MOHINDER TRILOKCHAND KALANI,MUMBAI vs. INCOME-TAX OFFICER,

PER R.S.SYAL, VP :

These appeals by two different but related assesses (father and son) arise from the different orders passed by the

2 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

Commissioner of Income-tax (Appeals)-1, Nashik on 25-08-2014

in relation to the assessment year 2010-11.

legal heir of Late Sh. Trilokchand T. Kalani in ITA

No.1910/PUN/2014. The assessee is part of Kalani group of cases

at Nashik, which was subjected to search and seizure action

u/s.132(1) of the Income-tax Act, 1961 (hereinafter called ‘the

Act’) on 02-02-2011. During the course of search, certain

incriminating documents were found from the residential premises

of the assessee, which were seized. One of such seized documents,

numbered as page no. 147 to 150 of Annexure-A/1, was a Hand

Loan Deposit Receipt dated 04-12-2009 made on a stamp paper of

Rs.100/- between Mr. Trilokchand T. Kalani and Mr. Mohinder T.

Kalani (the payers) and M/s. Karda Construction Pvt. Ltd.

(M/s.KCPL) (the payee) through its Director Mr. Naresh J. Karda.

The said Receipt acknowledged the receipt of hand loan of Rs.2.00

crore by Mr. Naresh J. Karda on behalf of M/s KCPL from Mr.

Trilokchand T. Kalani and Mr. Mohinder T. Kalani for purchase of

agricultural land at Survey No.41/1/1+2+3+4+5+6, total area

admeasuring 3153.73 sq.mtrs, Aanandvali, Nashik. Towards the

security of the said loan, the Receipt records that the payee gave

3 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

three cheques of Rs.40.00 lakh each totaling Rs.1.20 crore in the

name of Mr. Trilokchand T. Kalani and two cheques of Rs.40.00

lakh each totaling Rs.80.00 in the name of Mr. Mohinder T.

Kalani. The said Receipt was signed by Mr. Naresh J. Karda,

Director of M/s. Karda Construction Pvt. Ltd. During the course

of the assessment proceedings, the assessee was asked to explain as

to whether such transaction was recorded in the books of account.

In response, the assessee denied the transaction and submitted that

no such loan was actually given and in fact, no such transaction

took place. The Assessing Officer (AO) observed that the assessee

vide his statement u/s.132(4) had admitted to be involved in

business of money lending, giving hand loan finance, purchase and

sale of land. He further admitted that he had given cash loan to

various persons and against such loans he had taken the cheques as

security. In this backdrop of facts, the AO refused to accept the

contention of the assessee that no transaction actually took place

for which Hand Loan Receipt was found at the premises of the

assessee. He made an addition of Rs.1.20 crore on this count in the

hands of the assessee and a further addition of Rs.80.00 lakh in the

hands of Mr. Mohinder T. Kalani, the other assessee in this batch

of appeals, being the amounts for which the cheques were issued

4 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

by M/s. KCPL. The ld. CIT(A) affirmed the action of the AO

against which the assessee has approached the Tribunal.

material on record. The foundation of the addition is the Hand

Loan Receipt dated 04-12-2009 found from the place of the

assessee at the time of search, whose english translation has been

placed on record. This is a receipt on non-judicial stamp paper of

Rs.100/-. As per this Receipt signed by M/s. KCPL through Sh.

Naresh Karda, being Loan receiver, there is a description of

property, namely, land bearing Survey No. 41/1/1+2+3+4+5+6,

admeasuring 3153.73 sq.mtrs situated at Aanandvali, Nashik,

which was sought to be purchased by the M/s KCPL. Para 2 of the

Hand Loan Receipt records that both the payer and the payee of the

loan are familiar and well connected. Then there is clear cut

mention of Karda Construction Pvt. Ltd. having received loan

from Mr. Trilokchand T. Kalani and Mr. Mohinder T. Kalani, the

relevant part in this regard reads as under :-

“2) ….We wanted to purchase the property mentioned in para 1, from its previous owners, in our name. We need financial assistance to purchase the said property, we made a request to you for hand loan to us and in view of our request, our business and on demanding a hand loan of Rs.2,00,00,000/- ( in words two crore only) from us, you accepted our request of hand loan considering our business, our financial situation and our needs and you have already paid us an

ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

amount of Rs.2,00,00,000/- ( in words two crore only) by cheque and in cash from time to time. We have received the said amount and we acknowledge to have received the same. We have no grievance or objection of the same and there will be no complaints after this.

3) You have given this amount without interest to us for use and we shall refund the said amount by the cheques written hereunder, the said amount is to be returned without any reason or complaint and we hereby give assurance to you by this HAND LOAN RECEIPT for the same.

4) You shall recover the said amount time to time by depositing the cheques as mentioned hereunder. If we fail to refund the said amount to you or refused to pay the said amount or if the said cheques are dishonoured and you will not received the cheque amount then you shall take necessary legal action for recover the said amount and we will be responsible for the expense incurred by such legal action.

