is evidenced from the
panchnama (APB Vol 3, Pg. 912). It is also a fact that the
hard copies of print out which were undated were found
in the loose papers, which, when examined by running
the CDs were found to be pertaining to 23.03.2003 and
28.03.2003, prior period to the period for 153A
proceedings.
23. On examination of the seized print out, it is seen
that the impugned CDs
was in fact created on 28.03.2003. This means that
seized hard copies was nothing but the print out of the
CD prepared on 28.03.2003, therefore, the assumption of
the AO that since the papers were undated, and
therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its
legs and this assumption falls. Hence addition can be
sustained on this arguments.
24. On the other hand, the submissions of the AR cannot
be ignored that all the assets and liabilities were
distributed as per the family arrangement immediately
thereafter and wherever necessary, capital gains had
been paid.
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25. Before us though the AR placed reliance on the
decisions of
In the case of P R Metrani vs CIT- 287 ITR 209 (SC)
In the case of Surendra M Khandhar vs ACIT 321 ITR
254 (Bom)
in our view both these decisions may not be necessary,
because, the question of rebuttal on the proposed
addition has not been occasioned because the additions
made by the AO, have been based on notings on the CDs
prepared on 28.03.2003, which we have held cannot be
sustained.
26. We also reject the GOA no. 6, wherein the
department has sought restoration of the case to the file
of the AO, because of non allowance of proper
opportunity under Rule 46A. This has been categorically
rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any
evidence, which was not before the AO or was not in the
seized material.
27. We, therefore, reject the grounds as raised by the
department and consequentially dismiss the appeal as
filed by the department.
28. In the result, Departmental appeal, as filed by the
revenue stands dismissed.
35. Following the above said paras, we dismiss the grounds involved
in department ITA No. 3777/Mum/2013. Accordingly, Department's
appeal stands dismissed.
ITA No. : 3765/Mum/2013 : Department Appeal :
36. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the ground
of limitation by holding that the C.D. was created on 28.3.2003,
falling beyond six years limitation period prescribed in section
153A(1) without verifying the authenticity and alleged date of
CD through forensic expert.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the basis of
surmises and presumptions without verifying the facts as
available on record.
3. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
11,87,00,000/- on account of unaccounted receipts due to
family arrangement ignoring the presumptions with regard to
the entries found in sized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
11,86,00,000/- on account of unaccounted payments due to
family arrangement ignoring the presumptions with regard to
27 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
the entries found in seized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the
assessment and deleting the additions by relying on the
additional evidence in the form of family agreements dated
March 2000 and 01.01.2003 but ignoring that these agreements
indicated financial transactions during the years covered u/s
153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary".
37. The CIT(A) on consideration of the submissions as made by the
assessee along with the documents found seized, has observed:
"I have considered the facts of the case and perused the
material on record including the CD2 and Ct)19
submitted during the course of the hearing and
opened by the representatives of the Appellant in my
presence.
On an examination of the material furnished by the
Appellant during the course of the hearing and on
perusing the two CD I am of the opinion that no new
evidence is sought to be placed before me by the
Appellant. The entire material including that on the two
CD forms part of the seized material and was therefore
with the AO when he passed the order.
In the Remand Report the AO has not off ered
any comments in respect of assessment orders for
A.Y.2010-11 without assigning any reason thereby
suggesting that he had nothing to say in the matter.
B e y o n d d o u b t C D 1 9 f il e h av i n g p a t h n a m e as
' c o p y l 9 \ s u r e s h \ o h d \ M y Documents\data\MSODAT
A\EXCEL\INDBS.XLS' contains same two pages as 37 &
38 copies of which have been appended to the
assessment order and which constitute the basis for the
impugned assessment.CD No. 2, when opened showed
another five pages pertaining to group balance sheets.
These five pages are the basis for preparation of two
pages No. 37 & 38. Relevant figures on pages 37 & 38.
The relevant figures on pages 37 & 38 perfectly match
with the figures on 5 pages on CD 2 It is seen that
these five pages have very clear headings as
"BALANCE SHEET AS ON 13/03/2003". It is thus
clear that two pages i.e. 37 & 38 are the summarized
version of five pages available on CD 2 and further
that the entire data contained therein pertains to the
28 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
period before 31/03/2003
The AR has clarified that pages 37 & 38 represent
probable balance sheets drawn up in the context of
Family agreement of 01/01/2003.
On an examination of the material on record it is
quite clear that there have been long standing
disputes within the Mehta family genesis of which
goes beyond the year 2000. A series of letters have
been exchanged between the Appellant and his son
Sailesh wherein various claims and counter claims
have been raised.
Mr. CKM, who is into his eighties, as the head of
the f amily wanted to evolve a succession plan the
aim of which was peace and harmony in the family.
He along with his wife Mrs. Kanta Mehta desired to
relinquish in favor of their sons, their interests in the
two listed companies DFPCL and DNL.
Since the 2000 Agreement did not result in
settlement of disputes a fresh Family Agreement
was drawn up by M/s. Udwaclia, Udeshi and
Bergis, Solicitors, in January, 2003. Under this
family agreement DCM would own and manage
DNL, SCM would own and manage DFPCL and ACM
was to be paid Cash of Rs. 53 crores being his share
in the value of the Family shares. For this
purpose shares in DFPCL and DNL, which were
notionally valued and divided equally among the
three sons in such a way that each son was to
receive assets of the value of Rs.53 crores. The
2003 agreement provided for various things
including payment of specified amounts and inter se
redistribution of other assets and liabilities between the
family members as explained in detail by the AR in his
submissions.
As explained by the AR equal distribution of the
f amily assets among the f our Groups meant
redistribution of assets involving various family
members and their corporate entities. This involved
ensuring that control, ass, and liabilities of specific
entities were , allotted to specific Group in the process
ensuring that there was financial equality.
An exercise of plotting probable /required
redistribution of financial assets as appearing on
said pages 37 & 38 was undertaken around 12th
March, 2003 i.e. soon after the Family agreement was
entered into on 1st January, 2003. Since this exercise
involved as many as about 33 entities and financial
assets of large number and value and diverse nature,
the office of the Appellant thought expedient to plot in
separate accounting software. An elementary exercise of
preparing memorandum ledger accounts by recording
memorandum journal entries etc was utilized for this
purpose. The CDs on record also clearly establish the
fact that the starting point of this entire exercise was
Balance sheets as on 13.03.2003 as appearing in the
books of account maintained by various group entities.
The further fact which distinctly emerges from the seized
material/CD is that the components of the figures of
29 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
CASH PAID and CASH RECD as appearing at the end
of these probable balance sheets are in fact liquid
assets in the form of loans, liabilities, cash and bank
balances etc.
The probable Balance sheet in the case of DCM Group as
appearing on page 37 & 38 reads as under:
CAPITAL 1000 MARYLAND 392
OTHER Gotri 17
LIABILITY (Tax
67 DNL 647
on YIL)
OTHER 4
STOCK OTHER 6
SH/.
1
BALANCE
1067 1067
Cash received + 1,187
Cash paid _ 1,186
1
The AO has brought to tax Rs.11.87 crores and
Rs.11.86 crores as unexplained CASH RECD and
CASH PAID".
