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TMI Blog2002 (9) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... ng was carried out at the assessee from 21-8-1995 to 22-8-1995. As a result of search various incriminating documents and records were seized by the department and block assessment order under section 158BC read with section 143(3) was passed on 24-8-1996 for the block period from 1-4-1985 to 21-8-1995. While scrutinizing the seized documents in the course of assessment for block period, the Assessing Officer observed that assessee had accepted and repaid loans/deposits in excess of Rs. 20,000 by mode other than account payee cheques/drafts and thus has contravened the provisions of sections 269SS and 271D. The Assessing Officer thereafter had initiated penalty proceedings under sections 269SS and 269T. We are concerned with the contravention made under the provisions of section 26988 in the present appeals. The year-wise contravention as found by the Assessing Officer is as follows: Asst. year 1990-91 ------------------------------------------------------- Date Amount Name of the depositor ------------------------------------------------------- 13-2-1990 50,000 Shri Vishnu Laxman Patil,Hatle Asst. year 1991-92 ------------------------------------------------------- Date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12-1992 40,000 Shri Dilip Suratwala 05-01-1993 10,000 -do- 05-01-1993 10,000 -do- 19-01-1993 45,000 -do- 06-02-1993 9,000 -do- 01-03-1993 10,000 -do- 06-06-1992 20,000 Shri Pradeep Chaudhari 09-07-1992 10,000 -do- 01-12-1992 1,15,000 -do- 02-12-1992 25,000 -do- 30-03-1993 25,000 -do- 21-10-1992 50,000 Shri Satish Kankaariya 10-01-1993 10,000 -do- 13-01-1993 20,000 -do- 31-01-1993 10,000 -do- 21-10-1992 10,000 Shri Sahebrao Patil (Vishwanath Bhojnalaya) 15-01-1993 20,000 -do- 22-01-1993 20,000 -do- 27-01-1993 6,000 -do- 20-02-1993 15,000 -do- 30-12-1992 50,000 Shri Anil Chawhan 16-01-1993 10,000 Shri Manoj 23-01-1993 5,000 - do- 02-12-1992 25,000 Shri Vilas Patil(Baba) 15-12-1992 25,000 -do- 25-12-1992 25,000 -do- 21-10-1992 10,000 Shri Bhimrao Sonavane 21-10-1992 5,000 -do- 10-01-1993 10,000 -do- 21-12-1992 5,000 -do- 16-01-1993 10,000 -do- 26-03-1993 30,000 -do- ------------ Total: 14,57,449 ------------------------------------------------------- Assessment year 1994-95 ------------------------------------------------------- Date Amount Name of the depositor ------------------------------------------------------- 17-03-1994 1,000 Shri Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-03-1995 10,000 -do- 03-09-1994 10,000 Shri Prakash Rana 12-09-1994 5,000 -do- 15-09-1994 10,000 -do- 03-10-1994 10,000 -do- 22-10-1994 5,000 -do- 28-11-1994 17,000 -do- 14-12-1994 25,000 -do- 23-12-1994 5,000 -do- 23-01-1995 5,000 -do- 03-02-1995 10,000 -do- 14-02-1995 25,000 -do- 21-08-1994 25,000 Shri Ishwar Pagare 14-09-1994 10,000 Shri Anil Rana 28-09-1994 25,000 -do- 19-05-1994 13,000 -do- 03-09-1994 10,000 -do- 12-09-1994 5,000 Shri Anil Rana 22-10-1994 5,000 -do- 28-11-1994 17,000 -do- ------------ Total 8,06,000 ------------------------------------------------------- 3. It has clearly been recorded in all the penalty orders that the seized material upon which it has been found that the assessee had accepted these loans/ deposits contains the signature of both the parties i.e. loaner and loanee, as it is clear from the following observations of the Assessing Officer in the penalty order appearing at page 3 for assessment year 1990-91: "I have gone through the assessee's reply which is dealt as under: As regards the assessee's plea that no loaner has accepted to have given loan is not acceptable as ACIT while scrutinizing the seized material notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are as under: ".....Thus, the initiative in depositing money comes usually from the depositor, This is not the case with the assessee, because he has made specific borrowings from different persons and these constitute loans in his hands, , , ," Further in para 8 the findings of the Tribunal are under: ".....The assessee's case is that he has repaid the loans and not deposits and, therefore, question of invoking provisions of section 271E for contravention of section 269T could not have arisen," Further in para 9, the findings of the Tribunal are as under: "To conclude, there is a marked distinction between 'loan' and 'deposit' as brought out supra; the assessee repaid loans and not deposits; and therefore, question of invoking provisions of section 271E for contravention of section 269T does not arise, Accordingly, we uphold the orders of the CIT(A) and decline to interfere." 5. The learned counsel of the assessee narrated the abovementioned facts. He further contended that the penalty has been levied and upheld only on the basis that there was admission in the form of statement given by the assessee during the course of search proceedings, He further contended that for levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the demand, on making of which the deposit will become repayable. In other words, unlike a loan there is no immediate obligation to repay in the case of a deposit" "A loan imports a positive act of tending coupled with an acceptance by the other side of the money as loan." Referring to these definitions, he contended that loan makes a positive act of lending coupled with an acceptance by the other side of the money as loan. He further contended that the parties whose names have appeared on the loose paper have not admitted that they have given the loans to the assessee. The entire case of the department for holding that assessee has taken these loans in cash is based on the assumption under section 132(4A). Out of all persons mentioned in the loose papers, only one Mr. Patil has admitted that he had arranged the loan for the assessee. No other person has admitted the fact of giving loans to the assessee. Mr. Patil was working as an employee of the assessee from 1987 onwards as per facts mentioned by him in answer to question No. 4 on page 14 of the paper book. Thus, he was a person of no means and he could not advance the loan in lakhs to the assessee. The department did not mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Halappa & Sons to contend that where the assessee had agreed to the levy of penalty, still it was held not leviable by the Court. He further raised a proposition that admission made by the assessee was admission on the point of law which cannot be held to be binding on the assessee. He categorically placed reliance on the Commentary of Chaturvedi & Pithisaria (5th Edition), page 4907 and also on the decision in the case of Banarsi Das v. Seth Kanshiram AIR 1963 SC 1165. He has placed a copy of this order on the file. According to this decision, an admission insofar as facts are concerned would bind the maker of the admission but not insofar as it relates to a question of law. Her further submitted that in the penal provision, the basic offence has to be proved by the department. For this purpose, he has taken an example for levy of penalty in case of late filing of the return. According to him, for levy of penalty in respect of late filing of the return, the Assessing Officer must show that the return is filed late and therefore, penalty is attracted. He in this regard, placed reliance on the following decisions: (1) CIT v. Anwar Ali [1970] 76 ITR 696 (SC), wherein it has been hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paper book had raised the loans through various persons. Shri Patil was only an employee of the assessee drawing salary of Rs. 300 p.m. which was increased over the years to Rs. 1,000 p.m. Thus, he could not be in a position to give so much of the amount in lakhs to the assessee. Therefore, it was clear that he did arrange these funds from others. The department has not been able to get any confirmation even from a few persons whose names were mentioned by Shri Patil in the statement. Thus, it has not been proved that individual each such person has given more than Rs. 20,000 in cash to the assessee. Unless this is established by the revenue, the question of holding that the assessee has violated the provisions of section 269SS does not arise. Thus, he contended that penalty is not leviable in respect of the amount raised by the assessee through Shri Patil. He in this regard placed reliance on the decision of the Tribunal in the case of Sharma Associates v. Asstt. CIT [1996] 217 ITR 1 (Pune) (AT). In the said case, the issue was about the disallowance under section 40A(3) of the cash payments made to the various persons. During the survey, paper was found wherein it was mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g provision of section 132(4A). Thus, according to the learned counsel, this section does not apply to the notings found as per seized papers in this case. 9. On the other hand, the learned D.R. contended that the constitutional validity of the provisions of sections 269SS and 269T has been upheld by the Hon'ble Supreme Court in the case of Asstt. Director of Inspection (Investigation) v. Kum. A.B. Shanthi [2002] 255 ITR 258. He contended that the argument of the learned counsel is not correct to the extent that the provisions of sections 269SS and 269T are applicable only to a situation where cash is found at the time of search. According to the language of section 269SS, no person can take or accept deposit/loan apart from a mode of account-payee cheque/draft. He contended that in respect of violation of such condition laid down by the statute, the intention of the party is immaterial subject to the condition of reasonable cause to be established by a person who has contravened the provisions. He contended that there is basic difference between the provisions of section 271(1)(c) and provision in regard to violation of section 269SS contained in provisions of section 271D. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available with the assessee is to establish reasonable cause as provided under section 273B. He further contended that presumption as laid out in section 132(4A) is absolute for the purpose of section 132(5) and for the purpose of other proceedings, the presumption is rebuttable. For this proposition, he placed reliance on the following decisions: (1) CIT v. P.R. Metrani (HUF) [2001] 251 ITR 244 (Kar.) (2) Kerala Liquor Corpn. v. CIT [1996] 222 ITR 333 (Ker.). He further contended that legislation does not impose any bar on revenue to utilise evidence collected at the time of search in any other proceedings. Further, referring to the decision of the Hon'ble Supreme Court decision given in the case of Chuharmal v. CIT [1988] 172 ITR 250, he contended that as per section 110 of Evidence Act, 1872 a salutary principle of common law jurisprudence viz. where a person was found in possession of anything, the onus of proving that he was not its owner was on that person, has been recognized and the said principle could be attracted to taxation proceedings in a set of circumstances that satisfy its conditions. He contended that in search proceedings, the assessee had admitted that he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions in the light of the material placed before us. The main crux of the argument of the learned counsel of the assessee is based on the ground that despite being admission of the assessee, it was obligatory upon revenue to establish by bringing some material on record that the assessee had raised loans in contravention of section 269SS. According to the learned counsel, three ingredients of loans, if not established, it could not be presumed by Assessing Officer that the assessee raised loans. Heavy reliance in this regard placed on the decision of the Hon'ble Calcutta High Court in the case of Shankar Industries. The contention of the learned counsel could be correct in the circumstances where there is no admission of having received loans by the assessee. But we are dealing with the case where the assessee has not only made admission during the course of search proceedings but also did not retract to the same even upto the proceedings before us. The assessee in the present case is highly educated person knowing the intricacies of law. As per the statement recorded in the search proceedings, the qualification of the assessee is B.Sc., LLB. Reference in this regard can