The cheque details of the refund amount is mentioned as under :

The cheques of the Business Co-op. Bank Ltd. Branch Nashik Road, as mentioned below, have been issued in favor of Mr. Trilokchand Tejandas Kalani :

Sr.No. Cheque No. Amount Date 1 973769 40,00,000/- 01/05/12 2 973770 40,00,000/- 01/08/12 3 973771 40,00,000/- 01/11/12 Total 1,20,00,000/-

The cheques of the Business Co-op. Bank Ltd., Branch Nashik Road, as mentioned below, have been issued in favor of Mr. Mohindar Trilokchan Kalani.

Sr.No. Cheque No. Amount Date 1 973772 40,00,000/- 01/02/13 2 973773 40,00,000/- 01/05/13 Total 80,00,000/-

Thus we have issued the cheques against repayment of hand loan amount Rs.2,00,00,000/- (in words two crore only) which we have taken from you. You should present the said cheques on respective date and encash the cheque amount. To honor the said cheques no respective date shall be our responsibility.

6 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

Receipt, it is clear beyond any shadow of doubt that Sh. Karda

received a sum of Rs.2.00 crore from both the assessees under

consideration and further such a receipt was in parts and the

process of receipt of the amount by Sh. Karda on behalf of M/s

KCPL got over on 4.12.2009, when he acknowledged to have

received loan of Rs.2.00 crore from them. It is further evident that

the loan was taken for a specific purpose, being, purchase of the

agricultural land as described in the Hand Loan Receipt. Pursuant

to the remand by the ld. CIT(A), the AO made further enquiries

from M/s KCPL, which though denied to have received loan from

the assessee, but accepted that the transaction of purchase of

agricultural land as mentioned in the Receipt did take place and

further it did not positively declare the source of receipt of money

for the transaction. It is very clearly written in the Receipt that:

`you have already paid us an amount of Rs.2,00,00,000/-. We have

received the said amount and we acknowledge to have received the

same. Para 3 of the Receipt categorically records `You have given

this amount’ and then there is undertaking that `we shall refund the

same amount of the cheques written hereunder.’ Not only that,

there is an apparent mention of Name of the bank, cheque Nos.,

7 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

amount and date through which the loan was proposed to be

repaid. There is a further mention that the cheques have been

issued in favour of both the assesses. Three cheques of Rs.40.00

lakh each dated 01-05-2012, 01-08-2012 and 01-11-2012 were

issued in favour of the assessee under consideration and two

cheques of Rs.40.00 lakh each dated 01-02-2013 and 01-05-2013

were issued in favour of Sh. Mohinder T. Kalani, the other

assessee in this batch of appeals. All these dates are post the

receipt of Hand Loan. Once we examine the Hand Loan Receipt in

entirety, it becomes manifest that the assessees under consideration

had given loan of Rs.2.00 crore to M/s. KCPL. The fact that the

entire transaction of Rs.2.00 crore has not been recorded in the

regular books of account of both the assesses, is not disputed. The

denial of transaction by M/s. KCPL in the subsequent proceedings

is of no avail in view of unambiguous incriminating evidence

found during the course of search from the residential premises of

the assessee. The ld. AR contended that non-signing of such a

document by the assessee proved that the same was not acted upon.

We do not agree with this contention. Unlike an agreement, which

is required to be signed by all the parties to it, a receipt for money

is to be signed only by the person receiving it. There is no

8 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

requirement that the payer of the money should also sign the

Receipt of money. Since the obligation to return the money is of

the payee, it is he who has to sign the Receipt. We, therefore, hold

that the authorities below were fully justified in not accepting the

contention of the assesse that he had not given any such loan to Sh.

Karda on behalf of M/s KCPL.

reading as under :

“1. Without prejudice to the other grounds, the Ld. Assessing Officer as well as CIT(A) erred in confirming addition without giving the benefit of telescoping against the income already offered/addition made in the hands of the Appellant/group concerns.”

the benefit of telescoping against the income already

offered/addition made in the hands of the assessee. The ld. DR did

not raise any serious objection to the admission of the additional

ground. We, therefore, admit the additional ground and take it up

for disposal on merits.

given the benefit of telescoping of other undisclosed income suo

9 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

motu offered or the addition made in respect of such undisclosed

income. The ld. DR objected to the same.

material on record. If some undisclosed income is earned by an

assessee, which has been offered/taxed either by way of surrender

or addition and such undisclosed income is found to be utilised

elsewhere, then, obviously the spending of such an income will not

again attract taxation. Undisclosed inflow of income taxed gets

telescoped into the undisclosed outflow of income.

