TaxTMI 
TaxTMI 
1999 (12) TMI 867
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....d bonus of his employees. 03. (a) The CIT(A) was not justified in sustaining disallowance of Rs. 1,19,952 out of interest claimed by the appellant on the ground that the relevant borrowals were made from concerns whose name appear in Annexure A-3 seized from the office premises of Eshita Dye Chem (P) Ltd. in December, 1991, in the course of search under s. 132 of the IT Act. 04. (j) The first appellate authority was not justified in upholding in principle the AO's decision to bring to tax in the hands of appellant, the "Peak" of the credits appearing in the bank accounts of the 110 bank accounts whose names appear in Annexure A-3. (The addition sustained by the CIT(A) in this regard is Rs. 2,62,01,981 out of the addition made by the AO of Rs. 12,86,70,053). 3. The assessee has also raised subsequently the following additional grounds: "(A) Without prejudice to the grounds mentioned at 4(a) to 4(k) [only 4(j) reproduced above], the first appellate authority should have directed the AO to deduct the "Peak" worked out and included in the IT assessment for the asst. yr. 1990-91, from the "Peak" arrived at for the asst. yr. 1991-92 and include only t....
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....hird in order of the following five brothers : (1) Shri Jagdish M. Khandhar. (2) Shri Praful M. Khandhar. (3) Shri Surendra M. Khandhar. (4) Shri Rajesh M. Khandhar. (5) Shri Bipin M. Khandhar. Shri Praful M. Khandhar is the director of a concern called Eshita Dye Chem (P) Ltd., which is one of the concerns which has been searched along with the residential premises of the assessee. The assessee obtained Bachelor's Degree in Commerce and also appeared for the Chartered Accountants' Examination but he did not obtain the degree. He started practice as an Income-tax Practitioner in October, 1980. It is stated by the learned counsel for the assessee that he discontinued his profession in 1983. The learned counsel for the assessee also explained in a note which may be seen at p. 2 of Volume III of the assessee's paper book (APB) that the assessee started with two other businessmen. Shri S.M. Hussain and Shri Sudershan Kumar, in 1984 a limited company "Suman Motels (P) Ltd.". After obtaining the permission of the Controller of Capital Issues in 1989, this company is stated to have gone public and the shares were issued to the pu....
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.... (9) Allahabad Bank, Sion. (10) The Madhavapura Merchant Co-op. Bank Ltd., Mandvi Branch. (11) New Bank of India, Khand Bazar. (12) Union Bank of India, Kakad Bazar. (13) Bank of Baroda, Khand Bazar. (14) Canara Bank, Sion. The Authorised Officer took a statement of the assessee on 20th Dec., 1991 and in the course of his statement he was examined on the bank accounts figuring in the statement termed as Annexure A-3. In a deposition taken from him during the search of Parshva Chambers, the assessee agreed to offer the peak of these bank accounts as his undisclosed income and it is on the basis of this admission that the AO made an addition of Rs. 12,86,70,053. Before we proceed to detail the deposition of the assessee on the bank accounts figuring in Annexure A-3, we may also mention that the statements have been taken from the assessee on different occasions and as per the details given in the APB at p. 1 of Volume-III, the relevant details are as follows : "18th Dec., 1991 At the residence of Shri S.M. Khandhar in Matunga, Bombay, preliminary statement was recorded from him by Shri Atul Pranay, Authorised Officer. 18th Dec.....
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....dia) Ltd. 3. Naheshri Marketing Ltd. 4. Tej Gaurav Industries Ltd. 5. Eshita Dye Chem (P) Ltd. 6. Saffron Surgical Systems (P) Ltd. 7. Tej Gaurav Farms Co. (P) Ltd. 8. Khandhar Engineering Works. 9. Raj Enterprises. 10. Raj Electricals. 11. Ray Engineering Co. 12. Shekakha & Co. 13. H.P.S. International. 14. Prabhavee. 15. S.M. Khandhar & Co. 16. P.M. Khandhar & Co. 17. Arckay Incorporated. 18. Shah & Khandhar Bros. 19. Gaurav Enterprise'Gaurav Family Trust. 20. Tejas Enterprises'Khandhar Family Trust. 21. Dhaksha P. Khandhar (Personal). 22. Bharti S. Khandhar (Personal). 23. Rajeshree B. Khandhar (Personal). 24. Asha R. Khandhar (Personal). 25. Bipin Khandhar'B.K. Trading Co. (Personal). 26. Snehal P. Khandhar'Minor (Personal). 27. Tejas S. Khandhar'Minor (Personal). 28. Gaurav S. Khandhar'Minor (Personal). 29. Mona P. Khandhar'Minor (Personal). 30. Eshita P. Khandhar'Minor (Personal). 31. Rup....
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....books are signed by actual parties and operated by us. Furthermore I also wish to clarify that in respect of current also the relevant cheques are signed by actual persons and we are operating the same. The list of the persons who are actually signing the cheques will be furnished to you at a later date. Q. 7. As regards quantification of income pertaining to the above concerns/persons under reference and the payment of tax due on them kindly give us a time frame. Ans. As regards quantification we require 21/2 months to work out and tax payment these will be paid as per tax norms as prescribed in the IT Act, 1961. Q. 8 In respect of the concerns referred in six pages as seized in Annexure A-3 please state whether in respect of concerns not falling under your family concerns also in respect of the persons referred in SB a/cs. whether beneficiary opened a locker and operated the same. Ans. No. Q. 9. Do you wish to say anything further? Ans. No. Please." It may be noticed from the above deposition that the assessee has admitted that the assessee's group consists of as many as 33 concerns which includes even Eshita Dye Chem (....
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....rily without any threat, pressure or coercion". Please confirm that. Ans. Yes, I have given my statement voluntarily without any threat, however it is pleased to be noted I was very much in tense, when my statement was recorded since search was conducted on page No. 3, 18th Dec., 1991 and it was continued upto 20th Dec., 1991. Q. 6. Please refer to the question No. 4 of the statement recorded on 20th Dec., 1991 in your case. Please confirm that you have given the statement as appearing in question No. 4 (Question No. 4 and reply given by him was shown to Shri Surendra M. Khandhar. Ans. Yes, I confirm, however following points to be considered with my above referred statement (1) Khandhar group and all Khandhar family members are regularly assessed to him IT Department. (2) All other proprietorship and partnership concerns also regularly assessed to the IT Department. (3) It is general practice in our market that parties are not co-operative to the search party. (4) I was in very much high tension at the time of search action. (5) Considering that parties may not be in a position to give documentary evidence at the time ....
