Shri Sanjay Jhunjhunwala, Kolkata V. D.C.I.T CC - XXI,kolkata, Kolkata

ITA 2003/KOL/2013

• Counselvise Citation: 200323514 RSA 2013
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 24-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY KUMAR SINGH
• Assessee Lawyers: S K TULSIYAN
• Keywords: Unexplained cash credit; Unexplained investment; Unexplained expenditure; Depreciation; Document seized; Additional evidence; Documents seized; Unabsorbed depreciation
• Section: 131; 68; 132; 12; 69C; 142(1)

Judgement Text

I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.(S.S.)A. NOS.: 86, 87 & 88/KOL. / 2013 ASSESSMENT YEARS : 2009-10, 2010-11 & 2011-12 DEPUTY COMMISSIONER OF INCOME TAX, ........ .APPELLANT CENTRAL CIRCLE-XXI, KOLKATA, AAYAKAR BHAWAN POORVA, 5 TH FLOOR, 110, SHANTI PALLY, KOLKATA-700 107 -VS.- SRI SANJAY JHUNJHUNWALA,........................... ................RESPONDENT MANI KUNJ, 2D, QUEENS PARK, KOLKATA-700 019 [PAN : ACVPJ 2365 E] & I.T.A. NOS.: 2003, 2004 & 2005/KOL. / 2013 ASSESSMENT YEARS : 2009-10, 2010-11 & 2011-12 SRI SANJAY JHUNJHUNWALA,........................... ................APPELLANT MANI KUNJ, 2D, QUEENS PARK, KOLKATA-700 019 [PAN : ACVPJ 2365 E] -VS.- DEPUTY COMMISSIONER OF INCOME TAX, ........ .RESPONDENT CENTRAL CIRCLE-XXI, KOLKATA, AAYAKAR BHAWAN POORVA, 5 TH FLOOR, 110, SHANTI PALLY, KOLKATA-700 107 APPEARANCES BY: SHRI S.K. TULSIYAN, ADVOCATE, FOR THE ASSESSEE SHRI AJAY KUMAR SINGH, CIT, D.R., FOR THE DEPARTMEN T DATE OF CONCLUDING THE HEARING : NOVEMBER 06, 2013 DATE OF PRONOUNCING THE ORDER : NOVEMBER 26, 2013 I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 2 O R D E R PER BENCH: 1. THESE ARE THE APPEALS FILED BY THE REVENUE AND C ROSS APPEALS BY THE ASSESSEE AGAINST ORDERS DATED 19 TH JUNE, 2013 OF COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, KOLKATA FOR ASSESSMENT Y EARS 2009-10, 2010-11 & 2011-12 RESPECTIVELY. 2. ASSESSEE IN ALL ITS APPEALS IS AGGRIEVED ON AN ADDITION FOR UNEXPLAINED INTEREST EXPENDITURE MADE RELYING UNDER SECTION 69C OF THE INCOME TAX ACT (IN SHORT THE ACT). AMOUNTS SO ADD ED CAME TO RS.5,06,52,000/- FOR ASSESSMENT YEARS 2009-10, RS.5 ,86,59,750/- FOR ASSESSMENT YEAR 2010-11 AND RS.6,91,95,240/- FOR AS SESSMENT YEAR 2011- 12. DEPARTMENT THROUGH ITS APPEALS SUPPORT THE ORDE R OF CIT(APPEALS) IN SO FAR AS HE CONFIRMED THE ADDITION MADE UNDER SECT ION 69C OF THE ACT, BY PLACING RELIANCE ON THE DOCUMENTS SEIZED IN THE OFF ICE PREMISES OF ONE M/S. ELECTRO ZAVOD (INDIA) PVT. LTD. HOWEVER, FOR I TS APPEAL FOR ASSESSMENT YEAR 2010-11, DEPARTMENT HAS TAKEN ONE A NOTHER GROUND BY WHICH IT ASSAILS THE DELETION OF AN ADDITION MADE B Y THE ASSESSING OFFICER DISBELIEVING THE VALUE OF SHARES SOLD BY ASSESSEE, LONG-TERM CAPITAL GAINS OF WHICH STOOD ADJUSTED AGAINST SHORT-TERM CAPITAL LOSS CARRIED FORWARD FROM EARLIER YEARS. 3. FACTS APROPOS OF THE FIRST ISSUE ARE THAT ASSESS EE WAS THE MANAGING DIRECTOR OF A COMPANY CALLED MANI SQUARE LTD. (IN S HORT MSL). ONE SHRI MANISH SARAF WAS THE CEO OF THE SAID COMPANY. THERE WAS A SURVEY OPERATION UNDER SECTION 133 OF THE ACT IN THE PREMI SES OF M/S. MANI SQUARE LTD., ON 14.09.2010 AND 15.09.2010 FOLLOWED BY A SEARCH ON 17.09.2010. SEARCH WAS DONE NOT ONLY IN THE PREMISE S OF M/S. MSL BUT ALSO IN THE RESIDENTIAL PREMISES OF ASSESSEE, HIS D AUGHTER, SHRI MANISH SARAF, CEO, SHRI RAJESH CHAPPARIA, COMPANY SECRETAR Y OF M/S. MSL, SHRI SOHAN SARKAR, VICE-PRESIDENT (ENGINEERING) OF M/S. MSL AND SMT. SHRABANI SARKAR, WIFE OF SHRI SOHAN SARKAR. DOCUMEN TS FOUND DURING THE COURSE OF SEARCH AS WELL AS SURVEY ON WHICH RELIANC E HAS BEEN PLACED IN I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 3 ASSESSMENT ORDER ARE MENTIONED AS MSL-1, MSG-2, MSG -15, MSL-6, MS-3, ETC. OUT OF THESE, EXCEPT FOR MS-3 ALL DOCUMENTS WE RE SEIZED FROM THE PREMISES OF M/S. MSL. MS-3 WAS SEIZED FROM SHRI MAN ISH SARAF. AS PER THE ASSESSING OFFICER ENTRIES IN MSG-15 REFLECTED HUGE CASH LOANS TAKEN BY THE ASSESSEE. THOUGH ASSESSEE, ON BEING QUERIED UND ER SECTION 132(4) OF THE ACT ON 17.09.2010, AND LATER UNDER SECTION 131 ON 15.11.2010 ADMITTED SUCH LOAN RECEIPTS, DID NOT GIVE THE NAMES OF THE CONCERNED PARTIES. 4. DURING THE COURSE OF SURVEY, REVENUE HAD ALSO RE CORDED A STATEMENT FROM ONE SHRI RAJ KUMAR MUSADDI, ACCOUNTANT OF THE GROUP OF COMPANIES, HEADED BY THE ASSESSEE. AS PER ASSESSING OFFICER TH E SAID STATEMENT PROVED THAT INTEREST PAYMENTS WERE AFFECTED ON THE LOANS RECEIVED BY ASSESSEE. SHRI RAJ KUMAR MUSADDI ALSO MENTIONED THA T CASH RECEIPTS OF THE GROUP WERE HANDLED BY THE ASSESSEE AND SOMETIME S BY HIMSELF OR BY SHRI MANISH SARAF. ASSESSEE IN HIS SWORN STATEMENT DATED 17.09.2010 DID STATE THAT THE FIGURES MENTIONED IN MSG 15 CAME RS. 50 CRORES. OUT OF THIS RS.49 CRORES WAS SHOWN IN RETURNS OF INCOME FILED B Y M/S. MSL FOR ASSESSMENT YEAR 2010-11 AND ASSESSMENT YEAR 2011-12 , WHEREAS RS.1 CRORE WAS SHOWN BY THE ASSESSEE IN HIS OWN RETURN F OR ASSESSMENT YEAR 2010-11. ASSESSEE HAD ALSO FILED A DISCLOSURE OF PE TITION WHEREIN IT WAS MENTIONED THAT THE LOAN AMOUNTS WERE BEING RETURNED AS INCOME FOR NOT PROLONGING LITIGATION WITH THE DEPARTMENT. ASSESSEE IN PARA 5 OF SUCH DISCLOSURE ALSO MENTIONED