M/s. Sneh Finance & Invesment, Pune V. ACIT, Pune

ITA 521/PUN/2010

• Counselvise Citation: 52124514 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-04-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 09-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Search and seizure; Loose papers; Document seized; Bogus loan; Documents seized
• Section: 143(3); 153A; 6; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER S. NO. I.T.A. NO. ASSTT. YEAR 1. 521/PN/2010 2001-02 2. 523/PN/2010 2002-03 3. 526/PN/2010 2003-04 M/S SNEH FINANCE & INVESTMENT, .. A PPELLANT 1194/1 VRINDAVAN SOCIETY, 2 ND FLOOR, SHIAJI NAGAR, PUNE PAN AAHFS 1098K VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RESPONDENT CEN. CIR. 2(2), PUNE APPELLANT BY: SHRI S UNIL PATHAK RESPONDENT BY: SHRI HARESHWAR SHARMA ORDER PER G.S. PANNU, AM THE CAPTIONED THREE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX ( APPEALS) WHICH IN TURN HAVE ARISEN FROM THE ORDERS OF THE ASSESSING OFFICER PA SSED UNDER SECTION 143(3) READ WITH SECTION 263 OF THE INCOME-TAX ACT, 1961 ( IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEARS 2001-02, 2002-03 AND 2003-0 4. SINCE THE APPEALS RELATE TO THE SAME ASSESSEE AND INVOLVE COMMON ISSU ES, THEY HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. BRIEFLY PUT THE BACKGROUND OF THE DISPUTE MANIFE STED IN THE GROUNDS OF APPEAL RAISED BY THE APPELLANT CAN BE SUMMARIZED AS FOLLOWS: ON THE FACTS AND IN LAW, 1) THE LD CIT (A) ERRED IN CONFIRMING AN ADDITION O F RS 4,06,250/-, (A.Y 2001-02), RS 7,05,000/- (A.Y. 2002-03) & RS 4,35,000/- (AY 2003- 04) AS INTEREST PAID TO SHRI SHRIRAM SONI ON THE LOANS TAKEN WHICH WERE NOT RECO RDED IN THE BOOKS. 2) THE LD CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAD NOT TAKEN ANY UNACCOUNTED LOAN FROM SHRI SONI AND THEREFORE, THE QUESTION OF PAYMENT OF ANY ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 2 UNACCOUNTED INTEREST OF RS 4,06,250/- (A.Y 2001-02) , RS 7,05,000/- (AY 2002-03) & RS 4,35,000/- (AY 2003-04) SIMPLY DID NOT ARISE. 3) THE LD CIT(A) FAILED TO APPRECIATE THAT A. THE APPELLANT HAD NOT TAKEN ANY LOAN FROM SHRI S HRIRAM SONI WHICH WAS NOT RECORDED IN THE BOOKS. B. THERE WAS NO EVIDENCE FOUND WITH THE DEPT. DURIN G SEARCH THAT THE ASSESSEE HAD TAKEN ANY LOAN IN CASH FROM SHRI SONI. C. SHRI SONI HAD ALSO DENIED HAVING ADVANCED ANY LO AN TO THE ASSESSEE. D. FURTHER, THE LOOSE PAPERS FOUND WITH SHRI SONI W ERE IN THE NAME OF SNEH YEOLE AND MAHENDRA YEOLE AND THEREFORE, THERE WAS NO REAS ON FOR MAKING ANY ADDITION IN THE HANDS OF THE ASSESSEE SINCE ITS NAME WAS NOT ON THE LOOSE PAPERS. E. THE PRESUMPTION U/S 132(4A) WAS NOT APPLICABLE T O THE ASSESSEE SINCE NO DOCUMENT WAS FOUND WITH THE ASSESSEE F. THE PROMISSORY NOTE ISSUED BY THE ASSESSEE WAS T OWARDS THE SECURITY GIVEN BY THE ASSESSEE IN RESPECT OF THE LOANS TAKEN BY IT N CHEQUES WHICH WERE DULY ACCOUNTED IN THE BOOKS AND HENCE, THERE WAS NO REAS ON TO MAKE ANY ADDITION. 