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.... after two three years. Q. 10. In reply to question No. 8 you have stated that "I may have to pay the tax". Please clarify what does this mean and how it is related to different concerns appearing in reply to the question No. 4 of the statement recorded on 20th Dec., 1991? Are you taking the responsibility to pay the taxes in all the Khandhar group by mentioning that I may have to pay the tax ? Khandhar group here means as stated by you in reply to question No. 4 of your statement recorded on 20th Dec., 1991. Ans. As I have stated earlier in case some of the parties may not co-operate and produce documentary evidence as required by the Department. I have to offer for taxation. It is to be noted that my statement is binding for S.M. Khandhar & Co., proprietorship concerns to some extent Suman Motels Ltd., in the capacity of director and partnership concern (to some extent) where I am partner. My statement is not binding to anybody else as they are separately assessed to IT Department. Q. 11. In reply to question No. 7 you have stated that Department could not found cheque books, slip-books any other documents except Khandhar group but in reply to ....
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....giving you opportunity to state why penal action should not be initiated against you in view of your statement recorded on oath on 20th Dec., 1991 that you fail to comply. Ans. I do hereby agree that I have given my statement voluntarily but it is human tendency that person gets tense at the time of normal situation. I am not taking any plea by stating repeatedly "tense", but I am making my position clear. Regarding closing down accounts except Khandhar group I would like to state that I could not force people to do as I want, they are all assessed to income-tax. I have given my statement and requested parties to close down the bank accounts as these bank accounts most of them are introduced by us. Q. 13 Vide question No. 19 of statement recorded on 18th Dec., 1991, you have accepted that you look after the mobilisation of finance of concerns of the group this implies that you are looking after the financial matters of the group do you confirm? Ans. Yes I do confirm." It may be observed from the above statement that the assessee had retracted from his earlier offer to disclose the peak of the bank accounts figuring in Annexure A-3 as his incom....
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....pen Chheda) myself will pay Rs. 5,00,000 (rupees five lakhs) towards the payment of loan out of twenty lakhs rupees. (2) Balance amount will be paid by 50 per cent of collection cheques and current account will be operated by Mahendra P. Shah. I hereby agree to deposit all cheques only in United Western Bank, Mandvi Branch. However, I further confirm I will pay at least rupees five lakhs even though I cannot collect collection to that extent. I further confirm I will pay all loan amount on or before 31st May, 1991. Signed and Delivered Sd/- Bhupen Chheda 22nd Jan., 1991 I, Mahendra P. Shah, stand guarantee for the above matter." During the course of the search, the assessee was examined in respect of the above paper and the relevant portion of his deposition on 18th Dec., 1991 may be seen at pp. 12 to 27 of the Department's paper book (DPB) and the relevant queries, i.e., question Nos. 20 and 21, put by the AO and the replies given are as follows : "Q. 20. I am showing you page No. 82 of the loose paper file No. A-20 as per which Mr. Bhupendra Chedda was liable to pay Rs. 20 lakhs to you on the ....
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....ned in his statement dt. 20th Dec., 1991, regarding the peak of the bank accounts figuring in Annexure A-3 cannot be acted upon because the statement itself had no legal validity for the reasons mentioned by us hereinbefore. It was also contended that the concerns to whom the accounts figuring in Annexure A-3 related were all assessees on file and as these accounts are disclosed by the respective concerns and their assessments had been made, no separate adition on the basis of the deposits figuring in the said accounts can be made in the individual assessment of the assessee. The method of working out the peak adopted by the AO was also assailed. The CIT(A), however, rejected these contentions but gave partial relief. While the AO brought to tax the aggregate of the deposits figuring in the various bank accounts, the CIT(A) held that only the maximum balance in each bank account should be taken for inclusion in the assessment of the assessee and thus he worked out the aggregate of the peaks of these accounts on the basis of the mode of disclosure given by the assessee in his deposition taken from him on 20th Dec., 1991 which we have extracted hereinabove. On this basis, he reduced ....
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.... the said statement mentioned it as having been recorded under s. 132(1) and not under s. 132(4). So, as the statement can be recorded only under s. 132(4) and not under s. 132(1), it is claimed that the statement is invalid. It is also claimed, as we have already mentioned, that there was no search warrant against the assessee when the Department searched 208-210, Parshva Chambers, and the relevant search warrant was only against M/s Eshita Dye Chem (P) Ltd. and the assessee was not a director or a shareholder on the date of the search of the said concern and his position was only that of a stranger so far as that concern was concerned and so it is pleaded that his statement, dt. 20th Dec., 1991, cannot be regarded by any stretch of imagination as a statement recorded under s. 132(4), as under this section the statement of only the person who is in possession and control of the searched premises can be recorded. It is claimed that being in the position of only a stranger, the assessee could not have been examined under the provisions of s. 132(4) and in this context reliance is placed upon the following decisions: (1) Nenmal Shankarlal Parmar vs. Asstt. CIT (1992) 102 CTR (Kar)....
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....e said Annexure A-3 only at the instance of the authorised officer after the paper was seized and if this writing of the assessee on the paper is ignored, as it should be, there is nothing to link the paper or the contents of the paper with the assessee. It is claimed that the assessee was under great tension because of a prolonged search operation which lasted more than 24 hours and a statement given under such anxiety and tension has no evidentiary value and for this proposition he relied upon the following decisions and certain other unreported decisions which may be seen at pp. 62 to 90 of Volume II of the APB : (1) Asstt. CIT vs. Mrs. Sushiladevi Agarwal (1994) 49 TTJ (Ahd) 663 : (1994) 50 ITD 524 (Ahd); (2) Deepchand & Co. vs. Asstt. CIT (1995) 51 TTJ (Bom) 421; and (3) Jagdish Chand Gupta vs. Asstt. CIT (1996) 56 TTJ (Chd) 337. It is also claimed that a statement given under tension cannot be acted upon and it can be retracted or modified and for this proposition, the learned counsel for the assessee has relied upon the following decisions : (1) Asstt. CIT vs. Mrs. Sushiladevi Agarwal's case (supra); (2) Deepchand & Co. vs. Asstt. CIT (supra); (3) Ma....
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.... us earlier. 12. It is also claimed that a finding of Benami ownership cannot be recorded on the basis of presumption and such a status has to be established by the Department by bringing in evidence. In other words, the argument is that the finding that the bank accounts figuring in Annexure A-3 belong to the assessee is invalid in law as it is not supported by any other evidence, except the admission contained in the statement, dt. 20th Dec., 1991. In this context, reliance is placed upon the decision of the Supreme Court in the case of CIT vs. Daulat Ram Rawatmal 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC) and also other decisions mentioned below : (1) Prakash Narain vs. CIT (1981) 20 CTR (All) 147 : (1982) 134 ITR 364 (All); (2) V. Balasubramanian vs. ITO (1986) 24 TTJ (Mad) 155 : (1985) 14 ITD 35 (Mad); and (3) Vinayakrao D. Chaudhary vs. ITO (1985) 23 TTJ 233 (Nag) : (1986) 15 ITD 180 (Nag). It is pleaded that assuming, without admitting, that the assessee is answerable for the contents of Annexure A-3, the bank accounts of concerns whose names appear in list A-3 but which are assessed to income-tax are to be excluded in working out the peak, as the genuineness ....