THAT THE LOAN AMOUNTS REC EIVED WERE UTILIZED FOR MEETING BUSINESS NEEDS, INVESTMENTS AND FOR JEW ELLERY. IN SUCH DISCLOSURE OF PETITION, ASSESSEE ALSO STATED THAT C ASH LOAN TRANSACTION RECORDED AT PAGES 10 TO 14 OF MSG-15 THOUGH IT TOTA LLED TO RS.8,693.64 LAKHS, WERE PREPARED MANUALLY IN EXCEL SHEET BY A J UNIOR ASSISTANT AND THERE WERE ERRORS IN CERTAIN ENTRIES. ACCORDING TO HIM AMOUNTS OF RS.1,000, 1000 AND 500 NUMBERED AGAINST SERIAL NUMB ER 84, 85 AND 86 RESPECTIVELY WERE EXAGGERATED BY ONE EXTRA ZERO. TH ESE FIGURES WHEN ADDED CAME TO RS.25 CRORES. THUS ACCORDING TO HIM, TOTAL LOANS CAME TO RS.50 CRORES ONLY. M/S. MSL IN ITS PROFIT & LOSS A/ C. FILED ALONGWITH THE I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 4 RETURN OF INCOME FOR ASSESSMENT YEAR 2010-11 & 2011 -12 HAD SHOWED RECEIPTS OF RS.11.85 CRORES AND RS.37.15 CRORES RES PECTIVELY. HOWEVER, NET PROFITS FOR THE RESPECTIVE YEARS SHOWN BY M/S. MSL WERE ONLY RS.7.49 CRORES AND RS.26.14 CRORES WHICH STOOD SET OFF AGAI NST BROUGHT FORWARD DEPRECIATION OF EARLIER YEARS. IN SO FAR AS ASSESSM ENT YEAR 2010-11 WAS CONCERNED THE PROFITS OF M/S. MSL STOOD ERASED AND FOR ASSESSMENT YEAR 2011-12, IT GOT SUBSTANTIALLY REDUCED DUE TO SUCH S ET OFF. 5. ASSESSING OFFICER AT PARA 11 OF THE ASSESSMENT O RDER CAME TO A CONCLUSION THAT PRIME ISSUE IN THE CASE OF ASSESSEE AND HIS GROUP WAS THAT UNACCOUNTED CASH WAS BROUGHT BACK IN THE FORM OF UN SECURED LOAN THROUGH VARIOUS INTERMEDIARIES, TO THE GROUP COMPAN IES. ACCORDING TO HIM, SUBSTANTIAL AMOUNT OF CASH TRANSACTIONS WERE A LSO GOING ON IN THE GROUP, AND OUTGOES IN THE NATURE OF INTEREST PAYMEN TS IN CASH WERE NOT PART OF THE BOOKS. THE GROUP WAS BRINGING IN THE UN ACCOUNTED INCOME, ALREADY GENERATED, AS UNSECURED LOANS THROUGH ITS COMPANIES WITH THE AID OF SOME ENTRY OPERATORS. NATURE OF FIGURES MENT IONED IN MSG-15 WERE IN CLOSE SIMILARITY WITH THOSE IN MSL-6. AS PER THE LD. ASSESSING OFFICER, CASE OF THE ASSESSEE THAT THERE WAS AN EXTRA ZERO I N SOME ENTRIES COULD NOT BE ACCEPTED. THUS AS PER THE ASSESSING OFFICER TOTAL CASH LOANS TAKEN CAME TO RS.8,693.64 LAKHS. FURTHER AS PER THE ASSES SING OFFICER SUCH CASH LOANS WERE ENTIRELY TAKEN BY THE ASSESSEE AND THERE WAS NO ERROR OF ANY FIGURE AS CLAIMED BY THE ASSESSEE. 6. ASSESSING OFFICER ALSO MADE SCRUTINY OF DOCUMENT NUMBERED AS MSL-6 AND CAME TO THE CONCLUSION THAT THERE WERE CE RTAIN CASH LOANS MENTIONED IN SUCH DOCUMENT WHICH WERE OVER AND ABOV E THESE RECORDED IN MSG-15. SUCH LOANS BEING RELEVANT FOR FINANCIAL YEARS 2008-09 AND 2009-10 ASSESSING OFFICER ISSUED NOTICE UNDER SECTI ON 142(1) ON 18.01.2013 TO THE ASSESSEE. AS PER ASSESSING OFFICE R FOR THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2010-11, MSL-6 CLEARLY SHOWED THAT ASSESSEE HAD RECEIVED CASH LOANS OF RS.6,517.75 LAK HS. WHAT WAS ADMITTED BY M/S. MSL IN ITS RETURN FOR ASSESSMENT Y EAR 2010-11 WAS ONLY I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 5 RS.1185.00 LAKHS. ACCORDING TO HIM, THERE WAS A SHO RTAGE OF RS.5,332.75 LAKHS FOR ASSESSMENT YEAR 2010-11. ASSESSING OFFICE R ALSO ANALYSED PRINTOUT MS-3 TAKEN FROM MANISH SARAFS LAPTOP , WH ICH ACCORDING TO HIM, SHOWED LOANS OF RS.127.75 LAKHS FOR PREVIOUS YEAR R ELEVANT TO ASSESSMENT YEAR 2009-10, INCLUDING CASH LOAN OF RS.49.65 CRORE S. 7. THOUGH THE CLAIM OF THE ASSESSEE ALL ALONG WAS T HAT CASH LOANS WERE RAISED BY M/S. MSL AND EXCEPT FOR A SUM OF RS.1 CRO RE WHICH HE HAD DULY OFFERED IN HIS OWN RETURN OF INCOME, BALANCE SUM OF RS.49 CRORES WAS OFFERED BY M/S. MSL, ASSESSING OFFICER REFUSED TO A CCEPT SUCH EXPLANATION GIVEN BY ASSESSEE. REASONS FOR THE REFUSAL CAN BE S UMMARISED AS UNDER :- (I) THE GROUP WAS UTILIZING HUGE CASH IN ITS DAY TO DAY BUSINESS, (II) SUCH CASH TRANSACTIONS WERE OUTSIDE THE BOOKS OF ACCOUNTS, (III) CASH LOANS WERE TAKEN FOR SHORT PERIODS AND I NTEREST SHOWN WERE ALSO PAID IN CASH OUTSIDE THE BOOKS. (IV) THE CASH WAS RECEIVED THROUGH SAME BROKERS/ MI DDLEMEN WHOSE NAMES APPEARED IN THE SEIZED AND IMPOUNDED DOCUMENT S MENTIONED AS MSL-1, MSG-2, MS-3, MSL-6, MSG-15, ETC. (V) IDENTITY OF THE LOAN CREDITORS AND BROKERS WERE NOT PROVIDED. (VI) FOR ASSESSMENT YEARS 2010-11 & 2011-12, CASH L OANS WERE OWNED UP IN THE HANDS OF MSL AS ITS INCOME FROM UNEXPLAINED SOURCES TO THE EXTENT RUPEES 49 CRORES, WHEREAS ASSESSEE HAD RETURNED RS. 1 CRORE ONLY. (VII) THE GROUP WAS CONTROLLED DIRECTLY BY ASSESSEE , AND HE WAS THE DIRECT PARTICIPANT AND BENEFICIARY OF A WELL-OILED RACKET OF MONEY LAUNDERING, (VIII) AMOUNT DISCLOSED IN THE ACCOUNTS OF M/S. MSL WAS ADJUSTED AGAINST BROUGHT FORWARD UNABSORBED DEPRECIATION IN ITS COMP UTATION AND THE RESULT WAS THAT NO TAX WAS PAID ON DISCLOSED INCOME FOR ANY ASSESSMENT YEARS. (VIII) THERE WAS NO ELEMENT OF INCOME IN THE LOANS TAKEN DESPITE ADMISSION OF RS.49 CRORES BY MSL IN ITS RETURN. (IX) ASSESSMENTS DONE ON M/S. MSL WERE LIMITED TO T HE TRANSACTIONS WHICH WERE APPEARING IN ITS BOOKS AND DID NOT COVER ANY TRANSACTIONS OUTSIDE SUCH BOOKS. I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 6 (X) SINCE THE AMOUNT OF RS.49 CRORES DISCLOSED BY M /S. MSL WAS A PART OF ITS BOOKS, THIS COULD NOT BE CONSIDERED AS REFLECTI VE OF TRANSACTIONS OUTSIDE ITS BOOKS. (XI) MSG-15 CLEARLY SHOWED THAT ASSESSEE WAS LIABLE TO PAY INTEREST ON THE LOANS RAISED BY HIM AT VARIOUS PERCENTAGE STARTING FROM 9%. THUS HE CONCLUDED THAT ASSESSEE HAD FAILED TO EXPLA IN THE SOURCE OF EXPENDITURE IN THE NATURE OF INTEREST ON LOANS TAKE N BY HIM AND SECTION 69C STOOD ATTRACTED. HE, THEREFORE, COMPUTED SUCH U NEXPLAINED EXPENDITURE TAKING 9% AS THE INTEREST RATE. RESULTI NG ADDITIONS HAVE BEEN GIVEN AT PARA 2 ABOVE. 