The ITO, Ward-2(3), Baroda V. Shri Harshad Maganlal Shukla, Baroda

ITSSA 234/AHD/2014

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which pertained to the assessment year 2003-04. The primary issue was the addition of Rs. 3,88,35,500 as peak cash loan to the assessee's income, which was based on documents seized during a search operation. The CIT(A) found that these documents actually detailed interest payments on loans rather than the loans themselves. The Tribunal examined the documents and the arguments presented by both parties, ultimately agreeing with the CIT(A)'s interpretation and upholding the addition of Rs. 1,25,00,000 which the assessee admitted to having taken as unaccounted cash loans.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133603 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 05-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-12-2022
• Assessment Year: 2003-2004
• Appeal Filed On: 15-05-2014
• Other Referred Cases: Ashok Kumar Aggarval 38 TTJ 189
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Loose papers; Document seized; Non passing of speaking order; Condonation of delay; Documents seized; Set aside
• Section: 68; 144; 133A; 22; 153C

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND T.R. SENTHIL KUMAR, JUDICIAL MEMBER IT(SS)A No.234/Ahd/2014 Assessment Year :2003-04 ITO, Ward-2(3) Baroda. Vs Shri Harshad Maganlal Shukla 903, Divyashree Opp: Raneshwar Temple Vasna Road, Baroda. PAN : AFKPS 2706 N (Applicant) (Responent) Assesseeby : Shri Mukund Bakshi, CA Revenue by : Shri A.P. Singh, CIT-DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 2 8 / 1 2 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 0 6 / 0 1 / 2 0 2 3 आदेश/O R D E R PERANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the Revenue against the order passed by the Commissioner of Income Tax (Appeals)-IV, Ahmedabad (in short referred to as CIT(A)), dated 4.3.2014 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2003-04. 2. Brief facts leading to the present appeal are that search action u/s 132 of the Act was carried out on Kabhai Chauhan Group of cases including the case of Shri Dinesh B. Patel. In the course of search certain documents pertaining to Divyashray Project of the firm M/s.Shree Corporation was found, of which the assessee is a IT(SS)A No.234 /Ahd/2014 2 partner. Consequently, survey under section 133A of the Act was carried out on the office premises of the assessee. Since documents pertaining to 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 onFeb., 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 file of the ld.CIT(A) with the direction that the assessee’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 assessee for condoning the delay, the ITAT directed the Ld.CIT(A) to condone the same and adjudicate the case on merits. IT(SS)A No.234 /Ahd/2014 3 4. In the second round, the ld.CIT(A) condoned the delay and thereafter proceeded to adjudicate the appeal on merits. While doing so, he deleted the addition made of Rs.3,88,35,500/- finding no basis or material with the AO to make the impugned addition, and noting that the material on which the AOrelied was factually incorrect for arriving at a finding that the assessee had taken cash loan of Rs.3,88,35,500/- during the year. The ld.CIT(A) thereafter held that since the assessee himself had admitted taking cash loan of Rs.1.25 crores from private financiers, which had not been reflected in his books of accounts, and the address of the financiers also could not be provided by him, and these cash loans were repaid in cash also, he upheld the addition to the extent of Rs.1.25 crores. Accordingly, the appeal of the assessee was partly allowed. 5. Aggrieved by the same the Revenue has filed appeal before us challenging the order of the Ld.CIT(A) both on account of condoning the delay in filing appeal as also restricting the addition to Rs. 1.25 Crs as opposed to Rs. 3.88 Crs added by the AO. 6. We shall first deal with the ground raised by the Revenue relating to condonation of delay by the ld.CIT(A) in ground No.1(a)(b) as under: “On the facts and circumstances of the case, the order passed by Ld.CIT(A) is bad in law in so far as its contrary to the direction of the Hon'ble ITAT for the following reasons: a) The Ld.CIT(A) has not passed reasoned order regarding condoning the delay in filing appeal and mere referred a letter of his predecessor, the existence of which is out of the knowledge of the department. b) The condonation of delay is a legal issue and cannot be decided by a mere correspondence between Ld.CIT(A) and assessee without making department aware which is an affected party.” IT(SS)A No.234 /Ahd/2014 4 7. The ld.DR pointed out that despite specific direction of the ITAT to the ld.CIT(A) with respect to the manner of condoning the delay, the ld.CIT(A)s order condoning the delay in the second round is a non speaking order and therefore, it could 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 1TAT 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 to be treated as deemed compliance with the direction of the ITAT. Moreover