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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV
आदेश/O R D E R
Assessee is in appeal before the Tribunal against order of ld.CIT(A)-XXI, Ahmedabad dated 5.11.2012 passed for Asstt.Year 1997-98.
The assessee has taken 12 grounds of appeal, but his grievance revolves around two issues viz. the ld.CIT(A) has erred in upholding re-opening of assessment under section 147 of the Income Tax Act, 1961, and (b) the ld.CIT(A) has erred in confirming addition of Rs.7,21,000/- which was added by the AO with the aid of section 68 of the Act.
With the assistance of the ld.representatives, I have gone through record carefully. It emerges out from the record that the assessee is a blind man serving at Blind Men’s Association as a cane instructor. He was getting salary income. According to the AO, one Shri Shailesh K. Thaker has filed complaint against
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assessee pointing out that he has taxable income which has escaped assessment. The background is that the assessee has given a loan of Rs.5,61,000/- to Shri Shalesh Thaker during the month of August and September, 1996. Shri Shailesh Thaker has issued a cheque bearing no. 105871 drawn on Central Bank of India, Vasna Branch. This cheque was dishnoured and the assessee has filed a criminal complaint under section 138 of Negotiable Instrument Act. In the proceedings before Judicial Magistrate, the assessee has deposed that loan of Rs.5.00 lakh was given to Shri Shailesh Thaker. Shri Shailesh Thaker has attached copy of cross- examination of the assessee done by his counsel during that proceedings and copy of plaint to the AO along with his tax evasion petition. On the basis of that complaint, the AO has recorded reason that the assessee has filed return of income only for Asstt.Year 2003-04. He has not filed any return for the Asstt.Year 1997- 98, therefore, alleged advancement of loan is escapement of income, and he issued a notice under section 148 of the Income Tax Act. Copy of the reasons is available at page no.51 and 52 of the paper book.
I have gone through the reasons as well as finding recorded by the ld.CIT(A). On due consideration of the material on record, I am satisfied that the AO was possessing sufficient information for harping a belief that taxable income has escaped assessment, and therefore, he has rightly reopened the assessment. I do not find any merit in the first fold of grievance raised by the assessee.
In the next fold of grievance, the assessee has pleaded that the ld.CIT(A) has erred in confirmation of Rs.7,21,000/-.
The stand of the assessee is that out of this total amount, Rs.4,55,000/- was obtained as loan from six persons in the past. Details of six persons have given as under: Name Amount 1. Rahimkhan F. Pathan 75,000 2. Satyanarayan Tiwari 75,000
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Pankaj K. Dagli 75,000 4. Nanji D. Khokhariya 75,000 5. Ravji N. Gopani 80,000 6. Tarkeshwar L. Luhar 75,000
He further contended that Rs.2.16 lakhs is his past savings. Rs.50,000/- was an advance given earlier, which has been received back by the assessee in this year. This amount has been added by the AO under section 69 of the Income Tax Act. The ld.CIT(A) while evaluating evidences, has made discussion with regard to nature of evidence produced by the assessee and how it deserves to be rejected. The discussion made by the ld.CIT(A) reads as under:
“3.8 In the course of appeal proceedings, the appellant has furnished the following in respect of the amounts claimed to have been received as loans from the foresaid six persons - i) Tarkeshwar K. Nabar :- [a) An undated confirmation letter (b) A certificate dtd. 29.07.2005 of Andhajan Mandal Staff Credit Co-op. Society giving details of loans taken by the said person on various dates in 1991, 1992 & 1993, aggregating to Rs. 1,05,000/- (c) An undated confirmation of account, ii) Pankajkumar Dagli :- (a) An undated confirmation letter (b) Details of salary drawn from 1984-85 to 2004- 05 (c) An undated confirmation of account, iii) Satyanaryan Tiwari :- (a) An undated confirmation letter b) A certificate dtd. 26.07.2005 of Andhajan Mandal Staff credit Co-op. Society giving details of loans taken by the said person on various dates in 1991, 1992 & 1994, aggregating to Rs. 94,5OO/- (c) An undated confirmation of account.
iv) Ravjibhai N. Gopani (a) An undated confirmation letter (b) 7/12 extract (c) An undated confirmation of account. v) Nanjibhai Khokhavia (a) An undated confirmation of letter (b) A certificate Rs. 26.05.2005 of Andhajan Mandal Staff Credit Co-op. Society giving details
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of loans taken by the said person on various dates in 1991, 1992 & 1995, aggregating to Rs. 94.000/-. (c) An undated confirmation of account. vi) Rahimkhan Pathan a) A Confirmation letter. (b) A certificate dtd. 26,07,2005 of Andhajan Mandal Staff Credit Co-op. Society giving details of loans taken in the said person on Various dates in 1991,1992 & 1995, aggregating to Rs.1,05,000/- (c) An undated confirmation of account.