8. ASSESSEE MOVED IN APPEAL BEFORE CIT(APPEALS) FOR ALL THE THREE YEARS. HIS PRIMARY CLAIM WAS THAT THE LOAN AMOUNTS WERE OFFERED AS INCOME BY MSL IN ITS RETURN OF INCOME FOR ASSESSMEN T YEARS 2010-11 AND 2011-12 AS UNDER :- NAME OF THE PERSON/COMPANY ASSESSMENT YEAR AMOUNT (RS. IN LACS) NATURE OF INCOME MANI SQUARE LTD. 2010 - 11 2011-12 1185 3715 OWNING UP OF CASH LOANS TAKEN BY ME AS PER STATEMENT ON PAGES 10 TO 14 OF SEIZED BUNCH MSG/15 AND OTHER RECEIPTS AS PER THE ASSESSEE, ONCE THE LOAN AMOUNTS ITSELF W ERE OFFERED FOR TAXATION BY MSL, THERE WAS NO WAY INTEREST THEREON COULD BE PAID BY HIM, OR CONSIDERED IN HIS HAND. AGAIN AS PER ASSESSEE, H E HAD ALREADY MENTIONED IN HIS STATEMENT RECORDED UNDER SECTION 1 32(4) OF THE ACT ON 17.09.2010 THAT SHRI RAJ KUMAR MUSADDI WHILE GIVING HIS STATEMENT ON 15.09.2010 WOULD HAVE MENTIONED SOMETHING, WITHOUT CORRECTLY APPRECIATING THE FACTS. FURTHER AS PER THE ASSESSEE , THERE WAS NO SEIZURE OF ANY DOCUMENT FROM HIS PREMISES. EVEN DOCUMENT MS -3 WAS SEIZED FROM THE PREMISES OF SHRI MANISH SARAF ONLY. ACCORDING T O HIM, ASSESSING I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 7 OFFICER IGNORED SECTION 292C OF THE ACT. NOTHING WA S FOUND FROM THE PREMISES OF ASSESSEE. AS PER THE ASSESSEE, ASSESSIN G OFFICER COULD NOT ESTABLISH THAT HE HAD INCURRED ANY EXPENDITURE IN T HE NATURE OF INTEREST NOR COULD HE SHOW THAT ANY EXPENDITURE INCURRED WAS NOT SATISFACTORILY EXPLAINED, FOR APPLYING SECTION 69C. ASSESSEE ALSO POINTED OUT BEFORE CIT(APPEALS) THAT AN APPLICATION STOOD FILED BEFORE SETTLEMENT COMMISSION UNDER SECTION 245C(1) OF THE ACT AND SET TLEMENT COMMISSION HAD ALLOWED TO PROCEED WITH THE APPLICATION. ASSESS EE POINTED OUT THAT A SUM OF RS.11.85 CRORES WAS OFFERED BY MSL IN ASSESS MENT YEAR 2010-11 AND RS.37.15 CRORES IN ASSESSMENT YEAR 2011-12 AND THESE WERE CONSIDERED IN THE ASSESSMENT OF M/S. MSL. THEREFORE , ACCORDING TO HIM, ANY FICTITIOUS INTEREST PAYABLE THEREON COULD NEVER BE CONSIDERED IN THE HANDS. AS PER THE ASSESSEE IT WOULD RESULT IN DOUBL E ADDITION. IN OTHER WORDS, AS PER THE ASSESSEE, CASH LOANS RECEIVED WER E NOT IN HIS PERSONAL CAPACITY BUT WERE FOR M/S.MSL. 9. HOWEVER, LD. CIT(APPEALS) WAS NOT APPRECIATIVE O F THESE CONTENTIONS. ACCORDING TO HIM, SHRI RAJ KUMAR MUSAD DI IN THE STATEMENT GIVEN AT THE TIME OF SURVEY HAD CLEARLY STATED THAT CASH TRANSACTIONS WERE DIRECTLY HANDLED BY THE ASSESSEE. IT WAS ALSO MENTI ONED BY SHRI RAJ KUMAR MUSADDI THAT SUCH CASH LOANS WERE TAKEN FROM DIFFER ENT INDIVIDUALS BY THE ASSESSEE. SHRI RAJ KUMAR MUSADDI HAD ALSO CONFIRMED THAT ASSESSEE HAD COLLECTED CASH LOANS IN THE RANGE OF 15-20 CRORES E VERY MONTH AND INTEREST PAYMENTS OUTSIDE THE BOOKS STOOD AT RS.8-1 0 CRORES PER ANNUM. FURTHER AS PER LD. CIT(APPEALS), MANISH SARAF IN HI S STATEMENT GIVEN ON 17/18-09-2010 HAD CLEARLY MENTIONED THAT LOANS OF R S.127.14 CRORES WERE TAKEN DURING FINANCIAL YEAR 2008-09, WHICH INT ER ALIA, INCLUDED RS.77.29 CRORES IN CHEQUES AND RS.49.85 CRORES IN C ASH. ASSESSEE HAD IN HIS STATEMENT DATED 15.11.2010 ALSO STATED THAT CAS H LOANS WERE DIRECTLY TAKEN BY HIM. AS PER CIT(APPEALS), ASSESSEE NEVER S TATED IN ANY OF HIS STATEMENTS THAT CASH LOANS TAKEN BY HIM WERE ON BEH ALF OF M/S. MSL. CIT(APPEALS) ALSO NOTED THAT IN THE DISCLOSURE PET ITION FILED BY ASSESSEE, M/S. MSL HAD ONLY OWNED UP CASH LOANS TAKEN BY THE ASSESSEE. AS PER I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 8 CIT(APPEALS), ASSESSEE HAD FAILED TO SHOW THAT THE SEIZED DOCUMENTS DID NOT PERTAIN TO HIM BUT ONLY TO TRANSACTIONS RELATAB LE TO MSL. IN ANY CASE, AS PER CIT(APPEALS), DOCUMENT MSG-15 CLEARLY MENTIO NED THE RATE OF INTEREST AND THE DATE OF REPAYMENT. ASSESSEE HAD HI MSELF ADMITTED THAT THE LOANS WERE REPAID AND RECYCLED. INTEREST RATE A DOPTED BY ASSESSING OFFICER WAS WHAT WAS MENTIONED IN MSG-15. IN THIS V IEW OF THE MATTER, HE WAS OF THE OPINION THAT ASSESSING OFFICER WAS JUSTI FIED IN APPLYING SECTION 69C OF THE ACT IN MAKING AN ADDITION FOR UNEXPLAINE D EXPENDITURE IN THE NATURE OF INTEREST ON CASH LOANS, IN THE HANDS OF T HE ASSESSEE. 