AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 260
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 2005-2006 and 2006-2007, challenging the learned lower authorities action adding unexplained loans extended to Shri Rajpal Panghal of Rs.25 lakhs in former and Rs.4,02,05,000/- to Shri Tanaji Jagtap in latter assessment year 2006-2007, in the course of assessments dated 31st December 2019, as upheld in the learned CIT(A)'s detailed discussion. We note from a combined perusal of both these case files that this is the second round of proceedings before the tribunal u/sec.143(3) r.w.s.153A r.w.s.254 of the Act. The department has admittedly carried out section 132 search action in assessee's and other cases on 24th October 2007. All this lead to initiation of section 153A proceedings which finally culminated in the Assessing Officer's first round assessment dated 31st December 2009 making these additions in the assessment years in question. The same admittedly stood affirmed in the CIT(A)'s first round common order dated 30th December 2013. The assessee thereafter preferred his appeals ITA.Nos.186 & 187/PUN./ 2014. Learned coordinate bench's earlier common order dated 17th October 2018 appears to have restored the same back to the Assessing Officer thereby accepting the said cases f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment year 2005-2006 and Rs. 2,27,50,000/- in the latter assessment year 2006-2007; respectively. Our attention is invited to the CIT(A)'s "lead" discussion in his impugned common order; followed mutatis mutandis in latter assessment year 2006-2007, reading as under : "7.4. As regards to the other additions of Rs.1,55,00,000/- and Rs.52,50,000/- being unexplained loan given to and interest received from Shri Chetan Mehta, the appellant has submitted that the AO has erred in making these additions only on the bases of the statements given by Shri Chetan Mehta. The appellant has further argued that on similar set of facts the case of Shri Vishal Prakash Malhotra another searched person from the same group was also set aside by the Honible ITAT Pune and the same Ld. AO has accepted the view taken by the Hon'ble ITAT Pune that the FIR stands quashed by the judgment of 16th First Class Magistrate Pune on 09.09.2016 and the AO has passed the order u/s 143(3) r.w.s.254 of the Act on 28.12.2018 in the case of Shri Vishal Prakash Malhotra without making any addition. The same Ld. AO while accepting the income returned by the said assessee held as under : "During the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 31.12.2009 in assessee's case making the impugned section 69 unexplained investment addition of Rs.1,55,00,000/- and Rs.52.50 lakhs (supra) in A.Y.2005- 2006 reading as under: "7. Unaccounted loan given to Sri Chetan Mehta and interest received (Rs.1,55,00,000 & Rs.52,50,000/-) : 7.1. During the search, it was found that Shri Habibullah Chaudhary is also actively engaged in the activity of money lending apart from dealing in purchase and sale of industrial steel scrap. He advances cash loans to the petty as well as corporate entrepreneurs at a huge rate of interest ranging from 2% per month to even 20% per month depending upon the repayment ability of a person. During the search and seizure action u/s 132 of the L.T. Act at his residence and the residences of his associates and counterparts engaged in this money lending business, various incriminating documents have been seized which clearly indicate that Habibullah is dealing in money lending activity in a big way. From the residence of Shri Tanaji Jagtap, a close associate of the assessee, vital incriminating documents were seized. 7.2. Amongst many persons, Shri Chetan Mehta is one of the persons to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her, the documents collected from the police authorities also confirm that 45 blank, undated cheques signed by Shri Mehta were given to Shri Habibullah's custody and similar 10 cheques to Shri Malhotra which were recovered by police authorities, from them. In the statement before the police, Shri Habibullah has stated that still a part of the money (Rs.38 lacs) is due from Shri Mehta out of the loan given to him. 7.3. From the perusal of the return of income for the relevant year i. e. AY 2005-06, it is observed that no such transaction of paying loan or receiving any interest in money lending activity has been accounted for by Habibullah. During the search as well as during the assessment-proceedings, Shri Habibullah has denied the above loan transactions. However, his denial cannot be accepted in view of the facts mentioned above as well as further evidences gathered during the search as discussed in subsequent paras. 