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TMI Blog2023 (1) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee were found during search, provisions of section 153C of the Act were invoked. Thereafter assessment was framed under section 153C read with section 144 of the Act on the basis of material available on record, since no reply was received from the assessee during assessment proceedings. On the basis of seized material with the AO, he found that the assessee had been receiving cash loans and repaying them in cash and further found that the documents seized revealed cash loans taken during the impugned year 2002-03, on 6.12.2002as being Rs.3,88,35,500/- and on Feb., 2003Rs.2,34,86,666/-.In the absence of any explanation offered by the assessee with respect to the source of this money, it was held as amount belonging to the assessee and repaid out of his undisclosed income. Therefore, addition of peak amount of Rs.3,88,35,500/- was made to the income of the assessee. 3. Before the ld.CIT(A) no compliance was made by the assessee, and accordingly, the appeal was dismissed by the Ld. CIT(A). The matter was carried in appeal before the ITAT who ,in the first round before it, vide order dated 24.10.2008 , set aside the order of the ld.CIT(A) and restored the appeal to the fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be ascertained whether he had complied with the direction of the ITAT while condoning the delay. He drew our attention to the specific direction of the ITAT as noted in para 3(vi) page 2 of the CIT(A) order as under: (vi) The Hon'ble ITAT vide order dtd.24-10-2008 set aside the order of CIT (Appeal) and restored the appeal to the file of CIT(Appeals). The Hon'ble ITAT has directed that appellant's request for condonation of delay while furnishing the appeal was to be checked from the appeal records and in case there was a request by the appellant for condonation of delay with the appeal memo itself, the directions were given by the Hon'ble ITAT to condone the delay and adjudicate the case on merits after hearing the appellant. 8. At this juncture, the ld.DR was asked at Bar as to what was the period of delay, to which he pointed out that it was a 22 days delay. Taking note of the smallness of the delay, which we find is too inconsequential, we are of the view that there was no need for the ld.CIT(A) to have passed an elaborate order on the issue of condonation of delay. The fact that delay was condoned by the ld.CIT(A) and stands noted in the order, is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e finding regarding cash loans of Rs.3.88 Crs taken by the assessee derived on the basis of documents seized as under: "Amount of Peak Cash Loan as per impounded Paper Reference is invited to page No. 96 wherein the amount against Saurabh Trading is mentioned as Rs. 22.500/-. Detailed account of Saurabh Trading is available in the impounded documents and a copy of the same is given at Page No. 30 of Annexure II. Here the principle amount is shown as Rs. 22,50,000/-. On comparison with the entries on page No. 96, it becomes clear that the entries on page No. 96 are coded and two zeros are to be added for arriving at the correct amount. As per page 96 of Annexure II, the total cash deposits are as under: Shri Prembhai Agarwal Rs. 30,000- Shri Vipin Oberoi Rs. 22,500 Shri P.C. Shah Rs. 9,000 Shri S.R. Vithlani Rs. 2,500 Shri M.V.Raval Rs. 1,250 Shri M.D. Amipara Rs. 1,750 Shri K. Vishweshrudu Rs. 1,375 Shri Raman Kalidas Patel Rs. 63,750 Chhayaben Trivedi (r) Rs. 12,000 Rasiklal V. Shukla (R) Rs. 4,000 Rashmikant V. Shukla (r) - Rs. 4,000 H.R. Vithlani Rs. 2,250 SanabhaiLaxmanbhai Rs. 4,300 MathurbhaiShivabhai Rs. 1,000 BhikhibenSomab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts mentioned in the Annexure did not reflect the principal amount, but reflected the interest amount. He noted that there were different columns in page no.96 having narration with 10th, 14th, 17th, quarterly etc. and such entries could not be attributed to the principal amounts, since they are given for a period of few months to year. He noted that some narrations suggested monthly or quarterly interest due to various parties which was clear from the word "quarterly" mentioned therein. He further noted various other papers and cheques, referred to by the AO on page no.3 of his order, containing the details of interest payable by cheque, payable by cash and the previous outstanding available. He therefore held that the details which were maintained by the assessee related only to