be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the facts of the case. 15. Again, reliance has been placed on the decision of Hon'ble Supreme Court in the case of Anwar Ali. This is a case where explanation given by the assessee was found to be false. The income of the assessee was assessed as such. Under these circumstances, it was held that the finding given in an assessment proceedings for determining or computing the tax may be a good evidence but before penalty can be imposed the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represent income and that assessee had consciously concealed the particulars of his income or deliberately furnished inaccurate particulars. In the present case, the explanation of the assessee has not been found to be false and was accepted by the department that the assessee had obtained loans. Thus the ratio of this decision has no application to the facts of the case as it has always been the case of the assessee in Anwar Ali's case that the amount was not the income of the assessee. 16. Now coming to the case of Sir Shadilal Sugar & General Mills Ltd., in the said case, assessee had agreed to the addition of certain sums to maintain good relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shah also has no application to the facts of the present case. The assessee had explained that the entries recorded in the loose papers was representing money taken for purchasing all flats constructed by the firm. The explanation of assessee was rejected and addition was made after decoding the figures mentioned in the loose papers multiplying by either 1000 or 1,00,000. In the said case, Assessing Officer had changed his stand frequently by decoding figures mentioned in the seized figures. Thus it was held that the Assessing Officer was not justified to make the impugned addition. 21. The decision in the case of Raj Pal Singh Ram Avtar is also not applicable as the loose papers seized contained certain figures, rate and consequent calculation--It does not bear any name--assessee categorically explained that it did not belong to him and also explained that it was not in the handwriting of any of the partners or employees or any connected person. Under these circumstances, it was held that initial onus lying upon the assessee was discharged. The facts in the present case are different. 22. The facts in the case of D.K. Gupta are also different as the said case does not have any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position to his disadvantage by reason of the representation. Following observations of the Bombay High Court in the case of CIT v. Army and Navy Stores Ltd. [1957] 31 ITR 959 will be relevant to be reproduce: "It is difficult to understand how the assessee can be permitted to deny the truth of the representation made by it in its letter of the 24th of Nov. 1946, when on the strength of it obtained a certain benefit and when on the strength of it the Taxing Department relieved it of a certain obligation. The Taxing Department having changed its position to its prejudice by reason of this representation, the assessee company cannot be permitted to deny the truth of that representation when the question arises of assessing its refund to tax under the proviso to section II(II)." At page 4909 of Chaturvedi and Pithisaria's Commentary, 5th edition, it has been mentioned that to sum up law relating to admission, the admission is the best evidence that an opposing party can rely upon and though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous. This conclusion is based on the following authorities: (1) Narayan Bhagwantrao Gosavi, Balajiwale v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the material found at the time of search. Here in the present appeal, there is no question of presumption. Here reference can be made to the decision of the Hon'ble Kerala High Court in the case of Kerala Liquor Corpn., the case relied upon by the learned D.R., that the provisions of section 132(4A) spells out the presumption that the documents belongs to the person from whom they are seized and their contents are true. In addition it must be stated that these aspects were not denied. The facts were very clear and did not require the aid of any presumption. Thus, in the present case, there is no question for application or non-application of section 132(4A). 26. Similarly, we find no force in the contention of the learned AR. that the admission made by the assessee admission of law. In our opinion, what the assessee admitted was admitted of fact and not admission of law. 27. Now coming to the plea of the assessee that penalty should not be imposed in respect of the amount relating to Shri Vishnu L. Patil. It is the contention of the assessee that the said person was employee of the assessee who had been drawing a salary of Rs. 300 p.m. to Rs. 1,000 p.m. and he could not be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard has been placed on the following decisions: (a) Chandra Cement Ltd.'s case. We have gone through this decision. The ratio of the said decision cannot be applied to the present case. In the said case, one 'G' was a promoter-director, who utilised his own money for the purposes of incorporation of the company, purchase of land, plant and machinery, construction material and so on, when the company was awaiting disbursement from financial institutions, and it was taken back later on. These are not the facts in the present case. Here, the transactions of the assessee were with other persons. The persons being clients cannot be equated as a promoter-director of the said company. (b) Industrial Enterprises' case. We have also gone through the decision in this case. As per the facts of this case, the assessee had been able to secure loans sanctioned by banks and financial institutions. These loans had not come in time. In compelling circumstances, the assessee accepted the cash loans from friends as and when emergency arose. Thus, the provisions of section 271D were not held to be applicable. In the present case, no such exigency has been established. Therefore, the said de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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