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2013 (1) TMI 140 - HC - Income TaxModus operandi for tax evasion - Sham transactions - Identities of the creditors – Genuineness & creditworthiness of the loan creditors – Assessee in a 3 days’ time contact 148 persons and took loan in cash - too in small amount of less than Rs.20,000/- and collected Rs. 25.97 lakhs in no time - that too, as interest-free loan and further to give it to a Company as interest free loan - Assessee was asked to file the details of the names and addresses of the persons from whom he had taken loan - A.O. demanded further proof from the assessee, who in turn, submitted the loan confirmation from creditors - A.O. issued summons u/s 131 to 26 person - Issued enquiry letters u/s 133(6) in 30 cases - Out of 26 cases, where summons under Section 131 were issued, two summons returned 'unserved' and in 15 cases, no reply to the summons was received Whether in the taxation matter, there can be a test check method for finding out the “genuineness of the transaction” as alleged by the assessee which can be examined independent to even creditworthiness of the creditors Held that:- If the A.O. would have proceeded further to enquire about the creditworthiness of those 148 persons, he may have found that all persons had capacity to advance a loan of Rs.20,000 in cash. In such fact situation, it is heavy duty of the A.O. and other authorities to find out all truth from the evidence which includes acceptance or rejection of evidence of independent or interested witnesses. In three days, the assessee himself, who was having no worth, alleged that he borrowed Rs.25.97 lakhs from 148 persons as if every person was waiting for this person to come and demand the money and every person was ready to give him money. This type of modus-operandi can be adopted by many persons. The test check method for the purpose of finding out the creditworthiness of individual creditor may not be a valid mode of proceeding in the other tax matter. But so far as to find out whether the transaction as a whole is absolutely unbelievable which may not be believed by a prudent man of slightest common sense, then in that situation, in addition to other facts and circumstances, test check can be the right mode so as to meet with the clever mode of avoiding the tax Every officer, who is required to assess the evidence of any witness/deponent, is required to evaluate the evidentiary value of the evidence. In favour of revenue Interest u/s 234A and 234B – Whether interest can be levied over the assessed income or it can be levied only on the income declared in the return - Held that:- Following the decision in case of Smt. Tej Kumari (2000 (9) TMI 52 - PATNA HIGH COURT) that the revenue can levy the interest only on the total income declared in the returns and not on the income assessed and determined by the A.O. to that extent. In favour of assessee
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