TaxTMI 
TaxTMI 
2015 (7) TMI 1296
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....ng NIL undisclosed income. During the course of assessment proceedings, the AO called for the details of transactions made by the assessee in respect of M/s. Maheshwari Financiers, Adoni (Andhra Pradesh) and Rajashree Enterprises. The assessee in his reply stated that the loans and interest payment are genuine and are reflected in regular books of account and should not be treated as undisclosed income u/s.68 and unexplained expenditure u/s.69. 3. During the course of assessment proceedings, the AO noted that a search and seizure action u/s.132 of the I.T. Act was carried out on 12-10-2001 in the case of M/s. Rajashree Enterprises, Proprietor Shri Ramanlal Shah and M/s. Maheshwari Financiers, Proprietor Shri Mahendra Shah at Adoni, Andhra Pradesh. It was found that Shri Ramanlal Shah was the main person who had generated unaccounted cash from various business activities which was deposited in 1980 by opening many bank accounts in the name of different HUFs and Kartas who were family members and concerns. This process of deposit of cash in HUF accounts continued till 1997-1998. He also wanted to accommodate other persons by providing many lending list of members. To bring back th....
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....anghvi group or there were some sort of business understanding or partnership with Shah group so that there is no problem in the recovery of loan or the interest amount. The two finance concerns, i.e. M/s. Maheshwari Financies and M/s. Rajashree Enterprises have given the loan entries to Pune parties and to give a colour of real transaction, interest was charged on these loans and from this interest received interest payments were shown to have been made to family and friendly HUFs. Relying on the decisions of the Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT reported in 214 ITR 801 and the decision in the case of CIT Vs. Durga Prasad More reported in 82 ITR 540 the AO came to the conclusion that the loan amount of Rs. 22 lakhs given by M/s. Maheshwari Financiers and M/s. Rajashree Enterprises to the assessee was the assessee's own money which was routed through the concerns of M/s. Maheshwari Financiers in the garb of loan. The AO accordingly treated the amount of Rs. 22 lakhs shown by the assessee as loan received from M/s. Maheshwari Financiers, Adoni as undisclosed income of the assessee for the block period being unexplained cash credit u/s.68 of the I.T. Act. Simi....
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....t both factually and legally the AO was not justified in making the addition. 7. However, the Ld.CIT(A) was not satisfied with the arguments advanced by the assessee. He called for a remand report from the AO. After considering the remand report of the AO and submission of the assessee to such remand report the Ld.CIT(A) upheld the addition made by the AO. While doing so, she observed on perusal of the satisfaction note of the AO of M/s. Maheshwari Financiers, which was enclosed by way of a covering letter, that the same clearly shows that loan transactions amounting to Rs. 22 lakhs were shown in the books of account of M/s. Maheshwari Financiers against whom search and seizure was conducted on 12-02-2001. The covering letter is accompanied by a satisfaction note into 10 pages which details the books of accounts, documents, bank passbooks etc., that were seized and verified during the course of search and the enquiries that were conducted post search. Therefore, the satisfaction of the AO who has jurisdiction over the searched person is found to be clearly recorded that the undisclosed income found in the books belonging to the assessee. The extract of the books of account inclu....
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....due process of law, beyond reasonable time and violating principles of natural justice and therefore bad in law and be cancelled. 3. On the facts and circumstances of the case, it may be held that A.O. and CIT(A) have failed to follow the binding judicial precedents and the remarks may be quashed. 4. Without prejudice to the above grounds on the facts and circumstances of the case, the A.O. erred in bringing to tax amounts totaling Rs. 29,03,485 u/s.68, 69C of the act and CIT(A) confirmed without appreciating evidence on record, legal position and explanation furnished before him and same may be deleted , cancelled or appropriate relief granted to the assessee. 5. The appellant craves leave to add/amend /alter/modify or raise additional grounds of appeal and to provide additional evidence if found necessary, at the time of hearing." 11. The Ld. Counsel for the assessee submitted that the search in the case of M/s. Maheshwari Financiers and M/s. Rajashree Enterprises took place on 11-10-2001 and the Block Assessments in these cases were completed on 24-12-2003 by making certain additions in the hands of the searched person. Subsequently, the Ld.CIT set ....
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....ertain types of cases and (d) statements recorded are no material for purpose of 158BD. 12. So far as the merit of the case is concerned he submitted that there is no evidence of deposit of cash by the assessee in bank account of M/s. Maheshwari Financiers. The entries were recorded in the books of M/s. Maheshwari Financiers before the search took place. The assessee has discharged the onus and there is no material before the revenue that assessee has deposited cash in the bank account of M/s. Maheshwari Financiers. Therefore, the application of provisions of section 68 are not applicable to the facts of the case. 13. He also relied on the following cases: 1. Manish Maheswari Vs. ACIT & Another reported in 289 ITR 341 (SC) 2. CIT Vs. Alka Bhandari reported in (2015) 92 CCH 0027 (Del.) 3. CIT Vs. Late Rajpal Bhatia reported in 333 ITR 315 4. CIT Vs. Uttamchand Jain reported in 320 ITR 554 5. CIT Vs. Manoj Bansal reported in (2015) 92 CCH 0005 (Del.) 6. Nivedita M. Makwana Vs. P.M. Shukla reported in (2008) 11 DTR (Guj.) 225 7. CIT Vs. Bharat Bhushan Jain reported in (2015) 92 CCH 0004 (Del.) 14. The Ld. Departme....
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....correct and proper. It is further to be noted here that the block assessment order passed in the case of the searched person has been set aside by the CIT u/s.263 on 23-03-2006. Subsequent to the order passed u/s.263 the AO completed the assessment of the searched persons on 29-12-2006 by making addition u/s.69A amounting to Rs. 1,63,77,713/- as money lent to third parties, a statement made by the Ld. Counsel for the assessee at the bar and not controverted by the Ld. Departmental Representative. Therefore, we find merit in the submission of the Ld. Counsel for the assessee that when the order passed u/s.263 is in force in case of the searched person, there was no question of making addition in the hands of the assessee. In view of the above discussion, we are of the considered opinion that the CIT(A) was not justified in sustaining the addition of Rs. 22 lakhs as undisclosed income of the assessee for the block period. Since the loan amount has been treated as genuine, therefore, the disallowance of interest u/s.69C by the AO and upheld by the CIT(A) also is not warranted. Accordingly, the disallowance of such interest on such loan by the AO u/s.69C and upheld by the CIT(A) is dir....
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....tement could not be treated "books of accounts or other documents or assets" which only could be the basis for invoking the provision of s. 158BD of the Act. Admittedly, statement of Mrs. Charla is neither 'books of accounts' nor 'assets'. The question, therefore, is as to whether this statement can be treated as 'other documents'. Prima facie, it is difficult to accept this proposition. Statement was not the document which was found during search. In fact this was the document which came to be created during the search as the statement was recorded at the time of search. Therefore, it cannot be said that the statement was 'seized' during the search and thus, would not qualify the expression "document" having been seized during the search. In such a scenario, proper course of action was reassessment under s.147 r.w s. 148 of the Act." 19. The Bangalore Special Bench of the Tribunal in the case of Y. Subbaraju & Co. and others Vs. ACIT reported in 91 ITD 118 has held that in a case where not an iota of evidence was found during search regarding undisclosed income of any other person, there is no question of assessment of such other persons u/s.158B....