partywise interest payment for various months. Accordingly, he held that documents page no.96, Annexure-2 did not represent details of cash loans taken by the assessee, but in fact represented details of interest payable by the assessee, and further that the figure in the said documents could not be rounded off with two "0s". He therefore held that the peak cash loans of Rs.3.88 crores, added on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f narrations are normally not written in respect of principal amounts as the principal amounts are generally given for a period of few months to a year. The notings suggests that monthly / quarterly interest was due to various parties on the dates mentioned against their respective names. The word 'quarterly1 also suggests that the figures relate to interest payments. It appears that all these due dates were related to payment of interest to the respective parties. Further, there are many other loose papers like page No. 199 of Annexure-VII as on April 2004, page No.201 of Annexure-VII as on March 2004, page No.19 of Annexure-ll as on January 2004 which have been discussed in assessment order on page No.3. On all these loose papers, details of interest payable by cheque, interest payable by cash and previous outstanding are available. Therefore, it is clear that appellant was maintaining the details of party-wise interest payments for various months. Further, other examples have also been given by appellant in the submissions on the remand report to prove that the figures on page No.96 were related to interest only. Such e.g. are discussed in the case of depositors named P. K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This ground is partly allowed." 16. Coming to the issue of the peak loan of Rs.2.34 crores taken by the AO as on Feb.2003, our attention was drawn to the order and the finding of the AO in this regard at para-5 of the order as under: "From the amount of cash interest The impounded loose papers from the office of Harshad Shukla, contain names of the persons from whom advances were obtained by him, and details of payments of interest in cash and in cheque to these persons. Such details are on pages 87,90,96,97,99 and 100 of Annexure A-4. The details on Page No. 90 shows that payment of interest due in cash and in cheque, for the month of January, 2004 and over due interest. This page is listed in Annexure 2. Total interest payable by cheque and in cash is shown at Rs. 70,093 and Rs. 2,63,897/-respectively. The previous outstanding interest is shown at Rs. 3,15,668/-. Obviously, the amount of interest of Rs. 2,63,897/- payable in cash, is on the cash advances obtained by Harshad Shukla on various dates. Similar working is appearing on Pages 96, (for December, 2002) and on page 100 (for February, 2003). The page 96 is listed in Annexure 3. Shri. Harshad Shukla was asked to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principal amount has mounted due to the reason that he could not pay interest during the last few years, and such unpaid interest has been added to the principal, periodically. Shri Shukla could not produce any necessary evidence on his contention, nor he could identify all the persons mentioned in the list. In reply to question No. 40 in te statement recorded on 28/04/2005, he could not furnish the addresses of these person, except in the cases of a few. He also could not furnish the details of loans obtained from these persons, from time to time. In the circumstances, there is no alternative, but ot estimate the principal amount of cash loan taken by him, on the basis of his initial statement, and as well as on the basis of interest rate. From the interest working, he total cash interest for January, 2004 as per page 90 of Annexure II is Rs. 2,63,897. Hence the principal amount at the rate of 1.50% would be = Rs. 1,75,93,133/-. The above is the position as on 01/01/2004. As per page nos.99 and 100 of the Annexure II which is the position I February, 2003 the total cash interest is = Rs.2,72,550+Rs.79,750/- totaling to Rs.3,52,300/-. The principal amount at the rate of 1.50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a perusal of the said loose paper would reveal that certain dates which mentioned in the first column of the said loose paper, these are nothing but due date of payment of interest of the loans borrowed by the appellant from various parties. The amounts stated by the said loose paper pertain to amounts received by cheque as well as by cash. The amounts stated on the said loose paper are