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....(P) Ltd. Allahabad Bank, Sion Branch. (4) Kapil Marketing (P) Ltd. Allahabad Bank, Sion Branch. (5) Naheshri Marketing (P) Ltd. Indian Bank, Mandvi Branch. (6) Eshita Dye Chem. (P) Ltd. The United Western Bank Ltd. Vadgadi Branch. (7) Mona Traders (P) Ltd. The United Western Bank Ltd., Vadgadi Branch. (8) Namrata Exports (P) Ltd. State Bank of Saurashtra. (9) Eshita Dye Chem. (P) Ltd. State Bank of Saurashtra. (10) Suman Motels Ltd. The United Western Bank Ltd., Vadgadi Branch. (3) The other concerns, i.e., those which are not family concerns, and those which are not limited companies, but which are assessed to tax, are stated to account for deposits aggregating to Rs. 1,85,35,562, and the details of such concerns are stated to be the following : (1) Shital International Indian Bank, Mandvi Branch. (2) Deepak Impex Indian Bank, Mandvi Branch. (3) Shree & Associates Indian Bank, Mandvi Branch. (4) Shailesh Trading Co. Indian Bank, Mandvi Branch. (5) Unique Sales Corpn. Indian Bank, Mandvi Branch. (6) Vikas Sales Corpn. Indian Bank, Mandvi Branch. (7) Kapilesh Corporation Indian Bank, Mand....
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....) Bhogilal & Sons Indian Bank, Mandvi Branch. (46) Veena Corporation State Bank of Saurashtra. (47) Deepali Enterprises State Bank of Saurashtra. It is mentioned that, as mentioned at p. 22 of the order of the CIT(A), the maximum amount that could be added according to the assessee, if at all, is only Rs. 43,38,305 after excluding the deposits figuring in the accounts of the abovementioned three categories of concerns which are assessed to tax. The details as given by the CIT(A) at p. 22 work out as follows : Aggregate of the maximum balance in the 110 bank accounts as per Annexure-A Rs. 3,05,40,286 Less : (i) Total of the maximum balances in the bank accounts of which the concerns in which the appellant and his brothers and family members are interested as per Annexure-B Rs. 39,59,779 Rs. 39,59,779 Rs. 3,05,40,286 (ii) Total of the maximum balances in the bank accounts of the limited companies which are registered with the Registrar of Companies and assessed to income-tax as per Annexure-C. Rs. 37,06,640 (iii) Total of the maximum....
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.... to whom the bank accounts reflected in Annexure A-3 relate. "Pertaining to concerns which filed the first return of income before 18-12-1991 Pertaining to concerns which filed first return of income after 18th Dec., 1991 Pertaining to concerns whose tax details are not known to the Assessee or concerns which did not file return of income Total 1. Limited Companies 9 9 2. Family concerns 14 1 1 16 3. Outside concerns 57 10 9 76" The learned counsel for the assessee has also furnished the income-tax position, such as upto what assessment year the returns have been filed and who is the relevant AO in respect of the concerns to whom the accounts figuring in Annexure A-3 relate and the relevant details may be seen at pp. 95 to 112 of the APB (Vol. III). From the above statements, the learned counsel for the assessee pleaded that even going by the details furnished by the assessee during the search in respect of the bank accounts figuring in Annexure A-3, a large number of the concerns to whom the accounts relate had already filed their returns before the date of the search and t....
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....any evidence or established that it is the assessee who had invested the funds in the various bank accounts appearing in list A-3 and, accordingly, it is claimed that the addition of Rs. 12,86,70,053 is unwarranted. It is also pleaded that even the addition at the reduced figure of Rs. 3,05,40,285, as upheld by the CIT(A), is not warranted because the requirements of the provisions of s. 68 or 69 are not satisfied, as mentioned above. 14. Regarding the addition of Rs. 62,500 sustained by the CIT(A) in respect of the professional income, it is claimed that the assessee had furnished monthwise details of the professional income and the AO had not noticed any understatement receipts and so he was not justified in estimating the professional receipts of the assessee at Rs. 5,00,000 as against the admitted receipts of Rs. 4,37,500. 15. Regarding the disallowance of Rs. 20,000 out of salary and bonus paid, sustained by the CIT(A), it is claimed that the assessee had to rely more on his assistants during this year because he had to devote more time to M/s Suman Motels Ltd., which went public in May, 1990 and so a higher expenditure on salary and bonus was incurred during the year an....
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.... P.M. Khandhar & Co. and M/s Tej Gaurav Industries Ltd. relating to the Khandhar group were seized. The search proceedings were temporarily ceased at 8 a.m. the next day, i.e., 19th Dec., 1991 and a prohibitory order was placed under s. 132(3) on the cabin of the assessee and a computer room and the search was resumed on 20th Dec., 1991 when the said cabin of the assessee and the computer room were searched. It is mentioned that it is in the course of the search of the cabin of the assessee that six pages marked as Annexure A-3 containing the list of 110 unaccounted bank accounts referred to hereinabove were seized, as per the Panchnama dt. 20th Dec., 1991 relating to M/s Eshita Dye Chem. (P) Ltd. 208-210, Parshva Chambers, and a copy of this Panchnama may be seen at pp. 7 to 11 of the Department's paper book (DPB). It is claimed that this document was not found during the search on 18th Dec., 1991 when the rest of the premises, except the cabin of the assessee and the computer room, were searched. It is also explained that the said premises, 208-210, Parshva Chambers, had an area of about 1,500 sq. ft. and a large area of about 1,000 sq. ft. was occupied by the cabin of the as....
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....t the assessee has been generally in control of the entire group, inclusive of Eshita Dye Chem. (P) Ltd. So, as the assessee has been generally in control of the entire Khandhar group, which included M/s Eshita Dye Chem. (P) Ltd., it is claimed that the statement recorded on 20th Dec., 1991 has to be regarded only as a statement recorded under the provisions of s. 132(4). In this context, attention is also invited to a letter dt. 17th Feb., 1992 signed by the assessee on behalf of the Director of M/s Eshita Dye Chem. (P) Ltd. and addressed to the AO, a copy of which may be seen at p. 70 of the DPB and which reads as follows : "Dear Sir, Sub :'Your Notice under r. 112-A of the IT Rules dt. 7th Dec., 1992 Ref. :'No. ITO/W-2(2)/32-E/91-92. We refer to your notice under r. 112-A, dt. 7th Feb., 1992. We hereby state that, Shri S.M. Khandhar'Managing Director of Suman Motels Ltd., has also received notice under r. 112-A from A.C. Cir. 14(1) (Inv.) for seizure of share certificates of Suman Motels Ltd., valued at Rs. 95,12,500. We also state that company's and Shri S.M. Khandhar's premises is one and the same. Further we sta....