3. AS THE AFORESAID GROUNDS OF APPEAL SHOW, THE SUB STANTIVE ADDITION IN ALL THE THREE YEARS RELATES TO INTEREST CLAIMED BY THE REVENUE TO HAVE BEEN PAID BY THE ASSESSEE TO ONE SHRI SHRIRAM SONI, OUT OF UNACC OUNTED INCOME OF THE ASSESSEE. 4. THE BACKGROUND OF THE DISPUTE IS THAT A SEARCH A ND SEIZURE ACTION UNDER SECTION 132(1) WAS CARRIED OUT IN THE CASE OF ONE S HRI SHRIRAM SONI ON 29.7.2003, WHO WAS FOUND TO BE ENGAGED IN MONEY LEN DING BUSINESS. THE MODUS OPERANDI ADOPTED WAS THAT THE SAID PERSON USED TO L END MONEY AND IN LIEU OF THAT, USED TO KEEP BLANK CHEQUES OR PROMISSORY NOTE S AS SECURITY. ON THE BASIS OF THE SEARCH AND SEIZURE OPERATION IN THE CASE OF SHRI SHRIRAM SONI, IT WAS NOTICED THAT THE NAMES OF SNEH GROUP COMPRISING OF THE ASSESSEE FIRM AND OTHER GROUP CONCERNS, NAMELY, SNEH BUILDERS, SNEH DEVELOP ERS, SNEH PROPERTY DEVELOPMENT P. LTD., SNEH PROMOTERS & ASSOCIATES AN D SHRI MAHENDRA J. YEOLE APPEARED TO HAVE ACCEPTED LOANS. IN THE CASE OF SNE H GROUP, INTER ALIA, COMPRISING OF CAPTIONED ASSESSEE, A SEARCH AND SEIZ URE ACTION WAS ALSO CARRIED OUT ON 16.10.2003. SUBSEQUENTLY, AN ASSESSMENT IN T ERMS OF SECTION 153A OF THE ACT WAS COMPLETED IN THE CASE OF THE ASSESSEE ON 30 .3.2006, WHEREBY THE ASSESSING OFFICER CONSIDERED VARIOUS INCRIMINATING DOCUMENTS AND OTHER ISSUES EMERGING FROM THE SEARCH. SIMILARLY, IN THE CASE OF M/S SNEH BUILDERS, CERTAIN ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 3 ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 153A ON ACCOUNT OF CASH L OANS OF RS 25 LAKHS RECEIVED FROM SHRI SHRIRAM SONI ON THE BASIS OF CER TAIN DOCUMENTS SEIZED IN THE COURSE OF SEARCH ON THE SAID PERSON. LATER ON, THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS REVISED BY THE COMMISSIONER OF INCOME- TAX IN TERMS OF SECTION 263 OF THE ACT AND THE IMPUGNED PROCEEDINGS ARISE O UT OF THE ADDITIONS MADE DURING THE COURSE OF CONSEQUENTIAL ASSESSMENT MADE IN TERMS OF SECTION 153A(B) READ WITH SECTION 143(3) OF THE ACT AND SECTION 263 OF THE ACT DATED 31.12.2008. 5. IN THE IMPUGNED ASSESSMENT, THE ASSESSING OFFICE R NOTED THAT ON PERUSAL OF VARIOUS DOCUMENTS SEIZED IN THE SEARCH ON SHRI S HRIRAM SONI, IT WAS FOUND THAT THE LOAN OF RS 25 LAKHS WHICH WAS ORIGINALLY F OUND TO BE RAISED BY SNEH BUILDERS WAS INDEED ACTUALLY TAKEN BY M/S SNEH FINA NCE & INVESTMENT, I.E. THE APPELLANT BEFORE US. ADDITIONALLY, IT WAS FOUND THA T A PROMISSORY NOTE OF RS 5 LAKHS SEIZED ALONG WITH CHEQUE NO 020903 OF THE ASS ESSEE FIRM SHOWED THAT THE LOAN WAS ACTUALLY MADE IN THE NAME OF THE ASSESSEE AND THAT SUCH TRANSACTIONS WERE NOT CONSIDERED BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT OF THE ASSESSEE ORIGINALLY UNDER SECTION 153A OF TH E ACT. 6. FOR ALL THE THREE CAPTIONED YEARS, THE ADDITION HAS BEEN MADE PRIMARILY ON THE GROUND THAT THE ASSESSEE FIRM HAS PAID INTEREST ON LOANS TO SHRI SHRIRAM SONI OUT OF UNACCOUNTED SOURCES. THE ASSESSING OFFICER H AS HELD THAT THE ASSESSEE FIRM HAS TAKEN LOAN OF RS 25 LAKHS FROM SHRI SHRIRA M SONI, WHICH WAS NOT RECORDED IN THE ACCOUNT BOOKS. ACCORDINGLY, HE HAS MADE ADDITIONS (A) ON ACCOUNT OF UNACCOUNTED INTEREST OF RS 4,06,2 50/- FOR ASSESSMENT YEAR 2001-02, (B) ON ACCOUNT OF UNACCOUNTED INTEREST OF RS 7,05,0 00/- FOR ASSESSMENT YEAR 2002-03, (C) ON ACCOUNT OF UNACCOUNTED INTEREST OF RS 4,50,0 00/- FOR ASSESSMENT YEAR 2003-04. ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 4 ADDITIONALLY, FOR ASSESSMENT YEAR 2002-03, A FURTHE R ADDITION HAS BEEN MADE OF RS 10 LAKHS ON THE GROUND THAT THE ASSESSEE HAS REP AID SUCH AMOUNT OUT OF THE TOTAL LOAN OF RS 25 LAKHS RAISED OUTSIDE THE ACCOUN T BOOKS. 7. THE AFORESAID ADDITIONS HAVE SINCE BEEN UPHELD B Y THE COMMISSIONER OF INCOME-TAX (APPEALS) AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT NO DOUBT A SEARCH ON SHRI SHRIRAM SONI REVEALED A PROMISSORY NOTE OF RS 5 LAKHS ALONGWITH CHEQUE NO 020903 PERTAINING TO THE ASSESS EE FIRM, BUT THE ASSESSING OFFICER WRONGLY INFERRED THAT THE ASSESSEE MUST HAV E BORROWED THE IMPUGNED AMOUNT OUTSIDE THE BOOKS OF ACCOUNT. IN THIS REGARD , WE FIND THAT IN PARAS 8.1 TO 8.6 OF THE ASSESSMENT ORDER, A REFERENCE HAS BEEN M ADE TO THE DIARY SEIZED FROM SHRI SHRIRAM SONI, WHEREIN THE NAMES OF THE ASSESSE E ARE FOUND TO HAVE BEEN NOTED WHICH AS PER THE ASSESSING OFFICER, SHOWED TH AT THE ASSESSEE HAS RAISED LOANS FROM THE SAID PERSON. 9. APART FROM THE AFORESAID, THE ASSESSING OFFICER HAS ALSO REFERRED TO CERTAIN SEIZED PAPERS FOUND DURING THE COURSE OF SEARCH ON THE ASSESSEE GROUP IN ORDER TO JUSTIFY THE INFERENCE THAT THE ASSESSEE HAD PAID INTEREST TO SHRI SHRIRAM SONI AND ALSO REPAID LOANS OUTSIDE THE ACCOUNT BOOKS. I N PARA 8.6 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS REFERRED TO CERTAI N BLACK DIARY SEIZED FROM THE ASSESSEE. AS PER THE ASSESSING OFFICER NOT ONLY THE MATERIAL SEIZED IN THE COURSE OF SEARCH ON SHRI SONI, BUT EVEN AS PER THE PAPERS SEIZED IN THE COURSE OF SEARCH ON THE ASSESSEE GROUP, IT IS CLEAR THAT THE ASSESSE E HAD TAKEN LOAN OF RS 25 LAKHS FROM SHRI SHRIRAM SONI, WHICH WAS UNRECORDED IN THE ACCOUNT BOOKS AND, THEREFORE, HE HAS MADE ADDITIONS ON ACCOUNT OF UNAC COUNTED INTEREST PAID BY THE ASSESSEE TO SHRI SONI IN THE CAPTIONED THREE YEARS AND IN THE ASSESSMENT YEAR 2002-03 HE HAS MADE A FURTHER ADDITION OF RS 10 LAK HS ON THE GROUND THAT SUCH AMOUNT WAS REPAID OUT OF UNDISCLOSED SOURCES. THE A FORESAID REASONING MADE BY THE ASSESSING OFFICER HAS BEEN SUSTAINED BY THE COMMISSIONER OF INCOME-TAX (APPEALS). ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 5 10. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE ADDITIONS ARE NOT JUSTIFIED AT ALL. FIRSTLY, IT IS POINTED OUT THAT THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS TAKEN ANY LO AN FROM SHRI SHRIRAM SONI OUTSIDE THE BOOKS OF ACCOUNT. IT HAS BEEN SUBMITTED THAT THE ASSESSEE RAISED LOANS FROM SHRI SHRIRAM SONI, WHICH WERE DULY RECOR DED IN THE ACCOUNT BOOKS AND THERE WAS NO LOAN TAKEN FROM SHRI SHRIRAM SONI WHICH WAS NOT RECORDED IN THE ACCOUNT BOOKS. EXPLAINING THE PROMISSORY NOTE A ND A CHEQUE OF RS 5 LAKH ISSUED BY THE ASSESSEE, WHICH WAS FOUND WITH SHRI S HRIRAM SONI, IT WAS STATED THAT THE ASSESSEE HAD INDEED TAKEN LOANS IN THE REG ULAR COURSE OF BUSINESS FROM SHRI SHRIRAM SONI AND THE CHEQUES WERE REQUIRED TO BE GIVEN AS SECURITY FOR SUCH LOANS TAKEN, WHICH WERE DULY RECORDED IN THE ACCOUN T BOOKS. IN THIS CONNECTION, THE LEARNED COUNSEL ALSO REFERRED TO THE STATEMENT OF SHRI SHRIRAM SONI COPY OF WHICH HAS BEEN PLACED AT PAGES 34 TO 39 OF THE PAPE R BOOK TO POINT OUT THAT THE POSITION HAS BEEN CLARIFIED IN THIS REGARD. IT HAS BEEN POINTED OUT THAT PARTNER OF THE ASSESSEE HAS CLARIFIED THAT THE CHEQUE FOUND WI TH SHRI SHRIRAM SONI WAS GIVEN AS A SECURITY FOR THE LOANS RAISED, WHICH WER E DULY RECORDED IN THE ACCOUNT BOOKS. WITH REFERENCE TO THE AFORESAID STATEMENT, I T HAS ALSO BEEN POINTED OUT THAT AT NO STAGE THE PARTNER OF THE ASSESSEE ADMITT ED THAT ANY UNACCOUNTED LOANS WERE RAISED FROM SHRI SHRIRAM SONI. 11. MOREOVER, IT IS POINTED OUT THAT THE CHEQUE WHI CH WAS FOUND WITH SHRI SHRIRAM SONI WAS ISSUED FROM THE REGULAR BANK ACCOU NT MAINTAINED BY THE ASSESSEE AND NOT FROM ANY UNDECLARED BANK ACCOUNT. THEREFORE, IF CERTAIN UNACCOUNTED LOANS WERE TAKEN BY THE ASSESSEE, AS AL LEGED BY THE REVENUE, THERE WOULD NOT BE ANY JUSTIFICATION OF THE ASSESSE E ISSUING CHEQUE FROM THE REGULAR BANK ACCOUNT BECAUSE IN THE EVENT OF NON-RE PAYMENT OF THE LOAN AMOUNT, THE LENDER WOULD SEEK TO ENCASH THE CHEQUE. IN THAT SITUATION, THE UNACCOUNTED NATURE OF THE TRANSACTION WOULD IMMEDIATELY BE THRO WN UP AND THEREFORE, IN THE PRESENT CASE, SINCE THE SAID CHEQUE WAS ISSUED FROM REGULAR BANK ACCOUNT, THAT CLEARLY ESTABLISHES THAT THE CHEQUE FOUND WITH SHRI SHRIRAM SONI WAS GIVEN AS A ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 6 SECURITY FOR THE LOANS WHICH WERE DULY RECORDED IN THE ACCOUNT BOOKS. FOR THE AFORESAID TWIN REASONS, THE LEARNED COUNSEL SUBMITT ED THAT THE ADDITIONS MADE ON ACCOUNT OF INTEREST HAVING BEEN PAID OUT OF UNAC COUNTED FUNDS, IS NOT JUSTIFIED AT ALL. 12. FURTHER WITH REGARD TO THE SEIZED DOCUMENTS FOU ND DURING THE COURSE OF SEARCH ON SHRI SHRIRAM SONI WHICH HAS BEEN RELIED U PON BY THE ASSESSING OFFICER, THE LEARNED COUNSEL SUBMITTED THAT SUCH MA TERIAL NOWHERE INDICATED THAT THE ASSESSEE HAS TAKEN ANY LOAN FROM SHRI SHRIRAM SONI. IN FACT A PERUSAL OF THE SEIZED MATERIAL, COPIES OF WHICH HAVE BEEN PLACED A T PAGES 29 TO 33 OF THE PAPER BOOK WOULD REVEAL THAT IN MOST OF THE DOCUMEN TS THE NAME OF SNEH FINANCE & INVESTMENT (I.E. THE ASSESSEE) IS NOT MEN TIONED. RATHER, ON MOST OF THE DOCUMENTS, NAMES OF SHRI MAHENDRA YEOLE, SNEH B UILDERS YEOLE, SNEH YEOLE ETC. HAVE BEEN MENTIONED, BUT THE NAME OF THE ASSESSEE IS CONSPICUOUS BY ITS ABSENCE. IT WAS, THEREFORE, SUBMITTED THAT T HERE CAN BE NO PRESUMPTION THAT IT IS THE ASSESSEE FIRM WHICH HAD TAKEN LOANS FROM SHRI SHRIRAM SONI IN RESPECT OF THE NOTINGS MENTIONED AGAINST THE NAMES OF SNEH YEO LE OR MAHENDRA YEOLE. IT WAS, THEREFORE, SUBMITTED THAT EVEN ON THE BASIS OF THE MATERIALS SEIZED FROM SHRI SHRIRAM SONI, IT CANNOT BE HELD THAT THE ASSESSEE H AD TAKEN ANY LOANS FROM SHRI SHRIRAM SONI OUTSIDE THE ACCOUNT BOOKS. 