TaxTMI 
TaxTMI 
2024 (8) TMI 1597
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....nd the implication, it would be necessary to take note of the facts of one appeal. We are, accordingly, narrating the facts, as they appear in the appeal in ITA no. 106/Nag./2023, for assessment year 2016-17. ITA no.106/Nag./2023 Assessee's Appeal - A.Y. 2016-17 3. In its appeal, the Revenue has raised following grounds:- "1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 87,00,000/- on account of cash loan u/s 69A of the I.T. Act, 1961, without appreciating the fact that the addition of Rs. 87,00,000/- made by the AO was supported with finding as per the document seized during the search action u/s 132 of the I. T. Act, 1961. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 1,25,25,852/- on account of interest income earned on the cash loan advanced, without appreciating the fact that the addition of Rs. 1,25,25,852/- made by the AO was supported with finding found as per the document seized during the search action u/s 132 of the I.T. Act, 1961. 3. Whether on the fact and in the circumstances of case, Lt. CIT(A) is correct in holdi....
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....so found documents pertaining to my money lending business and the same were impounded and inventorised as Anx. B1 to B 20. The seized documents included Goldy DM Book (Anx B18 to B20) wherein the details of interest on money lent on Hundi/cash Loan to various parties have been recorded. The particulars in the said book indicate the names of the borrowers and lenders in the coded in the form of initials of their names. As against these names are written the amounts again in coded form, for example 100 indicates 1 Lakh, rate of interest and amount of interest and the due dates on which the borrowers have to repay the amounts and if extensions are sought by the borrowers, the extended dates also are mentioned. That the documents seized contain transactions which have been entered either through Cheques / Banking channels or Cash Transactions. The transactions entered through cheques have been verified by the learned assessing officer. The brokerage earned on said cheque transactions has been accounted for in the books of account and offered for taxation. 7. The Assessing Officer has categorically stated in the assessment order that on verification of documents it was found that th....
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....terest thereon proposed by him as income of the appellant. On verification of the documents, it is found that there is no dispute that the appellant is finance broker who arranges loans for needy customers on commission basis from the parties having funds to advance on interest. It is also not disputed that during the A.Ys. in consideration, the appellant has arranged loans transacted in cheque mode and cash mode. The transactions transacted in cheque mode have been accepted by the AO to have been recorded in the books of the borrowers and lenders concerned. The only Page 20 of dispute is about the transactions carried out in cash. The AO has not accepted the contentions of the appellant and concluded the sums involved as investments of the appellant and treated the interest accrued thereon as his income of the corresponding periods. The AO has concluded in the assessment order that the appellant was involved in money lending directly in addition to his brokerage business of money lending. The arguments of the AO in his assessment orders in this regard are as under: "During the assessment year concerned the assessee has advanced cash loans and no interest has been....
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....he AO did not find any flaw in the appellant's contention wherein no cheques of the borrowers were found in possession of the appellant. Merely on the basis of cheques retained by the appellant towards surety of the funds of the lenders, no conclusion can be drawn about the ownership of the money involved. The appellant's contention is that the lending and borrowing always takes place on principal to principal basis between lender and borrower and it was only for the purpose of keeping track of the entitlement of his brokerage the appellant maintained the said diaries. In this context the proposition of the Ld. Counsel of the appellant referred to the decisions by the Pune Tribunal in the case of Ramanlal P Chordia vs. ACIT, 87 TTJ 713 and by the Mumbai Tribunal in the case of Biren V Sawla vs. ACIT, 100 TTJ 1006 are found squarely applicable to the case of the present appellant. In the cited cases also, the appellant were finance brokers and certain diaries were seized from their possession containing records of cash transactions. It was held by the Hon'ble Tribunals that the amount recorded in the diaries is not the assessee income and cannot be taxed under section 69....
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....d by the appellant as interest thereon ignoring that the entries in the seized diaries did not reflect that the appellant was receiving interest. The appellant's contention is that the lenders were entitled for the interest on the loan amount and he was entitled for brokerage only. If the commission earned on the said transactions have been accepted by the AO and brought to tax, there is no reason why interest on principal so advanced be taxed again. No evidence has been collected from the borrowers as to any interest payment to the appellant. Besides, apart from the entries in the diaries, no evidence was found to establish that the sums given on loan were belonging to the appellant. Last but not the least, no cash or asset was detected from the appellant which could be source for the so much of money advanced as loan by him." 9. Before us, the learned A.R. reiterated the above submissions which are reproduced below:- "That during the course of search, cash and jewellery were found and seized as detailed below:- Sr. no. Particulars Amount Remarks 01 Cash seized from Locker Rs. 79,000 That during the course of assessment proceedings the same ....
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....ecorded. That, in response to the notice issued u/s 153C, the assessee offered additional brokerage income on cash loan transactions for taxation (Refer Page 8 & 24 of learned CIT(A) order) which has been accepted by the learned AO in the assessment orders passed. 2.2.3 Therefore, the learned AO having accepted brokerage income earned from cash loan transactions between lenders and borrowers, the learned AO erred in making additions on alleged unexplained loan and interest u/s 69A in the hands of the assessee. The learned AO cannot blow hot and cold at the same time. 2.3 Presumption under section 132(4A) applies vis-a-vis entire content of seized document 2.3.1 The provisions of section 132(4A) raise a statutory presumption, that the contents of the seized diaries are true. The learned AO accepted that, transactions recorded in diary which were carried out through banking channels was between lenders and borrowers and the assessee earned only commission income. Thus, the assessee has simultaneously discharged the burden lay on him by submitting that, when from the same diaries hundi/ cheque outgoings are treated as investments of the lenders, the similarl....
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....no evidence of large scale hidden or secret wealth. As per the Statement of Affairs for the years under appeal submitted during the course of assessment proceedings reveal that at the age of 54 Years and after putting so many years of hard work the assessee capital as of 31.03.2019 is at Rs 73,52,757.00. Considering the meagre capital it is not at all possible for the assessee to make such huge amount of Investments. 2.5.2 The assessee had submitted particulars of household withdrawals for the years under consideration before learned AO. The assessee had submitted that, he belonged to a Middle Class family having a very moderate standard of Living and education of both the Daughters have been from Saint Joseph School, LIC Square, Nagpur under free education scheme of the Government the amount withdrawn towards household expenses is reasonable and sufficient to take care of our expenses. (Refer Para 10, page 6 of assessment order for AY 2016-17) 3. Legal precedents * Copy of Judgment in Biren V. Savla v. Assistant commissioner Of Income-Tax, Central Circle 11 [2006] 155 Taxman 270 (Mumbai) (Mag.)/[2006] 100 TTJ 1006 (Mumbai ITAT) (Refer pages 1-38 of paper....
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....ry to examine the veracity of the seized documents. It is not the case that the Assessing Officer did not have the particulars of lenders before him. He did not understand the trite fact that an individual lender cannot earn brokerage from himself which is an impossible situation when the assessee had denied that his own funds were involved in cash loans, the Assessing Officer needed to controvert the same by unearthing some corroborative evidences which he had miserably failed to do so. There are absolutely no credible and reliable evidences to establish that entire loans in cash were from the undisclosed funds whereas loan in cheques were accepted to be that of person other assessee and his role as a conduit or a mere intermediary was established. It is quite natural that the assessee is in a vantage position to mediate for loans in cash also. We further infer that - (i) A document seized in the search should be read as a whole. (ii) No party can pick and choose one part of document for its advantage. (iii) If an explanation relating to a transaction is found in the seized material, the same has to be considered. The onus will shift on to the Department....