7.4. During the search, Shri Chetan Mehta in his statement u/s.132(4) once again confirmed all the above facts. The documents as per page no.5 & 6 of bundle no.1 seized from the residence of Chetan Mehta reveals the fact of loan given by Habibu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rst entry, from 10/6/04 to 10/2/05 Rs.25,00,000/- have been given. Above this entry, '2,50,000/- per month' is written. A word 'Monthly' is written after this entry. As per the second entry, from 19/5/04 to 25/2/05 Rs.20,00,000/- have been given. Above this entry, "2,00,000/- per month is written. A word 'Monthly' is written after this entry. As per the third entry, on 20/4/04 Rs.15,00,000/- have been given. A word 'fix" is written after this entry. As per the fourth entry, on 5/5/04 Rs.20,00,000/- have been given. A word 'fix' is written after this entry. As per the fifth entry, on 12/5/04 Rs.10,00,000/- have been given. A word 'fix' is written after this entry. 7.6.3. Beneath each entry, the amount given is written in words also. At the end, a sentence "Habib ne Chetan ko diya" (Habib gave Chetan) is written and the noting is signed by both Shri Chetan Mehta and Shri Habibullah. When asked to explain this page, Shri Chetan Meht in his statement dated 24.10.2007 stated that this noting is in respect of loan of Rs.90,00,000/- given by Habibullah to him up to the date mentioned in the noting i.e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or sale consideration of Rs 35 lakhs. 3) I have taken Rs.10 lakhs loan from Citi Bank for purchase of office at Bombay (Andheri in 2004-05. This office has been sold in 2005-06 itself for sum of around Rs 20 laks. 4) For my Hinjewadi plant I have taken loan from Habibullah Choudhary residing at Somran apartments, Pimpri Pune-411018, a sum of Rs.1.5 crores in the year 2004 at the rate of interest of 5% which increased to 20% per month. The loan of Rs.1.5 crores was received by me in installment in cash only from Habibullah Chowdhary, I have repaid this loan of Rs.1.5 crores with interest which comes to Rs.5.68 crores [5 crores 68 lakhs only] in period of 2 years from 2004 to 2006. Even after repayment of 5.68 crores to Habibullah Choudhary, he is still claiming additional sum of Rs.88.50 lakhs from me and my company. For the same additional amount he has filed a case vide No. 861/07 against my company and as a director me anul my wife both are attending the court. For the repayment of Habibullah Choudhary's loan, we have withdrawn money from our company account, personal account and hand loan from friends. Also I have availed loan from Bangdia Finance company, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t time, we discussed the same with Habibullah and he asked us to pay him Rs.50 lakhs to finish the money matter with him. But within 3-4 days he started demanding for Rs 68 lace to be paid to him by mid May to finish the money matter. We paid him Rs.68 lakhs by end of May 2006 Since we paid him late by few days, he demanded for another Rs.50 lakhs to be paid to him by 10th June 2006. At that time he made us sign a document which stated that if we could not pay him by 10 June, we would have to pay him Rs.87 lakhs by October 2006. We then paid him an additional Rs.48 lakhs by end of September 2006. From his reply to question No.19,it is also clarified that the loose paper No.6 of Bundle No.1 which is discussed above pertains to the said transaction of cash loan of Rs.1,55,00,000/-only. 7.9. What transpires from the documents, related evidences and statements deposed by Chetan Mehta is that a cash loan transaction had taken place between Chetan Mehta and Habibullah Chaudhary whereby Habibullah had given a total cash loan of Rs.1,55,00,000/- to Chetan in F.Y.2004-05 in mutually convenient installments. 7.10. Even at the residence of Vishal Malhotra who is a c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2,01,68,000 Citi Bank Nil 24,40,000 1,29,32,000 Nil 1,53,72,000 Uco Bank 64,60,000 53,15,000 11,00,000 Nil 1,28,75,000 HDFC Bank Nil 9,50,000 1,00,12,461 Nil 1,09,62,461 Shri Jotiba Nil Nil 7,23,000 10,49,685 17,72,685 The Cosmos Bank 12,62,000 3,45,000 Nil Nil 16,07,000 Indusind Nil Nil Nil 14,90,000 14,90,000 Total 77,22,000 90,50,000 3,75,36,461 99,38,685 6,42,47,146 7.14. It has been stated by Chetan Mehta that the money of 5.68 crores (principal plus interest) has been repaid to Habibullah out of the withdrawals of 6.42 Crores from the bank a/c as mentioned above. As stated by Chetan Mehta he has repaid the principal plus interest of Rs 5.66 crores as under : A.Y.2005-06 Rs.75,00,000/- A.Y.2006-07 Rs.3,25,00,000/- A.Y.2007-08 Rs.1,66,00,000/- Total Rs 5,66,00,000/- 7.15. As per the agreement dated 10.04.2006 between Mehta and Habibullah and Civil suit filed by Habibullah which are annexed as Annexure-III, Mehta had executed a power of attorney in respect of his immovable properties viz. Factory with plant & mach....