30 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
Similarly the so called CASH RECD is in fact the total of
the following:
ASSETS:
Loan given
To Group 150
Current Assets
Group 1011
Others 3
31 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
Cash and Bank Balance 23
(Treated as Cash Received In Pages
37 & 38)
TOTAL 1187
In my opinion, it is beyond doubt that the words CASH
PAID and CASH RECD have been in fact used to refer
to identified liquid assets by way of loans taken,
loans given, current liabilities, and cash/bank balances
which were proposed to be redistributed pursuant to the
Family Agreement. These words do not represent hard
cash received or hard cash paid as ordinarily conveyed
by these words.
That the figures appearing on pages 37 and 38 are
probable balance sheets is obvious.
The purpose of the entire exercise of preparing
memorandum probable balance sheets has also been
satisfactorily explained by the appellant; it has its
genesis in the long standing family disputes which are
in fact still not settled.
The fact that these probable balance sheets have been
drawn up from the accounted balance sheets as on
13.03.2003 is also clearly reflected in CD 2 (G-6 to G-ll of
the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that
though by passing similar orders in the case of 5
group assessees, the AO has brought to tax
Rs.242,75,00,000/- as unaccounted CASH, during
search on 21.07.2009 no unaccounted cash was
found at any place - office or residence - across the
Group. Similarly no accounted investment or
unaccounted expenditure was also found. This lends
further support to the contention of the appellant that
these are only probable or projected figures and not
figures of hard cash..
Another noteworthy fact which emerges on viewing CD 19
containing pages 37 & 38 is that the content there of was
created on 28.03.2003. The properties of this CD/file as
recorded in the computer at the time of its creation,
which was also demonstrated before me, appear as
under:
There is therefore merit in the contention of the AR that this
CII) was created on 28.03.2003 a date falling beyond
six year limitation period prescribed in section 53A(1)
32 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
the Act.
In my opinion the appeal merits being allowed both on
grounds of limitation and the ground that the figures
are in any event only probable balance sheets and do
not reflect actual transactions of CASH PAID AND
CASH RECD. These probable balance sheets were
themselves based on balance sheets as on 13.03.2003
drawn up from the regular books of account maintained
by the appellant.
Moreover the words CASH PAID AND CASH RECD do not
in fact reflect hard cash but identified and accounted
liquid assets.
For all the reasons discussed hereinabove, the
assessment is annulled and ex consequentia the
sum of Rs.23,73,00,000/- added to the total income of
the Appellant does no t survive and ge ts del ete" .
38. As the issues involved in the impugned appeal are common as
deliberated and decided by us hereinabove in our order while
adjudicating the Department's ITA No. 3767/Mum/2013 at length and
following the same decided another department's appeal in ITA
3777/Mum/2013. The relevant conclusive paras of our order read as
under:
"20. We have perused the arguments from either side
and have also perused the material placed before us
along with the orders of the revenue authorities.
21. The following abbreviations, as used in the seized
papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand CKM
Mehta
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation
Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments YIL
Ltd
22. The fact that papers and CDs were seized at the
time of search on 21.07.2007, is evidenced from the
panchnama (APB Vol 3 912). It is also a fact that the
hard copies of print out which were undated were found
in the loose papers, which, when examined by running
the CDs were found to be pertaining to 23.03.2003 and
28.03.2003, prior to the period for 153A proceedings.
23. On examination of the seized print out, it is seen
that the impugned CDs
33 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
was in fact created on 28.03.2003. This means that
seized hard copies was nothing but the print out of the
CD prepared on 28.03.2003, therefore, the assumption of
the AO that since the papers were undated, and
therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its
legs and this assumption falls. Hence addition can be
sustained on this arguments.
24. On the other hand, the submissions of the AR cannot
be ignored that all the assets and liabilities were
distributed as per the family arrangement immediately
thereafter and wherever necessary, capital gains had
been paid.
25. Before us though the AR placed reliance on the
decisions of
In the case of P R Metrani vs CIT- 287 ITR 209 (SC)
In the case of Surendra M Khandhar vs ACIT 321 ITR
254 (Bom)
in our view both these decisions may not be necessary,
because, the question of rebuttal on the proposed
addition has not been occasioned because the additions
made by the AO, have been based on notings on the CDs
prepared on 28.03.2003, which we have held cannot be
sustained.
26. We also reject the GOA no. 6, wherein the
department has sought restoration of the case to the file
of the AO, because of non allowance of proper
opportunity under Rule 46A. This has been categorically
rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any
evidence, which was not before the AO or was not in the
seized material.
27. We, therefore, reject the grounds as raised by the
department and consequentially dismiss the appeal as
filed by the department.
28. In the result, Departmental appeal, as filed by the
revenue stands dismissed.
34 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
39. Following the above said paras, we dismiss the grounds involved
in department ITA No. 3765/Mum/2013. Accordingly, Department's
appeal stands dismissed.
ITA No. : 3766/Mum/2013 : Department Appeal :
40. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the ground
of limitation by holding that the C.D. was created on 28.3.2003,
falling beyond six years limitation period prescribed in section
153A(1) without verifying the authenticity and alleged date of
CD through forensic expert.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the basis of
surmises and presumptions without verifying the facts as
available on record.
3. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs. 6,68,00,000/-
on account of unaccounted receipts due to family arrangement
ignoring the presumptions with regard to the entries found in
sized material as per provisions of Section 292C r.w.s. 132(4A)
of I.T. Act.
4. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
36,21,00,000/- on account of unaccounted payments due to
family arrangement ignoring the presumptions with regard to
the entries found in seized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the
assessment and deleting the additions by relying on the
additional evidence in the form of family agreements dated
March 2000 and 01.01.2003 but ignoring that these agreements
indicated financial transactions during the years covered u/s
153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary".
41. The CIT(A) on consideration of the submissions as made by the
assessee along with the documents found seized, has observed:
To further bolster his case the AR opened in my presence
the said two CD 2 and 19.
On being accessed CD 19, and on
o p e n i n g h a v i n g p a t h n a m e a s 'copy 1
9\suresh\ohd\MyDocuments\data\MSODATA\EX
35 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
CEL\INDBS .XLS', he showed me file containing same
two pages as 37 & 38 which is the basis for the
impugned assessment.
He also drew my attention to the fact that as per the
computer record, this file having two pages similar to 37
& 38, was created on 28/03/2003. The copy of
computer printout was also placed on record.
He submitted that, in the circumstances, use of the
words 'Cash paid' and Cash received' has to be seen
in the facts and context of the case and not with
reference to the English dictionary as has been done by
the learned AO.
The AR submitted that the AO vide his letter dated
17.01.2012 had permitted the appellant to take copies
of all the seized material (including soft material)
which includes the material recorded on the said two
CDs. He submitted that the appellant obtained such
copies from the AO on 08.02.2012. Thus, no additional
evidence is contained in these CDs.
I have considered the facts of the case and perused
the material on record including the CD2 and CD19
submitted during the course of the hearing and
opened by the representatives of the Appellant in my
presence.
On an examination of the material furnished by the
Appellant during the course of the hearing and on
perusing the two CD I am of the opinion that no new
evidence is sought to be placed before me by the
Appellant. The entire material including that on the two
CD forms part of the seized material and was therefore
with the AO when he passed the order.
In the Remand Report the AO has not off ered
any comments in respect of assessment orders for
A.Y.2010-11 without assigning any reason thereby
suggesting that he had nothing to say in the matter.