10. NOW BEFORE US, LD. A.R. STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), AT THE OUTSET SUBMITTED THAT SECTION 292C WAS TOTAL LY IGNORED BY THE LOWER AUTHORITIES. ACCORDING TO HIM, NOTHING WAS SE IZED FROM THE PREMISES OF ASSESSEE. DEPARTMENT WAS TRYING TO PLAC E AN ARTIFICIAL ONUS ON THE ASSESSEE. IN THE DOCUMENTS SEIZED FROM THE PREM ISES OF M/S. MSL, THERE WAS NOTHING WHICH COULD LINK ANY ENTRIES TO T HE ASSESSEE. M/S. MSL HAD ADMITTED RS.49 CRORES AS A PART OF ITS INCOME F OR ASSESSMENT YEARS 2010-11 & 2011-12. THIS WAS CLEARLY MENTIONED IN SC HEDULE 12 OF THE ACCOUNTS OF M/S. MSL FOR THE RESPECTIVE YEARS, FILE D ALONGWITH THE RETURNS. OTHER RECEIPTS SHOWN IN ASSESSMENT YEAR 2010-11 R S.11.85 CRORES AND RS.37.15 CRORES FOR ASSESSMENT YEAR 2011-12 WERE CL EARLY REFLECTED IN SUCH SCHEDULE. DESPITE THIS OFFER ASSESSING OFFICER STILL ENDEAVOURED TO MAKE AN ADDITION IN THE HANDS OF THE ASSESSEE AND T HE ASSESSEE, HAD THEREFORE MOVED FURTHER SETTLEMENT COMMISSION. SETT LEMENT COMMISSION HAD ALLOWED TO PROCEED WITH SUCH APPLICATION. M/S. MSL HAD OFFERED THE LOANS AS INCOME, AS IT WAS NOT POSSIBLE TO GET CONF IRMATIONS FROM THE PARTIES. STATEMENT OF THE ACCOUNTANT RELIED ON BY T HE LOWER AUTHORITIES DID NOT SHOW THAT ANY OF THE TRANSACTIONS WERE ENTE RED INTO BY THE ASSESSEE IN HIS PERSONAL CAPACITY. THERE WAS NOTHIN G ON RECORD TO SHOW THAT ASSESSEE HAD PAID ANY INTEREST ON LOANS AND NO NE OF THE INGREDIENTS REQUIRED FOR APPLYING SECTION 69C STOOD SATISFIED. CIT(APPEALS) HAD SIMPLY CONFIRMED THE ADDITION. I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 9 11. PER CONTRA, LD. D.R. BROUGHT OUR ATTENTION TO T HE ANSWERS TO QUERY NUMBER 14 GIVEN BY SHRI RAJ KUMAR MUSADDI, ACCOUNTA NT OF THE ASSESSEE GROUP, WHICH READ AS UNDER :- FROM ENTRY NO. 1 TO 18 IN MSL/1 ARE CASH LOANS TAK EN FROM DIFFERENT INDIVIDUALS BY SRI SANJAY JHUNJHUNWALA WH ICH WAS COLLECTED BY ME AND EVERY MONTH SINCE LAST 3 YEARS THIS COLLECTION IS 15 CRORE TO 20 CRORE PER MONTH. FROM ENTRY NO. 19 SHOWS THAT 10 CRORE HAS RECEIVED FROM SRI PADAM JAIN @12% INTEREST TO SRI SANJAY JHUNJHUNWALA. THE AMOUN T WAS RECEIVED ON 01.04.2010 BY SRI SANJAY JHUNJHUNWALA I NVESTS THIS MONEY. FROM SL. NO. 20 TO 112 SHOWS LOANS TAKE N FROM DIFFERENT PERSONS IN CASH AND RATE OF INTEREST AND PERIOD OF LOAN WAS ALSO MENTIONED ON THAT PAPER. TOTAL AMOUNT OF LOAN IS RS.86.9364 CRORE AND WAS TAKEN IN CASH DURI NG THIS FINANCIAL YEAR. ABOVE LOAN/TRANSACTIONS ARE NO REFL ECTED IN OUR BOOKS OF ACCOUNTS. PAGE NO. 20-29 ARE THE ENTRI ES REPRESENTING LOANS/ADVANCES TAKEN IN CHEQUE IN MANI SQUARE LIMITED. WE HAVE PAID OUT OF BOOKS INTEREST TO DIFFERENT PARTIES OF AN AMOUNT OF RS.8 CRORES TO RS .10 CRORES PER ANNUM. AS PER D.R., PAGES 10-14 OF MSG-15 CLEARLY SHOWED C ASH LOANS AMOUNTING TO RS.8,693.64 LAKHS. AS PER LD. D.R. IT WAS UNBELI EVABLE THAT ASSESSEE HAD PAID NO INTEREST, ON SUCH LOANS. ASSESSEE WAS THE K EY OPERATOR BEHIND THE GROUP AND THE LOANS WERE ADVANCED BY VARIOUS PARTIE S TO THE ASSESSEE PERSONALLY AND NOT TO M/S. MSL. THE LOANS WERE GIVE N BASED ON PERSONAL RELATIONS AND NOT BECAUSE OF THE REPUTATION, IF ANY , ENJOYED BY MSL. THEREFORE, ASSESSEES CASE THAT AMOUNTS THERE BORRO WED BY MSL OUTSIDE ITS BOOKS COULD NOT BE BELIEVED. AS PER THE LD. DR THIS WAS ONLY A STORY BUILT UP BY ASSESSEE SO THAT AMOUNT ADDITIONALLY OF FERED AS INCOME COULD BE SET OFF AGAINST CARRIED FORWARD DEPRECIATION, SI NCE SAID COMPANY HAD SUBSTANTIAL CARRIED FORWARD DEPRECIATION. NET PROFI T STOOD ERASED ON ACCOUNT OF SUCH SET OFF AND NO TAXES WERE PAID. ACC ORDING TO LD. D.R., CIT(APPEALS) HAD MADE A PROPER ANALYSIS OF THE CASE AND RELIANCE PLACED BY HIM ON STATEMENTS GIVEN BY ASSESSEES ACCOUNTANT AS WELL AS SHRI MANISH SARAF COULD NOT BE IGNORED. 12. LD. D.R. WHILE SUPPORTING THE ORDER OF CIT(APPE ALS) IN SO FAR AS IT CONFIRMED THE ADDITION MADE UNDER SECTION 69C OF TH E ACT, PLACED RELIANCE I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 10 ON A DOCUMENT REFERRED AS E/1 SEIZED FROM THE PREMI SES OF ONE M/S. ELECTRO ZAVOD (INDIA) PVT. LTD. ACCORDING TO HIM TH IS DOCUMENT CLEARLY MENTIONED THAT SAID COMPANY HAD ADVANCED LOANS TOTA LLING RS.1 CRORE TO ASSESSEE AT 11% RATE. DURING FINANCIAL YEAR 2009-10 SAID COMPANY HAD ALSO ADVANCED RS.30 LAKHS TO MSL AT INTEREST RATE O F 14%. SAID COMPANY IN ITS APPLICATION TO SETTLEMENT COMMISSION HAD ACC EPTED THE SUM OF RS.1 CRORE GIVEN TO ASSESSEE AS UNEXPLAINED INVESTMENT M ADE OUTSIDE ITS BOOKS. AS PER LD. DR, ASSESSEE COULD NEVER EXPLAIN WHY THE CASH TRANSACTIONS WERE KEPT OUTSIDE ITS BOOKS. M/S. MSL WAS A COMPANY WHICH HAD MAINTAINED ITS BOOKS IN ACCORDANCE WITH THE MAN DATE OF THE COMPANIES ACT, 1956 AND, HENCE ANY OFFER OF INCOME MADE BY IT COULD NOT BE CONSTRUED AS ONE MADE BY THE ASSESSEE. ACCORDING TO HIM, LD. CIT(APPEALS) WAS JUSTIFIED IN CONFIRMING THE ADDITI ON MADE BY THE ASSESSING OFFICER. 13. AD LIBITUM REPLY OF AR WAS THAT RULE 29 OF THE INCOME TAX APPELLATE TRIBUNAL RULES DID NOT ALLOW FOR PRODUCTION OF ANY ADDITIONAL EVIDENCE WHETHER DOCUMENTARY OR NOT AND, THEREFORE, REVENUE COULD NOT PLACE RELIANCE ON NEW DOCUMENT. 14. WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE ARE THREE ISSUE RAISED BY ASSESSEE IN THESE APPEALS. FIRST ONE IS WHETHER CASH LOANS FOUN D IN MSG-15 PERTAINED TO ASSESESE OR M/S. MSL SECOND WHETHER THE LOANS, I F IT PERTAINED TO ASSESSEE, ANY INTEREST EXPENDITURE WAS INCURRED ON SUCH LOANS. THIRD EVEN IF SUCH INTEREST WAS PAYABLE WHETHER INGREDIENTS RE QUIRED FOR APPLYING SECTION 69C WAS PRESENT. 