13. IT IS FURTHER SUBMITTED THAT THE SEIZED MATERIA L FOUND FROM SHRI SHRIRAM SONI CANNOT BE STRAIGHTAWAY TAKEN AS AUTHENTIC QUA THE ASSESSEE SINCE THE PRESUMPTION OF ITS CORRECTNESS AS PER SECTION 132(4 A) OF THE ACT IS AVAILABLE ONLY QUA THE PERSON FROM WHOSE PREMISES SUCH MATERIAL WA S FOUND AND CERTAINLY NOT AGAINST THE ASSESSEE, FROM WHOM SUCH MATERIAL HAS N OT BEEN SEIZED. THEREFORE, RELIANCE PLACED BY THE ASSESSING OFFICER ON SUCH PA PERS FOUND WITH SHRI SONI IS NOT JUSTIFIED AT ALL, INASMUCH AS THERE IS NO MATER IAL FOUND WITH THE ASSESSEE TO SUGGEST THAT ANY LOANS HAVE BEEN RAISED BY THE ASSE SSEE FROM SHRI SHRIRAM SONI OUTSIDE THE ACCOUNT BOOKS. ON THIS PROPOSITION, REL IANCE HAS BEEN PLACED ON THE FOLLOWING PRONOUNCEMENTS: ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 7 I. ADDL. CIT V. MISS LATA MANGESHKAR 97 ITR 696 (B OM), II. RAMA TRADERS V. 1 ST ITO 25 ITD 599 (TM) (PATNA), III. MONGA METALS (P) LTD. V ACIT 67 TTJ 247 (ALL.) . 14. EVEN WITH REGARD TO THE MATERIAL SEIZED DURING THE COURSE OF THE SEARCH ON THE ASSESSEE GROUP, IT IS POINTED OUT THAT THE ASSE SSING OFFICER HAS ERRED IN COMING TO THE CONCLUSION THAT SUCH SEIZED PAPERS RE FLECTED PAYMENT OF UNACCOUNTED INTEREST BY THE ASSESSEE TO SHRI SHRIRA M SONI. FIRSTLY, IT IS POINTED OUT WITH REFERENCE TO PAGES 1 TO 3 OF THE PAPER BOO K THAT THERE IS NO MENTION OF NAME OF THE ASSESSEE FIRM ON SUCH SEIZED DOCUMENTS. SECONDLY, IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS REFERRED T O CERTAIN NOTINGS ON PAGE 58 WHICH SHOWS 0.75 SONI , WHICH HAS BEEN INTERPR ETED BY THE ASSESSING OFFICER TO MEAN THAT INTEREST HAS BEEN PAID TO SHRI SHRIRAM SONI. IT IS CONTENDED THAT THE AFORESAID NOTINGS DO NOT INDICATE WHETHER THE AMOUNT IS PAID OR RECEIVED AND, IN ANY CASE, IT DOES NOT SHOW THAT ANY UNACCOU NTED INTEREST HAS BEEN PAID. 15. FOR ALL THE AFORESAID REASONS, IT IS CONTENDED THAT THE ENTIRE ADDITION HAS BEEN MADE ON A MERE PRESUMPTION THAT THE ASSESSEE H AS BORROWED RS 25 LAKHS FROM SHRI SHRIRAM SONI OUTSIDE THE BOOKS OF ACCOUNT . IT HAS ALSO BEEN SUBMITTED THAT THE EVIDENCE REFERRED BY THE ASSESSING OFFICER DOES NOT PROVE PAYMENT OF UNACCOUNTED INTEREST BY THE ASSESSEE TO SHRI SONI. ACCORDINGLY, THE ADDITIONS HAVE BEEN SOUGHT TO BE ASSAILED. 16. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL QRE PRESENTATIVE HAS SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BY PL ACING RELIANCE ON THE SAME. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E, LOOSE PAPERS FOUND ON SHRI SHRIRAM SONI WERE IN ABBREVIATED FORM, BUT THE UNEARTHING OF A PROMISSORY NOTE OF RS 5 LAKHS AND CHEQUE NO.020903 OF THE ASSE SSEE CLEARLY SHOWED THAT THE ASSESSEE HAD TRANSACTED LOANS OUTSIDE THE ACCOU NT BOOKS. IT IS FURTHER POINTED OUT THAT THE DOCUMENTS SEIZED FROM THE PREM ISES OF THE ASSESSEE GROUP AT THE TIME OF SEARCH, ALSO INDICATED PAYMENT OF IN TEREST TO SHRI SHRIRAM SONI AND, THEREFORE, ON THE BASIS OF AFORESAID EVIDENCES, THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS RAISED UNACCOUNTED LOANS FROM SHRI SHRIRAM ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 8 SONI AND HAS PAID INTEREST THEREON OUTSIDE THE BOOK S OF ACCOUNT. IN PARTICULAR, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO AND RELIED UPON PARA 8.3 OF THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S) IN SUPPORT OF THE CASE OF THE REVENUE. 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE SUBSTANTIVE CHARGE MADE BY THE REVENUE AGAINST THE ASSESSEE IS THAT IT HAS RAISED LOANS FROM SHRI SHRIRAM SONI OUTSIDE THE REGULAR BOOKS OF ACCOUNT ON WHICH INTEREST HAS BEEN PAID FROM UNACCOUNTED SOURCES. FACTUALLY S PEAKING, THERE IS NO DISPUTE BETWEEN THE ASSESSEE AND THE REVENUE THAT THE ASSES SEE FIRM GROUP HAS UNDERTAKEN LOAN TRANSACTIONS WITH SHRI SHRIRAM SONI . IT IS ALSO NOT IN DISPUTE THAT SHRI SHRIRAM SONI IS ENGAGED IN MONEY LENDING BUSIN ESS AND THE MODUS OPERANDI ADOPTED BY HIM IS THAT WHILE ADVANCING MON IES, BLANK CHEQUES OR PROMISSORY NOTES ARE KEPT BY HIM AS SECURITY. SUCH CHEQUES ARE ISSUED BY THE PARTIES TAKING LOAN AND IN THE PROMISSORY NOTES THE NAME OF THE BENEFICIARY ARE NOT MENTIONED MOST OF THE TIMES. THE AFORESAID FACT UAL ASPECTS OF THE DISPUTE ARE EMERGING FROM THE DISCUSSION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND ARE NOT IN DISPUTE. THE DISPUTE STARTS FR OM A CHARGE MADE AGAINST THE ASSESSEE THAT IT HAS RAISED A LOAN OF RS 25 LAKHS F ROM SHRI SHRIRAM SONI WHICH IS NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNT. THE PREMISE WITH THE ASSESSING OFFICER IS THAT IN THE COURSE OF SEARCH O N SHRI SHRIRAM SONI, A PROMISSORY NOTE OF RS 5 LAKHS WAS SEIZED ALONGWITH CHEQUE NO 02093 OF THE ASSESSEE FIRM. ON ACCOUNT THE AFORESAID SEIZURE, TH E ASSESSING OFFICER INFERRED UNACCOUNTED TRANSACTIONS UNDERTAKEN BY THE ASSESSEE BY WAY OF RAISING LOANS FROM SHRI SHRIRAM SONI AND, THEREFORE, THE CONSEQUE NTIAL ADDITIONS ON ACCOUNT OF UNACCOUNTED INTEREST PAYMENTS HAVE BEEN MADE IN THE CAPTIONED YEARS. 18. THE DEFENCE PUT UP BY THE ASSESSEE IS THAT THE CHEQUE FOUND ON SHRI SHRIRAM SONI HAS BEEN ISSUED OUT OF REGULAR BANK AC COUNT AND THAT THE SAME WAS LYING WITH SHRI SHRIRAM SONI AS A SECURITY AGAI NST THE LOANS RAISED WHICH WERE DULY ACCOUNTED FOR IN THE ACCOUNT BOOKS. IN OT HER WORDS, AS PER THE ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 9 ASSESSEE, IT HAS NOT UNDERTAKEN ANY LOAN TRANSACTIO N WITH SHRI SHRIRAM SONI OUTSIDE THE ACCOUNT BOOKS. THEREFORE, THE MOOT QUES TION TO BE DECIDED IS AS TO WHETHER IN THE FACE OF EVIDENCE REFERRED TO BY THE ASSESSING OFFICER, CAN IT BE SAID THAT THE ASSESSEE HAS RAISED A LOAN OF RS 25 L AKHS IN CASH FROM SHRI SHRIRAM SONI WHICH IS UNRECORDED IN THE ACCOUNT BOO KS. 20. IN ORDER