interest payments payable by the apepllant and not the loan amounts as contemplated by the Learned Assessing Officer in her Assessment Order. The Learned Assessing Officer has grossly erred in holding that the total amount stated on the said loose papers pertains to amount borrowed by the appellant, from various person, names of whom have been stated in the said loose paper. It may be submitted here that the various columns on the said loose paper included following details namely: i) Name of the Depositor ii) Due Date iii) Previous Outstanding iv) By Cheque v) By Cash vi) Total The previous outstanding amount pertains to the interest due as on 6.12.2002 interest payable for the period till 6.12.2002 which includes payment by cheque as well as by cash. A perusal of the said lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,500/- made by the Learned Assessing Officer. In respect of the amount of Rs.22,500/- purported to have been received by the appellant from Saurabh Trading Company it is stated that the said amount of Rs.22500/- pertains to the interest payment payable to Hasmukhbhai Shah against 1 & 2 and not against Saurabh Trading Company as stated by the Learned Assessing Officer in the assessment order. The said amount of Rs.7500/- and Rs.15000/- pertains to the interest payments due to Hasmukhbhai Shah (at sr.no.40) aggregating to Rs.22500/-. The total borrowings from Hasmukhbhai Shah was Rs.9,00,000/- on the interest due to 2.5% p.m. for which the interest amount works out to Rs.7500/- and Rs. 150007- respectively the borrowings of Rs.3,00,0007- and Rs.6,00,000/- respectively. The particulars of cheque stated in the said loose papers do not pertains to the amounts borrowed but the same pertains to the interest payments paid by cheque and by cash. The contention of the appellant can also be substantiated from the entry at Sr,No.53 which pertains to an amount of Rs.50000/-borrowed from Shri J.N. Besana op an interest rate of 2.5% p.m. which works out to Rs. 1250/- p.m. and an amount of Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee pointed out that it was demonstrated to the ld.CIT(A) that the rate of monthly interest paid by the assessee was around 2.5% and on the said basis cash loan taken by the assessee worked out to 1.06 crores and not 2.34 crores as worked out by the AO. He pointed out that the figures of these cash loans was less than that admitted by the assessee of having taken at 1.25 crores and addition upheld by the ld.CIT(A) of Rs.1.25 crores, therefore was justified. 21. We have heard rival contentions and have gone through the orders of the authorities below, and also the documents referred to before us. 22. Grievance of the Revenue in this ground is that the ld.CIT(A) ought to have restricted addition made on account of cash loans taken and repaid by the assessee worked out on the basis of documents found during the search, to an amount of Rs.2.34 crores being cash loan as on Feb. 2003 as opposed to the ld.CIT(A) restricting it to Rs.1.25 crores, as admitted by the assessee in his statement recorded during the search. The contention of the Revenue being that while the AO had taken peak of two figures of cash loans worked out by the AO on the basis of the documents before him bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets of these companies. Similarly the assessee had pointed out that figures represented in page no.96 of Annexure- 2 represented interest paid on various cash/cheques loans taken at therate of 2.5% on an average. The assessee therefore, we find, had suitably demonstrated with evidence to the Ld.CIT(A) that the document Annexure II page 96 represented details of interest paid on loans taken by the assessee and the rate of interest so paid was 2-2.5%. The ld.CIT(A), we have noted, found merit in the contentions of the assessee that figures mentioned in the said documents represented interest amount and not the cash loans, which finding has not been challenged by the Revenue before us. Since it is an admitted fact that Annexure II page 96 represented details of interest paid by assessee on various cash and cheque loans taken, which the assessee had suitably demonstrated as paid @ 2.5 %,the cash loans of Rs. 2.34 Crs worked out by the AO by taking interest rate of 1.5% , we hold, have been rightly rejected by the Ld.CIT(A). 25. Further, we find that the AO had applied rate of 1.5% on the basis of one instance only; that too relating to the subsequent year of January, 2004. The AO had ..... 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