Taxability/addition can be only to the extent of the higher of the

undisclosed income/expenditure.

of the seized documents found during the course of search, whose

copy has been placed on record at page 62 of the paper book,

contained details of loan given by the assessees to the tune of

Rs.1,22,06,750/- in July, 2008. Thereafter, this document records

interest from July, 2008 to August, 2009 at Rs.1,22,06,750/- per

month. There is reference of further interest of Rs.1,54,472/- at the

end of the calculation with remarks “9 Sept to March-10”. Two

things are discernible from the document. First is that the assessee

10 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

advanced a loan of Rs.1.22 crore from undisclosed sources in July,

2008, out of which a sum of Rs.1.00 crore was received back in

August, 2009. Second is that on such a loan made out of

undisclosed sources, the assessee earned interest income of Rs.15

lakh and odd. It is an admitted position that the assessee offered a

sum of Rs.1.37 crore (Rs.1.22 crore towards principal amount of

loan and interest of Rs.15 lakh) for taxation in his return for the

A.Y. 2009-10. While finalizing the assessment of the assessee for

A.Y. 2009-10, the AO noted discrepancy in calculation of interest

on such principle of Rs.1.22 crore for the period July, 2008 to

March, 2009 and made further addition of Rs.1,98,603/-. Apart

from that, for the year under consideration, the assessee had suo

motu offered interest on such loan as income amounting to

Rs.6,51,657/-. Continuing with the same discrepancy, the AO

made further addition of Rs.91,085/-. Thus, the position which

emerges from the above discussion is that the assessee got taxed

for a sum of Rs. 146.4 lakh and odd in his assessments for the

A.Ys. 2009-10 and 2010-11. The ld. AR contended that surrender

of income of Rs.1.37 crore for the A.Y. 2009-10 has not been

assailed in further appeals and further the additions made by the

AO for the A.Y. 2009-10 at Rs.1,98,603/- and for the A.Y. 2010-

11 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

11 at Rs.91,805/- have also not been challenged, thereby allowing

the finality to happen. It is thus evident that the loan of Rs.22 lakh

as advanced out of Rs.1.22 crore in July, 2008 continued up to the

date of advancing of Hand loan of Rs.2.00 crore to M/s KCPL up

to 4.12.2009. The crux of the matter is that out of the above

surrendered/taxed undisclosed income, the assessee had

availability of funds to the tune of Rs. 1,24,42,065/- (Rs.1.00 crore

received back out of principle amount of Rs.1.22 crore + Interest

income of Rs.15.00 lakh for the A.Y. 2009-10 and Rs.6,51,657/-

offered for taxation for the A.Y. 2010-11 + addition of interest

made by the AO at Rs.1,98,603/- for the A.Y. 2009-10 and

Rs.91,805/- for the A.Y. 2010-11) for use. The loan in question

was given up to 04-12-2009, meaning thereby that the amount of

income earned by the assessee and subjected to tax for the A.Yrs.

2009-10 and 2010-11 comes to Rs.1,24,42,062/-, which was

available with the assessee at the time of advancing loan to M/s.

KCPL. The Department has not shown that such an amount was

spent elsewhere. In that view of the matter, it will have to be

presumed that such amount was utilized by the assessees in

question in advancing loan of Rs.2.00 crore to M/s. KCPL. The

advancing of total loan of Rs.2.00 crore by the assessee and his son

12 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

Sh. Mohinder T. Kalani to M/s KCPL is treated as explained to the

extent of Rs.1.24 crore. Since addition of Rs.1.20 crore has been

made in the hands of the assessee on this count, we allow the

benefit of telescoping and order to delete the addition of Rs.1.20

crore. The balance amount of available funds to the extent of

Rs.4,42,062/- will be considered for telescoping in the hands of

Mr. Mohinder T. Kalani.

appeal, which hereby stand dismissed.

@10% on the amount of tax payable. The ld. AR contended that

no surcharge was payable for the relevant year. The AO is directed

to verify the contention of the assessee and then proceed as per law

accordingly.

filed by Sh. Mohinder Kalani for the A.Y. 2010-11.

of addition of Rs.80.00 lakh towards loan advanced to M/s KCPL

through the Hand Loan Receipt dated 4.12.2009 as discussed

above. Both the sides agreed that the facts and circumstances of

13 ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

this appeal are similar to those of the appeal in the case of Sh.

Mohinder Kalani legal heir of Sh. Trilokchand T. Kalani, father

of the instant assessee. While disposing off the above appeal in

ITA No.1910/PUN/2014, we have deleted the addition of Rs.1.20

crore by allowing the benefit of telescoping. The amount still

available for the benefit is Rs.4,42,065/-. We, ergo, allow the

benefit of telescoping to the instant assessee to the extent of

Rs.4,42,065/- on the same raison détre and sustain the remaining

addition of Rs.75,57,935/- (Rs.80 lakh minus Rs.4,42,065/-).

Order pronounced in the Open Court on 04th October, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 04th October, 2019 सतीश

ITA Nos.1910 & 1911/PUN/2014 A.Y. 2010-11

आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-1, Nashik

/ True copy // आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 01-10-2019 Sr.PS 2. Draft placed before author 01-10-2019 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *