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TMI Blog2018 (12) TMI 1688X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (in short ''the Act'') for loans accepted in cash during the previous year relevant to assessment year 2006-2007, which levy was confirmed by ld. Commissioner of Income Tax (Appeals). Appeal No.2930/Chny/2017 is again levy of penalty of Rs. 3,00,000/- u/s.271E of the Act on repayment of loan in cash for the very same assessment year, which was also confirmed by ld. Commissioner of Income Tax (Appeals). Appeal No.2931/Chny/2017 is an appeal against an order dated 11.10.2017 of ld. Commissioner of Income Tax (Appeals)-19, Chennai confirming certain additions/disallowances made by the ld. Assessing Officer in the assessment done for assessment year 20122013. 3. Grounds taken by the assessee in its appeal ITA 2928/Chny/2017 for assessment year 2006-07, count ten of which grounds 1 and 2 are general needing no specific adjudication, whereas grounds 10 and 11 are on levy of interest under Section 234A and 234B of the Act, which are consequential in nature. 4. Vide its grounds 3 to 5, assessee assails sustenance of an addition of Rs. 90,62,161/-.(Actual figure it appears is Rs. 90,66,072/-) 5. Facts apropos are that assessee, a pawn broker, was subjected to a search u/s.132 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lyanmalji Ranka Rs. 2,00,000/- (f) C. Kamalachand Rs. 4,00,000/- (g) A.Pukhraji Gulecha Rs. 1,00,000/- 59,40,160/- It is to be noted that out of the total sum of Rs. 60,00,000/- claimed by the assessee to have been received from Shri. Sivarajan Nadar, a sum of Rs. 49,40,160/- was accepted by the ld. Assessing Officer and balance sum of Rs. 10,59,840/- alone was considered to be unexplained. The claims which were not accepted by the ld. Assessing Officer were as under:- M/s. C. Kishanlal & Sons and C. Kishanlal A6,56,232 M/s. C. Kishanlal (HUF) A7,00,000 C. Shri Sivaraja Nadar Rs. 10,59,840 Shri. B.K. Vimal Chand Rs. 34,00,000 Smt. V. Suvetha Rs. 9,00,000 Smt. Kanchan Bai Rs. 23,50,000 Total Rs. 90,66,072/- 7. Reasons for disbelieving the above claims of loans/advances, cited by the ld. Assessing Officer were as under:- (i) M/s. C. Kishanlal & Sons Rs. 6,56,232/- - Though it was claimed as cash balance held by the assessee, income returned by the assessee from his business was only Rs. 2,20,000/- and assessee could not have had cash of Rs. 6,56,232/- with him. (ii) M/s.C. Kishanlal & Sons (HUF) Rs. 7,00,000/- - Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flected in the Trial Balance and return of income filed by the said HUF. As per the ld. Authorised Representative, HUF had earlier advanced a sum of Rs. 10,20,000/- to one Shri. M. Venkatachalam who had repaid it in two installments during the relevant previous year. According to him, HUF had advanced Rs. 7,00,000/- to the assessee out of the said amount. 11. Viz-a-viz, addition of Rs. 10,59,840/-, out of Rs. 60,00,000/- received from Shri. Shivraj Nadar, contention of the ld. Authorised Representative was that the said sum was duly reflected in the ledger of the assessee. According to him, the sum of Rs. 10,59,840/- was adjusted against agricultural land sold by the assessee as power agent and after such adjustments the balance due to Shri. Shivraj Nadar was A49,40,160/-. According to him, this did not deplete the availability of A60,00,000/- with the assessee. 12. Coming to the claim of advance of Rs. 34,00,000/- from Shri. B.K. Vimalchand, ld. Authorised Representative submitted that the amount was duly reflected in the return filed by Shri. B.K. Vimalchand for assessment year 2006-07. According to him, Shri. B.K. Vimalchand in the previous year relevant to assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be definitely reflected in his capital account. In the circumstances, we are not inclined to accept the claim of the assessee that the sum of Rs. 6,56,232/- came out of his capital account. The sum remains unexplained, without source. 17. Coming to the second item which is the claim of the assessee that a sum of Rs. 7,00,000/- was received from C.Kishnalal & Son (HUF), Income Tax return of the said HUF for assessment year 2006-07 is placed at paper book page 125. The said Income Tax return has been filed on 23.02.2007 much prior to the date of search. Trial Balance as on 31.03.2006, filed alongwith the said return, copy of which is available at paper book page 127 clearly shows an agricultural land advance of Rs. 7,00,000/- paid to C. Kishanlal. In our opinion, return of C.Kishnalal & Son (HUF) having been filed much earlier to the date of search, there can be no reason to disbelieve the advance shown in such return. It may be true that assessee could not produce evidence for the advance paid by C.Kishnalal & Son (HUF) to Shri. M. Venkatachalam in an earlier year, and returned by the latter in the relevant previous year. However, it is clear from the Wealth Tax return filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date :11.03 2014 The Assistant Commissioner of Income Tax, Central Circle III (3), Chennai- 600034. Sir Ref: Shri.C.Kishanlal, PAN : AAKPK 7263 K/2006-2007 Sub : Source for money advanced by Shri,B.K.Vimalchand to Shri.C.Kishanlal- regarding. With reference to above and we state that Shri.B.K,Vimalchand has deposited a sum of Rs. 3000000/- by way of cheque during the ass.year 2006-2007 with Shri C.Kishanlal. The source for above deposited made by Shri.B.K.Vimaichând is out of refund by Agriculture land advance of Rs. 3400000/- which was made by him during the asst. year 2005-2006.We are herewith enclosing the financial statement of Shri B.K. Vimalchand relating to asst. year 2005-06. We are also herewith enclosing intimation of 143(1) of the I T. Act of relating to asst.year 2005-2006 and 2006-2007 of Shri.B.K. Vimalchand as well as his Bank statement for year ended 31.03.2006. We hope the above will clarify the matter regarding source of money advanced by Shri.B.K.Vimalchand to Shri.C.Kishanlal during the asst.year 2006-07. Thanking you Yours Faithfully, For RICAB CHAND & CO., Chartered Accountants End: 1. Financial Statement of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kanch Bai No.23, Kutchery Road, Mylapore, Chennai -600 004. Date: 31.03.2006 CONFIRMATION I hereby confirm having advanced a sum of Rs. 25,40,000/- ( Rupees Twentyfive Lakhs Forty Thousand ) (Details as below ) to Shri. C.Kishanlal, residing at No.23, Kutchery Road, Mylapore, Chennai - 600 004 towards lease advance for Agricultural land situated at No.41, Laxmipuram Village, Sri-perumpudur Taluk, Thiruvallur District comprised in Survey no. 23/4A of an extent 0 acre 31 cents, Survey no. 59/1Rs. 1 of an 0 acre 02 cents, Survey no. 59/1B2 of an extent 0 acre 07 cents, Survey no. 59/2Rs. 1 of an extent 0 acre 26 cents, Survey no. 34/3B of an extent 0 acre 28 cents, Survey no. 34/3A of an extent 0 acre 04 cents, Survey no. 30/2 of an extent 0 acre 02 cents, Survey no. 28/1 of an extent 0 acre 59 cents, and Survey no. 28/2 of an extent 0 acre 58 cents and Agricultural Land situated at No. 49, Veeraragavapuram Village, Tiruttani Taluk, Thiruvallur District comprised in Survey No. 219/2A of an extent 0 acre 91 cents, Survey No. 220/1 of an extent 1 acre 25 cents and Survey No. 170/15 of an extent 0 acre 86 cents. 18.10.2005 23,50,000.00 24.03.2005 Further Advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition is sustained. Grounds 3 to 5 are treated as partly allowed. 23. Vide it grounds 6 & 7, assessee assails an addition of Rs. 3,14,93,768/- made disbelieving the claim of sale proceeds of jewellery belonging to his relatives. 24. As already mentioned by us at para 5 above, source for the investment of Rs. 4,65,00,000/- made by the assessee with M/s. Surana Corporation was partly explained by the assessee as coming out of sale proceeds of jewels of relatives. Assessee had stated before the ld. Assessing Officer that proof for sale of jewellery aggregating to Rs. 3,14,93,768/- belonging to his family members, were handed over to Shri. Saravana Prabhu, Inspector of Police, Egmore, when a police complaint was filed by the assessee against M/s. Surana Corporation. However, it seems assessee was unable to furnish any confirmation or acknowledgment for handing over the bills to the police authorities. As per the ld. Assessing Officer, Superintendent of Police, CB-CID, had informed through his letter dated 27.01.2014 that no such bills were handed over by the assessee. Claim of the assessee before ld. Assessing Officer was that his family members had in their respective Wealth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Inspector of Police before Hon'ble Principal District and Sessions Judge, Chennai placed at paper book pages 207 to 214 in connection with the case filed by the assessee, it is stated by the said officer as under at para 8:- 8. I submit that investigation done by the CS CID discloses the following facts: i. Lakshmi Chand Bafna who is the Paterhal uncle of the accused Pinku @ Bafna. The De facto Complainant Kishanlal was introduced to the accused during the month of October 2005 at R.B. Jewelry, situated in No.1411 8, Veerappan St., Sowcarpet, Chennal by Lakshmichand Bafna. ii. The petitioner /accused conspired together with intent to cheat the De facto Complainant with dishonest intention represented and induced the De facto Complainant during October 2005 at Chennai to enter into the Gold Trade business to earn more profit through them for the use of the Trust created by the De facto Complainant. iii. The De-facto Complainant collected funds in the form of cash and jewels from the relatives for investing the amount in Gold Trade business and decided to use the profit for the compound wall erection at the Trust at Sulurpet. iv. The De-facto Complainant collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been