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 22,50,000 52,50,000 2006- 07 3,25,00,000 97,50,000 2,27,50,000 2007- 08 1,66,00,000 35,00,000 1,31,00,000 Total 5,66,00,000 1,55,00,000 4,11,00,000 7.18. Despite of the clinching evidences, Shri Habibullah has denied to be engaged in any money lending activity, When the facts and statement pertaining to the loans given by Habibullah to Chetan Mehta and other persons were confronted to him, he has given only an evasive reply that those persons are not telling the truth. During the assessment proceedings, the assessee vide letter dated 01.12.2009 was asked to show cause as to why unaccounted loan given by him to Shri Mehta should not be treated as unexplained investment and interest received as unaccounted income. The assessee vide letter dated 24.12.2009 denied of being indulged in any money lending activity. He asked for the copies of relevant documentary evidence as discussed above. The same were given to the assessee. However, no detailed submission rebutting the contents of "Those documents has been made by the assessee. 7.19. In view of the statements of Chetan Mehta given during the search confirming the receipt and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s case where incriminating documents do exists involving the unaccounted payment of loan to Mr. Chetan Mehta. It is fact that the said documents/material were not discovered or served from the premises of the assessee, in our view, the very facts of the said documents constitute incriminating evidence and both assessee and Shri Mehta are searched u/s.132 of the Act, the additional grounds raised by the assessee needs to be dismissed. There was search and seizure action on all these assessees on the same day and therefore, the incriminating information gathered in the said premises of Shri Mehta is rightly used by the Assessing Officer in making assessment. Absence of any incriminating evidence seized from the premises of the assessee, does not alter the incriminating nature of the said documents. Accordingly, the question of document not belonging to the transaction of the assessee does not arise. Considering the admitted position of the nature of incrimination, we are of the opinion that the assessment made based on the documents relied by the Assessing Officer constitutes a validity of assessment. Therefore, additional ground No.(a) raised in appeal by assessee stands dismissed."....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ditions made and dismissed the appeals filed by the assessee vide his office order dated 31.12.2013. 3). Being aggrieved the assessee filed the second appeal before the Hon. ITAT, Pune. In the appellate proceedings before the Hon ITAT the assessee filed an additional evidence in the form of Copy of Civil court's order in favour of assece. ITAT has considered the order passed by the Sixteenth First Class Magistrate, Pune on the regular Criminal complaint against the assessee and others alleging the violation of Section 386, 120(b), 506(2) of Rule 33 of IPC and section 32 & 33 of Bombay Money lending Act wherein the assessee and others are released from charges leveled against them. As discussed in para 6 and Para No.9 (c) of the ITAT's appellate order Nos.ITA Nos.186 to 188/PUN/2014 for A.Y. 2005-06 to 2007-08 and another appeal No. ITA.No.498/PUN/2014 for A.Y. 2009-10 dated 17.10.2018, the ITAT has adjudicated the appeals and has remanded the issue to the file of the Assessing Officer for the A.Y.2005-06 to 2007-08 and also for 2009-10 in the case of the assessee. While setting aside the order in para-9(c) the ITAT has observed that it has fond the order of the 1st Cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... above it is important to note the relevant contents of the order of the 1st First Class Magistrate, Pune dated 09.09.2016. The short story in the form of summary of prosecution before the Court as discussed by the Hon. Court in para 2 of the decision and