Beyond doubt CD 19 file having path name as 'copy
l9\suresh\ohd\MyDocuments\data\MSODATA\EXCEL
\INDBS.XLS' contains same two pages as 37 & 38
copies of which have been appended to the assessment
order and which constitute the basis for the impugned
assessment.
CD No. 2, when opened showed another five pages
pertaining to group balance sheets. These five pages
are the basis for preparation of two pages No. 37 & 38.
Relevant figures on pages 37 & 38 perfectly match with
the figures on 5 pages on CD 2.
It is seen that these five pages have very clear
headings as "BALANCE SHEET AS ON 13/03/2003".
It is thus clear that two pages i.e. 37 & 38 are the
summarized version of five pages available on CD 2
and further that the entire data contained therein
pertains to the period before 31/03/2003
The AR has clarified that pages 37 & 38 represent
probable balance sheets drawn up in the context of
Family agreement of 01/01/2003.
36 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
On an examination of the material on record it is
quite clear that there have been long standing
disputes within the Mehta family genesis of which
goes beyond the year 2000. A series of letters have
been exchanged between the Appellant and his son
Sailesh wherein various claims and counter claims
have been raised.
Mr. CKM, who is into his eighties, as the head of
the f amily wanted to evolve a succession plan the
aim of which was peace and harmony in the family.
He along with his wife Mrs. Kanta Mehta desired to
relinquish in favor of their sons, their interests in the
two listed companies DFPCL and DNL.
Since the 2000 Agreement did not result in
settlement of disputes a fresh Family Agreement
was drawn up by M/s. Udwaclia, Udeshi and
Bergis, Solicitors, in January, 2003. Under this
family agreement DCM would own and manage
DNL, SCM would own and manage DFPCL and ACM
was to be paid Cash of Rs. 53 crores being his share
in the value of the Family shares. For this
purpose shares in DFPCL and DNL, which were
notionally valued and divided equally among the
three sons in such a way that each son was to
receive assets of the value of Rs.53 crores. The
2003 agreement provided for various things
including payment of specified amounts and inter se
redistribution of other assets and liabilities between the
family members as explained in detail by the AR in his
submissions.
As explained by the AR equal distribution of the
f amily assets among the f our Groups meant
redistribution of assets involving various family
members and their corporate entities. This involved
ensuring that control, ass, and liabilities of specific
entities were , allotted to specific Group in the process
ensuring that there was financial equality.
An exercise of plotting probable /required
redistribution of financial assets as appearing on
said pages 37 & 38 was undertaken around 12th
March, 2003 i.e. soon after the Family agreement was
entered into on 1st January, 2003. Since this exercise
involved as many as about 33 entities and financial
assets of large number and value and diverse nature,
the office of the Appellant thought expedient to plot in
separate accounting software. An elementary exercise of
preparing memorandum ledger accounts by recording
memorandum journal entries etc was utilized for this
purpose. The CDs on record also clearly establish the
fact that the starting point of this entire exercise was
Balance sheets as on 13.03.2003 as appearing in the
books of account maintained by various group entities.
The further fact which distinctly emerges from the seized
material/CD is that the components of the figures of
CASH PAID and CASH RECD as appearing at the end
of these probable balance sheets are in fact liquid
assets in the form of loans, liabilities, cash and bank
balances etc.
37 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
SCM & Group
Capital 806 Gotri 17
Loan taken 84 Bunglow 396
Deficit DFPCL-Sh 2,153
-WCCL-2200
-Others 753 2953
YIL TDR Sh. 94
Loans to Others 10
Loan to Smart 430
3843 3843
Cash Recd. + 668
Cash paid - 3,621
Deficit 2,953
The AO has brought to tax Rs.6.68 crores and
Rs.36.21 crores as unexplained CASH RECD and
CASH PAID".
The break up of the said two figures as available on CD
2 is as under:
38 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
39 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
In my opinion, it is beyond doubt that the words CASH
PAID and CASH RECD have been in fact used to refer
to identified liquid assets by way of loans taken,
loans given, current liabilities, and cash/bank balances
which were proposed to be redistributed pursuant to the
Family Agreement. These words do not represent hard
cash received or hard cash paid as ordinarily conveyed
by these words.
That the figures appearing on pages 37 and 38 are
probable balance sheets is obvious.
The purpose of the entire exercise of preparing
memorandum probable balance sheets has also been
satisfactorily explained by the appellant; it has its
genesis in the long standing family disputes which are
in fact still not settled.
The fact that these probable balance sheets have been
drawn up from the accounted balance sheets as on
13.03.2003 is also clearly reflected in CD 2 (G-6 to G-ll of
the Paper Book - Box File No. 1).
There is also merit in the contention of the AR that
though by passing similar orders in the case of 5
group assessees, the AO has brought to tax
Rs.242,75,00,000/- as unaccounted CASH, during
search on 21.07.2009 no unaccounted cash was
found at any place - office or residence - across the
Group. Similarly no accounted investment or
unaccounted expenditure was also found. This lends
further support to the contention of the appellant that
these are only probable or projected figures and not
figures of hard cash..
Another noteworthy fact which emerges on viewing CD 19
containing pages 37 & 38 is that the content there of was
created on 28.03.2003. The properties of this CD/file as
recorded in the computer at the time of its creation,
which was also demonstrated before me, appear as
under:
There is therefore merit in the contention of the AR that this
CII) was created on 28.03.2003 a date falling beyond
six year limitation period prescribed in section 53A(1)
the Act.
In my opinion the appeal merits being allowed both on
40 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
grounds of limitation and the ground that the figures
are in any event only probable balance sheets and do
not reflect actual transactions of CASH PAID AND
CASH RECD. These probable balance sheets were
themselves based on balance sheets as on 13.03.2003
drawn up from the regular books of account maintained
by the appellant.
Moreover the words CASH PAID AND CASH RECD do not
in fact reflect hard cash but identified and accounted
liquid assets.
For all the reasons discussed hereinabove, the
assessment is annulled and ex consequentia the
sum of Rs.42,89,00,000/- added to the total income of
the Appellant does no t survive and ge ts del ete" .
42. As the issues involved in the impugned appeal are common as
deliberated and decided by us hereinabove in our order while
adjudicating the Department appeal in ITA No. 3767/Mum/2013 at
length and following the same decided another two appeal of the
department in ITAs No. 3777/Mum/2013 & ITA 3765/Mum/2013.
The relevant conclusive paras of our order read as under:
"20. We have perused the arguments from either side
and have also perused the material placed before us
along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized
papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand CKM
Mehta
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation
Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments YIL
Ltd
22. The fact that papers and CDs were seized at the
time of search on 21.07.2007, is evidenced from the
panchnama (APB Vol 3, Pg. 912). It is also a fact that the
hard copies of print out which were undated were found
in the loose papers, which, when examined by running
the CDs were found to be pertaining to 23.03.2003 and
28.03.2003, period prior to the 153A proceedings.
23. On examination of the seized print out, it is seen
that the impugned CDs
41 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
was in fact created on 28.03.2003. This means that
seized hard copies was nothing but the print out of the
CD prepared on 28.03.2003, therefore, the assumption of
the AO that since the papers were undated, and
therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its
legs and this assumption falls. Hence addition can be
sustained on this arguments.