even the Ld.DR was unable to bring to our notice any fact prompting a contrary stand on the issue.Therefore we do not find any infirmity in the order of the Ld.CIT(A) condoning the delay in filing appeal by the assessee before him. 9. Ground of appeal No. 1(a) & (b), raised by the Revenue are accordingly dismissed. IT(SS)A No.234 /Ahd/2014 5 10. Ground No.2 (a)(b)(c)raised by the Revenuerelating to the merits of the case read as under: “a) On the facts and circumstances of the case, the Ld.CIT(A) erred in restricting the addition on account of cash loans to the extent of Rs.1.25 crore out of Rs.3,88,35,500/-. b) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in restricting the addition on account of cash loans to the extent of Rs.1.25 crore, which is contradictory to his finding of accepting the contention of the assessee that the jottings at page no.96 are the details of the interest paid/payable because as per rate of interest @ 1.5%, the cash loan taken would come to Rs.2,58,90,333/-. c) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in restricting the addition on account of cash loans to the extent of Rs.1.25 crore out of Rs.3.88,35,500/-, without appreciating that even on considering the alternative facts i.e. interest paid / payable as on February 2003 is Rs.3,52,300/- and as per rate of interest @ 1.5%, the total cash loan would come to Rs.2,34,86,666/- as discussed in assessment order.” 11. Taking up the above ground, our attention was first drawn to the fact, as stated above, that he AO had noted two peak cash loans in the impugned year,of Rs.3.88 crores on 6.12.2002 and Rs.2.34 crores as on Feb.2003, on the basis of the documents found during the search, and had made addition of peak of Rs.3.88 crores. It was contended that the ld.CIT(A) had dealt with the addition of Rs.3.88 crores only ,deleting the same , and without considering other peak cash loan of Rs.2.34 crores, had sustained the addition to the extent of Rs.1.25 crores merely on the admission of the assessee. 12. Thereafter, our attention was drawn to the basis on which the peak cash loan of Rs.3.88 crores was worked out by the AO and subsequently deleted by the Ld.CIT(A). Attention was first drawn toPage No.3 to 5 of the assessment order which dealt with the finding regarding cash loans of Rs.3.88 Crs taken by the assessee derived on the basis of documents seized as under: IT(SS)A No.234 /Ahd/2014 6 “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 ® Rs. 12,000 Rasiklal V. Shukla (R) Rs. 4,000 Rashmikant V. Shukla ® - Rs. 4,000 H.R. Vithlani Rs. 2,250 SanabhaiLaxmanbhai Rs. 4,300 MathurbhaiShivabhai Rs. 1,000 BhikhibenSomabhai Rs. 150 Dilipbhai Upadhyay Rs. 1,400 P.P. Upadyay Rs. 1,000 Kukoo Samuel Rs. 600 K.K. Chokshi (Padra) Rs. 2,000 R.C. Patel Rs. 5,000 A.K. Ray Rs. 4,000 Urvi R. Soni Rs. 7,000 Amrish Patel Rs. 9,000 Saurabh Trading Rs.22,000 C.J. Velhai Rs.22,840 Nayan C. Patel Rs. 2,500 MeenabenThakar Rs. 13,000 P.K. Roy Rs. 6,620 R.R. Gohil Rs. 2,500 J.H. Bhesania Rs. 1,250 Lark Finance Rs. 30,000 Shree BholenathEnternrises Rs.5,000 A.D. Patel Rs. 4,000 R.R. Joshi Rs. 21,000 Rs. 67,500 Total Rs. 3,88.355 For arriving at the correct amount, the above amount is to be multiplied by 100, as discussed above. Hence the total cash deposits would come to Rs.3,88,35,500 (i.e., 3,88,355 x 100) 13. Referring to the above, it was pointed out that the addition was made on the basis of noting in page no.96 of the seized material, IT(SS)A No.234 /Ahd/2014 7 where certain amounts were noted, which totaled to Rs.3,88,355/-. The AO noted from the documents before him that the figure of 22,500 mentioned against Saurabh trading was actually Rs.22,50,000/- which he discovered from the accounts of Saurabh Trading available in the impugned documents at page no.30 of the Annexure-2. He accordingly held that all the entries at page no.96 were coded and two “0s” to be added for arriving at the correct amount. Thus, peak cash loans as per page no.96, Rs.3,88,35,500/- was arrived at on the basis of detail contained in page no.96 of Annexure-2 of impounded documents. 14. It was thereafter pointed from order of the ld.CIT(A), that co- relation between the figure of Saurabh Trading as appearing in page no.96 of the Annexure-2 and the account of Saurabh Trading at page no.30 of Annexure-2 was found to be factually incorrect. The ld.CIT(A) perused the contents of page no.30 of Annexure-2 and found that there was no cash loans of Rs.22,50,000/- from Saurabh Trading reflected therein. The same was confronted to the AO , who confirmed the said facts. The ld.CIT(A) noted that this figure of Rs.22.50 lakhs in fact belonged to another person viz. Shri Hasmukhbhai Shah. Therefore, on verification of the facts, the ld.CIT(A) found that the basis with the AO for treating the amounts reflected in page no.96 of the Annexure-2 as cash loan to be rounded off with two “0s” was incorrect. Further, on perusal of the said documents, theld.CIT(A) gave a finding that the amounts 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 10 th , 14 th , 17 th , quarterly etc. and such entries could not be attributed to the