TO ADDRESS THE CONTROVERSY, WE FOUND I T EXPEDIENT TO REFER TO A STATEMENT RECORDED UNDER SECTION 131(1)(B) OF THE A CT DATED 15.12.2003 OF SHRI SANJAY SHRINIVAS ZANWAR , PARTNER OF THE ASSESSEE FIRM WHICH IS PLACED IN PAPER BOOK AT PAGES 34 TO 39. IN THIS STATEMENT, SHRI SAN JAY ZANWAR WAS ASKED ABOUT THE TERMS AND CONDITIONS FOR OBTAINING LOANS AND WH AT SECURITY WAS BEING GIVEN FOR OBTAINING LOANS FROM SHRI SHRIRAM SONI. THE MOD US OPERANDI HAS BEEN EXPLAINED BY THE SAID PARTNER, WHEREBY IT IS CONFIR MED THAT FOR OBTAINING THE LOANS POST DATED CHEQUES OF EQUIVALENT AMOUNT WERE TENDER ED TO SHRI SHRIRAM SONI AS SECURITY. THE SAID PARTNER WAS ALSO QUESTIONED AS T O THE ENTRIES THAT ARE BEING MADE BY THE ASSESSEE FIRM WHILE ISSUING CHEQUES FOR SECURITY OF LOANS. IT WAS EXPLAINED THAT WHILE ISSUING CHEQUE FOR SECURITY AN ENTRY IS MADE IN THE COUNTERFOIL OF THE CHEQUE WHILE NO ENTRY IS MADE IN THE REGULAR BOOKS OF ACCOUNT AT THAT POINT OF TIME, UNLESS THE CHEQUE IS ENCASHE D BY THE FINANCER SUBSEQUENTLY. IN CASE THE CHEQUE IS ENCASHED, ENTRY IS MADE IN THE REGULAR BOOKS OF ACCOUNT ON THE SUBSEQUENT DATE. PERTINENTL Y, THE PARTNER OF THE ASSESSEE FIRM WAS ALSO ASKED AS TO HOW MANY CHEQUES WERE STILL LYING WITH SHRI SHRIRAM SONI AND HIS ASSOCIATES WHICH WERE GIVEN BY THE ASSESSEE AS SECURITY, AND THE SAME CONTINUED IN THE CUSTODY OF SHRI SHRIR AM SONI. IN HIS ANSWER, SHRI SANJAY ZANWAR STATED THAT ONE UNDATED CHEQUE OF RS 5 LAKH BEARING NO 02093 WAS STILL IN THE CUSTODY OF SHRI SHRIRAM SONI. THE PARTNER WAS ALSO ASKED AS TO HOW MUCH AMOUNT OF LOAN WAS STILL PAYABLE TO SHRI S HRIRAM SONI AND HIS ASSOCIATES. IN REPLY, IT WAS STATED THAT LOANS OF A BOUT 80 TO 85 LAKHS ARE RAISED FROM SHRI SHRIRAM SONI AND HIS ASSOCIATES, WHICH AR E STILL PAYABLE. SHRI SANJAY ZANWAR WAS FURTHER QUESTIONED AS TO HOW IF LOANS OF RS 80 TO 85 LAKHS WERE STILL PAYABLE, THEN WHY ONLY A CHEQUE OF RS 5 LAKHS WAS K EPT AS SECURITY WITH SHRI ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 10 SHRIRAM SONI GROUP. IN ANSWER TO SUCH A QUESTION, I T WAS EXPLAINED THAT THE ASSESSEE GROUP HAD ISSUED CHEQUES OF EQUIVALENT AMO UNTS TO THE FINANCERS EHO HAD LENT THROUGH THE SONI GROUP AND THE CHEQUE OF R S 5 LAKH WAS KEPT AS ADDITIONAL SECURITY WITH SONI GROUP. FURTHER QUESTI ONS WERE PUT TO THE PARTNER, AND IT EMERGES FROM THE STATEMENT THAT THE ASSESSEE GROUP HAS BEEN REGULARLY BORROWING THROUGH SHRI SHRIRAM SONI SINCE 1995. WE HAVE REFERRED TO THE AFORESAID SALIENT FEATURES OF THE STATEMENT GIVEN B Y PARTNER OF THE ASSESSEE ONLY TO POINT OUT THAT THERE IS NO INDICATION TO INFER T HAT THE ASSESSEE HAD RAISED ANY LOANS OUTSIDE THE REGULAR BOOKS OF ACCOUNT. IN FACT , NO PARTICULAR ENTRY FROM THE MATERIAL SEIZED FROM SHRI SHRIRAM SONI HAS BEEN CON FRONTED TO THE PARTNER OF THE ASSESSEE TO SAY THAT ANY UNACCOUNTED LOAN HAS BEEN RAISED. IT IS ALSO EMERGING FROM THE STATEMENT THAT THE PRESENCE OF THE BLANK C HEQUE OF RS 5 LAKHS WITH SONI GROUP HAS ALSO BEEN EXPLAINED