24. On the other hand, the submissions of the AR cannot
be ignored that all the assets and liabilities were
distributed as per the family arrangement immediately
thereafter and wherever necessary, capital gains had
been paid.
25. Before us though the AR placed reliance on the
decisions of
In the case of P R Metrani vs CIT- 287 ITR 209 (SC)
In the case of Surendra M Khandhar vs ACIT 321 ITR
254 (Bom)
in our view both these decisions may not be necessary,
because, the question of rebuttal on the proposed
addition has not been occasioned because the additions
made by the AO, have been based on notings on the CDs
prepared on 28.03.2003, which we have held cannot be
sustained.
26. We also reject the GOA no. 6, wherein the
department has sought restoration of the case to the file
of the AO, because of non allowance of proper
opportunity under Rule 46A. This has been categorically
rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any
evidence, which was not before the AO or was not in the
seized material.
27. We, therefore, reject the grounds as raised by the
department and consequentially dismiss the appeal as
filed by the department.
28. In the result, Departmental appeal, as filed by the
revenue stands dismissed.
42 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
43. Following the above said paras, we dismiss the grounds involved
in department's ITA No. 3766/Mum/2013. Accordingly, Department's
appeal stands dismissed.
ITA No. : 3764/Mum/2013 : Department Appeal :
44. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the ground
of limitation by holding that the C.D. was created on 28.3.2003,
falling beyond six years limitation period prescribed in section
153A(1) without getting any forensic examination.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in annulling the assessment on the basis of
surmises and presumptions without verifying the facts as
available on record.
3. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
49,39,00,000/- on account of unaccounted receipts due to
family arrangement ignoring the presumptions with regard to
the entries found in sized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
4. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
24,99,00,000/- on account of unaccounted payments due to
family arrangement ignoring the presumptions with regard to
the entries found in seized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
5. On the facts and in law, the Ld. CIT(A) erred in annulling the
assessment and deleting the additions by relying on the
additional evidence in the form of family agreements dated
March, 2000 and 01.01.2003 but ignoring that these
agreements indicated financial transactions during the years
covered u/s 153A of the I.T. Act.
6. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary".
45. The CIT(A) on consideration of the submissions as made by the
assessee along with the documents found seized, has observed:
Thus the word CASH has been used in the
context of liquid assets not only by the
appellant but also by an external CA and by the
Pane Off ice of the Appellant. This ther ef ore
43 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
establ ishes a set pattern of using the wo rd
CASH l oosel y not only wi th reference to hard cash
but also other liquid assets.
It is also a fact that the Letter dated 03.12.2008
was dictated to the Secretary of CKM and copies
thereof were also marked to Company Executives,
eminent Solicitor and also given to Arbitrators.
T h e r e i s me r i t i n t h e c o n te n ti o n of th e A R t h a t
s u c h o p e n r ef e re n c e to C A S H o r unaccounted
transactions of such magnitude can be said to be
contrary to normal human conduct.
As rightly pointed out by the AR SCM in his letter
dated 11/12/2008 has questioned the correctness
of the contents of CKM;s letter dated 03/12/2008.
It is seen that this letter is again marked to a
Company Executive and to the same Solicitor. The
Assessing Officer has not made a reference to this
letter in the assessment order though it was part
of the seized material.
The other material fact which the Assessing Officer
has not given due importance is that d u r i n g th e
c o u r s e of th e s e a r c h c o v e r i n g t h e e n ti r e
D e e p ak G r o u p c o v e r i n g b o t h residences of all
family members and all the companies, no unaccounted
cash was found.
Going by the Assessing Officer own presumption,
this cash transaction is supposed to have taken
place during the period 01.04.2008 to 31.03.2009
while the search took place on 21.07.2009. During
this extensive search neither was any
unaccounted cash or any unaccounted
investment or unaccounted expenditure was
detected either by the search party or by the
Assessing Officer during assessment proceedings
barring use of the word CASH in the said letter of
03.12.2008.
In my opinion this fact lends further credence to
the argument of the AR that use of the word CASH
in the said letter was in the context of liquid funds
only and not hard cash as presumed by the
Assessing Officer.
The other relevant f act is that the f amily disputes
particularly between CKM and SCM have not been
settled even today and the matter is pending
before Arbitrators. This fact is also coming out from
the submissions made during assessment proceedings.
It is also seen that the Assessing Officer has
brought Rs.20 crores to tax in A.Y. 2009-10 only
because there is use of the word CASH in the letter
dated 03.12.2008. In my opinion there is no basis
for such approach. The seized material clearly
shows that family disputes are deep rooted and
going on since prior to the year 2000. The first
family agreement is of March, 2000. The second
family agreement is of 01/01/2003. The 2003
agreement speaks of the Appellant being required
to pay Rs.30 crs. to ACM on or before 31.03.2003.
The agreement also notes as a fact that "which
44 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
funds have been provided by CKM to SCM".
Thus, according to the January 2003 agreement
this was the only obligation undertaken by the
Appellant vis- ã-vis SCM's liability to pay 53
crores to ACM. On the date of execution of the
agreement itself on 01/01/2003 the agreement
uses the past tense "which f unds have been
provided by CKM to SCM" suggesting that the
event, if at all, has already happened and CKM
has already discharged his undertaking by
providing funds to ACM as early as 01/01/2003.
There is theref ore no basis f or the Assessing
Off icer to come to a conclusion that the alleged
CASH transaction took place in F.Y.2008-09
warranting an addition in A.Y.2008-09.
The transaction of sale of FSI by the CKM Group
company Sof otel to DFPCL, SCM Group Company,
is also stated to have taken place in March, 2003.
This transaction, was duly approved by the Board of
Directors of DFPCL and has also been accepted by the
Department both in the case of Sofotel and DFPCL. This
transaction was undertaken to provide liquidity to
the f amily. This event has also occurred in
March 2003 which coincides with the deadline for
discharge by SCM of his obligation to pay ACM
Rs.30 crores on or before 3 1.03.2003 for which
funds were provided by CKM at that point of time
since SCM did not have liquidity.
This fact also does not support the AO conclusion that
the alleged CASH transaction took place in F.Y.2008-09
warranting an addition in A.Y.2008-09.
On a combined reading of Para 18 and Para 31 of the
Statement of facts with the appeal Memo two things
emerge namely that CKM had provided (in the
sense of arranged) assets worth Rs.30 crores for
ACM and his group entities before 31/03/2003 and
further that, in course of time, ACM was provided (in
the sense of made available) funds in liquid form to the
extent of Rs.34.83 crores by CKM by providing control
over certain private companies having liquid funds.
Correctness of this Statement of facts has not been
challenged by the AO at any point of time after filing
of the appeal memo and therefore should be presumed
to be correct.
In this manner CKM can be said to have discharged his
only obligation towards ACM undertaken on behalf of
SCM.
The seized material does not and it is also not the case
of the AC that there was any other obligation
undertaken by CKM under the family agreement of
2003.
There was therefore no question of CKM being
required to pay hard CASH to ACM on behalf of SCM
in pursuance of the said agreement.
The word CASH has therefore to be necessarily
interpreted consistent with the manner in which it has
been generally used within Group which seems to be
45 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
the normal conduct of the Group.
The fact also remains that CKM and SCM and the rest
of the family were having deep rooted differences
which even the 2003 agreement did not fully resolve
notwithstanding the fact that the scheme of control over
the two public limited companies was completely
changed therein as compared to the 2000 family
agreement.
