TaxTMI 
TaxTMI 
1999 (3) TMI 639
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....n. The search was conducted on 15th and 16th of July, 1996, Simultaneously, a search was conducted at the premises of Shri C. D. Shah also. In the course of the search, 34 hundies of various dates and amounts were found aggregating to Rs. 1,61,72,000. The details of these hundies such as (a) the party who issued it, (b) the party in favour of whom it is issued, (c) the date of issue, and (d) the amount of the hundi in respect of the 34 hundies in question are given by the Assessing Officer at pages 3 to 5 of his order. While they bear the signature of the party who issued it, some of the hundies are blank either in respect of the party in favour of whom it issued or the date of issue, or both. It may also be clarified that in respect of the said 34 hundies aggregating to Rs. 1,61,72,000, what were located during the search were only photocopies and not originals. 4. The search party also located certain documents during the search and one of the documents included in the Panchnama as Sheet 41 of Annexure A-3 read as follows :- "R.S. J. Chittarajan and Co. Outstandings 0.72 1-1-1992 2.70 1-1-1992 5.00 1-....
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....d Rs. 48.75 lakhs were advanced in cash to M/s. J. Chittarajan and Co., of which Shri C. D. Shah is the major partner, about ten years approximately i.e., around 1985 or 1986 and so. After including the interest over the years the amount has ballooned to Rs. 136.42 lakhs. Q. 9 Please not that the date mentioned in the hundies, referred to above, are 1-10-1990 and of 1991 and 1992 with a few exceptions at pages 13, 10 and 8 on which the date 1-4-1988 is also mentioned. In that case how do you say the money was given in and around 1985 or 1986. Ans. My son Shri D. A. Patel can answer the question. As I can recollect that I have lent Rs. 48.75 lakhs around 1985 or 1986 and I am not aware of the subsequent developments. Q. 10 Was there any search action under section 132 of the Income-tax Act prior to this action in your case. If so, when. Ans. Yes, there was a search action under section 132 of the Income-tax Act somewhere in 1989. Q. 11 if I accept your earlier statement noted above as regards the loan of Rs. 48.75 lakhs as given in and around 1985 or 1986, then, whether you had surrendered the above amount during the search action in 1989....
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....mobiles Ltd. and Central Automobile (India) Ltd. But don't have dealings with both of these concerns. Q. 15 How much you have borrowed from Mr. A. K. Patel and whether you have received any Hundi from Mr. A. K. Patel towards loan ? Ans. Yes, I have borrowed and took loan from Mr. A. K. Patel in the way back 1986-87 (Approximately Rs. 25,00,000) (Rupees twenty five lakhs) at the interest rate of 24% per annum and it should be compounded quarterly. I have to state that the interest component, so compounded have also been converted into Hundies. Further, so far I have not paid any interest on unaccounted component of Hundies (original hundi) which runs into Rs. 15,00,000 (Rupees fifteen lakhs), nor any interest component on cash Hundi is paid. Therefore cash Hundies for further interest have been issued by me. It is to be stated further that I have already paid back sufficient portion of accounted component of loan and interest thereupon. Q. 16 You say that the Hundi taken in cash was to the extent of Rs. 15,00,000 (Rupees fifteen lakhs) and it was taken in the year 1986-87. The interest accrued have also been converted into Hundies for the entire period....
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....n used by you in your business which means that those will be unexplained investment made in the business, as per Income-tax Act since you have already raised unaccounted hundies more than 2 crores, which thereby will be your unexplained investments. Please explain this. Ans. In my preliminary statement itself, I have stated that I have received Rs. 15,00,000 in cash for which the hundies were given to Mr. A. K. Patel. However, as I could not/was not paying interest quarterly compounded, the principal amount of Rs. 15,00,000 plus interest may be Rs. 2 crores. Moreover, in my preliminary statement I have mentioned that in 1986-87 (Approximately) but it is before 1984-85. So the principal amount was only Rs. 15 lakhs in cash. Q. 28 What about Hundies raised in cash for interest, what will be its nature ? Ans. Hundies raised for interest - quarterly compounded were added to the principal amount and old hundies were destroyed. Q. 29 Whether you feel you have got any unaccounted money either in your name or in your firm's name ? Ans. No please." Shri D. A. Patel, son of the late Shri A. K. Patel, was also questioned on these hundies an....
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....7,000 83,02,000 Int. for the period - 1-1-1989 to 31-12-1989 14,95,000 97,97,000 Int. for the period - 1-1-1990 to 31-12-1990 17,64,000 1,15,61,000 Int. for the period - 1-1-1991 to 31-12-1991 20,81,000 1,36,42,000 Int. for the period - 1-1-1992 to 31-12-1992 24,55,000 1,60,97,000 Int. for the period - 1-1-1993 to 31-12-1993 28,97,000 1,89,94,000 Int. for the period - 1-1-1994 to 31-12-1994 34,18,000 2,24,12,000 Int. for the period - 1-1-1995 to 31-12-1995 40,34,000 2,64,46,000 It may be observed that the amount of Rs. 2,64,46,000 figuring in the above statement is the same amount figuring on Sheet No. 41 in Annexure-A-3 which was seized during the search. The Assessing Officer rejected the above claim that the initial advance was only Rs. 25 lakhs and that this advance fell before the commencement of the block period on the ground that it was only a convenient and self-serving back calculation. 6. Before us, the learned counsel for the appellant reiterated the contention that the amount originally advanced was only Rs. 25....