15. TAKING THE FIRST QUESTION, THERE IS NO DISPUTE THAT DOCUMENTS NUMBERED MSG-15, MSL-6 AND MSL-1 RELIED ON BY THE R EVENUE, WERE FOUND IN THE PREMISES OF MSL AND NOT IN THE PREMISE S OF ASSESSEE. EVEN DOCUMENT MS-3 ON WHICH CONSIDERABLE RELIANCE WAS PL ACED BY THE REVENUE, WAS A PRINT OUT TAKEN FROM THE LAPTOP OF M /S. MANISH SARAF AND I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 11 FOUND FROM THE PREMISES OF SHRI MANISH SARAF AND NO T FROM THE ASSESSEE. THERE IS ALSO NO DISPUTE THAT NONE OF THESE DOCUMEN TS CARRIED THE NAME EITHER OF ASSESSEE NOR OF COMPANY M/S. MSL. SECTION 292C WHICH IS RELEVANT HERE, IS REPRODUCED HERE :- SECTION 292C : WHERE ANY BOOKS OF ACCOUNT, OTHER DO CUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE POSSESSION OR CONTROL OF ANY PERSON IN THE C OURSE OF A SEARCH UNDER SECTION 132 [OR SURVEY UNDER SECTION 133A] IT MAY, IN ANY PROCEEDING UNDER THIS ACT, BE PRESUMED (I) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG BELONG OR BELONGS TO SUCH PERSONS; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHE R DOCUMENTS ARE TRUE, AND (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SUCH BOO KS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HANDWRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUMED TO HAVE BEEN SIGNED BY, O R TO BE IN THE HANDWRITING OF, ANY PARTICULAR PERSON, ARE IN THAT PERSONS HANDWRITING, AND IN THE CASE OF A DOCUMENT STAMPED, EXECUTED OR ATTESTED, THAT IT WAS DULY STAMPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPORTS TO HAVE BEEN SO EXECUTED OR ATTESTED. (2) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS HAVE BEEN DELIVERED TO THE REQUISITIONING OFFICER I N ACCORDANCE WITH THE PROVISIONS OF SECTION 132A, THEN, THE PROV ISIONS OF SUB- SECTION (1) SHALL APPLY AS IF SUCH BOOKS OF ACCOUNT , OTHER DOCUMENTS OR ASSETS WHICH HAD BEEN TAKEN INTO CUSTO DY FROM THE PERSON REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C), AS THE CASE MAY BE, OF SUB-SECTION (1) OF SECTION 1 32A, HAD BEEN FOUND IN THE POSSESSION OR CONTROL OF THAT PERSON I N THE COURSE OF A SEARCH UNDER SECTION 132. ONCE A DOCUMENT IS FOUND IN THE POSSESSION OF A PER SON, THE PRESUMPTION IS THAT SUCH DOCUMENT BELONGED TO THAT PERSON. A P ERSON IS DEFINED IN SECTION 2(31) OF THE ACT, WHICH READS AS UNDER:- PERSON INCLUDES- (I) AN INDIVIDUAL, (II) A HINDU UNDIVIDED FAMILY, (III) A COMPANY, (IV) A FIRM, (V) AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS , WHETHER INCORPORATED OR NOT, (VI) A LOCAL AUTHORITY, AND I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 12 (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLING WITH IN ANY OF THE PRECEDING SUB-CLAUSES. EXPLANATION : FOR THE PURPOSES OF THIS CLAUSE, AN A SSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A LOCAL AUTH ORITY OR AN ARTIFICIAL JURIDICAL PERSON SHALL BE DEEMED TO BE A PERSON, WHETHER OR NOT SUCH PERSON OR BODY OR AUTHORITY OR JURIDICAL PERSON WAS FORMED OR ESTABLISHED OR INCORPORATED WI TH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS. ABOVE CLEARLY SHOWS THAT A PERSON INCLUDES A COMPAN Y. THEREFORE, WHATEVER DOCUMENTS WERE SEIZED FROM THE PREMISES OF M/S. MSL HAS TO BE PRESUMED AS BELONGING TO MSL, IRRESPECTIVE OF WHETH ER THE NAME MSL WAS MENTIONED IN IT OR NOT. NO DOUBT THIS IS A REBUTTAB LE PRESUMPTION, IF EVIDENCE TO THE CONTRARY IS AVAILABLE. THIS REQUIRE S US TO HAVE A LOOK AT THE EVIDENCE ON WHICH DEPARTMENT HAS PLACED CONSIDE RABLE RELIANCE FOR MAKING THE ADDITION UNDER SECTION 69C OF THE ACT. T HESE ARE (I) STATEMENT RECORDED FROM RAJ KUMAR MUSUDDI ON 15.09.2010, ACCO UNTANT OF ASSESSEES GROUP, (II) STATEMENT RECORDED FROM SHRI MANISH SARAF ON 1 8.09.2010, (III) DISCLOSURE PETITION FILED BY THE ASSESSEE IN WHICH IT IS MENTIONED THAT (A) CASH LOAN TAKEN BY HIM WERE UTILIZED FOR MEETIN G NEEDS OF FAMILIES FOR CERTAIN INVESTMENT IN PROPERTY/ADVANCES/ JEWELLERY, ETC. (B) CASH LOANS TAKEN AS PER PAGES 10-14 OF SEIZED B UNCH MSG-15 WAS BEING OWNED UP BY M/S. MSL, AND (IV) DOCUMENT MSG-15. 16. TAKING UP THE STATEMENT OF SHRI RAJ KUMAR MUSSA DI FIRST, IN ANSWER TO QUESTION NO. 12, (PAPER BOOK PAGES 84 & 86) HE S TATES AS UNDER :- Q.12. DURING THE COURSE OF SURVEY SOME PAPERS INVEN TORIZED UNDER IDENTIFICATION MARK MSL/1 WERE FOUND. PLEASE GO THROUGH THESE PAPERS AND EXPLAIN THIS NATURE OF THIS ENTRIE S APPEARING THEREIN. PLEASE ALSO EXPLAIN WHY THE PAPERS ARE TOR N WHICH ARE PASTED ON A PLAIN PAPER AND IN YOUR PRESENCE AND DU LY AUTHENTICATED BY YOU. ANS..: NORMALLY AFTER COMPLETION OF TRANSACTIONS I USED TO DESTROY/TORN THE PAPERS. TRANSACTIONS, AS ENTERED I N THESE PAPERS ARE RELATING TO M/S. MANI SQUARE LIMITED, DE TAILS OF SUCH ENTRIES ARE AS UNDER :- I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 13 PAGE NO. 1 TO 4 THESE ARE THE PHOTOCOPIES OF CHEQ UES ISSUED BY M/S. SAMUDRA VAYPAAR PVT. LTD. AND M/S. TANISHQU E VINIMARY OF INDIA SECURITIES BROKING PVT. LTD. DIR ECTORS OF THESE COMPANIES HAVE RECENTLY CHANGED AND SRI ABHIS EK AGARWAL, PURCHASE MANAGER HAS INSTRUCTED ME TO KEEP PHOTOCOPIES OF SUCH CHEQUES. PAGE NO. 5 ROUGH PAPER. PAGE NO. 6- IT CONTAINS DETAILS OF ADVANCES RECEIVE D THROUGH SRI DEBRIWABJI FROM VARIOUS COMPANIES. THESE FIGURES AR E IN LAKHS. OUT OF TOTAL RECEIPT OF 1450 LAKH, WE HAVE ALREADY REFUNDED RS.500 LAKH. THIS PIECE OF PAPER ALSO CONTAINS DETA ILS OF RECEIPT AND PAYMENT, DATE WISE IN LAKHS. PAGE NO. 7 THE LOWER PART OF THE ENTRIES ARE THE AMOUNT IN LAKHS RECEIVABLE FROM J.K. GOYAL FOR BOOKING A FLAT IN SHIROMONY