other issues reproduced as under: Complainant Chetan Suryakant Mehta wanted to start new factory at Hinjwadi hance he was in need of money. Hence through Vishal Malhotra introduced him with Mr Habibullah Abbas Choudhary. Mr. Mehta wanted to establish the new factory, he demanded of Rs.One Crore Fifty lakh from Habibullaha Khan. Together the accused Shri Habibullha has given the amount as under : (i) 19.03.2004 Rs.10,00,000/- (ii) 28.04.2004 Rs. 15,00,000/- (iii) 05.5.2004 Rs.20,00,000/- (iv) 12.05.2004 Rs. 10,00,000/- (v) 19.05.2004 Rs.20,00,000/- (vi) 19.06.2004 Rs.25,00,000/- (vii) 4.08.2004 Rs.50,00,000/- Together an amount of Rs.1,50,00,000/- were paid by Habibulah to Chetan Mehta. 2. It is stated that Rs.1 Crores was taken on 2% interest and Rs.50,00,000 wert taken at 5% interest per month. This amount is used for factory at Hinjewadi. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion proved that accused no.1 had taken signature on consent agreement of complainant on dtd. 6.5.2007 at Mantri lawns., Anand Park, Aundh Pune and in the May -2006 at Faactory of H-Block, MIDC complainants making conspiracy and to putting Gun to the complainant ear? Negative. 4. Can Prosecution proved that became money lender accused no. 1 hd taken signature on consent letter and two agreements of complainant & his family members on dtd 3.5.2006 in the morning 11.30 to 12.00 noon, and criminal conspiracy with other accused to put revolver on the ear on complained? Negative. 5. Can Prosecution have proved that all accused making criminal conspiracy in the motive of demanding forcefully ransom money from Chetan Mehta & his family to showing he is borrower? Negative. 6. What is order Through the Final Decision Accused are free from crime. In para 9 of the said order the discussion about the receipt of the amount of Rs.1,50,00,000 and there is no denial of such receipt of the amount by Chetan Mehta. There is discussion about repayment of Rs.4,50,00,000 and demand of additional amount of Rs.68,00,000/- and threat to shoot with revolver. Hence Meht....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the statement in search action is considered. What transpires from record seized documents is elaborately been discussed at point No.7 to 7.19. It is noted that the total repayment made by Chetan Mehta is Rs.5.66 crores in different years which includes the repayment of principal amount of Rs.1.55 Cr. Therefore, a sum of Rs.4.11 Cr. (6.66 Cr - Rs.1.55 Cr.) is taxable as undisclosed interest income for different assessment years from A.Y. 2005-06 to 2007-08. Since the interest component is approximately 70% of the total amount repaid by Chetan Mehta, whatever amounts have been repaid by Chetan Mehta in a particular assessment year, 70% is taken as the interest and accordingly taxed as interest income for that particular year as discussed in the original assessment order. It is to be noted that in the post assessment the assessee has agitated the order passed by this office before the CIT(A) and also taken-up the matter before the Hon. ITAT A Bench, Pune. In the appellate proceedings before ITAT, he has produced the copy of courts order wherein the assessee has been released from the charges leveled against him by Chetan Mehta for various actions taken by him for recovery o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss under section 292C of the Act. 11.1. So far as the assessee's reliance on some developments in learned criminal court's proceedings is concerned, we are of the considered view in light of GTC Industries Limited vs. ACIT [2017] 80 taxmann.com 284 [Mumbai] [S.B.] that the proceedings under the provisions of the Act are governed by the theory of preponderance of probability than governed by the provisions of the Indian Evidence Act applicable in a criminal court wherein the prosecution is supposed to prove it's case beyond reasonable doubt. It has further come on record that learned Assessing Officer's specific findings extracted in the preceding paragraphs 7 to 7.19 had discussed all the relevant facts whilst retreating the impugned addition and therefore, the mere fact that there is some other similarly placed assessee whose facts are neither here nor there discussed as per section 250(6) of the Act; would not form the sole reason for granting relief to the assessee/respondent herein. We thus reject learned counsel's vehement contentions that we must follow the findings in the criminal court so as to delete the impugned addition since the provisions of Income Tax Act 1961 are ....