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....ours faithfully, For S.M. Khandhar & Co. Sd/- (S.M. Khandhar)." Attention is also invited to another letter dt. 5th May, 1992 addressed by the assessee to the AO, which may be seen at pp. 74 to 76 of the DPB and which reads as follows : "Dear Sir, Sub. : ESHITA Dye Chem. (P) Ltd. Search & seizure explanation Further to our letter dt. 29th April, 1992, we furnish the following : 1. Details of Income-tax Numbers of the persons who are the real owners of equity shares of 'Suman Motels Ltd.' (Ann-A). 2. Copy of acknowledgment of income-tax returns filed, for the above persons, as per Annexures B1 to B3. 3. Family Tree of Khandhar family Annexure 'C'. 4. Cash found and not seized Rs. 78,961'The cash found on 18th Dec., 1991 at the premises belong to Shekhakha & Co. a partnership firm in which Shri Bipin M. Khandhar is a partner. The amount of Rs. 89,500 was withdrawn on 17th Dec., 1991 from State Bank of Saurashtra, Mandvi Branch, A/c No. 7615 and was kept for office expenditure. 5. Promissory Notes : (i) Sitaram Rs. 50,000 dt. 25th Jan., 1990 (ii) Sit....
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.... Khandhar & Co., Sd/- (Surendra M. Khandhar)." In the light of the above correspondence, it is claimed that the assessee had not only admitted to be looking after the administrative and financial matters of the entire group in the depositions taken from him during the search but had also signed the correspondence on behalf of the group, as is evident from the above letters. In other words, the contention made out by the learned Departmental Representative is that, undoubtedly, the assessee is the key figure in the entire group and had been generally in control of the entire group. inclusive of Eshita Dye Chem. (P) Ltd., and so is not a stranger to M/s Eshita Dye Chem. (P) Ltd., against whom the search warrant was issued and during the execution of which warrant, the deposition dt. 20th Dec., 1991, from the assessee had been taken. The crux of the argument is that the statement dt. 20th Dec. 1991 recorded from the undoubtedly a statement recorded under the provisions of s. 132(4) and as such admission contained in that deposition had an evidentiary value, it cannot be ignored. The learned Departmental Representative also mentioned that the reference to s. 132(1)....
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.... stood and such intimate knowledge is possible only because the assessee was generally in control of the affairs of the entire group and also because they actually represented the accounts of the assessee himself in benami names, as admitted by him in the deposition dt. 20th Dec., 1991. It is also pleaded that even assuming that the statement dt. 20th Dec. 1991 cannot be regarded as a statement recorded under s. 132(4) of the IT Act or under other provisions of the IT Act, it still cannot be regarded as an invalid statement without any evidentiary value. It is claimed that even if the seizure of the document Annexure A-3 is illegal inasmuch as there is no warrant under s. 132 against the assessee in respect of the search of 208-210, Parshva Chambers, where the said document had been seized and as such even if the deposition dt. 20th Dec., 1991 given by the assessee cannot be regarded as having been taken under s. 132(4), the user of the statement in the assessment of the assessee cannot be faulted in view of the following decisions : (1) Pooran Mal vs. Director of Inspection (Inv.) 1974 CTR (SC) 25 : (1974) 93 ITR 505 (SC); (2) Dr. Partap Singh & Ors. vs. Director of Enforcem....
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....e deletion of s. 132(5) cannot be explained unless it is held that the presumption contained in this provision is available even for regular assessment purposes. It is claimed that as the assessee had clearly admitted to be the owner of the 110 bank accounts figuring in Annexure A-3 in his deposition dt. 20th Dec., 1991, the subsequent retraction from this position by itself does not absolve the assessee from being answerable to the Revenue in this regard. In this context, attention is invited to the decision of the apex Court in the case of CIT vs. Durga Prasad More 1973 CTR (SC) 500 : (1971) 82 ITR 540 (SC) wherein it was held that where a party relied on self-serving recitals and documents it was for that party to establish the truth of those recitals and that the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. It is claimed that in view of the admission contained in the statement dt. 20th Dec., 1991, it is not sufficient if the assessee simply disowns any connection with the said accounts. The onus of proving that he did not, in fact, have anything to do with those accounts squarely lay on the assessee. It is....
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....evidence was not available at the time of the initial assessment because the assessee was totally unco-operative and has resorted to delay tactics as a result of which the Revenue had no time to gather this vital information. This evidence only strengthens the admission made by the assessee during the course of the search proceedings that these 110 bank accounts appearing in A-3 list were operated by him or his family members and that he offers the peak as his income. 6. The Hon'ble members may kindly consider the importance attached to the introduction given by the assessee or his family concerns in introducing the 110 bank accounts in various names as appearing in A-3 list. There is a direct nexus with the assessee and the address is that of the assessee. 7. Undisputable evidence showing the nexus between the concerns in A-3 list and the assessee M/s. Suman Motels Ltd. will be evident from the bank account of Harmesh Trading Co. in the United Western Bank, Vadgadi, Mumbai. M/s Harmesh Trading Co. whose name appears in A-3 list has received Rs. 1,00,50,000 on 31st March, 1995 from Lok Housing and the amount was immediately withdrawn/transferred to Suman Motel....
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....4th April, 1995. On the same day, this amount was transferred to Suman Motels Ltd. 9. In the nutshell the amount of Rs. 1,00,50,000 received by Harmesh Trading Co. (A-3 concern) was transferred to the assessee's main concern i.e., Suman Motels Ltd. through the media of various other A-3 concerns discussed above. The point which the Revenue would like to stress before the Hon'ble members of the Tribunal is that the assessee is fully aware of the activities of the various A-3 concerns and the ultimate beneficiary is the assessee. Therefore, it is incorrect to state that the assessee does not know about the A-3 concerns and he has no contracts with them. The bank account as in 1995 clearly prove to the hilt that the assessee still has connection with those A-3 concerns and there is interlacing and interlocking of funds with A-3 list. 10. Another glaring example of transfer of funds by the A-3 concerns, i.e., Harmesh Trading Co. is evident from the transfer of its funds received from IDBI amounting of Rs. 99,40,000 on 27th Oct., 1995 to Suman Motels Ltd. immediately thereafter. The Bank A/c No. 2191 of Harmesh Trading Co. in United Western Bank is enclosed. ....
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....ions between the A-3 concerns and the assessee was detected at the time of assessment proceedings of the assessee and his group concerns. Since the assessee was highly unco-operative in furnishing the details to the Department, it took considerable time for the Revenue to lay its hands on the bank statements which goes to prove that the assessee still has dealings with the A-3 concerns and his averment that he has no dealings with A-3 concerns is incorrect and misleading. Therefore, it is prayed that the Hon'ble membes may kindly consider the above evidence gathered by the Revenue subsequent to the assessment proceedings as it was only due to the non-cooperation of the assessee and moreover, in the present appeals, the point which the Department would like to stress is that Shri S.M. Khandhar is fully aware of the benami nature of the bank accounts appearing in the A-3 list and that the assessee still has dealings with these concerns even subsequent to the search and his averment that he does not know the whereabouts of the A-3 concerns is incorrect. 16. The respected members of Tribunal 'C' Bench may kindly admit the letter of Parshva Chambers Premises Co-op. ....