PROJECT. UPP4R POSITION OF THIS ENTRIES, I CANNOT R EMEMBER AT PRESENT. PAGE NO. 8 LOWER PART CONTAINS THIS AMOUNT OF RS. 25 LAKH RECEIVED BY CASH FROM ONE SRI VIJAY DEBRIWAL AS ADV ANCE FROM PURCHASE OF A FLAT AT SWARNOMANY PROJECT. THE CASH WAS RECEIVED DIRECTLY BY OUR M.D. SRI SANJAY JHUNJHUNWA LA ON 29.06.2010. THE UPPER PART CONTAINS CASH REMITTANCE OF RS.17 LAKH ON VARIOUS DATES TO JAIPUR FOR OUR JAIPUR PROJ ECT. THE ABOVE CASH WAS DIRECTLY REMITTED BY OUR M.D. SHRI JHUNJHUNWALA. I WAS SIMPLY ASKED BY HIM TO MAKE A N OTE OF THE SON. PAGE NO. 9 IT WAS AN INTEREST BILL RAISED BY DEBR IWABJI FOIR PAYMENT IN CASH TAKING THE RATE OF INTEREST AT 16.5 % P.A. TOTAL INTEREST COMPUTED/CHARGED AT RS.14,73,698/- AS ON 1 3.09.2010. HOWEVER, NO PAYMENT HAS BEEN MADE TILL DATE. PAGE NO. 10. THIS IS THE CONFIRMATION LETTER ISSUED BY OUR COMPANY TO M/S. PIONEER PROPERTY MANAGEMENT LTD. IN WHICH A DEPOSIT OF RS.5 CRORE WAS ARRANGED FROM M/S. GOLCHI COMMODITIES PVT. LTD. IT IS FURTHER MENTIONED IN PE NCIL FOR PAYMENT OF SERVICE CHARGE TO M/S. PIONEER PROPERTIE S MANAGEMENT LTD. @ 1% IN CHEQUE AND .80% IN CASH. PAGE NO. 11-19 : THESE ARE COMPUTERIZED PRINT OUT S HOWING LOAN REPAYMENT SCHEDULE IN LAKH. AS PER THE LOWER AUTHORITIES THE ABOVE ANSWER SHOWE D THAT CASH LOANS RECEIVED PERTAINED TO ASSESSEE AND NOT TO M/S. MSL. IN OTHER WORDS, AS PER THE REVENUE, TRANSACTIONS MENTIONED IN MSG-15 F OUND FROM THE I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 14 PREMISES OF MSL DID NOT PERTAIN TO M/S. MSL BUT TO ASSESSEE. HOWEVER IN OUR OPINION, ANSWER GIVEN BY SHRI RAJ KUMAR MUSADDI IS NOT GOOD ENOUGH TO COME TO SUCH A CONCLUSION. M/S. MSL BEING A CORP ORATE BODY CANNOT ACT BY ITSELF. IT CAN ACT ONLY THROUGH A DESIGNATED OFF ICER. ADMITTEDLY, ASSESSEE WAS THE MANAGING DIRECTOR. HENCE, THE CLAI M OF ASSESSEE THAT THE MONEY RECEIVED AS CASH LOANS WERE FOR MSL CANNOT BE BRUSHED ASIDE, LIGHTLY. ESPECIALLY SO SINCE DOCUMENT WAS SEIZED FR OM THE OFFICE OF MSL. 17. QUESTION NUMBER 14 POSED TO SHRI RAJ KUMAR MISS ADI AND ITS ANSWER IS ALSO VERY RELEVANT. THESE REPRODUCED HERE UNDER :- Q. 14 : WE ARE SHOWING YOU THE COMPUTER PRINT OUT O F MONEY TAKEN IN CASH FROM VARIOUS INDIVIDUALS SIGNED BY SR I MANISH SARAF. PLEASE EXPLAIN THIS ENTRIES IN THOSE PAPERS. ANS. : FROM ENTRY NO. 1 TO 8 IN MSL/1 ARE CASH LOAN TAKEN FROM DIFFERENT INDIVIDUALS BY SRI SANJAY JHUNJHUNWALA WH ICH WAS COLLECTED BY ME AND EVERY MONEY SINCE LAST 3 YEARS THE COLLECTION IS 15 CRORE TO 20 CRORE PER MONTH. FROM ENTRY NO. 19 SHOWS THAT 10 CRORE HAS RECEIVED FROM SRI PADAM JAI N @ 12% INTEREST TO SRI SANJAY JHUNJHUNWALA. THE AMOUNT WAS RECEIVED ON 01.04.2010 BY SRI JHUNJHUNWALA INVESTS THIS MONE Y. FROM SL. NO. 20 TO 112 SHOWS LOANS TAKEN FROM DIFFERENT PERS ONS IN CASH AND RATE OF INTEREST AND PERIOD OF LOAN WAS ALSO ME NTIONED ON THAT PAPER. TOTAL AMOUNT OF LOAN IS RS.,86.9364 CRO RE AND WAS TAKEN IN CASH DURING THIS FINANCIAL YEAR. ABOVE LOANS/TRANSACTIONS ARE NOT REFLECTED IN OUR BOOKS O F ACCOUNTS. PAGE NO. 20-29 ARE THE ENTRIES REPRESENTING LOANS/A DVANCES TAKEN IN CHEQUE IN MANI SQUARE LIMITED. WE HAVE PAI D OUT OF BOOKS INTEREST TO DIFFERENT PARTIES OF AN AMOUNT OF RS.8 CRORE TO RS.10 CRORE PER ANNUM. THE QUESTION ITSELF MENTIONS THAT PRINT-OUTS WERE S IGNED BY SHRI MANISH SARAF, WHO ADMITTEDLY WAS THE CEO OF MSL. THIS CLEA RLY SHOW THAT TRANSACTIONS MENTIONED THEREIN, WERE NOT OF THE ASS ESSEE BUT THAT OF MSL ONLY. 18. COMING TO THE CLAIM OF ASSESSING OFFICER THAT A MOUNT OF RS.49 CRORES SHOWN BY M/S. MSL IN ITS RETURN WOULD HAVE B EEN REFLECTED IN ITS BOOKS AND HENCE NOT ANYTHING REPRESENTING OUTSIDE T HE BOOKS, THOUGH AT I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 15 THE FIRST FLUSH LOOKS APPEALING IS NOT SO. THE AMOU NT DOES APPEAR AS OTHER INCOME IN ITS PROFIT & LOSS ACCOUNT. HOWEVE R, NOTE NUMBER 14 AS SCHEDULE 21 OF ITS ACCOUNTS PLACED AT PAGE 193 OF P APER BOOK, CLEARLY MENTIONS THAT OTHER RECEIPTS INDICATED ADDITIONAL INCOME FOR THE YEAR OFFERED FOR TAXATION. IN OTHER WORDS, IT WAS AN ENT RY INTRODUCED INTO THE BOOKS FOR OFFERING ADDITIONAL INCOME. M/S. MSL WAS BRINGING INTO BOOKS THE CASH TRANSACTIONS, WHICH WERE OUTSIDE ITS BOOKS . THEREFORE, RS.49 CRORES OFFERED BY M/S. MSL THROUGH ITS RETURNS CANN OT BE CONSIDERED IRRELEVANT WHILE FRAMING THE ASSESSMENT ON ASSESSEE . 19. NOW COMING TO THE DISCLOSURE PETITION FILED BY THE ASSESSEE. THIS HAS NECESSARILY TO BE SEEN IN THE LIGHT OF STATEMEN T RECORDED FROM THE ASSESSEE ON 15.11.2010. IN ANSWER TO QUERY NO. 32 H E HAS GIVEN THE FOLLOWING ANSWERS :- THE CLAIM MADE BY SHRI MUSADDI REGARDING PAYMENT O F INTEREST BY US AMOUNTING TO RS.8 TO 10 CRORES IS NO T CORRECT. WE HAVE NOT PAID ANY INTEREST SO FAR. THEREFORE, THERE IS NO QUESTION OF TREATING ANY AMOUNT AS UNDISCLOSED INCO ME FOR THE ALLEGED PAYMENT OF INTEREST. MOREOVER, WHEN I HAVE OWNED UP THE ENTIRE AMOUNT AS MINE THERE IS NO QUESTION OF P AYING ANY INTEREST TO ANY ONE. IN OUR OPINION, THE ABOVE ANSWER SHOULD BE SEEN IN THE LIGHT OF THE FACT THAT ASSESSEE WAS THE MANAGING DIRECTOR OF M/S. MSL . WHEN HE OWNS UP THE MONEY, IT COULD VERY WELL BE FOR HIM OR FOR M/S . MSL. ASSESSEE ADMITTEDLY WAS THE KEY PERSON BEHIND M/S. MSL