SUNSHINE PROJECTS PRIVATE LIMITED,MUMBAI vs. DCIT- CENTRAL CIRCLE 16(2), MUMBAI, MUMBAI

Ground Nos. 1 to 4 raised by the assessee are interrelated and interconnected and relates to challenging the order of the learned CIT(A) in confirming the addition made by the AO of Rs. 82,80,000/- on account of interest payment calculated at the rate of 15% on Rs. 5,52,00,000/- in the hands of the assessee under section 69C of the Income Tax Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

We have heard the counsels for both the parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we notice that in the present case, the additions were made by the AO under section 69C on account of information received by the Assessing Officer from the Investigation Wing to the effect that a search and survey action under section 132 of the Income Tax Act was carried out in the case of M/s. Evergreen Enterprises.

Mr. Nilesh Bharani was one of the partners of M/s. Evergreen Enterprises, and the documentary evidences found during the course of search, as well as the statements on oath of Mr. Nilesh Bharani, Jagdish Tarlamani, Ashwin Rathore and Vibha Sachin, were also recorded under section 132(4) of the Income Tax Act. During the course of search proceedings, an undisclosed activity of money lending and borrowing in unaccounted cash, being operated at the premises of M/s. Evergreen Enterprises by its key person, Nilesh Bharani, was unearthed.

From their statements, according to the AO, it was established that Mr. Nilesh Bharani had given cash loans to several individuals and business concerns. In this regard, he relied upon the statement recorded under section 132(4) of the Income Tax Act of the said Nilesh Bharani, wherein he had specifically confessed in answers to Questions Nos. 17, 18, 19 and 20 that he was involved in cash loan lending and borrowing.

It was also pointed out that Nilesh Bharani had disclosed in his statement that he had arranged private loans for several borrowers and earned brokerage income therefrom.

As far as the interest part is concerned, it was admitted that the same was usually charged at the rate of 15% per annum on the principal amount, though it varied from party to party. As far as brokerage is concerned, the same was charged at the rate of 0.6% per annum on the principal amount.

Thus, in this way, the parties to whom cash loans were given by Nilesh Bharani had also been identified by the Investigation Wing, and it was found that an amount of Rs. 5,52,00,000/- was received in cash by the assessee from Nilesh Bharani. Thus, on the basis of these findings, the assessment was reopened and reassessed after providing an opportunity of hearing to the assessee and also providing video conferencing facilities. Ultimately, the additions were made in the case of the assessee.

Although the assessee challenged these additions before the learned CIT(A), the same were upheld by the learned CIT(A).

Before us, the counsel for the assessee submitted that the assessee had not received any cash amount from Nilesh Bharani. However, on the facts, we notice that Nilesh Bharani, one of the key persons of the assessee company who subsequently became its director, is the same person who was found during the search proceedings to be extensively involved in money lending and borrowing activities in unaccounted cash through M/s.

It is important to mention that this fact assumes critical importance in the present proceedings and has also been examined in detail by the Revenue authorities.

We also notice that during the course of search and seizure action in the case of Evergreen Enterprises, it was found that the said Evergreen Enterprises, a partnership firm, was engaged in money lending and borrowing activities. As far as the statement of Nilesh Bharani is concerned, he categorically mentioned that he was a partner of Evergreen Enterprises and was also connected with the assessee company, being a key person and thereafter a director.

The statement of the said Nilesh Bharani was recorded on various dates, and since the recorded statement ran into 70 pages, it covered multiple aspects of the loan transactions undertaken by the said Nilesh Bharani through M/s. Evergreen Enterprises.

Apart from this, we notice that this statement forms the foundation of the entire assessment proceedings, and the said statement also assumes particular significance because Nilesh Bharani is not merely a third party, but is himself a director as well as a key person of the assessee company, thereby creating a direct nexus between the lender and the borrower.

The entire aspects with regard to the admission regarding money lending business, admission regarding the interest rate and modus operandi, and also with regard to cash transactions were specifically dealt with by the said Nilesh Bharani and were also duly examined and verified in detail by the Revenue authorities. The findings of the Revenue authorities are recorded hereinbelow:

From the above discussion, we find that it was confirmed by Nilesh Bharani himself that a stapled bunch of 8 pages of computer printouts, in which the first 7 pages were numbered serially as page Nos. 1/7 to 7/7 at the right bottom, with the heading and sub-heading as "Evergreen Enterprises", borrower-wise monthly balance reports, and columns mentioning the amount given and the amount received, were clearly depicted. The admission of the said Nilesh Bharani is also quite important as it goes to establish that Evergreen Enterprises and Nilesh Bharani, one of its partners, were actively involved in money lending activities involving hundreds of crores of rupees, as the aggregate closing balance of the loans outstanding as on 28th February, 2014 was Rs. 276,96,90,000/-, which demonstrates the scale of money lending operations being conducted.

