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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R.S. SYAL & SHRI PARTHA SARATHI CHAUDHURY
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.
The only issue raised in this appeal is against the confirmation of the addition anent certain material found during the course of search evidencing the advancing of cash loans by the assessee outside his books of account.
2 ITA No.1984/PUN/2014 A.Y. 2011-12
Briefly stated, the facts of the case are that a search and
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.
We have heard both the sides and gone through the relevant
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.
Certain cheques totaling Rs.22.00 lakh were found having
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
The ld. AR submitted that in sofaras the case of advancing
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.
It is seen that loan to M/s. Govind Ram & Sons was given by
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.
The second addition of Rs.1.08 crore is on the basis of
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.
Having heard both the sides and gone through the relevant
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.
The assessee has raised an additional ground similar to the
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.
We have disposed of the appeal of the assessee for the A.Y.
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).
The next addition is of Rs.10.00 lakh on account of cheques
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.
The ld. AR fairly conceded before the Tribunal that he had no
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
Next is the addition on account of unrecorded loans
given/cheques found to have been issued by Mr. Pradip D. Kalani
amounting to Rs.34,67,560/-.
Page no. 92 of the paper book is a copy of a document found
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.
Having heard both the sides and gone through the relevant
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.
However, the ld. AR submitted that Mr. Pradip D. Kalani
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.
We are not convinced with the argument of the ld. AR on this
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.
To sum up, we uphold the action of the authorities below in
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.
In the result, the appeal is partly allowed.
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
The CCIT, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “ए” / DR ‘A’, ITAT, Pune; 6. गाड� फाईल / Guard file.
/ 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. *