DY.C.I.T, CENTRAL CIR., RAIPUR V. SHRI SUMIT DAGA, RAIPUR (CG)

ITA 224/BIL/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8918 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 30-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: R B DOSHI
• Keywords: Unexplained investment; Loose papers; Document seized; Documents seized
• Section: 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER) ITA. NO: 224/RAIPUR/2014 (ASSESSMENT YEAR: 2012-13) DY.CIT, CENTRAL CIRCLE, RAIPUR V/S SUMIT DAGA FLAT NO. E-601, PALM RESIDENCY, NEAR BAGRECHA NUSSING HOME, KATORA TALAB, RAIPUR (C.G) (APPELLANT) (RESPONDENT) PAN: AHKPD5700H APPELLANT BY : SHRI P.K. MISHRA, D.R RESPONDENT BY : SHRI R. B. DOSHI, ADV. ( )/ ORDER DATE OF HEARING : 06 -03-201 8 DATE OF PRONOUNCEMENT : 09 -03-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A), RAIPUR DATED 21.07.2014 PERTAINING TO A.Y. 2012-13. ITA NO. 224/RPR/2014 . A.Y. 2012-13 2 2. THE SUBSTANTIVE GRIEVANCE OF THE REVENUE READS AS U NDER:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS 14,00,000/- MADE ON ACCOUNT OF THE AMOUNT BORROWED ON HUNDIES SEIZED FROM THE POSSESSION OF THE ASSESSEE, U/S 69D OF THE INCOME TAX ACT,1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS 2,53,55,200/- MADE ON ACCOUNT OF UN EXPLAINED INVESTMENT IN THE FORM OF LOANS AS EVIDENT FROM THE PROMISSORY NOTES / HUNDIS FOUND DURING SEARCH, WHERE IT IS NOTED THAT THE ASSESSEE HAD ADVANCED LO ANS ON HUNDIS TO VARIOUS PARTIES AS NAMED IN THE SEIZED DOCUMENTS U/S 69 OF THE INCOME TAX ACT,1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS 48,00,000/- MADE ON ACCOUNT OF UNEX PLAINED INVESTMENT IN THE FORM OF LOANS AS EVIDENT FROM HUNDIS SEIZED SHOWING THE AMOUNTS, DATE OF ISSUE AND PERIOD AND SIGNATURE. CIT (A) HAD THEREFORE ERR ED IN HOLDING SUCH DOCUMENTS AS DUMB DOCUMENTS WITHOUT EXAMINING THE SAME. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE CIT(A) ERRED IN DELETING THE ADDITIONS OF RS 1,32,04,800/- MADE ON ACCOUNT OF UN EXPLAINED INVESTMENT IN THE FORM OF LOANS U/S 69, AS EVIDENT FROM THE PROMISSOR Y NOTES / HUNDIS FOUND DURING SEARCH, WHERE IT IS NOTED THAT THE ASSESSEE HAD ADV ANCED LOANS ON HUNDIS TO MILANO FOOD(P) LTD. AS NAMED IN THE HUNDI AND OTHER LOOSE DOCUMENTS SEIZED. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN ALLOWING THE APPEAL, DESPITE THE FACT THAT IT IS NOT A VALID RET URN U/S 139(9) OF THE ACT. THE CIT(A) SHOULD HAVE DECIDED THE ISSUE OF FRAMING OF ASSESSMENT ORDER U/S 144 BEFORE ADMITTING THE GROUNDS OF APPEAL IN THIS CASE . 3. THE UNDERLYING FACTS IN THE ISSUES RAISED VIDE GROU ND NOS. 1, 2, & 3 ARE COMMON AND THEREFORE ALL THESE GROUNDS ARE TAKEN UP TOGETH ER FOR DISPOSAL. 