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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: Shri M. Balaganesh, & Shri S.S. Viswanethra Ravi
These appeals of the assessee arise out of the orders of ld. CIT(A), Kolkata in Appeal No.177/CIT(A)/Asl/Cir-1/2007-08 and Appeal No.180/CIT(A)/Asl/Cir- 1/2007-08 both dated 18-12-2008 arising out of the ld. AO orders of assessment framed u/s 144/254 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28-12-2007 for the assessment years 1991-92 & 1992- 93.
As the issues involved are identical in nature, they are taken together and these appeals are disposed off by this common order for the sake of convenience
Shri Subash Agarwal the Learned AR argued on behalf assessee and Shri Sanjit Kr. Das, JCIT, the Learned DR argued on behalf of the revenue. & 239/Kol/09-C-AM 1 Biswanath Agarwal A.Y 1992-93 (by the assessee):
During the course of hearing before us the ld.AR for the assessee has stated that he would like to withdraw the appeal filed by the assessee for the assessment year 1992-93 in ITA No. 239/Kol/09. The ld.DR has not raised any objection to this proposition of the ld.AR of for the assessee. Hence, the appeal filed by the assessee for the assessment year 1992-93 in is dismissed as withdrawn.
4.1 The appeal of the assessee in for the A.Y 1992-93 is dismissed. A.Y 1991-92 (by the assessee)
In this appeal though the assessee has raised as many as ten grounds before us, during the course of hearing, the ld.AR for the assessee has stated that he would not like to press all the grounds except ground no.6 regarding the addition made in the in sum of Rs. 8 lakhs on protective basis. The same is taken as a statement from the Bar and accordingly, the other grounds raised by the assessee are dismissed being not pressed by the ld.AR for the assessee.
Ground no.6 raised by the assessee is reproduced herein below:-
6. For that, on the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming the addition, on protective basis, of Rs.8,00,000/- made by the A.O on account of loan advanced, when such addition was altogether liable for deletion”.
& 239/Kol/09-C-AM 2 Biswanath Agarwal
Brief facts of this issue are that the assessee was in receipt of Rs. 8 lakhs from his brother, Shri Nandalal Agarwal. There was a search in the premises of the assessee and his brother on 18-06-1992. During the course of search some loose sheets containing a loan transaction of Rs. 8 lakhs was found and seized by the search party. In the said loose sheets (seized document reference BAN-6 ) is kept in page 57 of the paper book filed by the assessee. The replica of the said seized documents containing the same loan transaction was found in the premises of assessee’s brother, Shri Nandalal Agarwal vide seized document Reference LF/17. The said seized document in LF/17 is kept in page 58 of the paper book filed by the assessee. Both the assessee as well as assessee’s brother were assessed by the same ld.AO. The ld.AO while completing the assessment of Shri Nandlal Agarwal (assessee’s brother) u/s 143(3) of the Act on 25-02-1994 made an addition of Rs. 8 lakhs towards loan advanced by him ( the assessee herein) as unexplained investment among other additions. Hence, there is a clear finding that assessee has only received a loan of Rs. 8 lakhs from his brother. Admittedly, this loan transaction of Rs. 8 lakhs has been kept outside the books of account of the assessee as well as by his brother. But while framing the assessment u/s. 143(3) of the Act in the hands of the assessee for the assessment year 1991-92 the same ld.AO again treated the said loan transaction of Rs. 8 lakhs as if the assessee has advanced the loan amount to his brother as against the fact of assessee having received a loan from his brother. Admittedly, this loan transaction was subjected to interest and assessee has indeed paid interest to his brother and the same interest income was also taxed in the hands of the assessee’s brother by the same ld.AO.
We have heard the rival submissions and perused the material available on record. The ld.AR argued that the ld.AO had wrongly invoked Sec. 69, which is not at all applicable in the facts of the instant case. On a specific query from the bench to the ld.AR as to whether the assessee could get away from the rigours of taxation & 239/Kol/09-C-AM 3 Biswanath Agarwal merely because the ld.AO has invoked wrong section. The ld.AR replied that the provisions of section 68 per se would not be applicable in the instant case as the same transaction of Rs. 8 lakhs is kept outside the books of account by the assessee and it is not found credited at all in the books of account, but only found in the loose sheets seized by the department at the time of search, which cannot be construed as books of account. The ld.AR also placed his reliance on the decision of the Third Member’s decision of ITAT Mumbai in the case of S.P. Goel Vs. DCIT reported in (2002) 82 ITD 85 (Mum.)(TM) in support of his contention, wherein it was held as under:- “During the course of search of the premises, certain documents were seized, consisting of 10 loose sheets. Out of this, one sheet of paper was marked which contained certain handwritings by the assessee. The said handwriting was on the loose diary sheet of November 1992 and a sum of rs. 6o lakhs had been entered as cash against 26-9-1992. Certain expenses also were noted in the form of silver utensils, gold ornaments and miscellaneous expenses, etc. The Assessing Officer called for the explanation and it was submitted that the same was in the nature of planning for purchase of gold ornaments and silver utensils, etc. for the marriage of his daughter. The amount was stated to be in anticipation of consignment sales to be made by him of the goods of C(Pvt) Ltd. The Assessing Officer did not accept the explanation and treated the entire amount of Rs. 60 lakhs as undisclosed income of the assessee which was confirmed by the Commissioner (Appeals). The first point of difference was whether these loose sheets of paper torn out of diary for 1992 could be construed as books for the purpose of section 68. If the loose papers seized in the premises of the assessee were examined in the light of the ratio of the Supreme Court in V.C Shukla’s case (supra), it was quite clear that these loose papers could not be termed as books of account an asessee maintained for any previous year. The loose papers appeared to be part of a 1992 diary. However, these loose papers consisted of pages torn out from March, April, November and December. There were no closing balances nor opening balances and there was no reconciliation of these entries. Therefore, these could not be termed as books maintained by the assessee during the previous year. & 239/Kol/09-C-AM 4 Biswanath Agarwal
Secondly, the assessee had been explaining that the entries were in the nature of planning. The books of account tallied with the items found at the time of search on 14-10-1993. In such a case, the contention of the assessee that the entries made on 26-9-1992 were in the nature of planning was more probable. The Assessing Officer did not give any concrete proof to reject the explanation offered by the assessee. In the present case, it was a mere loose in which the assessee confirmed that the entry was in his own handwriting. The loose paper in itself has got no intrinsic value. It does not represent negotiable instrument which can be exchanged for a sum of Rs.60 lakhs. Therefore, the above decision did not have direct application on the facts of the present case. When it was a mere entry on a loose sheet of paper and if the assessee claimed that it was only a planning, not supported by actual cash, then there had to be circumstantial evidences to support that this entry really represented cash of Rs.60 lakhs. There was no such evidence found by the revenue in the form of extra cash, jewellery or investment outside the books. In such a case, the explanation offered by the assessee could not be rejected. In that view of the matter, the view taken by the Accountant member was justified” .
