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TMI Blog2014 (10) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... a total income of Rs. 214 crores. The First Appellate authority passed his order on 28.2.2003 upholding the assessment order. The matter travelled upto the Tribunal. The main contention before the Tribunal was in respect of the admission of additional evidence in the form of books of accounts. The Tribunal vide its order dt. 11.7.2008 in ITA No. 3664/M/03 and C.O. No. 211/M/03 set aside the appeal and the cross objection to the files of the Ld. CIT(A) for adjudicating the issues afresh after considering the books of accounts of the assessee. Admittedly, the Tribunal was pleased to admit the additional evidence in the form of books of accounts and restore the matter to the files of the Ld. CIT(A) to examine the same. 4.1. In terms of the directions of the Tribunal, the books of accounts were submitted by the assessee which were forwarded to the AO by the Ld. CIT(A). It would be pertinent to mention here that pursuant to the order of the Hon'ble Special Court dt. 16.10.2003 on the Custodian's Report dt. 1st October, 2003, the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 appointed M/s. Vyas & Vyas, Chartered Accountants for preparing and auditin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so by the assessee. Merely because the books are not contemporary cannot be a reason to reject the books. All that has to be seen is whether the books have been prepared on the basis of the contemporaneous documents. At this stage, it is pertinent to mention that the books have been prepared from the documents/details which are in possession of the custodian/Revenue authorities. The Ld. CIT(A) has also mentioned that no books of accounts were found during the course of the searches in 1990 or in 1992 which means that the assessee was never maintaining contemporary proper books of accounts. This observations of the Ld. CIT(A) is against the facts of the case because the AO at para 3.4 on page-5 of his assessment order has observed as under: "During the course of search at various premises of the assessee in 1990 and 1992 no books of accounts were produced by him. It was found that most of the details of transactions were maintained by the assessee on a number of computers. Hence the data from the computers were copied and seized. One copy of such seized data has been provided to the assessee. The seized data was analysed but it was found that complete share market transactions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts are in the form of journal entries in the names of related person. We failed to understand how can this be a reason for rejecting the books of accounts. When a person is maintaining books of accounts on mercantile system of accounting, obviously, most of the entries would be in the form of journal entries. Further, we find that in the cases of other members of the Harshad Mehta group, the Tribunal has restored the matter to the files of the Ld. CIT(A) for verification of the books of accounts. 12.1. The Ld. DR has not brought on record the rejection of books of accounts by the Tribunal in any of the cases of the family members. Therefore, this reason is also not acceptable. 13. The fifth reason is that the books of accounts are not backed by primary documentary evidence. Once again, the Ld. CIT(A) observed that the books of accounts are not audited and are self certified therefore the accounts cannot be held as authentic . As mentioned elsewhere, the books of accounts have been prepared on the basis of the evidences which are seized by the authorities which mean that they are still in the possession of the department/custodian. There is no specific instance pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Raman Committee reports were further verified with the books of accounts, which were not fully tallied. We have also written letters to the concerned parties, which were responded by some parties/banks and some parties/banks have not responded. The banks who responded have confirmed the contents of said reports. We have reported the responses of concerned parties in our report. As regards charge sheet filed by CBI. We have tried to verify facts and figures in the books provided in the computers but not offered any comments, as the matter is subjudice before the Hon'ble Special Court. We have also checked in detail the transactions of money market entered into by HSM but could not verify the total transactions due to lack of information. The response given by concerned parties showed huge differences in transaction in HSM's books. Therefore. the correctness in such accounts cannot by ascertained. We have also studied the third party liabilities towards banks, financial institution and other notified parties etc. As per books/records made available to us and other information gathered as reported in our report, the liabilities appear in the Balance sheet as 8l June1992 are no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to retrieve the data from some of the computers, which were provided by the custodian pertaining to HSM. We were also provided hard copies and some files relating to shares and securities transactions of HSM. We compared the hard data with the data retrieved from computer s and found huge differences in figures. Thereafter we thoroughly checked both the data and corrected the figures wherever it was possible. We have also done accounting work relating to shares, which was major activity of HSM and found major variations which is reported as under: Period Ending As per HSM Book (Trading of Investment a/c) *(1) As per Annexure No. 4A, 4B, 4C (compiled out Vallan and DBP Files) *(2) As per Annexure No. 40, 4P, 4Q (Trading) and 4R, 4S, 4T(Investment as compiled by us from HSM Books. *(3) 31.3.91 1,04,73,245 8,04,52,271 -1,88,63,819 31.3.92 -84,45,42,966 12,76,82,935 7,05,83,523 8.6.92 10,56,29,006 3,93,78,662 34,44,46,907 Total -72,84,40,715 24,75,13,868 39,61,66,611 * (1) Profit calculated by HSM in his books. (2) Profit compiled out of Vallan and DBF Files (3) Profit compiled by us from Books of HSM Our report is based on the information made available to us and is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ented that there was non-cooperation on the part of the assessee for the purpose of audit and that due to lack of verification, the reliabilities of these books could not be verified does not have any force for the simple reason that in a case of such huge magnitude expecting the widow to answer each and every query was not possible. 16.1. If the report of the Special Auditors was so sacrosanct to the revenue authorities, then we find that while drawing the statement of affairs of M/s. Harshad Mehta, the auditors have determined the net profit earned during 1.4.1990 to 8.6.1992 at Rs. 1235321902 or say Rs. 123.53 crores, the assessment should have been made by bifurcating this income for the financial year under consideration. 16.2. Another reason for rejecting the books of account is that the balances in the account of the assessee and the balances in the books of related entities do not tally. A Perusal of the orders of the authorities below do not show any specific entry/balance which is not tallied. Moreover, if the Revenue authorities were of the opinion that certain account balances are not getting tallied, then they should have confronted those specific balances to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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