AND I F HE INTENDED THE REPLIES TO HAVE BEEN GIVEN IN HIS CAPACITY AS MANAG ING DIRECTOR OF M/S. MSL, IT IS A DISTINCT POSSIBILITY WHICH CANNOT BE I GNORED. IN THE LIGHT OF THIS, THE DISCLOSURE PETITION, WHICH, INTER ALIA, M ENTION M/S. MSL OWNING UP THE CASH LOANS OR THE MONEY BEING INVESTED IN BU SINESS, COULD ONLY BE CONSIDERED AS GIVEN IN THE CAPACITY OF THE HEAD OF THE GROUP BUSINESS AND MANAGING DIRECTOR OF M/S. MSL. I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 16 20. COMING TO THE STATEMENT RECORDED FROM SHRI MANI SH SARAF, CEO OF M/S. MSL PLACED AT PAPER BOOK PAGES 88 TO 96, RELEV ANT QUESTION NUMBER 12 AND ANSWER THERETO ARE REPRODUCED HEREUNDER :- Q-12. PLEASE GO THROUGH THE PAGE NOS. 13 & 14 CONT AINING PRINTOUTS TAKEN FROM YOUR LAPTOP BEARING ID MARK MS /3 FOUND FROM YOUR RESIDENCE PREMISES DURING THE COURSE OF S EARCH AND EXPLAIN THE CONTENTS OF THE SAME. ALSO EXPLAIN THE WORDS CHQ AND OTH USED AS COLUMN NAME ON THESE PAGES. ANS. : PAGE NO. 13 CONTAINS DETAILS OF LOAN TAKEN F ROM RELATIVES OF SHRI SANJAY JHUNJHUNWALA AGGREGATING 23.93 CROES AND PAGE NO. 14 CONTAINS DETAILS OF LOAN TAKEN FROM LOAN BRO KERS AGGREGATING 127.14 CRORES. THE WORD CHQ AND OTH DIFFERENTIATE THE UNSECURED LO AN TAKEN IN CHEQUE AND THE UNSECURED LOAN TAKEN IN CASH RESP ECTIVELY. OUT OF THE AGGREGATE FIGURE OF RS.23.93 CRORES, I.E . THE AMOUNTING IN CHEQUE IS 17.49 CRORES AND AMOUNT TAKE N IN CASH IN 6.44 CRORE. OUT OF THE AGGREGATE FIGURE OF RS.127.14 CRORES, I. E. THE AMOUNTING IN CHEQUE IS 77.29 CRORES AND AMOUNT TAKE N IN CASH IS 49.85 CRORES. IN OUR OPINION, NOTHING IN THE ABOVE CAN LEAD TO CO NCLUSION THAT LOAN OF RS.127.14 CRORES WAS TAKEN BY ASSESSEE IN HIS PERSO NAL CAPACITY. 21. THE LAST BUT MOST IMPORTANT DOCUMENT CONSIDERED FOR THE PURPOSE OF MAKING THE ADDITION IN MSG-15 FOUND FROM THE PRE MISES OF M/S. MSL. WHAT HAS BEEN RECORDED THEREIN, HAS BEEN SET OUT IN PAGES 23 TO 30 OF THE ASSESSMENT ORDER, AND WE ARE AVOIDING A REPRODUCTIO N THEREOF FOR BREVITY. WITHOUT DOUBT THE DESCRIPTION DOES GIVE THE NAME OF CREDITOR, AMOUNT AND INTEREST RATE. HOWEVER, THE QUESTION IS WHETHER REQ UIREMENT OF SECTION 69C HAVE BEEN SATISFIED FOR MAKING AN ADDITION IN A SSESSEES HAND. AT THIS JUNCTURE IT IS NECESSARY TO HAVE A LOOK AT SECTION 69C. THIS SECTION IS REPRODUCED HEREUNDER:- 69C : WHERE IN ANY FINANCIAL YEAR AN ASSESSEE HAS INCURRED ANY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPENDITURE OF PART THEREOF, OR THE EXPLANATIO N, IF ANY, OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESS ING OFFICER, SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITUR E OF PART THEREOF, AS THE CASE MAY BE, MAY BE DEEMED TO BE TH E INCOME OF THE ASSESSEE FOR SUCH FINANCIAL YEAR. I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 17 PROVIDED THAT, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, SUCH UNEXPLAINED EXPEN DITURE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NO T BE ALLOWED AS A DEDUCTION UNDER ANY HEAD OF INCOME. TO COME TO A CONCLUSION THAT ASSESSEE HAD INCURRED INTEREST EXPENDITURE. ASSESSING OFFICER PRIMARILY RELIED ON THE ANSWER TO QUESTION NO. 14 POSED TO SHRI RAJ KUMAR MUSADDI, ACCOUNTANT, REPROD UCED AT PARA 17 OF THIS ORDER. QUESTION ITSELF SAY THAT THE DOCUMENT B ASED ON WHICH IT WAS BEING ASKED WAS SIGNED BY SHRI MANISH SARAF, CEO OF M/S. MSL. HENCE ANSWER GIVEN IS RELEVANT ONLY FOR M/S. MSL AND DOES NOT BRING ASSESSEE INTO THE PICTURE, PERSONALLY. 22. AT THIS POINT, IT IS ALSO VITAL TO REPRODUCE A FINDING OF THE AO RECORDED AT PARA XI OF HIS ORDER, WHICH READS AS UN DER :- MODUS OPERANDI FOR AREAS OF UNDISCLOSED INCOME OF THE GROUP PRIME ISSUES IN THIS GROUP OF CASES ARE THAT UNACCO UNTED CASH IS BROUGHT BACK IN THE FORM OF UNSECURED LOAN THROUGH VARIOUS INTERMEDIARIES TO THE GROUP COMPANIES. SUBSTANTIAL AMOUNT OF CASH TRANSACTION ARE ALSO GOING ON IN THE GROUP WHI CH ARE IN THE NATURE OF INTEREST PAYMENTS IN CASH WHICH ARE N OT PART OF THE BOOKS. THE COST OF CONSTRUCTION OF MANI MALL WA S UNDER REPORTED. THIS GROUP IS ALSO BRINGING IN ITS UNACCO UNTED INCOME, ALREADY GENERATED, AS UNSECURED LOANS THROU GH THE COMPANIES OF ENTRY OPERATORS. AT THE FIRST PLACE, IF IT IS OWN MONEY THERE CAN BE NO CASE FOR ANY INTEREST OUTGO FOR THE SIMPLE REASON THAT ONE CANNOT PAY ONE SELF. SECOND THE ALLEGED LOANS HAVING BEEN REGULARLY AND CONTINUOUSL Y RECORDED THERE IS EVERY CHANCE INTEREST PAYMENTS IF ANY COULD HAVE EF FECTED OUT OF NEW LOANS. WE CANNOT SAY THAT ASSESSEE HAD NO FUNDS TO EXPLAIN THE INTEREST OUTGO. THUS RECORDINGS IN MSG-15, IN OUR OPINION, I S NOT SUFFICIENT ENOUGH TO SHOW THAT ANY UNEXPLAINED EXPENDITURE IN THE NAT URE OF INTEREST WAS INCURRED BY THE ASSESSEE. SECTION 69C COULD NOT HAV E BEEN ROPED IN. 23. IN OUR OPINION, REVENUE HAS NOT BEEN ABLE TO ES TABLISH THAT CASH LOAN MENTIONED IN VARIOUS DOCUMENTS SEIZED FROM PRE MISES OF M/S. MSL WAS RELATABLE TO ANY PERSONAL BUSINESS OF THE ASSES SEE. IF AT ALL ANY I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 18 INTEREST EXPENDITURE WAS INCURRED, IT COULD HAVE BE EN CONSIDERED IN THE HANDS OF MSL AND NOT IN THE HANDS OF THE ASSESSEE. NOTHING HAS BEEN PRODUCED TO SHOW THAT ASSESEE HAD PERSONALLY INCURR ED ANY INTEREST EXPENDITURE. IN OUR OPINION, SECTION 69C COULD NOT HAVE BEEN AFFECTED UNDER SUCH CIRCUMSTANCES. 