2019 (10) TMI 255 - AT - Income Tax

Tribunal adjusts income additions, upholds unrecorded loan addition despite partial disclosure.

The Tribunal partly allowed the appeal, directing the deletion of an addition of Rs. 8.00 lakh in the assessee's hands related to loans issued by M/s. ... Addition on the basis of loan receipts/cheques found during the course of search, in seriatim - HELD THAT:- It is found as an admitted position that cheques amounting to ₹ 1.08 crore issued by M/s Karda Constructions were found at the assessee’s premises. The assessee failed to corelate such cheques with the recorded loan transactions. Considering the fact that the assessee himself admitted during the course of search that he was engaged in the business of making cash loans on receipt of security by cheques, it has to be held that such cheques found at the premises of the assessee were representing security for the loans advanced, which were not recorded in the books of account of the assessee. The assessee has raised an additional ground similar to the one taken in his appeal for the A.Y. 2010-11 seeking the benefit of telescoping. DR did not raise any serious objection to the admission of this additional ground, which is hereby admitted for disposal on merits. We have disposed of the appeal of the assessee for the A.Y. 2010-11 by firstly sustaining the addition of ₹ 2.00 crore and then allowing the benefit of telescoping to the extent of available undisclosed income already taxed. We hold that the addition on this count is warranted and also benefit of telescoping should be given. While giving the benefit of telescoping for the preceding year, we did not allow the benefit of ₹ 22,06,750/- because the same was unrecovered at the time of advancing loan of ₹ 2.00 crore which was subject matter of addition for the preceding year. In view of the fact that ₹ 22,06,750/- was suo moto offered by the assessee as his undisclosed income along with certain other income, the benefit of such a portion, which has not been allowed for the preceding year, is now available to be adjusted against the income for the current year. Thus, the extent of the benefit of telescoping for the year would be ₹ 22,06,750/- as against the addition of ₹ 1.08 crore. We, therefore, sustain the addition of ₹ 85,93,250/- (₹ 1.08 crore minus ₹ 22,06,750). Addition is of ₹ 10.00 lakh on account of cheques found as having been issued by Mr. Manohar B.Sadhwani and another addition is of ₹ 5.00 lakh on the basis of cheques issued by Mr. Baldeva and found from the assessee’s premises. The AO made addition totaling ₹ 15.00 lakh on the basis of such cheques found, which was countenanced in the first appeal. AR fairly conceded before the Tribunal that he had no explanation in respect of these two amounts. We, therefore, sustain the additions of ₹ 10.00 lakh and ₹ 5.00 lakh. Addition on account of unrecorded loans given/cheques found to have been issued by Mr. Pradip D. Kalani - HELD THAT:- Argument of the AR on this score that the addition to the extent of ₹ 5.00 lakh should be deleted as the equivalent amount of income was offered by Mr. Pradip D. Kalani as his income. What is material for our purpose is the taxability of the amount of income earned by the assessee and not disclosed the same for tax purposes. As it is the assessee who gave loan of ₹ 5.00 lakh to Mr. Pradip D Kalani out of his undisclosed income, the same has to be taxed in his hands. It is trite that income should be taxed in the hands of the right person as has been held in ITO vs. Ch. Atchaiah [1995 (12) TMI 1 - SUPREME COURT] We, therefore, hold that such an amount of ₹ 5.00 lakh should be subjected to tax in the hands of the assessee. However, it is made clear that Sh. Pradip K Kalani is entitled to take recourse to the legal remedies available to him for ensuring that he is not wrongfully charged to tax. To sum up, we uphold the action of the authorities below in making the addition of ₹ 41.00 lakh in the hands of assessee as there was sufficient evidence to the effect that the assessee advanced cash loan to Sh. Pradip D Kalani out of his undisclosed income. Issues:Confirmation of addition based on cash loans advanced outside books of account.Analysis:1. The appeal was against the addition of cash loans advanced outside the books of account found during a search and seizure action. The documents forming the basis of the addition were loan receipts/cheques issued by certain parties found at the assessee's premises.2. The first issue involved cheques totaling Rs. 22.00 lakh issued by M/s. Govind Ram & Sons. The AO found discrepancies in the loan details, leading to an addition of Rs. 8.00 lakh in the assessee's hands. However, it was revealed that the loan was given by another individual, Mr. Mohinder T. Kalani. The Tribunal directed the deletion of the Rs. 8.00 lakh addition in the assessee's hands and suggested examination in Mr. Mohinder T. Kalani's hands.3. The second issue concerned cheques amounting to Rs. 1.08 crore issued by M/s. Karda Construction. The assessee failed to correlate these cheques with recorded loan transactions, leading to an addition. The Tribunal sustained an addition of Rs. 85,93,250 after allowing the benefit of telescoping.4. Another addition was made based on cheques issued by Mr. Manohar B. Sadhwani and Mr. Baldeva, totaling Rs. 15.00 lakh. The assessee did not provide explanations for these amounts, resulting in the sustained additions.5. The last addition was on account of unrecorded loans given by Mr. Pradip D. Kalani, amounting to Rs. 41.00 lakh. The Tribunal upheld this addition as there was direct evidence of the advancing of cash loans by the assessee. Despite Mr. Pradip D. Kalani offering Rs. 5.00 lakh as his income, the Tribunal held that the undisclosed income should be taxed in the assessee's hands.6. In conclusion, the Tribunal partly allowed the appeal, upholding the additions made based on the cash loans advanced outside the books of account. The decision was pronounced on 4th October 2019.