MOHINDER TRILOKCHAND KALANI, L/H. OF LATE SHRI TRILOKCHAND T KALANI,,MUMBAI vs. INCOME-TAX OFFICER,, NASHIK

PER R.S.SYAL, VP :

This appeal by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals)-1, Nashik on 26-09-2014 in relation to the assessment year 2011-12.

2 ITA No.1984/PUN/2014 A.Y. 2011-12

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

called ‘the Act’) was taken against Kalani group of cases on

02-02-2011. The assessee is member of the Kalani group. During

the course of search, certain incriminating documents were found.

Some of such documents, which formed the bedrock for the

addition in the instant assessment, are certain loan receipts/cheques

issued by certain parties found at the premises of the assessee. The

Assessing Officer (AO) sought explanation of the assessee qua

these loan receipts/cheques and made the addition on not being

satisfied with the explanation so tendered. The action of the AO

was echoed in the first appeal. Now the assessee is in appeal

before the Tribunal seeking relief on this count.

material on record. We will take up the addition, made on the

basis of loan receipts/cheques found during the course of search, in

seriatim.

been issued by M/s. Govind Ram & Sons. During the course of

search, statement of the assessee was recorded u/s.132(4) of the

Act and he was asked to explain the nature of such cheques. In

3 ITA No.1984/PUN/2014 A.Y. 2011-12

reply to question No.17, he stated that he was doing business inter

alia of Hand Loan Finance and in such business he had given cash

loans to various persons after taking cheques as security. He

further admitted that the loans given by cheques were duly

reflected in the books of account. The assessee was called upon to

explain the nature of cheques of Rs.22.00 lakh issued by M/s.

Govind Ram & Sons and found at his premises. The assessee

stated during the course of assessment proceedings that original

loan of Rs.13.75 lakh was given to M/s. Govind Ram & Sons out

of which Rs.4.00 lakh was received back and total cheques of

Rs.22.00 were taken as security including the projected interest

cost. The AO found that there was no loan shown to have been

given by the assessee to M/s. Govind Ram & Sons. However, such

a loan was appearing in the balance sheet of his son, Mr. Mohinder

T. Kalani, with closing balance at Rs.10.60 lakh, which was being

shown from the A.Yrs. 2005-06 to 2011-12. Out of total cheques

of Rs.22.00 lakh, cheques totaling Rs.14.00 lakh were in the name

of Mr. Mohinder T. Kalani. Since the remaining cheques of

Rs.8.00 lakh were payable to self, the AO made addition for such

Rs.8.00 lakh in the hands of the assessee, which came to be

affirmed in the first appeal.

4 ITA No.1984/PUN/2014 A.Y. 2011-12

loan to M/s. Govind Ram & Sons is concerned, it was admittedly a

loan given by Mr. Mohinder T. Kalani. He further submitted that

an addition on this score concerning the cheques in his name was

made in his hands, which was challenged before the Tribunal.

Placing on record a copy of the order passed by the Tribunal dated

04-09-2019 in ITA No.321/PUN/2016, the ld. AR submitted that

such an issue has been restored to the file of AO for fresh

adjudication. It was fairly submitted that in sofaras the addition of

Rs.8.00 lakh on account of cheques made in the hands of the

assessee is concerned, the same may also be examined in the hands

of Mr. Mohinder T. Kalani along with giving effect to the afore

referred Tribunal order. The ld. DR did not raise any objection to

the same.

Sh. Mohinder T Kalani and not the assessee. Further such cheques

of Rs.8.00 lakh were not in the name of the assessee. Possibly,

such cheques may have relation only with loan transaction in the

hands of Sh. Mohinder T Kalani, which issue has been restored by

the Tribunal to the AO for fresh adjudication. In view of the

foregoing discussion and agreeing with the common submission,

5 ITA No.1984/PUN/2014 A.Y. 2011-12

we direct to delete the addition of Rs.8.00 lakh in the hands of

assessee and simultaneously hold that the same may be examined

in the hands of Mr. Mohinder T. Kalani.

cheques found at the premises of the assessee having been issued

by M/s. Karda Construction. Such cheques amounted to

Rs.1,53,50,000/-. On being called upon to explain and correlate

such cheques with the loans given to M/s. Karda Constructions, the

assessee gave cheque-wise explanation which has been recorded

on pages 6 and 7 of the assessment order. The AO got convinced

with the genuineness of the transactions in respect of cheques from

Sl. Nos. 9 to 15 and did not make any addition on that score.

Against Cheque at Sl. No.16 again he did not make any addition.

He, however, added Rs.1.08 crore towards cheques at Sl. Nos. 6 to

8 and 17 to 20 by noting that the assessee’s contention of Mr.

Naresh J Karda of Karda Constructions inadvertently forgetting

these cheques at the premises of the assessee, was without force.

The ld. CIT(A) affirmed the addition.

material on record, it is found as an admitted position that cheques

amounting to Rs.1.08 crore issued by M/s Karda Constructions

6 ITA No.1984/PUN/2014 A.Y. 2011-12

were found at the assessee’s premises. The assessee failed to co-

relate such cheques with the recorded loan transactions.