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....as pp 292 to 295. The intention to file the income-tax return details of Vipko Sales Corporation is to depict incorrect statement made by the assessee's authorised representative before the Honourable Members. It was communicated by the assessee's authorised representative that Vipko Sales Corporation is a partnership concern which filed its return of income for asst. yr. 1989-90 before the ITO Ward 24(3) Bombay. On verification of the income-tax records it was noticed that return of Vipko Sales Corporation was filed with ITO 17(12) for asst. yr. 1995-96 on 2nd July, 1997 as a new return. Thus it would be clear that the Vipko Sales Corporation filed its return for the first time for asst. yr. 1995-96 and not as the assessee's authorised representative has stated that it has filed the return of income for asst. yr. 1989-90 on 18th Jan., 1990. To show this incorrect statement page No. 271 was filed. 6. As regards Dipali Enterprises the assessee's authorised representative stated that the return of income was filed for the first time for asst. yr. 1984-85 on 26th Sept., 1994 before the ITO, BSD(N), Bombay. But on verification it is seen that the return of inco....
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....l accounts relating to the concerns figuring in Annexure A-3. It may be seen in ss. 6, 7 and 13 of the DPB which, as we have already mentioned before, has not been serially numbered. On the basis of the paper books sought to be filed, the learned Departmental Representative argued that the assessee cannot dissociate himself from the bank accounts figuring in Annexure A-3 because the accounts were introduced in the various banks either by the assessee or by his family concerns or the address as given related to that of the assessee or his family concerns and the funds also moved to and fro between the concerns relating to the 110 bank accounts figuring in Annexure A-3 and M/s Suman Motels (P) Ltd. of which the assessee and his family members were directors, or other family concerns. Adverting to the contention of the learned counsel for the assessee that on the day the statement dt. 20th Dec., 1991 was obtained from the assessee by the authorised officer, no proceeding was pending, it is claimed that as the statement had been obtained under the provisions of s. 132(4) during the search, the pendency or otherwise of any assessment proceeding is irrelevant. 19. Regarding the claim ....
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.... but it was filed belatedly on 20th Sept., 1991 and in the circumstances of the case, the assessee cannot take the benefit of the decision of the Hon'ble Patna High Court in the case of Ranchi Club Ltd. vs. CIT (supra). It is also pointed out that interest under s. 234A is not penal in nature and it is only compensatory in character, and in this context reliance is placed upon the following two decisions : (1) Sant Lal vs. Union of India (1996) 134 CTR (P&H) 581 : (1996) 222 ITR 375 (P&H), and (2) Union Home Products Ltd. vs. Union of India (1995) 29 CTR (Kar) 217 : (1995) 215 ITR 758 (Kar). It is argued that in the Ranchi Club case relied on by the learned counsel for the assessee (supra), there was no default in filing of the return of income or in payment of advance tax/self-assessment tax and in the assessee's case, the return of income had been filed belatedly and so the facts of the assessee's case are distinguishable from those of the Ranchi Club case considered by the Hon'ble Patna High Court. 23. Regarding the additional ground raised by the assessee in respect of the levy of interest under s. 234B, it is mentioned that the advance tax paid i....
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.... (1995) 214 ITR 15 (Bom); (3) A.K. Babu Khan vs. CWT (1976) 102 ITR 757 (AP); (4) Dy. CIT vs. Vira Construction Co. (1997) 61 ITD 33 (Bom) (TM); and (5) Y.W.C.A. of India vs. IAC (1988) 33 TTJ (Del) 131 : (1989) 29 ITD 620 (Del). In the written submission filed by the learned counsel for the assessee, which may be seen at pp 67 and 68 of APB (Vol.IV), the value of the additional evidence sought to be filed by the Department is assailed as follows : "(i) The papers given by the Departmental Representative relate to the details of IT assessments of'(i) S.M. Khandhar, (ii) Suman Motels Ltd., (iii) Mrs. Bharati S. Khandhar, (iv) Praful M. Khandhar, (v) Shaikh Mukhtar Hussain, and (vi) Late Sudershan Kumar. These papers relating to the asst. yr. 1996-97 have no relevance for the issue which are now involved in the appeals for the asst. yr. 1991-92. (ii) The facts of the case of the asst. yr. 1996-97 are entirely different from the facts for the asst. yr. 1991-92. (a) In the accounting year relevant for the asst. yr. 1996-97, the assessee borrowed amounts from some concerns, and such borrowals appear in the books of account of the assessee. Ther....
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....hri P.M. Khandhar, brother of the assessee. It is, however, not denied that Shri S.M. Khandhar, the assessee, was looking after the mobilisation of finance. 28. It is refuted that the assessee has introduced various concerns to the banks. It is mentioned that the bank requires that only a person holding an account with it can introduce other parties and the assessee had accounts only with a new branches and so could not have introduced new parties to other branches. Adverting to the argument of the learned Departmental Representative that certain pay-in-slips and cheques book were also seized in the course of the search, it is mentioned that such material was seized only from Shri B.M. Khandhar, brother of the assessee, and that material was considered in the assessment of Shri B.M. Khandhar and so the assessee cannot be held responsible in anyway for such material. Similarly, it is contended that even though the seized assets in the group were of the order of Rs. 1,03,40,044, they largely represent the share certificates and they are accounted for and considered for assessment purposes in the hands of various concerns like Eshita Dye Chem. (P) Ltd. and no adverse inference can ....
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....accounts in the list of six pages marked as Annexure A-3 to the Panchnama is a valid statement under the IT Act and whether it has any evidentiary value for framing the assessment in the case of the assessee for the asst. yr. 1991-92 and other years. We agree with the contention of the learned Departmental Representative that this is a valid statement recorded under the provisions of s. 132(4) and the admission contained therein regarding the ownership of the 110 banks account has an evidentiary value of framing the assessment in the case of the assessee for the asst. yr. 1991-92 and other years. It is of course termed as a statement under s. 132(1), but we are of the view that this is only a typographical error and the evidentiary value of the statement cannot be detracted by such an error, especially in view of the provisions of s. 292B of the IT Act. The power exercised by a competent authority cannot be regarded as illegal simply because a wrong section is mentioned if the said authority has jurisdiction under some other provision. So we are of the view that the mention of a wrong sub-section, i.e., the mention of sub-s. (1) of s. 132, instead of sub-s. (4) of s. 132, at the he....