Even otherwise, the said Nilesh Bharani had also made specific admissions regarding the interest rates charged and the modus operandi of the loan transactions. The relevant portion of the statement of the said Nilesh Bharani is at page 39, in answer to Question No. 60, which has already been discussed by us above, wherein there was a categorical admission and confirmation that a stapled bunch of 10 pages of computer printouts, numbered as page Nos. 1/10 to 10/10, contained the borrower report in regard to Sunshine Group and, under the heading and sub-heading on each page as "Evergreen Enterprises", contained a list having columns such as Date, Lender, Rate/Interest Rate, Principal, Repayment, Interest Amount, TDS and Net, and was also marked serially as page Nos. 29 to 38 of Annexure A1.

The said document was also admitted to have been found during the course of search while recording the statement under section 132(4) of the Income Tax Act.

Since it was argued on behalf of the assessee that the said Nilesh Bharani had retracted the statement made by him, in this regard, a categorical finding has been recorded by the Revenue authorities, wherein it has specifically been mentioned that the said retraction was made by Nilesh Bharani on 18th May, 2023, which was more than five and a half years after the original statement was recorded during the search proceedings, and the cross-examination was conducted through video conferencing at the request of the assessee.

However, the fact that Nilesh Bharani, who is a director of the assessee company, appeared through video conferencing along with the assessee company and made a denial statement, but when confronted with the earlier detailed admissions made during the search proceedings, the only answer given by the said Nilesh Bharani was that he had nothing to say in the matter. This, according to the findings recorded by the Revenue authorities, demonstrates that his denial during cross-examination was an afterthought and was intended to help the assessee company in order to escape its tax liability, more particularly in the background of the fact that the said Nilesh Bharani was exercising a dual role as the director of the assessee company and also as a partner of the lending company, Evergreen Enterprises, thereby creating a conflict of interest. The argument raised by the assessee that no addition can be made on the basis of a solitary statement is not sustainable.

In this regard, it is important to mention that the addition in the present case has not been made merely on the basis of a solitary statement. We cannot lose sight of the fact that the statement of Mr. Nilesh Bharani, who exercised a dual role as a partner of Evergreen Enterprises and also as a key person and director of the assessee company, was recorded during the course of search under section 132(4) of the Income Tax Act, and the said statement contains admissions made on oath.

Thus, the onus was upon the assessee to rebut the said admissions, and in this regard, no positive evidence has been led by the assessee to rebut the statements recorded under section 132(4) of the Income Tax Act.

Moreover, the said Nilesh Bharani had categorically confessed in answers to Questions Nos. 17, 18, 19 and 20 that he was involved in cash loan lending and borrowing and had also disclosed in his statement that he had arranged hand loans for several borrowers and earned brokerage income.

Apart from this, documents in the form of a stapled bunch of eight pages of computer printouts and also a stapled bunch of 10 pages of computer printouts, numbered as page Nos. 1/10 to 10/10 and page Nos. 1/7 to 7/7, contain details of loan transactions and cash loan transactions entered into by the said Evergreen Enterprises and facilitated by Nilesh Bharani.

Thus, in this way, the statement recorded during the course of search is also coupled with documentary evidence, and a clear admission has been made by the said Nilesh Bharani.

These documents specifically relate to loans given to Sunshine Group companies, and the said Nilesh Bharani also admitted in his statement that the same pertained to Financial Year 2016-17, relevant to Assessment Year 2017-18.

Even otherwise, the Hon'ble Supreme Court in Kishori Lal v. Mt. Chaltibai, AIR 1959 SC 504 considered the evidentiary value of an admission and the fact that an admission shifts the onus in terms of section 31 of the Evidence Act (now section 25 of the Bharatiya Sakshya Adhiniyam, 2023), and held that:

Therefore, considering the totality of the facts and circumstances as discussed in detail by us, and also keeping in view the decision of the Hon'ble Supreme Court in the case of Kishori Lal (supra) and the decision of the Hon'ble High Court in the case of Nayyar Patel (supra), we also hold that the statement made by Nilesh Bharani during cross-examination was contrary to his detailed admissions made during the search proceedings, which could not be explained or substantiated by him when confronted.

Thus, in this way, the said retraction cannot be relied upon to negate the conclusion that the assessee had received undisclosed cash loans.

Even otherwise, no new facts, circumstances or documents have been placed on record by the assessee in order to controvert or rebut the findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Hence, we dismiss the grounds raised by the assessee and uphold the order of the Ld. CIT(A).

In the result, appeal filed by the Assessee stands dismissed.