8.1 In response to this, the ld. DR fairly conceded the mistake committed by the ld.AO in invoking wrong provisions of the Act, but vehemently argued that addition u/s. 68 of the Act would still survive in the hands of the assessee as the loan transaction was kept out side the books.
8.2 We have perused the detailed paper book filed by the ld.AR numbering Pages 1-92 containing various assessment orders and appellate orders passed in the hands of the assessee’s brother, Shri Nandalal Agarwal, together with copies of the relevant seized documents, which are kept in pages 41-58 , pages 72-77 and pages 88-92 of the paper book. We find that the factual transactions have not been properly understood by the ld.AO and the ld.CIT(A). We hold that the assessee only received a sum of Rs. 8 lakhs as loan from his brother and had repaid the same to & 239/Kol/09-C-AM 5 Biswanath Agarwal his brother with interest. Hence, in these facts and circumstances the relevant section, if at all, that could be applied would be section 68 and not section 69. Even though the loan transaction of Rs. 8 lakhs has been kept outside the books of account by the assessee, it cannot be taxed as unexplained cash credit u/s. 68 in the facts of the case as essential three ingredients has been duly proved by the ld.AO himself and contents of the seized documents. The three essential ingredients of Section 68 of the Act are namely:- a) Identity of the creditor – it is proved beyond doubt as the ld.AO himself agrees that the money has been given by the assessee’s brother to the assessee in the assessment order of the assessee’s brother. b) Genuineness of the transaction- it is proved beyond doubt from the contents of the seized documents available in pages 57-58 of the assessee’s paper book, which are not disputed by the revenue. c) Creditworthiness of the creditor- this is proved beyond doubt as ld.AO himself had assessed an income of more than of Rs. 80 lakhs in the hands of the assessee’s brother in his own assessement vide assessment u/s. 143(3) dated 25-02-1994.
8.3 We hold that though the loan transaction of Rs. 8 lakhs has been kept outside the books by the assessee. It has been proved beyond doubt based on the findings given hereinabove, that the essential three ingredients of section 68 has been duly proved. Hence, the character of a receipt would not change as admittedly the loan transaction is only capital receipt in the hands of the assessee.
8.4 We find from the assessment order that the addition of Rs. 8 lakhs towards loan transaction has been made in the hands of the assessee by the ld.AO on protective basis, which has been upheld by the ld.CIT(A). In this regard, we would like to state that the circumstances under which a protective assessment could be made has not been properly considered by the revenue. There is absolutely no doubt with regard to the fact that the sum of Rs. 8 lakhs has already been added in & 239/Kol/09-C-AM 6 Biswanath Agarwal the hands of the assessee’s brother for the assessment year 1991-92 u/s. 143(3) vide assessment order dated 25-02-1994 by the very same ld.AO. Hence, we hold that there is no doubt that could be in the minds of the revenue in whose hands the said sum should be taxed and thereby to protect the interests of the revenue, a protective assessment could be justified. We hold that if an addition has been sustained for the assessment year 1991-92 in the hands of the assessee, it will amount to double addition as substantively it has already been taxed in the hands of the assessee’s brother by the very same ld.AO by giving cogent reasons and based on the seized documents found and seized by the search party in the premises of the assessee’s brother. Hence, there is no justification to make any addition in the hands of the assessee for the very sum of Rs. 8 lakhs as cash credit either on substantive or protective basis in the facts and circumstances of the case. We hold that the loan receipt of Rs. 8 lakhs by the assessee from his brother is only a capital receipt in the hands of the assessee Accordingly, the ground no.6 raised by the assessee in for the assessment year 1991-92 is allowed. The appeal of the assessee in ITA No. 238/Kol/09 for the assessment year 1991-92 is partly allowed.
In the result, the appeal of the assessee in for the assessment year 1992-93 is dismissed and the appeal of the assessee in ITA No.238/Kol/09 for the assessment year 1991-92 is partly allowed.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON 28/ 10/2015