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.... of finance of the entire group of his family, and as already mentioned, the group included Eshita Dy. Chem., in the course of the search of which concern Annexure A-3 containing 110 bank accounts in question was located. We have already extracted this reply at p. 35 of this order. Even in the statement dt. 23rd Sept., 1993 in which he retracted from the admission given in the statement dt. 20th Dec., 1991 regarding the ownership of the 110 bank accounts in question figuring on the six pages marked as Annexure A-3, the assessee clearly admitted in his answer to Question No. 13 that he looked after the mobilisation of finance of the entire group and even this reply we have extracted at p. 14 of this order. The same position is repeated in the reply to the other questions in the statement dt. 23rd Sept., 1993, and as an example, reply to Question No. 15 may be noticed. This appears at p. 46 of the APB (Vol. I) and reads as follows : "Q. 15 Have you arranged unsecured loans from Mrs. Bharati S. Khandhar, please give answer either Yes or No. Ans. I cannot say in my reply to your question 'yes' or 'no'. I arranged mobilisation of finance for the group b....
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....ehalf of them by the assessee before the AO. In this context, we may also refer to the letter dt. 31st Jan., 1992 addressed by the assessee to the authorised officer asking for the lifting of the prohibitory order in respect of certain bank accounts. A copy of the letter may be seen at p. 71 of the DPB and it reads as follows : "We refer your search on 17th Dec., 1991, and prohibitory order in respect of the following Bank Account : 1. Deepak B. Bhatt A/c No. 102220 2. Bakurdas M. Bhatt A/c No. 102221 3. B.M. Shah A/c No. 101389 4. Rajeshree B. Shah A/c No. 101540 5. B.M. Khandhar A/c No. 100128 6. M/s Shree International A/c No. 500305 Hereby we request you kindly withdraw the above order so that we can operate the same and oblige." Again, in the written submissions which were filed at the end of the hearing, the learned counsel for the assessee sought to explain that this letter was on the letterhead of the assessee and it was written because Shri B.M. Khandhar was not available in Bombay during the relevant time. The question is not whether a particular person is available during the relevant time. The fa....
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....ing the deposition under the provisions of s. 132(4) from the assessee during the search of the premises of M/s Eshita Dye Chem. (P) Ltd. in pursuance of a warrant issued on that company. Our finding is that the assessee has been in control of the affairs of M/s Eshita Dye Chem. (P) Ltd. He had a cabin there and he was incharge of its administrative and financial matters and he was also offering explanations on behalf of that company before the AO. In the circumstances, we are of the view that the statement recorded from the assessee has to be regarded as one legitimately taken under the provisions of s. 132(4) under which any person who is in control of the premises and things in the premises can be examined and his deposition taken. We may also refer to the decision of the Hon'ble Punjab & Haryana High Court in the case of Smt. Sita Devi vs. CIT (supra) on which the learned counsel for the assessee had relied. This is also a case where some seizure of jewellery was involved and the jewellery belonging to the mother of the assessee was seized in the course of the search of the premises of her sons, but it is pleaded that such seizure of the jewellery could be effected only aft....
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....dly taken because there was a connection between the assessee and Eshita Dye Chem. (P) Ltd. against whom there was admittedly a warrant of search, inasmuch as the assessee was in charge of the affairs of the said company and as such was in control of the premises and affairs of that company within the meaning of s. 132(4). It may also be mentioned that the apex Court observed in the case of ITO vs. Seth Bros. (supra) that any irregularity in the course of entry, search and seizure committed by an officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken provided the officer has, in executing the authorisation, acted bona fide. We find that this decision of the apex Court actually supports the case of the Department and not of the assessee. In the written submissions filed at the end of the hearing, the learned counsel for the assessee, at p. 18 of Vol. IV of the APB, mentioned that Shri Arvind Kumar who recorded the statement from the assessee on 20th Dec., 1991 was not mentioned as an authorised officer in the warrant of authorisation dt. 17th Dec., 1991. This argument, however, was not taken during the hearing and the learned Departmental....
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....id premises, may be along with others. Viewed from this angle, we are of the opinion that the authorised officer was quite justified in taking the said deposition dt. 20th Dec., 1991 from the assessee under s. 132(4). We have perused the other decisions cited by the learned counsel for the assessee in this regard and find that they are all distinguishable. On the other hand, we are of the view that the case law cited by the learned Departmental Representative such as the Andhra Pradesh High Court decision in the case of Lan Eseda Steels Ltd. vs. Asstt. CIT (supra) support the case of the Department. In respect of the contention of the learned counsel for the assessee that the said Annexure A-3 was not seized from the cabin of the assessee in Parshva Chambers and that it was seized only from the drawer of a typist in Parshva Chambers, we are of the view that the probabilities are against the assessee even though no firm conclusion against the assessee can be given in this regard. It is not denied by the learned counsel for the assessee that the search was temporarily ceased on the morning of 19th Dec., 1991 and that a prohibitory order was served on the cabin of the assessee and the....
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....he assessee cannot be faulted in view of the decision of the apex Curt in the case of Pooran Mal vs. Director of Inspection (Invt) (supra) relied on by the learned Departmental Representative. As per the relevant portion of the headnote of this decision, it has been observed as follows : "In India, an in England, where the test of admissibility of evidence lies in relevancy, unless there is an express or necessarily implied prohibition in the Constitution or other law, evidence obtained as a result of illegal search or seizure is not liable to be shut out. Even though a search and seizure may be in contravention of s. 132 of the IT Act, 1961, still the material obtained thereby is liable to be used subject to law before the IT authorities against the person from whose custody it is seized and, therefore, no writ of prohibition in restraint of such use can be granted." In the course of the said decision, the apex Court referred to the decision of the Hon'ble Allahabad High Court in the case of Emperor vs. Allahdad Khan (1913) ILR 35 (All) 538 (All), where in the Superintendent of Police and a Sub-Inspector searched the house of a person without an authorisation but t....
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....ld that the amounts are assessable in the hands of the assessee unless there is any evidence to the contrary forthcoming from the assessee. 33. At this stage, we may also refer to the contention of the learned counsel for the assessee that the particulars relating to the concerns to which the 110 bank accounts in question related were written on the relevant papers by the assessee in his own hand only at the instance of the authorised officer and such details were not there on the document itself before it was located by the authorised officer. Firstly, there is no evidence that the pages did not bear the handwriting of the assessee but we are prepared to give the benefit of doubt to the assessee in this matter. Even going by the contention of the assessee that he had given those particulars only at the instance of the authorised officer, the fact of the matter still remains that the assessee was aware of the correct particulars relating to 110 bank accounts. The bank accounts were introduced in 14 branches of different banks either by the assessee or by his family concerns or the addresses of the account-holders were those with which the assessee had connection one way or the o....
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.... is limited only to the summary adjudication contemplated in sub-s. (5) of s. 132. These observations, in our view, are obiter as that was not the controversy before the Court. Sec. 132(4A) is special provision dealing with documents and other things recovered during a search and its very purpose would be frustrated if the presumption is restricted to the interim proceedings under s. 132(5). We, therefore, reject this contention of the assessee." As also mentioned by the learned Departmental Representative, s. 132(4A) survives the deletion of s. 132(5) as on today and this also supports the view that the presumption under s. 132(4A) is available for assessment proceedings also. In the case of R. Bharathan vs. ITO (1990) 89 CTR (Ker) 25 : (1990) 182 ITR 146 (Ker), the Hon'ble Kerala High Court held that there was no irregularity in applying the presumption available under s. 132(4A) in regular assessment. The document Annexure A-3 was in the constructive possession of the assessee and so we are of the view that any presumption formed by the Department is valid, though such presumption is rebuttable on further evidence to the contrary produced by the assessee. 35. Now the q....