Considering the fact that the assessee himself admitted during the

course of search that he was engaged in the business of making

cash loans on receipt of security by cheques, it has to be held that

such cheques found at the premises of the assessee were

representing security for the loans advanced, which were not

recorded in the books of account of the assessee.

one taken in his appeal for the A.Y. 2010-11 seeking the benefit of

telescoping. The ld. DR did not raise any serious objection to the

admission of this additional ground, which is hereby admitted for

disposal on merits.

2010-11 by firstly sustaining the addition of Rs.2.00 crore and then

allowing the benefit of telescoping to the extent of available

undisclosed income already taxed. Following the same reasoning,

we hold that the addition on this count is warranted and also

benefit of telescoping should be given. While giving the benefit of

telescoping for the preceding year, we did not allow the benefit of

Rs.22,06,750/- because the same was unrecovered at the time of

7 ITA No.1984/PUN/2014 A.Y. 2011-12

advancing loan of Rs.2.00 crore which was subject matter of

addition for the preceding year. In view of the fact that

Rs.22,06,750/- was suo moto offered by the assessee as his

undisclosed income along with certain other income, the benefit of

such a portion, which has not been allowed for the preceding year,

is now available to be adjusted against the income for the current

year. Thus, the extent of the benefit of telescoping for the year

would be Rs.22,06,750/- as against the addition of Rs.1.08 crore.

We, therefore, sustain the addition of Rs.85,93,250/- (Rs.1.08 crore

minus Rs.22,06,750).

found as having been issued by Mr. Manohar B.Sadhwani and

another addition is of Rs.5.00 lakh on the basis of cheques issued

by Mr. Baldeva and found from the assessee’s premises. The AO

made addition totaling Rs.15.00 lakh on the basis of such cheques

found, which was countenanced in the first appeal.

explanation in respect of these two amounts. We, therefore, sustain

the additions of Rs.10.00 lakh and Rs.5.00 lakh.

8 ITA No.1984/PUN/2014 A.Y. 2011-12

given/cheques found to have been issued by Mr. Pradip D. Kalani

amounting to Rs.34,67,560/-.

at the time of search acknowledging receipt of Rs.5.00 lakh which

was signed by Mr. Pradip D. Kalani on behalf of Deejay

Distilleries P. Ltd. Page 95 of the paper book is again a copy of

receipt of Rs.15,50,000/- signed by Mr. Pradip D. Kalani on behalf

of the Deejay Distilleries P. Ltd. Similar is the position regarding

page 96 of the paper book which records cash receipt from the

assessee amounting to Rs.15.50 lakh. Last is page 98 of the paper

book which records receipt of Rs.5.00 lakh. These 4 pages total to

Rs.41.00 lakh. The assessee failed to show that such cash loan

transactions were recorded in his books of account. The AO made

the addition on the basis of such incriminating evidence found

during the course of search by treating the same as loans advanced

by the assessee to Mr. Pradip D. Kalani in cash. The ld. CIT(A)

affirmed such an addition.

material on record, it is seen that these are receipts of Rs.41.00

lakh duly signed by Mr. Pradip D. Kalani on behalf of Deejay

9 ITA No.1984/PUN/2014 A.Y. 2011-12

Distilleries P. Ltd. affirming that he received cash loans to this

extent. Since such loans were not recorded in the books of account

of the assessee and there is direct evidence available showing the

advancing of such loans, in principle, such amounts need to be

added to the total income of the assessee.

offered Rs.5.00 lakh in relation to transaction depicted at page 98

of the paper book in his own return of income for the A.Y. 2011,

which if taxed, would amount to double taxation. The ld. DR

objected to the same.

score that the addition to the extent of Rs.5.00 lakh should be

deleted as the equivalent amount of income was offered by Mr.

Pradip D. Kalani as his income. What is material for our purpose

is the taxability of the amount of income earned by the assessee

and not disclosed the same for tax purposes. As it is the assessee

who gave loan of Rs.5.00 lakh to Mr. Pradip D Kalani out of his

undisclosed income, the same has to be taxed in his hands. It is

trite that income should be taxed in the hands of the right person as

has been held in ITO vs. Ch. Atchaiah (1996) 218 ITR 239 (SC).

We, therefore, hold that such an amount of Rs.5.00 lakh should be

10 ITA No.1984/PUN/2014 A.Y. 2011-12

subjected to tax in the hands of the assessee. However, it is made

clear that Sh. Pradip K Kalani is entitled to take recourse to the

legal remedies available to him for ensuring that he is not

wrongfully charged to tax.

making the addition of Rs.41.00 lakh in the hands of assessee as

there was sufficient evidence to the effect that the assessee

advanced cash loan to Sh. Pradip D Kalani out of his undisclosed

income.

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 No.1984/PUN/2014 A.Y. 2011-12

आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत 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 03-10-2019 Sr.PS 2. Draft placed before author 03-10-2019 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. *