In my opinion in such a situation and in the
background of such deep rooted family disputes,
normal human conduct would be of settling inter se
obligations and claims using accounted funds thereby
clearly leaving a trail establishing fact of settlement
of each claim and counter claim.
In the face of the bitterness in relations between CKM
and SCM as reflected in of some of the letters forming
part of the seized material, presumption that CASH
would have been paid by CKM to ACM on behalf of
SCM would be contrary to normal human conduct.
Normal human conduct would suggest payment by
cheque or by providing other liquid funds only.
The letter of 03.12.2008 has been formally marked
to the Solicitor Bergis Desai and also to DAD and
ACM. This would suggest that CKM wanted keep a
trail of the discharge by him of his obligation to pay
30 crores on behalf of SCM. This conduct is more in
tune with recording of fact of transactions in accounted
funds rather than of unaccounted cash.
Even on a preponderance of probability this would
appear to be true.
The fact that emerges on a conjoint reading of the
relevant seized material is that the sum of Rs.20
crores in fact merely represents value of disputed
net credit claimed by CKM from SCM arising out of
sale of FSI in March, 2003 by Sofotel (CKM Group
company) to DFPCL (SCM group company) and
not cash as a plain and isolated reading of the
letter dated 03.12.2008 would suggest. In my opinion
keeping in mind the totality of the facts of the case
there is no warrant for such plain and isolated reading.
It is also seen that though as per the Family agreement
of 2003 ACM was to be paid `cash' of 53 crores it is not
the case of the Assessing Officer that ACM has in fact
been paid Rs. 53 crores in unaccounted cash.
In my opinion the addition of Rs. 20 crs made by the
AO as unexplained payment in cash is contrary to the
material on record. The addition is made purely on the
basis of conjectures and surmises and on a plain and
isolated reading of a solitary letter and without giving
weightage to the other letters and other seized material
on record and the to the conduct of the Group in the
matter of use of the word CASH as clearly emerging
from the seized material. The said figure of Rs. 20
crores does not represent any CASH transaction as
presumed by the Assessing Officer".
46 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
46. As the issues involved in the impugned appeal are common as
deliberated and decided by us hereinabove in our order while
adjudicating the Department appeal in ITA No. 3767/Mum/2013 at
length and following the same decided another three appeals of the
department in ITAs No. 3777/Mum/2013, ITA 3765/Mum/2013 &
3766/Mum/2013. The relevant conclusive paras of our order read as
under:
"20. We have perused the arguments from either side
and have also perused the material placed before us
along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized
papers:
S.no. Name Abbreviation
1 Mr. Chimanlal CKM
Khimchand Mehta
2 Mr. Deepak Chimanlal DCM
Mehta
3 Mr. Sailesh Chimanlal SCM
Mehta
4 Mr. Ajay Chimanlal ACM
Mehta
5 M/s. Deepak Fertilizers DFPCL
& Petrochemicals
Corporation Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada YIL
Investments Ltd
22. The fact that papers and CDs were seized at the time
of search on 21.07.2007, is evidenced from the
panchnama (APB Vol 3, Pg. 912). It is also a fact that the
hard copies of print out which were undated were found
in the loose papers, which, when examined by running
the CDs were found to be pertaining to 23.03.2003 and
28.03.2003, period prior to the period for 153A
proceedings.
23. On examination of the seized print out, it is seen that
the impugned CDs
47 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
was in fact created on 28.03.2003. This means that
seized hard copies was nothing but the print out of the
CD prepared on 28.03.2003, therefore, the assumption of
the AO that since the papers were undated, and
therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its
legs and this assumption falls. Hence addition can be
sustained on this arguments.
24. On the other hand, the submissions of the AR cannot
be ignored that all the assets and liabilities were
distributed as per the family arrangement immediately
thereafter and wherever necessary, capital gains had
been paid.
25. Before us though the AR placed reliance on the
decisions of
In the case of P R Metrani vs CIT- 287 ITR 209 (SC)
In the case of Surendra M Khandhar vs ACIT 321 ITR
254 (Bom)
in our view both these decisions may not be necessary,
because, the question of rebuttal on the proposed
addition has not been occasioned because the additions
made by the AO, have been based on notings on the CDs
prepared on 28.03.2003, which we have held cannot be
sustained.
26. We also reject the GOA no. 6, wherein the
department has sought restoration of the case to the file
of the AO, because of non allowance of proper
opportunity under Rule 46A. This has been categorically
rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any
evidence, which was not before the AO or was not in the
seized material.
27. We, therefore, reject the grounds as raised by the
department and consequentially dismiss the appeal as
filed by the department.
28. In the result, Departmental appeal, as filed by the
revenue stands dismissed.
47. Following the above said paras, we dismiss the grounds involved
in department's ITA No. 3764/Mum/2013. Accordingly, Department's
appeal stands dismissed.
ITA No. : 3778/Mum/2013 : Department Appeal : AY 2009-10 :
48. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
20,00,00,000/- on account of unaccounted receipts due to
family arrangement ignoring the presumptions with regard to
the entries found in sized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
48 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary
A copy of the order of the CIT(A), Mumbai was received in this
office on 15.03.2013. The limitation date for filing of appeal u/s
253(2) is 13.5.2013. However, the appeal should be filed
immediately"".
49. The CIT(A) on consideration of the submissions as made by the
assessee along with the documents found seized, has observed:
"Thus the word CASH has been used in the
context of liquid assets not only by the appellant
but also by an external CA and by the Pane Off ice
of the Appellant. This theref ore establishes a set
pattern of using the word CASH loosely not only
wi th reference to hard cash but also other liquid assets.
It is also a fact that the Letter dated 03.12.2008 was
dictated to the Secretary of CKM and copies thereof
were also marked to Company Executives, eminent
Solicitor and also given to Arbitrators. T h e r e i s m e r i t
i n t h e c o n te n ti o n o f th e A R th a t s u c h o p e n
r ef e r e n ce to C A S H o r unaccounted transactions of
such magnitude can be said to be contrary to
normal human conduct.
As rightly pointed out by the AR SCM in his letter
dated 11/12/2008 has questioned the correctness
of the contents of CKM;s letter dated 03/12/2008.
It is seen that this letter is again marked to a
Company Executive and to the same Solicitor. The
Assessing Officer has not made a reference to this
letter in the assessment order though it was part of
the seized material.
The other material fact which the Assessing Officer
has not given due importance is that d ur i n g th e
co ur se of th e se ar c h cove r i n g th e e n ti re D eep ak
Gr o up co ve ri n g b o th residences of all family
members and all the companies, no unaccounted cash
was found.
Going by the Assessing Officer own presumption,
this cash transaction is supposed to have taken
place during the period 0 1.04.2008 to 3 1.03.2009
while the search took place 011 21.07.2009. During
this extensive search neither was any
unaccounted cash or any unaccounted investment
or unaccounted expenditure was detected either
by the search party or by the Assessing Officer
during assessment proceedings barring use of the
word CASH in the said letter of 03.12.2008.
In my opinion this fact lends further credence to the
argument of the AR that use of the word CASH in the
said letter was in the context of liquid funds only and not
hard cash as presumed by the Assessing Officer.