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....aken loan can be established. Thanking you," The stand of the assessee before the AO with regard to such requests made by the AO is contained in the letter, dt. 7th Dec., 1993 which may be seen at pp. 49 and 50 of the APB (Vol.I) and it reads as follows : "I invite reference to the summons dt. 1st Dec., 1993 issued by you under s. 131 of the IT Act asking me to appear before you on 8th Dec., 1993, and furnish the information as required in your letter No. AC/CC.14/SMK/1993-94, dt. 1st Dec., 1993. In compliance with your summons, dt. 3rd Aug., 1993, addressed to me, I furnished the information to the extent I knew, in my letter, dt. 17th Aug., 1993 addressed to you. As already stated in my letter, dt. 3rd Aug., 1992, on the above subject addressed to you, as some of the persons mentioned in the list, were my clients when I was in active practice as an Income-tax Practitioner, I could furnish their addresses to you. In respect of other names appearing in the list, as they agreed to be my clients long back, their income-tax papers were handed over by me to them. I am, therefore, not aware of their present office or residential addresses. I am unable to ad....
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....tion given by him in respect of the said list on 20th Dec., 1991 and even the so-called tension stated to have been experienced by him at that stage as per the contention of the learned counsel for the assessee before us during the hearing. In other words, the assessee was not cooperative at all. He did not think that it was his duty to discharge the burden cast upon him of proving the correctness of his retraction to the effect that he did not have anything to do with the 110 bank accounts. It is in this context that we have to see the correctness of the additional evidence produced by the Department before us, to which the learned counsel for the assessee has vehemently objected before us. It is only in the course of the hearing before us and it is only at our instance that the learned counsel for the assessee chose to give the present addresses and the income-tax position of a large number of the concerns figuring in Annexure A-3. We have already detailed in the course of this order such details furnished by the learned counsel before us. We had to ask for such details entirely because of the stand taken before us by the learned counsel for the assessee that all such concerns we....
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.... 1991-92 in the case of the assessee had been completed and this material could not have been considered. It is found that some of these concerns have not been responding to summons in their own assessments, nor were they produced by the assessee in support of his retraction before the AO in the context of the assessment framed on the assessee for the asst. yr. 1991-92. If we simply accept the claim of the assessee that they are all assessees on file and so the bank accounts standing in their names should be excluded for the purpose of framing the assessment on the assessee, it could mean that a person who has possibly created a labyrinth of 110 bank accounts in spurious names escapes scot-free without any verification. That would be the inevitable result if we do not allow the Department to file its additional evidence, which has become necessary only in response to the particulars of the concerns furnished by the assessee only during the hearing before the Tribunal. Without such particulars, the AO was entitled to act on the admission contained in the statement dt. 20th Dec., 1991, but in view of these particulars and the contentions raised before the Tribunal, it has become nece....
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....his subsequent retraction from the admission contained in the statement dt. 20th Dec., 1991, and also to allow the Department to produce any evidence it has in its possession to judge the correctness of such retraction and the particulars furnished by the assessee in support of that retraction. We see no irregularity in the procedure adopted by us. We are of the view that this is the only procedure that can be adopted which can be fair to both the sides. Accordingly, we reject the contention of the learned counsel for the assessee that the Department should be barred from filing any evidence at this stage. The reasons for admission of the additional evidence are recorded in this order itself in terms of the above mentioned r. 29 of the Appellate Tribunal Rules. Actually, we find certain amount of contradiction between the stand of the learned counsel for the assessee that the additional evidence sought to be filed by the Department should not be admitted and his other stand that when a statement given in the course of the search is retracted, the AO is not justified to make any addition without bringing any evidence in support of the said addition. This would amount to pleading tha....
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....rmally the burden of proof regarding benami status is on the person alleging such status or position, as held by the apex Court in the case of Heirs of Vrajlal J. Ganatra vs. Heirs of Parshottam S. Shah (1997) 137 CTR (SC) 103 : (1996) 222 ITR 391 (SC). However, to our mind, this position does not hold good when the statute provides a special rule of evidence as in s. 132(4A) of the IT Act. A similar rule of evidence stipulated in s. 118 of the Negotiable Instruments Act has been the subject of consideration by the apex Court in the case of Kundan Lal Rallaram vs. Custodian, Evacuee Property AIR 1961 1316 SC and the Court observed that the presumption contained in the said section is one of law and it proceeded to observe as follows : "The presumption is one of law and thereunder a Court shall presume, inter alia, that the negotiable instrument or the endorsement was made or endorsed for consideration. In effect it throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. The question is, how the burden can be discharged? The rules of evidence pertaining to burden of proof are embodied in Chapter VII of the Evidenc....
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....epting the version of the assessee that the document did not bear the details of the account-holders before its seizure by the authorised officer, the fact remains that the assessee knew the details of the account-holders, which he could readily furnish before the authorised officer, and actually wrote such details in his own hand on the document. In the circumstances, we are of the view that the Department has produced sufficient evidence for the Tribunal to draw the presumption that the assessee is the owner of all the accounts in question, even though such a presumption or inference is rebuttable by the assessee by providing evidence to the contrary. For these reasons, we are of the view that the onus of proving that the assessee had nothing to do with the 110 bank accounts in question and that his subsequent retraction reflects the correct state of affairs lies on the assessee. In other words, we hold that the Department is entitled to proceed on the presumption that the 110 bank accounts figuring in Annexure A-3 belong to the assessee, as admitted by himself in his statement dt. 20th Dec., 1991. We reject the contention of the learned counsel for the assessee that the assessee....
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....e given only when the recycling of funds is proved, as contended by the learned Departmental Representative. We find merit in the contention of the learned counsel for the assessee that the peak of the earlier year should be reduced from the peak of the subsequent year. Actually, this contention has not been seriously controverted before us by the learned Departmental Representative. We also find merit in the contention of the learned counsel for the assessee that there is no reason for including the aggregate of the maximum balances in the accounts in the assessment, though that was the basis on which the assessee offered to disclose the amounts lying in the accounts for assessment purposes. It is of course easier to work out the peak on the basis of the aggregate of the maximum balances in the accounts, but that is not the correct way of framing an assessment. We direct that the peak be worked out by arranging the transactions in the accounts datewise. The AO should first ascertain the bank accounts in respect of which there is evidence that they related to the assessee or were owned by him. Then such accounts should be considered for consolidation and datewise balances have to b....
