TaxTMI 
TaxTMI 
2012 (8) TMI 357
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....Rs.1,12,68,632/- to Rs.23,22,262/- made by the Assessing Officer on account of cash loan paid against the security of cheques. (ii) The CIT(A) has erred in law and on facts in directing to delete the addition of Rs.13,58,921/- made by the Assessing Officer on account of interest accrued on such cash loans paid against security cheques. 4. C.O. No.79/Ahd/2007(A.Y. 2003-04) Effective grounds of C.O. are as under: (Assessment Year 2003-04) (i) As per inventory of seized material total of cheques found is Rs.3,65,15,187/- while material actual total it comes to Rs.3,46,92,919/- this difference is self explained, which CIT(A) erred consider the same. (ii) Learned A.C. of I.T. has erred in law and on facts to add an amount of Rs.1,07,68,632/-(Rs.1,12,68,632-5,00,000/- accepted loan) as income from undisclosed source. Learned CIT(A) has also erred in sustaining addition of Rs.18,22,262/- without any evidence and also Rs.5,00,000/- for the reason that it is as per appellant's confirmation. (iii) Addition made by learned A.C. of I.T. and confirmed by CIT(A) contrary to the Hon'ble CBDT's circular on the issue of confession or disclosure and sustaining such addition by the ....
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....unt of cash loan paid against the security of cheques. The A.O. observed that the assessee was involved in business of cheque discounting. The assessee had also given loans against the security of cheques. During the course of search F.D.R. as per annexure E and FD to the Panchanama dated 27th April, 2003 valued Rs.1,25,20,784/- were found. The A.O. had given the reasonable opportunity during the course of assessment proceeding to explain the source of F..Ds. The assessee claimed before the A.O. that these F.Ds were recorded in the books of account. The A.O. noticed that the assessee has introduced cash in his capital account with Savita Enterprises to the extent of Rs.110526115/- on various dates. The introduction of this cash was offered for taxation in original return in A.Y. 2004-05. Besides this, the assessee also offered F.D.R. pertained to A.Y. 2003-04 of Rs.3,70,548/- and Rs.10,85,129/- for A.Y. 2004-05 which was part of disclosure of Rs.2,76,00000/- made in the return of income filed. During the course of search a large number of cheques, undated and post dated, were found valued Rs.3,65,15,181/-. The assessee explained the source of these cheques before the A.O. ....
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....ime of long search proceedings, the A.O. cannot simply rely on statement so recorded." 9. Before us the ld. D.R. relied on the order of the A.O. and requested to confirm the addition. Another side, the ld. A.R. submitted the reconciliation which is reproduced as under. I AO WANTED EXPLANATIONS FOR FOLLOWING CHEQUES Annexure Total Amt. Rs. (Para 6,10 of order) Amt. pertain to F.Y. 2002-03 Rs. Amt. Pertain to F.Y. 2003- 04 Rs. Search party Pg. 5 Amt. Rs. D 1,31,93,873 0 1,31,93,873 1,31,87,454 D-1 1,00,45,304 1,00,45,304 0 1,01,38,397 F 12,08,698 0 12,08,698 12,08,698 CQ 95,07,347 6,98,328 88,09,019 16,99,576 CQ-1 73,45,530 5,25,000 68,20,530 73,45,530 CQ-2 24,35,616 0 24,35,616 24,35,616 Sub Total 3,60,15,181 Chq. MM Builders 5,00,000 Total-A 4,37,36,368 1,12,68,632 3,24,67,736 3,65,15,181 II Inventory of cheques prepared by search party Annexure Amt. taken by CIT(A) as per search party Ann.Pg.5 Rs. Correct Amt. Rs. Difference D 1,31,87,454 1,32,09,864 22,410 ....
