TMI Blog2019 (1) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... cash loan. On all the cheques allegedly received as security there is no mention of date, except the cheque issued by drawer. The cheque issued by him bears the date 07-06-2006 i.e. period relevant to the assessment year 2007-08. As per the Negotiable Instrument Act, 1881 (as was applicable during the relevant period) validity of cheque was six months from the date mentioned thereon. Hence, the said cheque had become invalid and could not have been encashed by the assessee in the period relevant to the assessment year under appeal. On some of the cheques even the name of assessee is not mentioned. The additions have been made merely on the initial statement of the assessee without there being any corroborative material. There is no material on record to show that the assessee has extended loan to the parties named. - Decided in favour of assessee. - ITA No.434/PUN/2011 - - - Dated:- 8-10-2018 - Shri D. Karunakara Rao, AM And Shri Vikas Awasthy, JM For the Assessee : Shri Kishor Phadke For the Revenue : Shri Rajeev Kumar ORDER PER VIKAS AWASTHY, JM : This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by AO in right perspective Appellant has been engaged in money lending business. Appellant advances money to parties on the basis of Hundies / Promissory Notes and as a surety, cheques are taken. Whereas, alleged loans of ₹ 76 lakhs (subject matter of present appeal) are instances wherein only cheques are found and no corresponding HUNDI is found. Appellant has submitted copies of documents impounded during survey relating to a completed / executed loan transaction at Page- 137 to 140 of the PB-V. If documents of a completed / executed loan transaction are compared with the documents relating to alleged transactions of ₹ 76 lacs, following issues emerge. Particulars Observations from executed loan transaction Observations in alleged six loan transactions Date of transaction on Hundi and Cheque Same date of transaction is found on Hundi and Cheque Out of the alleged six loan transactions of ₹ 76 lacs having 9 cheques, date is mentioned only on 1 cheque amounting to ₹ 10 lacs. Name of the lender (appellant) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. As such, it transpires, that the declaration made during the survey was not full-proof. In fact, the same consisted of many errors. 4. Affidavits of parties confirming non-receipt of loan During the scrutiny proceeding, appellant has filed duly notarized affidavit of Mr. Lalit Zambad, Mr. Deepak Bharuka, Mr. Deepak Bharuka (HUF) and Mr. Rameshwer Shete. Total of alleged transactions covered by the above referred Affidavits is ₹ 70 lacs (out of total alleged transactions of ₹ 76 lacs). All the parties, in their respective affidavits, have confirmed that these parties had not availed loan from the appellant, though cheques were handed over to the appellant in anticipation of loan. The affirmation by sworn notarized affidavit ought to be considered in proper perspective. 5. Incorrect assumption of renewal of loan based on backside entries on cheques Learned AO and earned CIT(A) have observed that some dates were mentioned on the back side of the four (4) cheques given by Mr. Deepak Bharuka. Tabulation of these dates is available in the learned CIT(A) order at Para-8 of Page-8. Based on these dates and the time intervals between the diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also filed letter requesting to the learned AO to share the information regarding initiation of penalty (if any) in case of other parties. Copy of the said letter is attached herewith and is marked as Annexure 1. 10. Declaration during Survey is not binding : Appellant submits that the statement recorded during the course of survey is not binding. Appellant in this regards is placing reliance on following judicial pronouncements: a) CIT Vs. S. Khader Khan Son - 254 CTR 288 (SC) b) CIT Vs. S. Khader Khan Son - 300 ITR 157 (Madras) c) Jyotichand Bhaichand Saraf Sons Pvt. Ltd. Vs. DCIT -154 TTJ 226 (Pune). 3.1 The assessee has supplemented his written submissions by filing another set of note and the same reads as under : 1. Modus operandi of business: Appellant is engaged in the business of money lending. The modus operandi of the appellant's business is that, money is advanced to parties on the basis of Hundies / Promissory Notes and as a surety, cheques are taken. Survey proceeding u/s 133A of the ITA, 1961 was conducted on the appellant on 02/02/2006 during which, the said business modus operandi was clearly observed, ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded statement u/s 131 of the ITA, 1961; of most of these persons and in the said statements all the persons confirmed that no loan was advanced to them by the appellant. Appellant also cross examined these persons before the learned AO regarding the alleged loan transactions and it was reconfirmed that no loan was obtained from the appellant (Copy of statement placed at Page No. 23 to 49 of Paper Book-I). However the learned AO proceeded to make the addition on the basis of statement recorded and noting on back side of some of the cheques. 5. Proceeding before the learned CIT(A): The learned CIT(A) upheld the addition made by the learned AO. One of the reason stated by the learned CIT(A) was that a list of 17 borrowers was made by appellant which was recorded on the backside of impounded Page-42. Out of 17 borrowers, 3 persons name was present whose cheques were found viz. Mr. Deepak Bharuka, Mr. Ravindra Kumar Gupta and Mr. S. G. Shete. 6. Submission as regards backside of Paper No. 42 ; a) During Survey Proceeding: During the survey proceeding, a list of 17 borrowers was found on backside of Page-42. In the statement recorded on 02/02/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the month of June 17 (Copy of backside of Page-42 placed at Page No. 142 of Paper Book- VI). As such, it transpires till that stage the said paper (Le. backside of Page-42) was not extended to the appellant. 8. Affidavit filed by appellant: Appellant filed specific affidavit explaining the facts that Page-42 was not received prior to June 17 (Copy of affidavit placed at Page No. 143 to 146 of Paper Book-VII). 9. Prayer: Considering the above background, appellant, keeping his various grounds intact, requests the Honorable Bench to set aside the matter to the learned AO. 4. On the other hand Shri Rajeev Kumar representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals). The ld. DR submitted that during survey action several loose papers, cheques, hundis etc. were found and seized. The list of persons to whom the assessee had lended money was seized. The seized loose sheet is page marked as page 42 . However, the list of persons is not exhaustive. 5. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The assessee in appeal has assailed addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings of the present assessee. In First Appellate proceedings the Commissioner of Income Tax (Appeals) took cognizance of the affidavit and his statement and deleted the penalty levied u/s. 271D and 271E of the Act. The Department carried the issue in appeal before the Tribunal in ITA Nos. 201 202/PN/2012 for assessment year 2005-06. The Tribunal vide order dated 20-06-2013 confirmed the findings of Commissioner of Income Tax (Appeals) by holding as under : 9. As per the Revenue, Shir K.N. Mutha was engaged in financing cash loans by way of hundies/promissory notes, etc. and as a security he would keep signed cheques from the borrowers against the amount advanced in cash. The cheque amounting to ₹ 10,00,000/- issued by the assessee, which was found in possession of Shri K.N. Mutha lead to be inference by the Revenue that assessee would have received a loan of ₹ 10,00,000/- in contravention of Section 269SS of the Act. In the present case, before the penal provisions are trigged, it is to be established on the basis of concrete evidence that assessee had indeed received the alleged loan of ₹ 10,00,000/- in cash from Shri K.N. Mutha. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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