AS BEING ADDITIONAL S ECURITY ON ACCOUNT OF LOAN OF RS 80 TO 85 LAKHS RAISED BY THE ASSESSEE AND WHICH WERE OUTSTANDING FOR PAYMENT AT THE TIME OF SEARCH. PERTINENTLY WE FIND THAT THE SAID EXPLANATION OF THE ASSESSEE HAS BEEN MERELY DISBELIEVED BY THE ASSESSI NG OFFICER ON MERE SURMISES AND PRESUMPTIONS. IN FACT, IN THE ABSENCE OF ANY CLINCHING EVIDENCE FOUND IN THE COURSE OF SEARCH ON SHRI SHRIRAM SONI, IT WAS IMPERATIVE FOR THE ASSESSING OFFICER TO CONFRONT SUCH AN EXPLANATION O F THE ASSESSEE TO SHRI SHRIRAM SONI, IF THE ASSESSING OFFICER ENTERTAINED ANY DOUBTS WITH REGARD TO THE VERACITY OF THE EXPLANATION TENDERED BY THE ASSESSE E. WE DO NOT FIND ANY SUCH APPROACH ON THE PART OF THE ASSESSING OFFICER. 21. ANOTHER MATERIAL REFERRED BY THE ASSESSING OFFI CER IS THE DIARY SEIZED DURING THE COURSE OF SEARCH ON THE ASSESSEE. CERTAI N NOTINGS IN THIS DIARY, COPIES OF WHICH HAVE BEEN PLACED AT PAGES 1 TO 3 OF THE PA PER BOOK, HAVE BEEN RELIED BY THE ASSESSING OFFICER TO PROVE THAT CERTAIN AMOU NT OF INTEREST HAS BEEN PAID BY THE ASSESSEE. AFTER HAVING PERUSED SAID DOCUMENT S, IN OUR CONSIDERED OPINION, THE SEIZED MATERIAL DOES NOT JUSTIFY AN IN TELLIGIBLE INFERENCE THAT ANY UNACCOUNTED INTEREST HAS BEEN PAID TO SHRI SHRIRAM SONI BY THE ASSESSEE. AT THIS STAGE, IT WOULD BE ALSO RELEVANT TO RECAPITULATE TH AT THE ASSESSEE HAS A SUBSISTING ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 11 RELATIONSHIP WITH SONI GROUP BY WAY OF WHICH IT IS RAISING LOANS IN THE REGULAR COURSE OF BUSINESS EITHER BY UTILIZING THE SERVICES OF SHRI SONI OR FROM SHRI SONI HIMSELF. THEREFORE, IN THE FACE OF SUCH SUBSISTING RELATIONSHIP, A FEW ENTRIES REFLECTING PAYMENT OF INTEREST BY THE ASSESSEE IS N OT ENOUGH TO SHOW THAT THE SAME WAS ON ACCOUNT OF ANY UNACCOUNTED TRANSACTIONS . IT IS FOR THE REVENUE TO DEMONSTRATE THAT THE INTEREST PAYMENT CONTAINED IN THE SEIZED MATERIAL DO NOT PERTAIN TO THE REGULAR DEALINGS WITH SHRI SONI BUT RELATES TO AN UNACCOUNTED TRANSACTION. IN ANY CASE, WE ARE INCLINED TO AGREE WITH THE POSITION MADE OUT BY THE APPELLANT THAT THE SEIZED MATERIAL DOES NOT PRO VE RAISING OF ANY UNACCOUNTED LOAN OF RS 25 LAKHS FROM SHRI SHRIRAM SONI AND, THE REFORE, IN OUR VIEW, THE IMPUGNED ADDITIONS ARE UNSUSTAINABLE. 21. IN THE FINAL ANALYSIS, WE CONCLUDE BY HOLDING T HAT HAVING REGARD TO THE MATERIAL AND FACTS AVAILABLE ON RECORD, WE DO NOT F IND ANY FORCE IN THE CHARGE MADE OUT BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERTAKEN LOAN OF RS 25 LAKHS FROM SHRI SHRIRAM SONI OUTSIDE THE BOOKS O F ACCOUNT AND CONSEQUENT ADDITIONS MADE ON ACCOUNT OF PARTIAL REPAYMENT AND UNACCOUNTED INTEREST PAYMENT THEREOF ARE ALSO UNSUSTAINABLE. 22. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 31 ST MAY, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ACIT CEN.CIR. 2(2), PUNE 3. THE CIT(A) IV PUNE 4. THE CIT. CEN, PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE ITA NOS 521,523, 526/PN/10 SNEH FINANCE & INVESTMEN T, PUNE 12