2014 (8) TMI 164

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....ual is the Director of several companies. For the impugned assessment year assessee had originally filed his return of income on 31/07/2006 declaring total income of Rs. 87,63,933/- besides agricultural income of Rs. 70,000/-. A search and seizure operation was conducted in case of the assessee on 20/08/2009 during which, as alleged by the department, several incriminating materials were found and seized. Consequent upon search and seizure operation notice u/s 153A of the Act was issued to the assessee calling for return of income. In response to the said notice assessee filed a return of income on 18/01/2011 declaring income of Rs. 34,23,887/- and agricultural income of Rs. 70,000/-. During the assessment proceeding, the Assessing Officer noticed that amongst the seized material is a promissory note dt. 28/03/2006 given by the Chairman of M/s Amareswara Agritech Ltd. to the assessee for Rs. 88,50,000/-. Further, he noted that another seized document is Board's resolution dt. 23/03/2006 authorizing the chairman to obtain unsecured loan from the assessee for business purpose. Another promissory note executed by the Chairman on 27/03/2009 in favour of assessee for Rs. 1,36,29,000/- w....

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....ve been agreed that M/s Amareswara Agritech Ltd. would pay interest on the unsecured loan and that is the reason the appellant has requested for a promissory note for an amount of Rs. 88,50,000/- advanced as unsecured loan along with interest accrued on it for Rs. 47,79,000/-. Otherwise, why would M/s Amareswara Agritech Ltd. agreed for issuing the promissory note along with the interest accrued? That is why the second pro-note was drawn with the initial loan along with interest accrued over 3 years which worked out to Rs. 1,36,29,000/-. It is interesting to note that the original promissory note was dated 28/03/2006 and the second one is dated 2703/2009 i.e., exactly 3 years. It is not a coincidence but an evidence reflecting the truth behind the transaction. 7.1 It may be noted that both the parties are related and the confirmation from M/s Amareswara Agritech Ltd. that they have not paid interest is only a self-serving document and cannot be relied. Even the confirmation filed by M/s Amareswara Agritech Ltd. that it converted the unsecured loan into the share application money is not supported by any documentary evidences such as Annual Report as submitted to the ROC. The appel....

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....s Ltd., 358 ITR 295 and decision of Hon'ble Jharkhand High Court in case of Sanjay Rungta Vs. CIT, 99 DTR 18. 6. The learned DR strongly supporting the view of the CIT(A) and Assessing Officer submitted that promissory notes seized from the assessee clearly show charging of interest @ 18% for three years. As the assessee was following mercantile system of accounting interest has accrued on the amount advanced by the assessee. Ld. DR submitted that charging of interest is proved from the second promissory note dt. 27/08/2009 as the interest amount has been quantified and added to the principal. He submitted that the subsequent events like Board resolution and confirmations from the company are only afterthought to give a colour to the amount advanced as share application money. 7. We have considered the submissions of the parties and perused the materials on record as well as orders passed by the Revenue Authorities. We have also examined the decisions relied upon by the learned AR. Undisputedly, the promissory notes dt. 28/03/2006 and 27/08/2009 were seized from the possession of the assessee. There is also no dispute to the fact that assessee has advanced Rs. 88,50,000/- to M/s ....

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....ns relied upon by the learned AR are concerned, though we respectfully agree with the principles laid down therein but they are rendered in the context of the peculiar facts involved therein, hence, cannot be made applicable to the facts of the present case. In view of the aforesaid, we direct the Assessing Officer to verify the books of account of M/s Amareswara Agrotech Pvt. Ltd. to ascertain the date on which unsecured loan given by the assessee was converted to share application money and accordingly assess the interest income till such FY. 8. As the issue is materially identical in ITA Nos. 1727 to 1730/Hyd/2013 for AYs 2007-08 to 2010-11, following the decision in ITA No. 1726/Hyd/13 for AY 2006-07 (supra), we remit the issue in these appeals also to the file of the AO with identical directions. 9. In the result, assessee's appeals are allowed for statistical purposes. ITA No.1735 to 1739/Hyd/13 in case of Smt B. Sujatha 10. The first common issue in all these appeals of the assessee as raised in ground No.1 to 4 are identical to the issue decided in ITA No.1726 to 1730/Hyd/13 (supra). Therefore, following our decision therein, we direct the AO to decide the issue afresh ....