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....he assessee. The reconciliation submitted by the assessee appears to be reasonable but verification is to be made by the A.O. Therefore, the matter is remanded back to the A.O. to reconsider the reconciliation submitted by the assessee before us by giving reasonable opportunity of being heard and decide the matter on merit. Accordingly, ground number first of appeal is set aside. 11. Ground no.2 of the revenue is against deletion of addition of Rs. 13,58,921/- on account of interest accrued on such cash loan. The brief facts as mentioned above, the A.O. observed on page nos. 20 & 21 that assessee has admitted interest @ 25% per annum and charge the interest on loan given out. On some cheques the date were not mentioned. Hence, the date of search was taken as the date of cheque for working out the interest. After considering the assessee's reply, he worked out interest for A.Y. 03-04 at Rs. 19,39,486/- and same was added in the income of the assessee. 12. Being aggrieved by the order of the A.O., the assessee filed first appeal before CIT (A)-II, Ahmedabad, who had passed order on 22.12.2006 in para no. 4.2 the CIT(A) reduced the quantum addition from Rs. 1,12,68,832/- to Rs. ....
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....luded as under:- "I have carefully considered the assessment order and the above submissions. It is an accepted fact that there are different lady members in the family which includes mother and spouse of the appellant, his two sons. Total weight of the jewellery found is 3920.66 gms. There are 2 married lady members. Though the Circular is with reference to the seizure of the gold ornaments at the time of search, it is a fact that the CBDT has accepted that to this extent lady members and family members are expected to hold gold ornaments as Stridhan. Thus to the extent of limits stated in Circular there is no reason to consider ornaments as unexplained. This view is supported by various decisions referred to by the appellant which includes decision of ITAT Ahmedabad in thecase of Manial S. Dav. Further appellant's wife has in her books reflected purchase of ornaments of Rs.4,52,542/- which is appreciated by the A.O. also. In view of this position following explanation or ornaments has to be considered: Particulars Grams Value-Rs. Jewellery found 3920.66 17,96,826/- Less: Jewellery to be considered as Explained as per Board Circular 1850.00 9,65,40....
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....ever, I observe that the appellant has itself accepted cash loans of Rs.1,41,10,541/- by way of disclosure in the present year and hence the A.O. should recalculate the interest on such cash loans and make addition to that extent. Accordingly, the addition made at Rs.91,17,075/- made will be modified by him. With this remarks this ground of appeal is partly allowed." 22. Now the revenue is before us. At the time of hearing the ld. D.R. vehemently supported the order of the A.O. and ld. Counsel for the assessee, on the other hand, partly relied on the order of theCIT(A) and ITAT decision in ITA No.2656/Ahd/2009 for A.Y. 2006- 07, dated 28th July, 2011 in assessee's own case on addition made on account of notional interest. The Hon'ble ITAT decided as under:- "After hearing both the parties and perusing the record, we find that a search and seizure operation under section 132 of the Act was carried out by the Revenue at the residential and business premises of the assessee. During this search operation assessee made a disclosure of Rs.2.76 crores for the block period from 1998-99 to 2004-05 out of which an amount of Rs.1.41 crores pertained to Asst. Year 2004-05 which is not in....
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....rch u/s 132(4) of the I.T. Act. If any such admission was there, then the department should have pointed out specific question number of appellant's statement u/s 132(4) dated 24.7.2003. Further, he also submitted that in A.Y. 2006-07 the rate of interest for calculation of notional interest was taken by the A.O. @ 18%. Therefore, he claimed that the notional interest addition was without any basis and evidence which is required to be deleted. 23. We have considered the order of the authority below and submission of the assessee and also gone through the 'B' Bench decision (supra) in assessee's case for A.Y. 2006-07. The A.O. had not brought on record any evidence to substantiate that the assessee had charged interest on cash loan. There was disclosure on account of cash loan by the assessee at Rs.1.41 crore for the block period. The A.O. has presumed date for calculation of interest as date of search. It appears that there was no noting on seized material about charging of interest and no evidence had been gathered by the A.O. from the loanee. In absence of any conclusive evidence, the addition cannot be sustained. The A.O. made addition on conjuncture and surmises. Therefor....