24. COMING TO THE DOCUMENT SEIZED FROM THE PREMISES OF M/S. ELECTRO ZAVOD (INDIA) PVT. LTD ON WHICH RELIANCE HAS BEEN P LACED BY THE REVENUE IN ITS APPEALS. IT IS MENTIONED THAT RS.1 CRORE WAS GIVEN TO THE ASSESSEE AT 11% RATE OF INTEREST. BUT IT DOES NOT SHOW THAT SUC H SUM WAS RECEIVED BY THE ASSESSEE PERSONALLY AND NOT FOR MSL. APART FROM THE OBJECTION RAISED BY AR, RELYING ON RULE 29 OF THE INCOME TAX APPELLA TE TRIBUNAL RULES, WE ARE OF THE OPINION THAT THE SAID DOCUMENT WOULD NOT HELP THE REVENUES CASE IN ANY MANNER. M/S. MSL BEING A CORPORATE UNDE RTAKING, IT CAN ENTER INTO TRANSACTIONS ONLY THROUGH THE MEDIUM OF AN IND IVIDUAL, WORKING ON ITS BEHALF. WHEN THE CONCERNED INDIVIDUAL STATES TH AT CASH LOANS WERE FOR MSL AND REFLECTED IN THE RETURN OF M/S. MSL, IT CAN NOT BE DISBELIEVED, ESPECIALLY WHEN THE DOCUMENTS WERE ALL SEIZED FROM THE PREMISES OF THE COMPANY. WE ARE, THEREFORE, OF THE OPINION THAT ADD ITION OF UNEXPLAINED EXPENDITURE BY WAY OF INTEREST ON PERSONAL LOANS AL LEGED TO HAVE BEEN TAKEN BY ASSESSEE HAVE NO LEGS TO STAND. SUCH ADDIT IONS STAND DELETED. APPEALS OF THE ASSESSEE FOR ALL THE YEARS ARE ALLOW ED AND CROSS APPEALS OF REVENUE FOR ASSESSMENT YEARS 2009-10 & 2011-12 ARE DISMISSED. 25. THERE IS ONE OTHER GROUND TAKEN BY REVENUE IN I TS APPEAL FOR ASSESSMENT YEAR 2010-11. FACTS APROPOS THIS ISSUE A RE THAT ASSESSEE HAD SHORT-TERM CAPITAL LOSS OF RS.11,15,15,911/- CARRIE D FORWARD FROM PRECEDING ASSESSMENT YEAR. DURING RELEVANT PREVIOUS YEAR, ASSESSEE SOLD 4000 SHARES OF MSL @ RS.2005/- PER SHARE. LONG-TERM CAPITAL GAINS AFTER INDEXATION ON ACCOUNT SUCH SALE CAME TO RS.78,95,25 9/-. THIS WAS ADJUSTED AGAINST SHORT-TERM CAPITAL LOSS CARRIED FO RWARD FROM PRECEDING YEAR. REMAINING SHORT-TERM CAPITAL LOSS WAS CLAIMED FOR CARRIED FORWARD TO THE NEXT ASSESSMENT YEAR. ASSESSING OFFICER WAS OF THE OPINION THAT I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 19 ASSESSEE HAD DURING RELEVANT PREVIOUS YEAR TRANSFER RED SHARES OF THE SAME COMPANY TO HIS FAMILY MEMBERS, AT A LOWER RATE THAN THE RATE AT WHICH HE HAD SOLD IT TO OTHER PARTIES. AS PER ASSES SING OFFICER, BOOK VALUE OF SHARES OF MSL CAME TO RS.2,363 ONLY, WHEREAS ASS ESSEE SOLD SUCH SHARES TO OUTSIDE PERSONS @RS.2,500/- PER SHARE. WH EN ASSESSEE HAD SOLD SIMILAR SHARES TO HIS FAMILY MEMBERS AT A MUCH LOWE R RATE, SALE TO THIRD PARTIES @RS.2,500/- PER SHARE COULD NOT BE ACCEPTED . HE HELD THAT THE PRICE WAS OVERSTATED BY 75%. IN OTHER WORDS, HE SCA LED DOWN THE SALE CONSIDERATION ON SALE OF SHARES OF M/S. MSL BY 75% AND CONSIDERED SUCH AMOUNT AS UNEXPLAINED CASH CREDIT. ADDITION CAME TO RS.75 LAKHS. 26. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF ASSESSEE WAS THAT THE SALE OF EQUITY SHARES OF M/S. MSL AT RS.2,500/- PER SHARE WERE DONE TO THIRD PARTIES AND CONSIDERATION FOR SALE WAS RECEIV ED BY ACCOUNT PAYEE CHEQUE. AS PER ASSESSEE, BECAUSE SOME SHARES WERE T RANSFERRED AT A LESSER PRICE TO CLOSE RELATIVE WOULD NOT BE GOOD ENOUGH TO DISBELIEVE TRANSACTIONS WITH THIRD PARTIES. INGREDIENTS REQUIR ED FOR APPLYING SECTION 68 OF THE ACT WERE NOT THERE. M/S. MSL NOT BEING A LISTED COMPANY, ASSESSEE HAD SOLD ITS SHARES AT A PRICE COMPARABLE TO THE BOOK VALUE. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONTENTIONS. HE HELD THAT ASSESSING OFFICER COULD NOT BRING ANY MATERIAL TO P ROVE INFLATION OF SALE PRICE IN SHARES. IN THIS VIEW OF THE MATTER, ADDITI ON OF RS.75 LAKHS WAS DELETED. 27. NOW BEFORE US, LD. DR STRONGLY ASSAILING THE OR DER OF CIT(APPEALS) SUBMITTED THAT ASSESSEE WAS TRYING TO EVADE TAX THR OUGH THE TRANSACTION OF SALE. ITS ARGUMENT THAT SHARES WERE SOLD @ RS.2, 500/- PER SHARE COULD NOT BE TAKEN AT FACE VALUE. PER CONTRA LD. AR SUPPO RTED THE ORDER OF CIT(APPEALS). 28. WE HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS WE FIND THAT ASSESSEE HAD RECEIVED MONEY ON SALE OF SHARES BY CHEQUES. AL L RELEVANT I.T.(SS)A. NOS.: 86-88/KOL./ 2013 & ITA NOS.: 2003-2005-KOL-2013 ASSESSMENT YEARS :2009-10, 2010-11 & 2011-12 PAGE 1 TO 20 20 INFORMATION AS TO WHOM ASSESSEE HAD SOLD THE SHARES WAS AVAILABLE ON RECORD. IN OUR OPINION, JUST BECAUSE SOME SHARES WE RE SOLD AT LOWER RATES TO CLOSE RELATIVES WOULD NOT BE SUFFICIENT TO PROVE THAT SALE OF SHARES TO THIRD PARTIES WERE OVERPRICED. ADMITTEDLY, BOOK VAL UE OF THE SHARES CAME RS.2363 PER SHARE AND SALES WERE MADE @ RS.2,500/- PER SHARE. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE WAS NO THING ON RECORD TO SHOW ANY CONSCIOUS EFFORT BY THE ASSESSEE BY INCREA SING SALE PRICE TO TAKE ADVANTAGE OF SET OFF OF CARRIED FORWARD LOSSES. IN OUR OPINION, CIT(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION UNDER SECTION 68 OF THE ACT. WE, THEREFORE, DO NOT FIND ANY REASON TO I NTERFERE WITH THE VIEW TAKEN BY LD. CIT(APPEALS). 29. TO SUMMARIZE THE RESULTS ALL THE APPEALS OF REV ENUE STAND DISMISSED, WHEREAS APPEALS OF ASSESSEE FOR ALL THE YEARS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF NOVEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 26 TH DAY OF NOVEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.