49 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
The other relevant fact is that the family disputes
particularly between CKM and SCM have not been
settled even today and the matter is pending before
Arbitrators. This fact is also coming out from the
submissions made during assessment proceedings.
It is also seen that the Assessing Officer has brought
Rs.20 crores to tax in A.Y. 2009-10 only because
there is use of the word CASH in the letter dated
03.12.2008.
In my opinion there is no basis for such approach.
The seized material clearly shows that family
disputes are deep rooted and going on since prior to
the year 2000. The first family agreement is of
March, 2000. The second family agreement is of
01/01/2003. The 2003 agreement speaks of the
Appellant being required to pay Rs.30 crs. to ACM
on or before 31.03.2003. The agreement also notes
as a fact that "which funds have been provided by
CKM to SCM".
Thus, according to the January 2003 agreement
this was the only obligation undertaken by the
Appellant vis- à-vis SCM's liability to pay 53
crores to ACM. On the date of execution of the
agreement itself on 01/01/2003 the agreement uses
the past tense "which f unds have been provided
by CKM to SCM" suggesting that the event, if at
all, has already happened and CKM has already
discharged his undertaking by providing funds to
ACM as early as 01/01/2003. There is theref ore
no basis f or the Assessing Off icer to come to a
conclusion that the alleged CASH transaction
took pl ace in F.Y.2008-09 warranting an addition in
A.Y.2008-09.
The transaction of sale of FSI by the CKM Group
company Softel to DFPCL, SCM Group Company, is also
stated to have taken place in March, 2003. This
transaction, was duly approved by the Board of
Directors of DFPCL and has also been accepted by the
Department both in the case of Softel and DFPCL. This
transaction was undertaken to provide liquidity to the
f amily. This event has also occurred in March
2003 which coincides with the deadline for
discharge by SCM of his obligation to pay ACM
Rs.30 crores on or before 3 1.03.2003 for which hinds
were provided by CKM at that point of time since SCM
did not have liquidity.
This fact also does not support the AG conclusion that
the alleged CASH transaction took place in F.Y.2008-09
warranting an addition in A.Y.2008-09.
On a combined reading of Para 18 and Para 31 of the
Statement of facts with the appeal Memo two things
emerge namely that CKM had provided (in the
sense of arranged) assets worth Rs.30 crores for ACM
and his group entities before 31/03/2003 and further
that, in course of time, ACM was provided (in the sense
of made available) hinds in liquid form to the extent of
Rs.34.83 crores by CKM by providing control over certain
private companies having liquid funds.
50 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
Correctness of this Statement of facts has not been
challenged by the AG at any point of time after filing of
the appeal memo and therefore should be presumed to
be correct.
In this manner CKM can be said to have discharged his
only obligation towards ACM undertaken on behalf of
SCM.
The seized material does not and it is also not the case
of the AG that there was any other obligation undertaken
by CKM under the family agreement of 2003.
There was therefore no question of CKM being
required to pay hard CASH to ACM on behalf of SCM in
pursuance of the said agreement.
The word CASH has therefore to be necessarily
interpreted consistent with the manner in which it has
been generally used within Group which seems to be
the normal conduct of t h e G r o u p .
The fact also remains that CKM and SCM and the
rest of the family were having deep rooted
differences which even the 2003 agreement did not
fully resolve notwithstanding the fact that the scheme
of control over the two public limited companies was
completely changed therein as compared to the 2000
family agreement.
In my opinion in such a situation and in the
background of such deep rooted family disputes,
normal human conduct would be of settling inter se
obligations and claims using accounted funds thereby
clearly leaving a trail establishing fact of settlement of
each claim and counter claim.
In the face of the bitterness in relations between CKM
and SCM as reflected in of some of the letters forming
part of the seized material, presumption that CASH
would have been paid by CKM to ACM on behalf of SCM
would be contrary to normal human conduct. Normal
human conduct would suggest payment by cheque or
by providing other liquid funds only.
The letter of 03.12.2008 has been formally marked to
the Solicitor Bergis Desai and also to DAD and ACM.
This would suggest that CKM wanted keep a trail of
the discharge by him of his obligation to pay 30
crores on behalf of SCM. This conduct is more in tune
with recording of fact of transactions in accounted funds
rather than of unaccounted cash.
Even on a preponderance of probability this would
appear to be true.
The fact that emerges on a conjoint reading of the
relevant seized material is that the sum of Rs.20
crores in fact merely represents value of disputed net
credit claimed by CKM from SCM arising out of sale
of FSI in March, 2003 by Sofotel (CKM Group
company) to DFPCL (SCM group company) and not
cash as a plain and isolated reading of the letter
dated 03.12.2008 would suggest. In my opinion keeping
in mind the totality of the facts of the case there is no
warrant for such plain and isolated reading.
It is also seen that though as per the Family
agreement of 2003 ACM was to be paid 'cash' of 53
51 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
crores it is not the case of the Assessing Officer that
ACM has in fact been paid Rs.53 crores in unaccounted
cash.
In my opinion the addition of Rs.20 crs. made by the
AO as unexplained payment in cash is contrary to the
material on record. The addition is made purely on the
basis of conjectures and surmises and on a plain
and isolated reading of a solitary letter and without
giving weightage to the other letters and other seized
material on record and the to the conduct of the Group
in the matter of use of the word CASH as clearly
emerging from the seized material. The said figure of
Rs.20 crores does not represent any CASH transaction
as presumed by the Assessing Officer".
50. As the basic issues involved in the impugned appeal are
common as deliberated and decided by us hereinabove in our order
while adjudicating the Department appeal in ITA No. 3767/Mum/2013
at length and following the same decided another four appeals heard
on 10.11.2014 of the department in ITAs No. 3777/Mum/2013, ITA
3765/Mum/2013, 3766/Mum/2013 & 3764/Mum/2013. The relevant
conclusive paras of our order read as under:
"20. We have perused the arguments from either side
and have also perused the material placed before us
along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized
papers:
S.no. Name Abbreviation
1 Mr. Chimanlal Khimchand CKM
Mehta
2 Mr. Deepak Chimanlal Mehta DCM
3 Mr. Sailesh Chimanlal Mehta SCM
4 Mr. Ajay Chimanlal Mehta ACM
5 M/s. Deepak Fertilizers & DFPCL
Petrochemicals Corporation
Ltd.
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada Investments YIL
Ltd
22. The fact that papers and CDs were seized at the time
of search on 21.07.2007, is evidenced from the
panchnama (APB Vol 3, Pg. 912). It is also a fact that the
hard copies of print out which were undated were found
in the loose papers, which, when examined by running
the CDs were found to be pertaining to 23.03.2003 and
28.03.2003, period prior to the period for 153A
proceedings.
23. On examination of the seized print out, it is seen that
the impugned CDs
52 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
was in fact created on 28.03.2003. This means that
seized hard copies was nothing but the print out of the
CD prepared on 28.03.2003, therefore, the assumption of
the AO that since the papers were undated, and
therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its
legs and this assumption falls. Hence addition can be
sustained on this arguments.
24. On the other hand, the submissions of the AR cannot
be ignored that all the assets and liabilities were
distributed as per the family arrangement immediately
thereafter and wherever necessary, capital gains had
been paid.
