9911796707
TMI Blog2000 (12) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... eration at the residence of Shri Mahendra Jain (Sogani) loose papers and summary sheets as per Annexure-8 to Exhibit 1 to 46 dt. 7th Oct., 1997, were seized when the search was concluded. Shri Mahendra Jain partner stated that the loose papers related to the firm M/s. Manak Chand Kanhaiya Lal and M/s. Sogani Jewellers, Johari Bazar where he is a partner. Both these firms are doing business from the common premises having common stocks, etc. The assessee could not segregate the loose papers firm-wise. The AO gave finding that these loose papers belong to the appellant who are the main firm. From these loose papers and summary sheet, the AO found a peak credit from financial years 1991-92 to 1996-97 of Rs. 88,33,491 which pertains to financial year 1992-93. Out of that, for the financial year 1991-92 Rs. 65,56,735 was introduced in that year itself. Balance Rs. 22,74,756 pertains to financial year 1992-93. He further found that this peak credit includes Rs. 15,44,509 was reduced from the peak credit of Rs. 88,33,491 and the balance of Rs. 72,88,982 was considered as unexplained investment under s. 69 as under: For financial year 1991-92 Rs. 50,31,735 For financial year 1992-93 Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book pp 100 to 101 where entries as regards receipt of loan raised through brokers, entries as regards repayment of loan and the entries as regards payment of interest through brokers, etc. have been given as few instances only. The assessee received loans from these brokers. The alphabets represent the names of brokers and these were decodified by the said assessee Shri Mahendra Kumar in his statement recorded under s 132(4) of the Act. The entries so stated are as under: (a) Entries as regard receipt of the loan through brokers: 1. A-2/4pg28 Through "S" Sumer Mal 50. 2. A-2/1pg49 Through "SG" Rambabu Khandelwal 100. 3. A-2/1pg48 Through "SG" Kaushal Agarwal 200. 4. A-2/1pg45 Through "S" Ratan Kumar Jain 50. 5. A-2/1pg41 Through "S" Vimala Devi Bader 50. 6. A-2/8pg28 Through "S" Choth Mal Sharma 50. 7. A-2/7pg16 Through "PR" Manwati Bansal 100. 8. A-2/7pg16 Through "PR" Purshottam Dass Agarwal 250. 9. A-2/5pg16 Through "K" Suraj Prakash 100. 10. A-2/5pg7 Through "S" Padam Singh Mehta 100. 11. A-2/5pg10 Through "S" Vanita Devi 150. (b) Entry as regard repayment of the loan through brokers: 1. A-2/4pg26 Through "SG" Ram Babu 100. 2. A-2/4pg25 Through "N" Shanu Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clearly indicated that Shri Mahendra Kumar's account is on p 223-K-1/5 (lender's ledger). Against this account on p 101, annexure A-18 (regular party ledger of Shri Mahendra Kumar has also been recorded). The AO has included brokerage as income of Padam Chand Jain for the advances made by the said person as broker. No addition on account of loose papers has been made in the hands of Shri Mahendra Kumar. From this it clearly stands established that Shri Mahendra Kumar has not been found doing business independent and all the transactions recorded in the loose papers has been considered to be belonging to the firm and, therefore, the transaction recorded in the loose papers and books found from the brokers are nothing but the transactions of the firm for the loans procured through' him as a broker on which interest has also been paid and thus the claim of the assessee that the transaction in the loose papers are loans raised by it stands duly corroborated with the statement of Shri Mahendra Kumar at paper book pp 54 & 55. It is thus contended by the learned counsel that the credit entries represented in these loose papers are loan but not the income. These loans have been taken th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Ram Rawatmull 1972 CTR (SC) 411 : (1973) 87 ITR 349 (SC), and in the case of CIT vs. S.M.S. Investment Corpn. Ltd. (1994) 207 ITR 364 (Raj). This burden has also not been discharged for making the substantive addition. Besides this, the assessee has placed reliance on the decisions referred in written submissions and synopsis filed and placed on record. 6. On the other hand, the learned Departmental Representative contends that the assessee filed a block return declaring nil income and incriminating documents were found from the residence of the partner Shri Mahendra Kumar, who has made an admission that the papers related to the appellant firm and M/s Sogani Jewellers but he failed to segregate the same and has shown his inability to do so. The AO was left with no other alternative but to treat the same as belonging to the appellant firm. The AO has worked out the peak of the unaccounted investment of the assessee at Rs. 72.88 lacs which has been added as his income. A perusal of statement of Shri Mahendra Kumar will reveal that he did not have details of brokers nor any confirmation were filed by him. The amount so recorded as credited are nothing but investment of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR (SC) 146 : (1981) 130 ITR 244 (SC); (v) S. Kumaraswami Reddiar vs. CIT (1960) 40 ITR 590 (SC); (vi) (sic) (1961) 43 ITR 72 (SC); (vii) CIT vs. Orissa Corporation (P) Ltd. (1986) 52 CTR (SC) 138 : (1986) 159 ITR 78 (SC); (viii) Roshan Di Hatti vs. CIT (ix) Laxmi Narain Gupta vs. CIT (1980) 15 CTR (Pat) 306: (1980) 124 ITR 94 (Pat) (x) J.S. Parkar vs. V.B. Palekar & Ors. (1974) 94 ITR 616 (Bom); and (xi) Himmatram Laxminarain vs. CIT (1986) 53 CTR (P&H) 390: (1987) 161 ITR 7 (P&H) The learned Departmental Representative further contended that the AO at p 5 has categorically not accepted the version of the assessee that the firm was in losses. The same is supported by the fact that assessee himself has filed return declaring income. The assessee has also not explained the utilisation of alleged loan. In fact it is his own money invested in the market and the addition has been rightly made and deserves to be confirmed. He supported the decision taken by the learned CIT(A). 