doubted by the lower authorities. Their doubt is on claim of the assessee that such jewellery was sold by the assessee. In our opinion, report filed by the Investigating Officer before Principal District and Sessions Judge when seen along with the failure of the Revenue to find any such jewellery at the time of search, clearly indicate that the jewellery deposited by the close relatives with the assessee were sold by the latter. Preponderance of probability, in our opinion, is on the side of the assessee. We are of the opinion that the claim of the assessee that a sum of Rs. 3,14,93,768/- had come out of sale proceeds of jewellery deposited by his relatives with him, ought not have been disbelieved. Addition of A.3,14,93,768/- stands deleted. Grounds 6 & 7 of the assessee stand allowed. 28. Vide its grounds 8 & 9, grievance of the assessee is on an addition of Rs. 14,98,780/- made under the head long term capital gains. 29. Ld. Counsel for the assessee submitted that assessee had sold two plots at Mangadu for a sale consideration of Rs. 3,59,680/- and paid capital gains thereof. According to him, ld. Assessing Officer had applied Section 50C of the Act and substitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search reflected cash balance of Rs. 1,27,052/- only. In the circumstances, we are of the opinion that lower authorities were justified in ignoring any other books produced by the assessee at a later stage. The addition of Rs. 3,22,948/-, in our opinion was rightly made. Grounds 3 and 4 of the assessee stand dismissed. 38. Vide its grounds 5 & 6, assessee is aggrieved on an addition of Rs. 1,26,76,768/- considered as unexplained investment in silver bars. 39. Ld. Counsel for the assessee submitted that at the time of search 325.334 kgs of silver in the form of silver bars were found and seized by the Department. According to him, out of the above 325.334 kgs, 243.784 kgs belonged to assessee's mother. Contention of the ld. Authorised Representative was that assessee's mother, Smt. Saya Bai had declared such silver under VDIS scheme in 1997. However, according to him, this was disbelieved by the lower authorities for non availability of evidence for conversation of silverware to silver bars. According to him, assessee ought have been given credit for the silver already declared by his mother. 40. Per contra, ld. Departmental Representative submitted that bars found at the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee owned 3.26 acres of land. It might be true that assessee was unable to produce evidence for agricultural cultivation and earning of agricultural income. Nevertheless, we cannot say that assessee could have earned no agricultural income from a holding of 3.26 acres of land. We are of the opinion that assessee ought have been given credit of agricultural income at the rate of A5,000/- per acre. Accordingly, we restrict the addition to A72,874/-. Grounds 7 & 8 of the assessee are partly allowed. 46. Now, we take up appeals of the assessee in ITA Nos.2929 & 2930/CHNY/2017 which are against levy of penalty u/s.271D and 271E of the Act respectively. 47. Ld. Assessing Officer had levied the penalty since assessee has accepted loans in excess of Rs. 20,000/- in cash, aggregating to Rs. 10,00,000/- from six persons and repaid Rs. 3,00,000/- in cash to two persons. Ld. Assessing Officer took a view that assessee having violated Section 269SS and Section 269T of the Act levy of penalty u/s.271D and 271E of the Act was called for . Penalty of Rs. 10,00,000/- was levied u/s.271D of the Act and Rs. 3,00,000/- was levied u/s.271E of the Act, which were confirmed by ld. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lery given to him by the HUF without the permission of the HUF. We are afraid, we cannot accept the claim of the assessee. This is due to the reason that Shri. C. Kishanlal to whom the jewellery was given was the Kartha of the assessee (HUF). Hence, he cannot say that he was unaware of the sale of jewellery. Hence, ground of the assessee assailing the addition made long term capital gains is dismissed. However viz-a-viz, cost of acquisition, it is an admitted position that ld. Assessing Officer had considered such cost at 50% of the sale value. Contention of the assessee is that the jewellery which was sold was reflected in the Wealth Tax return of the HUF from assessment year 2001-02. We direct the ld. Assessing Officer to verify this claim of the assessee and consider the cost shown by the assessee in the Wealth Tax return for assessment year 2001-02, for the purpose of computing the long term capital gains. Grounds 3 to 6 are dismissed whereas ground No. 7 is allowed for statistical purpose. 55. To summarize the results, appeals of the assessee in ITA Nos.2928, 2931 and 2932/CHNY/2017 are partly allowed, whereas its appeals in ITA Nos.2929 and 2930/CHNY/2017 are dismissed. & ..... 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