25. Before us though the AR placed reliance on the
decisions of
In the case of P R Metrani vs CIT- 287 ITR 209 (SC)
In the case of Surendra M Khandhar vs ACIT 321 ITR
254 (Bom)
in our view both these decisions may not be necessary,
because, the question of rebuttal on the proposed
addition has not been occasioned because the additions
made by the AO, have been based on notings on the CDs
prepared on 28.03.2003, which we have held cannot be
sustained.
26. We also reject the GOA no. 6, wherein the
department has sought restoration of the case to the file
of the AO, because of non allowance of proper
opportunity under Rule 46A. This has been categorically
rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any
evidence, which was not before the AO or was not in the
seized material.
27. We, therefore, reject the grounds as raised by the
department and consequentially dismiss the appeal as
filed by the department.
28. In the result, Departmental appeal, as filed by the
revenue stands dismissed.
51. Following the above said paras, we dismiss the grounds involved
in department's appeal in ITA No. 3778/Mum/2013. Accordingly,
Department's appeal stands dismissed.
53 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
ITA No. : 3779/Mum/2013 : Department Appeal : AY 2009-10 :
52. The department has raised the following grounds:
"1. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in deleting the addition of Rs.
20,00,00,000/- on account of unaccounted receipts due to
family arrangement ignoring the presumptions with regard to
the entries found in sized material as per provisions of Section
292C r.w.s. 132(4A) of I.T. Act.
2. On the facts and in the circumstances of the case and in law
the Ld. CIT(A) erred in admitting the additional evidence in
violation of Rule 46A of the I.T. Rules 1962 without providing the
AO opportunity to comment on merits.
The appellant prays that the order of the CIT(A) on the above
grounds be set aside and that of the Assessing Officer be
restored.
The appellant craves leave to amend or alter any ground and/or
add new grounds which may be necessary
A copy of the order of the CIT(A), Mumbai was received in this
office on 15.03.2013. The limitation date for filing of appeal u/s
253(2) is 13.5.2013. However, the appeal should be filed
immediately".
53. As the basic issues involved in the impugned appeal are
common as deliberated and decided by us hereinabove in our order
while adjudicating the Department appeal in ITA No. 3767/Mum/2013
at length and following the same decided another five appeals heard on
10.11.2014 of the department in ITAs No. 3777/Mum/2013, ITA
3765/Mum/2013, 3766/Mum/2013, 3764/Mum/2013 &
3778/Mum/2013. The relevant conclusive paras of our order read as
under:
"20. We have perused the arguments from either side
and have also perused the material placed before us
along with the orders of the revenue authorities.
21. The following abbreviations, are used in the seized
papers:
S.no. Name Abbreviation
1 Mr. Chimanlal CKM
Khimchand Mehta
2 Mr. Deepak Chimanlal DCM
Mehta
3 Mr. Sailesh Chimanlal SCM
Mehta
4 Mr. Ajay Chimanlal ACM
Mehta
5 M/s. Deepak Fertilizers DFPCL
& Petrochemicals
Corporation Ltd.
54 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
6 M/s. Deepak Nitrate Ltd DNL
7 M/s. Yerrowada YIL
Investments Ltd
22. The fact that papers and CDs were seized at the time
of search on 21.07.2007, is evidenced from the
panchnama (APB Vol 3, Pg. 912). It is also a fact that the
hard copies of print out which were undated were found
in the loose papers, which, when examined by running
the CDs were found to be pertaining to 23.03.2003 and
28.03.2003, period prior to the period for 153A
proceedings.
23. On examination of the seized print out, it is seen that
the impugned CDs
was in fact created on 28.03.2003. This means that
seized hard copies was nothing but the print out of the
CD prepared on 28.03.2003, therefore, the assumption of
the AO that since the papers were undated, and
therefore, they have to be presumed to be pertaining to
the financial year, in which they were found, losses its
legs and this assumption falls. Hence addition can be
sustained on this arguments.
24. On the other hand, the submissions of the AR cannot
be ignored that all the assets and liabilities were
distributed as per the family arrangement immediately
thereafter and wherever necessary, capital gains had
been paid.
25. Before us though the AR placed reliance on the
decisions of
In the case of P R Metrani vs CIT- 287 ITR 209 (SC)
In the case of Surendra M Khandhar vs ACIT 321 ITR
254 (Bom)
in our view both these decisions may not be necessary,
because, the question of rebuttal on the proposed
addition has not been occasioned because the additions
made by the AO, have been based on notings on the CDs
prepared on 28.03.2003, which we have held cannot be
sustained.
26. We also reject the GOA no. 6, wherein the
department has sought restoration of the case to the file
of the AO, because of non allowance of proper
opportunity under Rule 46A. This has been categorically
rejected by the CIT(A), wherein he has held that the
assessee has not produced/submitted anything or any
55 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
evidence, which was not before the AO or was not in the
seized material.
27. We, therefore, reject the grounds as raised by the
department and consequentially dismiss the appeal as
filed by the department.
28. In the result, Departmental appeal, as filed by the
revenue stands dismissed.
54. Following the above said paras, we dismiss the grounds involved
in department's appeal in ITA No. 3778/Mum/2013. Accordingly,
Department's appeal stands dismissed. Issue of limitation is not
adjudicated since on merits, addition has been deleted while deciding
Ground nos. 5 & 6. Therefore, addition of Rs. 20 crores on this count
is hereby deleted. Hence, these grounds of appeal are hereby allowed.
55. Now, we shall deal with the Cross Objections filed by the
assessee Group, one-by-one for assessment years 2010-11 & 2009-10
respectively.
CO No. 148/Mum/2014 : By Assessee :
Arising out of ITA 3767/Mum/2013 :
56. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in
law, the Respondent objects to the learned CIT(A) rejecting
the contention of the Respondent before him that either no
approval of the Additional Commissioner u/s 153D was at
all obtained or that the said approval was non est as it
suffered from severe inadequacies and for that reason also
the impugned assessment order was bad in law.
On facts and in the circumstances of the case and in law, the
Respondent objects to the learned CIT(A) holding that the
assessment order was passed by the learned AO after giving
a reasonable opportunity of being heard to the respondent
and that the order is not contrary to the principles of natural
justice.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act, 1961 was illegal and void.
56 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not adjudicating
Grounds Nos. 7 to 12 raised in the Appeal Memo filed before
him for the reason that these grounds do not survive as he
had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
57. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013 on quantum and on
facts. The instant CO filed by the assessee is primarily on legal issues
involved, which according to us, would now become infructuous. We,
therefore, reject the grounds raised in the CO.
58. As a result, the CO, as filed by the assessee is dismissed.
CO No. 150/Mum/2014 : By Assessee :
Arising out of ITA 3777/Mum/2013 :
59. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) - 36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in
law, the Respondent objects to the learned CIT(A) rejecting
the contention of the Respondent before him that either no
approval of the Additional Commissioner u/s 153D was at
all obtained or that the said approval was non est as it
suffered from severe inadequacies and for that reason also
the impugned assessment order was bad in law.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not adjudicating
Grounds Nos. 7 to 11 raised in the Appeal Memo filed before
him for the reason that these grounds do not survive as he
had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
60. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013. On quantum and on
57 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
facts. The instant CO filed by the assessee is primarily on legal issues
involved, which according to us, would now become infructuous. We,
therefore, reject the grounds raised in the CO.