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....bove, it is pleaded that the late Shri A. K. Patel was suffering from Cancer at the time of search and so too much importance should not be given to his statement. 7. The learned Departmental Representative, on the other hand, pleaded that the late Shri A. K. Patel had mentioned that he had advanced Rs. 48.75 lakhs in 1985 or 1986 at the time of the search, whereas Shri C. D. Shah in his deposition on the date of the search had referred only to the receipt of Rs. 25 lakhs. It is also mentioned that while the late Shri A. K. Patel had mentioned the rate of interest as 18%, Shri C. D. Shah had mentioned it as 24%. In view of the variation in the statements of the creditor and debtor concerned, it is claimed that these statements, which cannot easily be reconciled, should be ignored, except to the extent that monies had really been advanced by the late Shri A. K. Patel to Shri C. D. Shah and we should go by the documentary evidence located during the search by way of photocopies of hundies and other papers. It is also mentioned that the late Shri A. K. Patel had given coherent answers on the date of the search to all the questions and his admission that he had advanced monies to Sh....
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....hundies seized (exclusive of the two in the name of Heena Y. Patel) only by Rs. 24,55,000. The following hundies issued by Meghana Enterprises and J. Chittranjan and Co. which figure in the seized list of the hundies aggregate exactly to the deficiency of Rs. 24,55,000 : Sr. No. Sheet No. Issued by In favour of Date of issue Amount (1) 3 Meghana Enterprises Blank Blank 4,00,000 (2) 4 -do- -do- -do- 4,00,000 (3) 5 -do- -do- -do- 4,00,000 (4) 6 -do- -do- -do- 4,00,000 (5) 7 -do- -do- 1-1-1993 4,00,000 (6) 16 J. Chittranjan and Co. -do- Blank 4,55,000 24,55,000 The above hundies, for which the date is blank, except in one case, which is 1-1-1993, aggregate to Rs. 24,55,000 which is the interest calculated in Sheet No. 41 for the period 1-1-1992 to 31-12-1992 at 18% on the outstandings as on 1-1-1992 of Rs. 1,36,42,000. We are of the view that the Assessing Officer was justified in coming to the conclusion that the above tally in the outstandings and the interest calculations between the photocopi....
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....he jurisdictional High Court. We have perused the depositions of Shri A. K. Patel and Shri C. D. Shah at the time of the search and it is evident from their depositions that both of them are men of means and of substance. We may also mention that on the date of the search, Shri D. A. Patel was in London attending a relative's marriage and the son of Shri C. D. Shah was studying in USA in a business school and we are mentioning these facts only to indicate that they are men of substance. As Shri C. D. Shah had acknowledged the debt and had also given fresh hundies to the extent of Rs. 24,55,000 towards interest and the total of these hundies tally with the figure of Rs. 24.55 lakhs mentioned in Sheet No. 41, we are of the view that it is a reasonable conclusion to hold that there was a constructive receipt of interest to this extent. It is only because the date is left blank on these hundies we are holding that it should be assessed in the year of assessment relevant for the year of seizure. It may be clarified that the seized hundies aggregating to Rs. 1,60,97,000 were outside the books of account of the appellant and so the method of accounting whether cash or mercantile, has ....
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....sp; 95,580 1-4-1987 to 31-3-1988 6,26,580 1,12,784 1-4-1988 to 31-3-1989 7,39,364 1-4-1989 to 31-3-1990 1,33,086 1-4-1990 to 31-3-1991 8,72,450 1,57,040 1-4-1991 to 31-3-1992 10,29,490 1,85,308 1-4-1992 to 31-3-1993 12,14,798 2,18,663 1-4-1993 to 31-3-1994 14,33,461 2,58,023 1-4-1994 to 31-3-1995 16,91,484 3,04,467 1-4-1995 to 31-3-1996 19,95,951 3,29,332 23,25,284 Balance as on 1-3-1996 23,25,284" The Assessing Officer has excluded the principal of Rs. 4,50,000 figuring in the above statement and has added the balance of interest of Rs. 18,75,284 as the income of the appellant. He has further worked out the interest on the amount of Rs. 23,25,284, i.e., interest Rs. 18,75,284 + Principal of Rs. 4,50,000 for the period 1-3-1996 to 15-7-1996, i.e., the date of search, and included this amount also as the income of the appellant. The Assessing Officer mentioned that the word "R.S." figuring in the above sheet shows that the paper belongs to the appellant, because according to him "R.S." ....
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.... 25,000 13 13 -do- -do- -do- 25,000 14 14 -do- -do- -do- 25,000 10,50,000 The Assessing Officer excluded the principal amount covered by the hundies at (1) to (7) above but included the undated issued by Bhupendra Motors as the undisclosed income of the appellant. He has omitted the hundies mentioned at (2) to (7) above on the ground that the dates of these hundies fell beyond the block period. He appears to have omitted the hundies of Rs. 4,00,000 issued by J. Chittranjan and Co. mentioned at (1) above on the ground that it did not belong to the appellant but belonged to Shri J. B. Patel (JBP) who is separately assessed to tax with the Department, as mentioned by the Assessing Officer in para I.B(iii) at page 14 of his order and Shri J. B. Patel accepted the loan standing in his name. That is how he included only the amount of Rs. 2,00,000 for which an objection is taken in the ground taken before us. He included the interest on the hundies worked out by him at Rs. 24,75,072 for the period 1-4-1986 to 15-7-1996. The working of this interest, it appears, is not available in the ....