Judgment:
ORDER
SHEET G.A.NO.1411 OF2014ITAT NO.40 OF2014IN THE HIGH COURT AT CALCUTTA Special Jurisdiction (Income Tax) ORIGINAL SIDE COMMISSIONER OF INCOME TAX, CENTRAL-II, KOLKATA Versus SANJAY JHUNJHUNWALA BEFORE: The Hon'ble JUSTICE GIRISH CHANDRA GUPTA The Hon'ble JUSTICE ARINDAM SINHA Date : 27th January, 2015.
For appellant/ revenue : Mr.P.Dhudhoria,Advocate For respondent/assessee: Mr.S.K.Kapoor,Sr.Advocate Mr.J.P.Khaitan,Sr.Advocate Mrs.M.Manot,Advocate Mr.B.Manot,Advocate The Court : The Revenue has come up in appeal against a judgement and order dated 26th November, 2013 by which the learned Tribunal set aside an order of the CIT (Appeals) who on his part had concurred with the views of the Assessing Officer in holding the assessee, Sanjay Jhunjhunwala liable under section 69C of the Income Tax Act for payment of interest amounting to the sum of Rs.5.06 Crores approximately for the assessment year 2009-2010, a sum of Rs.5.86 Crores approximately for the assessment year 2010-2011 and a sum of Rs.6.91 Crores approximately for the assessment year 2011-12.
A brief resume of the facts and circumstances of the case is required which is as follows.
From the assessment order itself, the following has transpired – “VI.
Unaccounted investment in the construction of Mani Square Mall This group has constructed a shopping cum commercial mall at Maniktala on the EM Bye pass which is one of the biggest malls of the City.
In the books cost of the mall is Rs.164 crores but as per an article posted in an internet article the cost was informed to be Rs.520 crores VII.
Jama Kharchi transaction This group is also engaged in pumping in its own unaccounted income/undisclosed income through accommodation entries from ‘jama kharchi’ companies namely M/S.Saket Vinimoy, M/s Oliver Moulds and Plastics (P) Ltd and Subham Fan (India) Pvt Ltd in the form of unsecured loans paying commission to the entry providers.” The assessee in this case, Sanjay Jhunjhunwala is the Managing Director of Mani Square Mall and he is also said to be the key person of the group known as “Mani Group”.
From the order of the CIT (Appeals) (paragraph 7.5.) it appears that the assessee, Sanjay Jhunjhunwala (hereinafter referred to as “the individual”) controls 91.5% of the shares of Mani Square LTD.(hereinafter referred to as “the company”).A search and seizure operation preceded by survey was conducted during the period between 14th September, 2010 and 17th September, 2010 at various places including the office of the company, the residence of the Directors and the residence of the individual.
On 18th September, 2010, the individual disclosed a sum of Rs.50 crores as undisclosed income.
According to him, a sum of Rs.11.85 crores for the assessment year 2010-11 and a sum of Rs.37.15 crores for the assessment year 2011-12, aggregating to a sum of Rs.49 crores belonged to Mani Square LTD.the company and the balance sum of Rs.1 crore belonged to him individually.
The assessing officer held that the documents seized during the search and seizure revealed that the large amount of loans were taken by the individual.
Such loans, according to him, were also repaid.
In repaying the loans supposedly taken by the individual he must also have paid interest.
It is on this basis that he sought to hold him liable under Section 69C for an aggregating sum of Rs.17,85,06,990/- , the particulars whereof are as follows : Sl No .”
1. 2.”
3. Asst.year 2009-10 2010-11 2011-12 Quantum of cash unsecured loan (Rs.in lacs) 5628 6517.75 7688.36 Rate of Interest P.a Amounts interest in Rs.9% 9% 5,06,52,000/5,86,59,750/6,91,95,240/- Aggrieved by the order of the assessing officer the individual preferred an appeal which was dismissed by a judgement and order dated 19th June, 2013.
An appeal was preferred by the individual to the learned Tribunal which was allowed by the impugned judgement and order dated 26th November, 2013.
The learned Tribunal, it appeaRs.framed the following questions : “…We have gone through the rival submissions and perused the material available on record.
There are three issues raised by assessee in these appeals.
FiRs.one is whether cash loans found in MSG-15 pertained to assessee or M/S.MSL.
Second whether the loans, if it pertained to assessee, any interest expenditure was incurred on such loans.
Third even if such interest was payable whether ingredients required for applying section 69C was present.” The learned Tribunal answered all the three questions in favour of the assessee.
Therefore, the revenue has come up in appeal.
It would appear that the fiRs.question framed by the learned Tribunal is the principal question which is also a question of fact.
The learned Tribunal has held in no uncertain terms that – “…In our opinion, revenue has not been able to establish that cash loan mentioned in various documents seized from premises of M/s.Ms.was relatable to any personal business of the assessee.
If at all any interest expenditure was incurred, it could have been considered in the hands of Ms.and not in the hands of the assessee.
Nothing has been produced to show that assessee had personally incurred any interest expenditure.
In our opinion, section 69C could not have been affected under such circumstances.” The questions of law proposed by the revenue are as follows : “(a) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal erred in law in upholding the order of the CIT(A) in deleting the addition made by the Assessing Officer of Rs.5,06,52,000/-, Rs.5,86,59,950/-, Rs.6,91,95,240/- in respect of the Assessment Years 2009-10,2010-11 & 2011-12 respectively under Section 69C of the Income Tax Act, 1961 without considering the fact that the Assessing Officer made additions on account of unexplained interest expenditure ?.
(b) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal erred in law as well as in fact by not considering that by inflating share sale price of unquoted shares of M/s.Mani Square LTD.the assessee had adjusted his brought forward long term Capital loss upto to Rs.75,00,000/- ?.
(c) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal erred in law in holding that the disclosure made by Mani Square LTD.cannot be taxed in the hands of the assessee without considering the ratio of the decision of Supreme Court in the case of CIT versus United Trading and Construction Company reported in 247 ITR819(SC) and ITO versus Ratanlal reported in 145 ITR183(SC).
(d) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal erred in law in holding that the revenue has not been able to establish that cash loan mentioned in various documents seized from the premises of Mani Square LTD.was relatable to any personal business of the assessee ?.
(e) Whether the impugned order is bad, arbitrary, illegal, perveRs.and the same is nothing but a total non-application of mind of the concerned Income Tax Appellate Tribunal and the same is liable to be set aside and/or quashed ?.” It would appear that the question Nos.(a).(c).(d) and (e) are related to the question as to whether the loans which transpired during the search and seizure were obtained by the company or by the individual and the question no.(b) is related to sale of shares of the company, Mani Square by the assessee, namely, Sanjay Jhunjhunwala.
The reason why Section 68 of the Income Tax Act was resorted to, according to the assessing officer, is as follows.
“The shares of Mani Square LTD.are not quoted shares therefore the market value of these shares are not known.
From the above two instances it is clear that as there was brought forward Short Term Capital Loss Mani Square shares were sold at an inflated rate so that the profit can be capitalized without payment of any tax on it.
The market value of shares of Mani Square LTD.should be much below Rs.2365/- or Rs.2500/- because major funding of Mani Square LTD.is either from known funds or d