7. In rejoinder, the learned authorised representative contends that the Department has nowhere found as to what investment has been made, to whom it has been made and without doing so it cannot be said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he residential premises of Shri Mahendra Kumar Jain and inventorised as Annexure A-2, exhibits 1 to 46 have been claimed to be belonging to the assessee's two firms namely, M/s. Manakchand Kanahiya Lal and M/s. Sogani Jewellers. The said Shri Mahendra Kumar Jain is a partner in both these firms. It has not been denied by the assessee that both these concerns are carrying business from the common premises for which common stock etc. have been maintained and it is not possible to demark the portion of each of these two concerns. Neither Shri Mahendra Kumar Jain nor any other partner of M/s. Sogani Jewellers have claimed ownership in these loose papers. The AO was, therefore, justified in coming to the conclusion that the loose papers found as per Anexure-A/2 exhibits 1 to 46 from the residential premises of Shri Mahendra Kumar Jain belong to the firm M/s. Manak Chand Kanahiya Lal, the appellant. 10. The assessee has submitted detailed replies before the AO vide his letters dt. 10th Aug., 1999, 20th Aug., 1999, 6th Sept., 1999 and 21st Sept., 1999, explaining that the seized loose papers are showing undisclosed borrowings. Copies of these letters have been placed at paper book pp 88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in the loose papers for his claim of taking loans through various brokers. Paper book p 122 of Annexure A-2/4 of p 28 of the seized annexure when examined found to reveal various entries. Against the entry of credit of 50 denoting to be Rs. 50,000 admitted by the assessee the name of Sumer Lal is found to be recorded with figure of 1.6 and 2(F). The figure of 1.6 is claimed to be denoting rate of interest and TF(2) is stated to be taken for 2 months for which interest has been paid in the entry mentioned on this paper. Similar claims have been made with respect to the abbreviation of various names and entries. The particulars entered have been examined in order to verify the correctness of the veracity that the abbreviations have been used for the brokers and the amount recorded are the loan through these brokers besides claim of making payment of interest on such loans. As a few instances only, we find that the following deposits received and credited against the alphabets with name of the lender and amount advanced and these have been repaid in these loose papers: (a) Paper book p 247 bears SG and name of party is Suraj Prakash for raising deposit of a figure of 100. This has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant was not confronted to dislodge the explanation rendered by the assessee by making them available for cross-examination more particularly when the Department has invaded the rights of the appellant by using last arsenal of searching a person available with it. In the absence of such an attempt, the statements recorded behind the back of the assessee, which have not been taken on oath nor read over and accepted by those persons cannot be said to be valid statements and the same cannot be used to draw any adverse inference against the assessee. We also find that the AO has not brought on record any material to show that the credit entries for which peak has been worked out represents assessee's own money or the partners' money or income of any of them. It has not been related to any of the transactions of purchase or sales or any unaccounted business on the basis of which a search was conducted at the premises of the assessee. The authorities below have also not brought on record whether the assessee carried any secret business of money-lending or that it has earned any interest income on making further advances after raising loans and deposits through the brokers. There wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law that suspicion howsoever strong cannot take the place of proof. This has been held by the Supreme Court in the case of Uma Charan Shaw vs. CIT (1959) 37 ITR 271 (SC). Keeping in view the various explanations given by the assessee and examination of material placed before us, we find the explanation of the appellant is a convincing explanation and in the absence of any material, we are inclined to agree that the alphabets like 'PR' and others have been coded for the names of brokers through whom the appellant assessee raised deposits on interest. We also find that the assessee has paid interest on such deposits and the same appears to have been paid out of loans raised. In the absence of any receipt as income from interest, such payment of interest from the deposit also supports the claim of loss by the appellant. Keeping in view the overall conspectus of the case, we hold that the Department has not been in a position to find out any substantive income nor any investment before attracting provisions of s. 69 of the Act and the amount of peak credit of Rs. 72.88 lacs calculated by the AO is nothing but the loans and deposits raised by the assessee through the source recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .196 kg found from the premises of the partners belong to the firm was not acceptable to the AO for the reasons that there was no stock register nor any details were found which could reveal that the stock is lying at the residential premises of the assessee. Besides this, Shri Raj Mal Jain was not aware of the quantum of the stocks lying at the residence of a particular partner. The AO, therefore, came to the conclusion that the assessee-firm is using firms stocks out of books and is having profit on such stock. She applied a g.p. rate of 11 per cent on the amount of short stock of Rs. 12,56,519 and accordingly Rs. 1,38,217 was worked out as undisclosed income of the assessee earned out of the stocks found short at the time of search. 15. The learned Departmental Representative supported the orders of the authorities below and argued that there was no entry in the stock register for taking the stocks at home by the partners. Any explanation given by them is an afterthought. Entries as found at p 30 is clearly a claim but same is not a conclusive evidence. The partner Shri Raj Mal gave only evasive reply. Since the AO merely added the profit, the addition needs to be upheld. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