4. REPRESENTATIVES OF BOTH SIDES WERE HEARD AT LENGTH, CASE RECORD PERUSED AND WITH THE ASSISTANCE OF THE LD. COUNSEL, WE HAVE CON SIDERED THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT ON RECORD IN THE FORM OF PAPER BOOK IN THE LIGHT OF RULE 18(6) OF THE ITAT RULES. ITA NO. 224/RPR/2014 . A.Y. 2012-13 3 5. BEFORE PROCEEDING FURTHER, WE MUST UNDERSTAND THE M ODUS OPERANDI OF THE BUSINESS OF THE ASSESSEE. THE ASSESSEE IS A FINANCE BROKER AND THE PERSONS WHO INTEND TO BORROW MONEY APPROACH THE ASSESSEE. THE A SSESSEE ASK THE INTENDED BORROWER TO SIGN A REQUISITION SLIP WHICH IS WHITE IN COLOUR. IN THE WHITE SLIP, THE INTENDED BORROWER PUTS HIS SIGNATURE AND THEREB Y AGREES WITH THE TERMS OF BORROWING. THEN THE ASSESSEE EXPLORES THE PROSPECTI VE LENDERS AND SHOW THEM THIS WHITE SLIP AND TRY TO STRIKE A DEAL WITH THE P ROSPECTIVE LENDERS. WHEN THE DEAL IS MATERIALIZED, A PROMISSORY NOTE IS DULY EXE CUTED WHICH BEARS SIGNATURE OF THE BORROWER, THE LENDERS AND THE ASSESSEE AND A RE VENUE STAMP IS AFFIXED AS PER SECTION 2(23) AND AS PER ARTICLE 53 OF INDIAN STAMP ACT. THE PROMISSORY NOTE BECOMES LEGALLY ENFORCEABLE DOCUMENTS. A SEARCH OPE RATION WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE AND THE MEMBERS OF THE FAMILY. DURING THE SEARCH OPERATION, WHITE SLIPS WERE FOUND AND IMPOUNDED. TH ESE IMPOUNDED DOCUMENTS CAN BE CATEGORIZED INTO THREE PARTS- (I) SLIPS ON WHICH NO NAME OF THE BORROWER IS MENTI ONED. (II) SLIPS ON WHICH NO NAME OF THE LENDER IS MENTIO NED. (III) BLANK SLIPS. 6. ON THE BASIS OF THESE SEIZED MATERIALS, THE A.O. FO RMED A BELIEF THAT THESE WERE HUNDIS AND THE ASSESSEE HAS FINANCED THE AMOUNT MEN TIONED IN THESE SEIZED SLIPS AND MADE THE ADDITIONS OF RS. 14 LACS U/S. 69 D OF THE ACT. AND RS. 2,53,55,200/- AND 48 LACS U/S. 69 OF THE ACT. 7. AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE TH E LD. CIT(A) AND VEHEMENTLY STATED CONTENDED THAT THE DOCUMENTS RELIED UPON BY THE A.O. ARE MERELY WRITTEN FOR FUTURE TRANSACTIONS, IF MATERIALIZED. I T WAS BROUGHT TO THE NOTICE OF ITA NO. 224/RPR/2014 . A.Y. 2012-13 4 THE LD. CIT(A) THAT SINCE THE TRANSACTIONS NEVER MA TERIALIZED, THEY DID NOT CULMINATE IN TO A PROMISSORY NOTE WHICH IS LEGALLY ENFORCEABLE IN LAW. 8. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, T HE LD. CIT(A) WAS CONVINCED WITH THE CONTENTION OF THE ASSESSEE AND DIRECTED TH E A.O. TO DELETE THE IMPUGNED ADDITIONS. 9. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. IT IS THE SAY OF THE LD. D.R. THAT SINCE THE DOCUMENTS WERE FOUND FROM THE PREMISES OF THE ASSESSEE DURING THE COURSE OF THE SEARCH OPERATION, THEREFORE, PROVISIONS OF SECTION 132(4) OF THE ACT SQUARELY APPLY BY WHICH T HE PRESUMPTION IS AGAINST THE ASSESSEE. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 10. THE UNDISPUTED FACT IS THAT ONE SET OF THE ALLEGED HUNDIS CONTAINS ONLY NAME OF BORROWER. ANOTHER SET OF THE ALLEGED HUNDIS CONTAIN S NEITHER THE NAME OF THE BORROWER NOR THE NAME OF THE LENDER AND THE THIRD S ET OF THE ALLEGED HUNDI CONTAIN NAME OF THE LENDER. THUS, IT CAN BE SAFELY CONCLUDED THAT NONE OF THE SEIZED MATERIAL COMPLIES WITH THE MANDATORY REQUIRE MENTS OF A LEGALLY ENFORCEABLE HUNDI (PROMISSORY NOTE). 