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....ential ground, and as we have set aside the assessment on the main ground relating to the addition to be made on the basis of the 110 bank accounts, we deem it fit to set aside the assessment on this issue also. If the AO should come to the conclusion that the interest has been paid to any of the concerns who are held to be benamis of the assessee in the assessment to be made by him afresh, he is entitled to disallow the interest relatable to those concerns. Subject to this remark, the assessment is set aside on this issue also. 42. Regarding the additional ground taken by the assessee about the peak of the earlier year being reduced from the peak to be assessed for this year, we have already given our remarks hereinabove. 43. Regarding the ground taken by the assessee in respect of the charging of interest under s. 234A, the contention made out is that the assessee had filed the return voluntarily and no notice under s. 142(1) was served on the assessee and so no interest under s. 234A is to be levied. We see no merit in this contention because the language of s. 234A clearly authorises the levy of interest whenever there is a delay in the filing of the return. It is not ....
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....refer to each of the decisions mentioned by him for two reasons. Firstly, they are distinguishable. Secondly, some of the cases were referred to even some of the points were raised only in the written submissions filed at the end of the hearing in respect of which the learned Departmental Representative had no opportunity of countering. 47. Subject to the above, the assessee's appeal is partly allowed. ITA No. 6181/Bom/95 48. We have reproduced the grounds taken by the Department in this appeal at pp. 2 and 3 of this order. 49. Regarding the addition of Rs. 5,70,000, the learned Departmental Representative that the CIT(A) was not justified in deleting this addition because the assessee had not produced the creditors in those names loans to the extent of Rs. 5,70,000 stood. The loans were credited in the books of account of the assessee as follows : Rs. (1) M/s. Indian Carrier Freight 1,70,000 (2) M/s. Kapilesh Corporation 4,00,000 5,70,000 The AO added these amounts with the following remarks : "5. Loans taken by the assessee : During the year, the assessee had taken loan from &n....
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....essee. It is, however, not denied before us that the assessee did not produce the creditors before the AO even though the AO required them to be produced. It is also not denied that the assessee never requested the AO to summon the parties concerned. 52. We are of the view that the addition of Rs. 5,70,000 deserves to be sustained. We do not agree with the comment of CIT(A) that the addition of Rs. 12,86,70,053 was made by the AO under the provisions of s. 68 of the IT Act. This amount, as already mentioned hereinbefore, represented the deposits in various bank accounts which were owned up by the assessee in the deposition dt. 20th Dec., 1991 taken from him. The addition of this amount, running into crores, was not made under the provisions of s. 68 but under the provisions of s. 69 of the Act, which is a somewhat different matter. The two loans in question aggregating to Rs. 5,70,000 figure in the books of account of the assessee, whereas his books did not reflect the transactions in the 110 bank accounts. There is clearly an onus under s. 68 of the IT Act on the assessee to prove the loan figuring in his books of account. To our mind, the assessee could not have simply rested ....
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....written submission dt. 31st Aug., 1994 made before him and which is reproduced at pp. 7 and 8 of his order: "During the course of assessment proceedings I understand that (i) Shri Mahendra P. Shah and (ii) Shri Bhupendra Chedda whose names appear in the seized paper were called and examined by the AC. In clear terms Shri Bhupendra Chheda denies having received any amount from me during the year ended 31st March, 1991. I understand that Shri Mahendra P. Shah also, stated before the AC that no loan of Rs. 20,00,000 was given by me in the year ended 31st March, 1991 to Shri Bhupendra Chheda. The United Western Bank Ltd., Vadgadi Branch. The United Western Bank Ltd., Vadgadi Branch, Bombay, with which the sum of Rs. 20,00,000 was to be deposited for withdrawal as per the seized paper, has also issued a certificate to Shri Mahendra P. Shah that no savings or current account was opened with that bank in the joint names of Shri Bhupendra Chheda and Shri Mahendra P. Shah. The bank also certified that there was also no account in the name of Shri Bhupendra Chheda with that bank. A copy of this certificate was also stated to have been filed by Shri Mahendra P. Shah before the AC. In....
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.... reads as under : "The addition was made on the basis of the seized paper and the loose paper file No. A-20. The copies of which were given vide order sheet noting dt. 26th Oct., 1994. During the appellate proceedings the assessee had taken the plea before the CIT(A) that letter filed by Shri Bhupen Chheda, letter filed by Shri Mahendra P. Shah & United Western Bank should be given to him. But it is to be noted that there is no reference of letter in the assessment order and it is to be noted that it is not used against the assessee." In view of the foregoing discussions it would be evident that the case made out by the AO has no legs to stand. Accordingly the addition made stands deleted." While deleting the addition, the CIT(A) accepted the contention of the assessee that the intended transaction, i.e., the advance of Rs. 20 lakhs by the assessee to Shri Bhupen Chedda, did not materialise. He also observed that the AO had not examined the issue properly and has not led any material evidence in support of his premises that the money did, in fact, pass hands in this case. He commented as follows, which appears at p. 6 of his order : "The AO has nothing....
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....1 ITD 12 (Bang). The following points are also made in the written submissions : "5. The paper shows that the transaction was to be completed by 31st May, 1991, long before the date of search (18th Dec., 1991). If the paper (Memorandum of Understanding) was acted upon, amounts should have been deposited in the bank before 31st May, 1991. The bank certified on 29th March, 1994, that there was no account and no deposits were made. This clearly shows that the Momorandum of Understanding was not acted upon. The AO cannot act on a part of the seized paper, ignoring the other part of depositing the amounts in bank a/c. 6. No question of collusion (or ganging up as the Departmental Representative chose to put it) arises even as per the paper seized, the transaction was to be completed by 31st May, 1991, and the search was made much later. 7. The A.C. made exhaustive enquiries from (a) Mahesh P. Shah, the guarantor, (b) Bhupendra Chhedda and (c) the bank, and all of them denied the transaction. 8. Sec. 69 is a deeming provision and should therefore be strictly construed. 9. Addition on the basis of this paper was made under s. 69 of the IT Act. ....
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....f of their proceeds towards the recovery of the balance amount of loan. It also contemplates that the collection cheques would be deposited into a current account which shall be operated by Mahendra P. Shah, who presumably, is an intermediary between the assessee and Shri Bhupen Chedda, and so stood guarantee for the above matter. Clause (2) also gives an undertaking that Shri Bhupen Chedda will clear the entire loan amount on or before 31st May, 1991. The clear language of the document leaves no doubt in our mind that it is an arrangement for recovery of a loan which had already been advanced before 22nd Jan., 1991, which is the date of the seized document. The denial of the implementation of the recovery measures as contemplated in the seized document could be a collusive affair between all the parties concerned. That, however, has no bearing at all on the question of advance, which is clearly witnessed by the seized document. Documents do not collude and can bear only one interpretation. This position is further confirmed by the replies given by the assessee to Question Nos. 20 and 21 in his deposition dt. 18th Dec., 1991, which as already mentioned, we have reproduced at p. 16 ....