61. As a result, the CO, as filed by the assessee is dismissed.
CO No. 149/Mum/2014 : By Assessee :
Arising out of ITA 3765/Mum/2013 :
62. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in
law, the Respondent objects to the learned CIT(A) rejecting
the contention of the Respondent before him that either no
approval of the Additional Commissioner u/s 153D was at
all obtained or that the said approval was non est as it
suffered from severe inadequacies and for that reason also
the impugned assessment order was bad in law.
On facts and in the circumstances of the case and in law, the
Respondent objects to the learned CIT(A) holding that the
assessment order was passed by the learned AO after giving
a reasonable opportunity of being heard to the respondent
and that the order is not contrary to the principles of natural
justice.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not adjudicating
Grounds Nos. 7 to 12 raised in the Appeal Memo filed before
him for the reason that these grounds do not survive as he
had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
63. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013. On quantum and on
facts. The instant CO filed by the assessee is primarily on legal issues
involved, which according to us, would now become infructuous. We,
therefore, reject the grounds raised in the CO.
58 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
64. As a result, the CO, as filed by the assessee is dismissed.
CO No. 159/Mum/2014 : By Assessee :
Arising out of ITA 3766/Mum/2013 :
66. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in
law, the Respondent objects to the learned CIT(A) rejecting
the contention of the Respondent before him that either no
approval of the Additional Commissioner u/s 135D was at
all obtained or that the said approval was non est as it
suffered from severe inadequacies and for that reason also
the impugned assessment order was bad in law.
On facts and in the circumstances of the case and in law, the
Respondent objects to the learned CIT(A) holding that the
assessment order was passed by the learned AO after giving
a reasonable opportunity of being heard to the respondent
and that the order is not contrary to the principles of natural
justice.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not adjudicating
Grounds Nos. 7 to 12 raised in the Appeal Memo filed before
him for the reason that these grounds do not survive as he
had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
67. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013. On quantum and on
facts. The instant CO filed by the assessee is primarily on legal issues
involved, which according to us, would now become infructuous. We,
therefore, reject the grounds raised in the CO.
68. As a result, the CO, as filed by the assessee is dismissed.
59 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
CO No. 146/Mum/2014 : By Assessee :
Arising out of ITA 3764/Mum/2013 :
69. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
1.1)On the facts and in the circumstances of the case and in
law, the Respondent objects to the learned CIT(A) rejecting
the contention of the Respondent before him that either no
approval of the Additional Commissioner u/s 153D was at
all obtained or that the said approval was non est as it
suffered from severe inadequacies and for that reason also
the impugned assessment order was bad in law.
On facts and in the circumstances of the case and in law, the
Respondent objects to the learned CIT(A) holding that the
assessment order was passed by the learned AO after giving
a reasonable opportunity of being heard to the respondent
and that the order is not contrary to the principles of natural
justice.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act, 1961 was illegal and void.
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not adjudicating
Grounds Nos. 7 to 12 raised in the Appeal Memo filed before
him for the reason that these grounds do not survive as he
had annulled the assessment:
4) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
70. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013. On quantum and on
facts. The instant CO filed by the assessee is primarily on legal issues
involved, which according to us, would now become infructuous. We,
therefore, reject the grounds raised in the CO.
71. As a result, the CO, as filed by the assessee is dismissed.
CO No. 147/Mum/2014 : By Assessee :
Arising out of ITA 3778/Mum/2013 : AY 2009-10 :
60 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
72. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that the
assessment order was passed by the learned AO after giving
reasonable opportunity of being heard to the respondent and
that the order Is not contrary to the principles of natural
justice.
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act,1961 was illegal and void.
4) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not annulling the
assessment as the alleged `unaccounted cash' relates to a
family arrangement made before 31/03/2003, which falls
beyond the six years period of limitation laid down by law.
5) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
73. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013. On quantum and on
facts. The instant CO filed by the assessee is primarily on legal issues
involved, which according to us, would now become infructuous. We,
therefore, reject the grounds raised in the CO.
74. As a result, the CO, as filed by the assessee is dismissed.
CO No. 145/Mum/2014 : By Assessee :
Arising out of ITA 3779/Mum/2013 : AY 2009-10 :
75. Following grounds have been raised in the Cross objection:
1) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned Commissioner of
Income Tax (Appeals) -36, Mumbai (the learned CIT(A)) not
accepting the contention of the Respondent that the
assessment order was bad in law and on facts.
2) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that the
assessment order was passed by the learned AO after giving
reasonable opportunity of being heard to the respondent and
that the order Is not contrary to the principles of natural
justice.
61 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
3) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) holding that
challenge to validity of the search u/s 132 could not be
raised before him and therefore rejecting the contention of the
Respondent that the assessment order, passed by the
learned AO is bad in law in as much as the search u/s 132 of
the Income Tax Act,1961 was illegal and void.
4) On the facts and in the circumstances of the case and in law,
the Respondent objects to the learned CIT(A) not annulling the
assessment as the alleged `unaccounted cash' relates to a
family arrangement made before 31/03/2003, which falls
beyond the six years period of limitation laid down by law.
5) The appellant craves leave to add to, alter, delete or modify
any of the above Objections".
76. After due deliberations we have conclusively dismissed the
department appeal in ITA No. 3767/Mum/2013 on quantum and on
facts. In the corresponding CO No. 148/Mum/2014 filed by the
assessee is primarily on legal issues involved, which according to us,
would now become infructuous. We, therefore, reject the grounds
raised in the CO.
77. Thus, the CO, as filed by the assessee is dismissed.
72. All the appeals captioned at the head of the order, and
connected to the lead case as filed by the department are dismissed.
Corresponding COs as filed by the assessees are held to be infructuous
and are dismissed.
To sum-up:
Department appeal in,
ITA No. 3767/Mum/2013 stands dismissed
ITA No. 3777/Mum/2013 stands dismissed
ITA No. 3765/Mum/2013 stands dismissed
ITA No. 3766/Mum/2013 stands dismissed
ITA No. 3764/Mum/2013 stands dismissed
ITA No. 3778/Mum/2013 stands dismissed
ITA No. 3779/Mum/2013 stands dismissed.
Assessee's CO in,
CO No. 148/Mum/2014 stands dismissed
CO No. 150/Mum/2014 stands dismissed
62 Shri Chimanlal K Mehta
ITA No. 3767/Mum/2013
CO 148/Mum/2014 &
Six Group comprising (06 ITAs & 06 Cos)=Total-14
CO No. 149/Mum/2014 stands dismissed
CO No. 159/Mum/2014 stands dismissed
CO No. 146/Mum/2014 stands dismissed
CO No. 147/Mum/2014 stands dismissed.
CO No. 145/Mum/2014 stands dismissed.
Order pronounced in the open Court on 26th December, 2014.
Sd/- Sd/-
(. . [)
. . ( [)
Û
(R C SHARMA) (VIVEK VARMA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Date : 26th December, 2014
/Copy to:-
1) /The Appellant/Applicant-Cross Objector.
2) × /The Respondent.
3) The CIT(A)-36, Mumbai.
4) The CIT(C) IV/Concerned ______, Mumbai
5) "G", , / The DR "G" Bench
ITAT, Mumbai.
6) [
Copy to Guard File.
/By Order
/ / True Copy / /
/
,
Dy./Asstt. Registrar
I.T.A.T., Mumbai
*å ..
*Chavan, Sr.PS
|