3.9 After careful consideration of the contentions of the A.O., the submissions of the appellant and the various documents furnished by him, I find as under:
(a) As observed by the A.O. the agreements for loan are undated and executed on plain paper.
(b) Both the appellant as well as the witnesses, i.e., the lenders are silent as to the status of the loans at the time of assessment proceedings. As observed by the A.O., the recovery of loans has become barred by limitation.
(c) There is no stipulation as to the amount of interest that the appellant is liable to pay to the lenders.
(d) The lenders have claimed to have lent money in cash to the appellant even though they had bank accounts. Also, as evident from the certificates issued by Andhajan Mandal Staff credit Co-op. Society, the loans had been taken by the lenders from the Society by cheque, which further substantiates the operation of bank accounts by them. Hence, the necessity of giving loans by cash is not clear.
(e) As evident from the certificated issued by Andhajan Mandal Staff Credit Co- o. Society, the lenders have themselves borrowed substantial amount from the Society, which are likely to carry the burden of interest. However, none of the lenders has stated that they have received interest from the appellant against the alleged loan. The confirmation of account submitted by each of these lenders does not reflect any interest received or receivable from the appellant.
(f) As evident from the certificates issued by Andhjan Mandal Staff Credit Co- op. Society, the loans taken by the lenders which is claimed to be one of the major sources of the impugned loans to the appellant, pertained to several years earlier, i.e., 1991, 1992, 1993, 1994 & 1995 though the impugned loans have been shown as advanced during the year 1996. Thus, there is no nexus between the loans taken from the Society and the alleged loans to the appellant.
(g) From the affidavit filed by the appellant before the City Civil Court, it is evident that the entire money belongs to him, as it is nowhere mentioned in the
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affidavit that the moneys advanced to Shri Shailesh Thakker belonged to such other persons and that these amounts were liable to be returned to the said alleged lenders. 3.10 In view of the above, I hold that the Assessing officer was justified in treating the amount of Rs.4,55,000/- as the unexplained investment of the appellant and hence his deemed income u/s. 69 of the Act.”
Section 68 of the Income Tax Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof, or the explanation offered by the assessee is not, in the opinion of the AO satisfactory, then the sum so credited in the accounts may be treated as income of the assessee of that previous year. However, in the present case, while rejecting explanation of the assessee, the ld.CIT(A) has approached facts and circumstances with little technical and mechanical way. It has been observed that the lenders are silent to status of loan as well as rate of interest. Lenders have bank account and they have given loan in cash. It is pertinent to observe that these are not transactions in day-to-day business of assessee. This is to be appreciated with back ground of the assessee, who is a blind person; who has some relationship with lenders. This way loans were taken by him in personal relation capacity. Whenever any small amounts are being taken from near-and-dear one, then interest and other terms and conditions are not negotiated. It is only on the basis of mutual faith and requirement of particular person. They have confirmed advancement of loans. They appeared before the AO in support of such advancement; they have submitted details of land holding and others source of earnings. To my mind, the ld.CIT(A) has erred in rejecting the explanation of the assessee. I am satisfied with the kind of evidence produced by the assessee that has discharged his onus as contemplated under section 68 of the Act. Similarly, the assessee is in service getting salary income. He used to manufacture cane furniture i.e. weaving/interlacing of cane in chairs etc. Savings at his end to the extent of Rs.2.60,000/- cannot be doubted. Therefore, taking into consideration the evidences produced by the assessee, I allow this fold grievance and delete addition of
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Rs.7,21,000/- made by the AO and confirmed by the ld.CIT(A). Accordingly, appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 4th December, at Ahmedabad.
Sd/- (RAJPAL YADAV) JUDICIAL MEMBER