11. THE HONBLE ANDHRA PRADESH HIGH COURT IN 214 ITR 57 6 HAD THE OCCASION TO CONSIDER THE MEANING OF HUNDI. THE HONBLE HIGH COU RT AFTER ANALYZING THE PROVISIONS OF THE NEGOTIABLE INSTRUMENTS ACT AS WEL L AS INDIAN STAMP ACT FORMULATED THE FOLLOWING BROAD FEATURES OF HUNDI TR ANSACTION.:- 1. THERE ARE ALWAYS THREE PARTIES TO SUCH A TRANSACTIO N. THEY ARE THE DRAWER, THE DRAWEE AND THE PAYEE. THE DRAWER CANNOT HIMSELF ALS O BE THE DRAWEE. IF THE ITA NO. 224/RPR/2014 . A.Y. 2012-13 5 TRANSACTION IS BILATERAL IT IS VERY STRONG INDICATI ON TO SHOW THAT IT IS NOT A HUNDI TRANSACTION. 2. A HUNDI IS PAYABLE TO SATISFY A PERSON OR ORDER BUT NEGOTIABLE WITHOUT ENDORSEMENT BY THE PAYEE. 3. THE HOLDER OF A HUNDI IS ENTITLED TO ON ITS BASIS W ITHOUT ANY ENDORSEMENT IN HIS FAVOUR. 4. A HUNDI ONCE ACCEPTED BY THE DONE, COULD BE NEGOTIA TED WITHOUT ENDORSEMENT. 5. IN THE CASE OF LOSS OF A HUNDI, THE OWNER CAN CLAIM DUPLICATE OR TRIPLICATE FROM THE DRAWER AND PRESENT THE SAME TO THE DRAWEE FOR CLAIM ING PAYMENT. 6. A HUNDI IS NORMALLY IN THE ORIENTAL LANGUAGE AS PER THE ME RCANTILE CUSTOM. 12. IN THE LIGHT OF THE AFORE-STATED GUIDELINES AS LAID DOWN BY THE HONBLE ANDHRA PRADESH HIGH COURT, WE HAVE PERUSED THE DOCUMENTS W HICH ARE PLACED IN THE PAPER BOOK. AFTER ANALYZING THOSE DOCUMENTS, WE CAN SAY THAT NONE OF THE INGREDIENTS OF HUNDI ARE PRESENT IN THE SAID DOCUME NTS AS LAID DOWN BY THE HONBLE ANDHRA PRADESH HIGH COURT (SUPRA). 13. SINCE THE DOCUMENTS IN QUESTION ARE NOT HUNDI AND T HEREFORE THERE IS NO SCOPE FOR THE A.O. TO INVOKE THE PROVISIONS OF SECTION 69 D OF THE ACT. 14. THOUGH THE A.O. HAS ASSUMED THAT THE ASSESSEE HAS L ENDED MONEY TO THE PERSONS WHOSE NAMES WERE FOUND WRITTEN BUT OTHER TH AN THIS ASSUMPTION, THE A.O. HAS NOT BROUGHT ANY COGENT MATERIAL ON RECORD TO SUBSTANTIATE HIS ALLEGATION. AS MENTIONED ELSEWHERE, THE WHITE SLIPS WERE PREPARED ON THE BEHEST OF THE PROSPECTIVE BUYERS AND TO ASSUME THAT AMOUNT HAS BEEN LENDED BY THE ASSESSEE WOULD BE A FALLACIOUS ASSUMPTION AN D CANNOT BE ACCEPTED BY ANY STRETCH OF IMAGINATION. CONSIDERING THE FACTS O F THE ISSUES IN TOTALITY, WE DO NOT FIND ANY SUBSTANCE IN THE ADDITIONS MADE BY THE A.O. AND IN OUR CONSIDERED OPINION, THE FIRST APPELLATE AUTHORITY HAS RIGHTLY DELETED THOSE ADDITIONS AND THEREFORE NO INTERFERENCE IS CALLED FOR. GROUND NOS . 