2019 (1) TMI 196

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....) aggregating to Rs. 76,00,000/- were found during survey. The Assessing Officer concluded that the assessee is engaged in unauthorized and illegal money lending business. The Assessing Officer inter-alia made addition of the aforesaid amount on account of undisclosed income. Aggrieved by the assessment order dated 31-12-2007, the assessee filed appeal before Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the explanation furnished by the assessee and confirmed the addition. Now, the assessee is in second appeal before the Tribunal assailing the findings of Commissioner of Income Tax (Appeals) by raising following grounds : "1. The learned CIT(A)-Aurangabad erred in law and on facts in confirming addition of Rs. 76,00,000; made by the learned AO on the basis of cheques found during the survey u/s 133A, without appreciating that no any loans / advances were given by the appellant against the said cheques and that no any Hundi papers were found as regards these cheques. The addition of Rs. 76,00,000 is arbitrary, excessive and based on mere suspicion. 2. The learned CIT(A)-Aurangabad erred in estimating an amount of Rs. 14,....

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....without considering the peculiar Modus Operandi. 3. Errors in quantum of "declaration" made during Survey Statements: As per the survey statements, appellant has declared undisclosed income of Rs. 2.51 Crs. Subsequently, appellant realized the errors in the said declaration and accordingly ROI was filed by rectifying the following errors - a) Entries counted twice :During the course of survey proceedings, declaration was made on the basis of documents impounded, which included cheques, Hundies, promissory notes, etc. Summation of the documents was carried out an, declaration was made. Later on, errors of duplication / double were realized wherein, HUNDI was considered as a loan transaction and related security cheque was also counted as loans transaction. In reality, both these are parts of the said loan transaction. As such, entries amounting to Rs. 43 Lakhs, which were doubly counted as loans, were reduced from declaration quantum, and the return of income was filed accordingly. The same was accepted by the learned AO. b) Source explained : Source for advances amounting to Rs. 40 Lakhs was explained and accordingly, declaration quantum....

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.... had confirmed that no loan was obtained from the appellant. 7. Reconfirmation of non grant of loan in cross examination before AO: Appellant cross examined the parties before the learned AO regarding the alleged loan transactions. All the parties whose statements were recorded u/s 131 of the ITA, 1961 reconfirmed the fact that no loan was obtained from the appellant. 8. Deletion of Penalty in the case of Mr. Rameshwer Shete by Honorable ITAT: The Honorable ITAT, Pune Bench has deleted the penalty v/s 271D & 271E of the ITA, 1961 in the case of Mr. Rameshwar Shete - ITA No. 2Ql-2Q2/PN/2012 (Copy, attached at Page No. 115 of PB-II). In the said decision, the Honorable Bench has noticed that Department has not brought anything on record to establish that Mr. Shete has received loan from Mr. Mutha (appellant). It is worthwhile to note that during the assessment proceeding of the appellant, Mr. Rameshwar Shete had filed notarized affidavit as to non receipt of the loan and statement of Mr. Shete was also recorded by the learned AO, wherein Mr. Shete reiterated that no loan was obtained for the appellant. However, the learned AO & the learned....

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....o loans Rs.0.76 Cr. (not accepted by AO) Less : Advance given in AY 07-08 Rs.0.03 Cr. (accepted by AO) Less : Sources explained Rs.0.40 Cr. (accepted by AO) Less : Bad-debts of NCCF Rs.0.03 Cr. (accepted by AO) Sub-total Rs.0.80 Cr. Other income, etc. Rs.0.06 Cr. Returned income Rs.0.86 Cr. 4. Addition of Rs. 76 made by the learned AO : During the course of survey proceedings certain cheques amounting to Rs. 76 Lakhs were found. While filing the return of income, appellant excluded the same as no actual loans were advanced and no corresponding HUNDI was found. It was explained that as per the modus operandi of appellant's business money is advanced to parties on the basis of Hundies / Promissory Notes and as a surety, cheques are taken. In this regard, appellant filed affidavit of the persons whose cheques were found viz. Mr. Lalit Zambad, Mr. Deepak Bharuka, Mr. Deepak Bharuka (HUF) and Mr. Rameshwer Shete. (Copy of affidavit placed at Page No. 18 to 22 of Paper Book-l}, All the persons, in their respective affidavits, have confirmed that these persons had not availed loan from the appellant, though cheques were....

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....n perusal of the assessment order, it transpires, there is no any mention of noting on the backside of Page-42. No effective opportunity was granted to appellant to explain contents of Page-42 during scrutiny proceeding. c) During 1st Appellate Proceeding: During the 1st Appellate Proceeding, the learned CIT(A) sought for Remand Report from the learned AO. The learned AO, in his Remand Report dated 04/08/2010, at Para-3 mentioned about noting on the backside of the impounded Page-42 (Refer Page No. 75 of Paper Book-l}, However, appellant did not receive any such enclosure (Le. backside of Page-42) along with Remand Report. It transpires, reference to the said noting on the back-side of Page-42 was made for the first time, only during the Remand Report Proceeding. Further, learned CIT(A) heavily relied on the said back-side entries of Page-42 while concluding the matter. But the said entries on backside of Page-42 were not put to the appellant and no any explanations were sought for on the same. 7. Letter to AO for copy of Page-42: Appellant on 31/05/2017, requested the learned AO to extend the copy of backside of Page-42 (Copy of letter filed pla....

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....dvanced to the parties on the basis of hundis/promissory notes and as a security cheques are taken. However, no corresponding promissory notes or hundis from the above mentioned six persons issuing cheques were recovered. The assessee has filed affidavits from all the persons whose cheques were found admitting that no loan was taken by them from the assessee. The aforesaid persons also appeared before the Assessing Officer and their statements were recorded. All of them corroborated with the submissions of assessee and stood fast to the affirmations made in the affidavits filed. The Department has disbelieved the statement and affidavits of all the above persons. 7. One of the person whose cheque was found during survey action is Shete Rameshwar Ganpatro Prop. Om Agro Services, Jalna. The Department in his case levied penalty u/s. 271D and 271E for taking cash loans from the assessee. The Assessing Officer in his case brushed aside his affidavit and his statement recorded in the assessment proceedings of the present assessee. In First Appellate proceedings the Commissioner of Income Tax (Appeals) took cognizance of the affidavit and his statement and deleted the penalty levied u....