1, 2 & 3 ARE DISMISSED. ITA NO. 224/RPR/2014 . A.Y. 2012-13 6 15. GROUND NO. 4 RELATES TO THE DELETION OF THE ADDITIO N OF RS. 1.32 CRORES MADE ON ACCOUNT OF UNEXPLAINED INVESTMENT ON THE ALLEGATION THAT THE ASESSEE HAD ADVANCED LOAN ON HUNDIS TO MILANO FOOD (P.) LTD. 16. THE A.O. MADE THE IMPUGNED ADDITION ON THE STRENGTH OF THE ALLEGED HUNDIS FOUND AT THE TIME OF SEARCH, THE DETAILS OF SUCH HU NDIS ARE AS UNDER:- BOOK' S. NO. BOOK NO. PAGE NO. NAME OF LENDER NAME OF BORROWER AMOUNT DAYS ISSUE DATE DUE DATE 2 ANNEXURE O 9 MILANO FOOD PVT LTD 200000 90 15-DEC-L 1 14-MAR-12 2 ANNEXURE O 8 MILANO FOOD PVT LTD 300000 90 15-DEC-L 1 14-MAR-12 2 ANNEXURE O 7 MILANO FOOD PVT LTD 200000 90 15-DEC-L 1 14-MAR-12 2 ANNEXURE 0 6 MILANO FOOD PVT LTD 30P0000 90 15-DEC-L 1 14-MAR-12 8 ANNEXURE A 79 MILANO FOOD PVT LTD 500000 21-DEC-L 1 20-MAR-12 8 ANNEXURE A 78 MILANO FOOD PVT LTD 300000 90 21-DEC-L 1 20-MAR-12 17. ANOTHER LOOSE SHEET WAS FOUND WHICH IS AS UNDER:- 14-3 CASH - 10 19-3 CASH -5 19-3 CASH -16 20-3 CASH -8 26-3 CASHG 12 26-3 CASH -5 2-4 --- -15 10-4 --- -10 13-4 --- -10 16-4 --- -20 8-5 --- --- 4-6 --- -5 ITA NO. 224/RPR/2014 . A.Y. 2012-13 7 11-6 --- -5 126 18. THE A.O. WAS OF THE FIRM BELIEF THAT IN THE LOOSE P APER AS EXHIBITED HEREINABOVE, THE AMOUNTS MENTIONED THEREIN REFERRED TO AMOUNTS IN LACS MEANING THEREBY THAT THE TOTAL OF RS. 126 WAS ASSUM ED TO BE RS. 1.26 CRORES. 19. AT THE VERY OUTSET, WE MUST MENTION THAT NO LOGICAL CONCLUSION CAN BE DRAWN FROM THE LOOSE PAPER MENTIONED HEREINABOVE. SECONDL Y AND MOST IMPORTANTLY, STATEMENT OF SHRI JASMIT SINGH DIRECTOR OF MILANO F OOD (P.) LTD. WAS RECORDED BY THE A.O. AND THE SAME IS EXHIBITED AT PAGES 142 & 143 OF THE PAPER BOOK. IN HIS STATEMENT, THE DIRECTOR OF THE MILANO FOOD CATE GORICALLY DENIED OF TAKING ANY LOAN FROM THE ASSESSEE. THE DIRECTOR OF THE MIL ANO FOOD PVT. LTD. HAD EMPHATICALLY STATED THAT THE DEAL NEVER MATERIALIZE D AND NO MONEY WAS BORROWED BY MILANO FOOD PVT. LTD. FROM THE ASSESSEE . 20. IN THE LIGHT OF THE STATEMENT OF THE DIRECTOR OF MI LANO FOOD PVT. LTD. AND CONSIDERING THE LOOSE PAPER EXHIBITED ELSEWHERE AS A DUMB DOCUMENT, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF THE LD. CIT(A). GROUND NO. 4 IS ALSO DISMISSED. 21. WITH GROUND NO. 5, THE REVENUE ALLEGES THAT THE LD. CIT(A) SHOULD NOT HAVE ENTERTAINED THE APPEAL AS THE RETURN WAS NOT A VALI D RETURN U/S. 139(9) OF THE ACT AND THE LD. CIT(A) SHOULD BE DECIDED THE ISSUE OF FRAMING OF ASSESSMENT U/S. 144 OF THE ACT. WE DO NOT FIND ANY MERIT IN TH IS GRIEVANCE OF THE REVENUE EVEN OF THE ASSESSMENT IS FRAMED U/S. 144 OF THE AC T, IT IS FRAMED ON THE BASIS OF THE SAME RETURN OF INCOME WHICH THE REVENUE ALLE GES TO BE AN INVALID RETURN. SINCE THE A.O. HAS COMPLETED THE ASSESSMENT ON THE BASIS OF THE SAID RETURN ITA NO. 224/RPR/2014 . A.Y. 2012-13 8 THEREBY CREATING A HUGE TAX DEMAND, THE ASSESSEE HA D TO PREFER APPEAL BEFORE THE APPELLATE AUTHORITY. THEREFORE, NO ADVERSE INFE RENCE SHOULD BE DRAWN. ORDER PRONOUNCED IN OPEN COURT ON 09 - 03- 2 018 SD/- SD/- (RAM LAL NEGI) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER RAIPUR: DATED 09/03/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER SR. P.S. ITAT,RAIPUR