principal amounts, since they are given for a period of few months to IT(SS)A No.234 /Ahd/2014 8 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 party- wise 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 basis of page no.96 Annexure-2 was not sustainable in the light of the facts before him, and deleted the addition relating to the same. His findings at para-5.3.2 to 5.4 of the order in this regard are as under: “5.3.2 After going through the remand report, comments of the appellant on remand report, it is clear that this observation of the AO was incorrect. In the remand report dated 27-12-2013, the AO has informed that there were 5 loose paper files in Annexure-A out of which in item No.5 there were only 18 pages. A perusal of page No.30 of al[ the other four loose paper files forming item No.1 to 4 of Annexure-A, does not t reflect any- details of cash loan for Rs.22,50,000/- from M/s Saurabh Trading have also perused copies of page No.30 of all the four loose paper files forwarded by the AO. Therefore, the observation of the AO in the assessment order that as per page No.30 of Annexure-ll the principal amount in the name of M/s Saurabh Trading was of Rs.22,50,000/- is not found to be correct on examination of the seized material. This has also been confirmed by the AO in the rernand report. Therefore, the only reason given by the AO of adding two zeros to the figures mentioned in page No.96 is not correct. Another claim of the appellant is that the figure of Rs.22,50,000/- taken by the AO as belonging to M/s Saurabh Trading (at Sr.No. 41 of page No.96) actually belong to Shri Hasmukhbhai Shah (at Sr.No.40 of page No.96). This contention of the appellant is found to be correct. As per page No.96 this figure of Rs.22,500/- is inclusive of two figures Rs.7500 + Rs.15,000. As per another seized paper i.e. page No.97 of Annexure A-4 there are two entries of Rs.7,500/- and Rs.15,000/- against the name of Shri Hasmukhbhai Shah. Therefore, the action of the AO of taking the amount of Rs.22,500/- as IT(SS)A No.234 /Ahd/2014 9 belonging to M/s Saurabh Trading is also not correct and these facts are clear from the seized material itself. 5.3.3 In view of above facts, it is clear that the action of the AO of reaching to a conclusion of adding two zeros on the basis of the entry in the name of M/s Saurabh Trading is not found to be correct. 5.4 Now coming to the issue of whether the figures mentioned on page No.96 represent interest amounts or principal amounts, it is seen that in the second column, due dates are written having narrations like 10th ,14th, 17th, quarterly etc. These type of 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 partywise 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. Roy, P. P. Upadyay, MeenabenThakar etc. The appellant has given copies of relevant balance sheet of the group concern to prove his claim.” 15. Thereafter it was pointed out that the ld.CIT(A) noted that the assessee in his statement had accepted taking cash loanof Rs.1.25 crores from private financiers, which were neither reflected in the books of accounts nor any details of the same provided, and accordingly, the addition to this extent was upheld by the ld.CIT(A). His finding contained in para 5.5 of the order is as under: “5.5 Though the contention of the AO in the remand report about the non- submission of confirmation of M/s Saurabh Trading is correct but, as discussed in the remand report and submission of the appellant, statement of the appellant was recorded during search on 28-03-2005 and 28-04- 2005. In his statement, the appellant had accepted of taking cash loans of Rs.1.25 crores from private financiers the addresses of whom the appellant could not provide. The appellant has accepted that these cash loans were not reflected in his books of accounts. The appellant could not exactly quantify the cash loans taken from different parties and he claimed that these loans were repaid in cash subsequently. Therefore, it is an admitted IT(SS)A No.234 /Ahd/2014 10 fact that appellant has taken cash loans from various private parties outside his books of accounts and these cash loans were repaid in cash. However, as appellant could not provide the addresses / confirmations of these parties, the onus is on the appellant to prove that such cash loans were taken from outside parties. Even in the submissions, appellant has accepted the figure of such cash loans to be around Rs.1.25 crores. As discussed above, after examination of seized material, it is clear that the figures written on page No.96 were related to interest only. Therefore, it is held that AO was not justified in adding two zeros to these figures for coming to the peak cash loan at Rs.3,88,35,500/-. As against this, as per appellant's own admission it is held that appellant was in possession of unaccounted cash of Rs.1.25 crores which was not accounted in the regular books of accounts and the sources of which could not be explained by the appellant either during search or during assessment, appeal proceedings. Therefore, the addition of Rs. 1,25,00,000/- is sustained in the hands of the appellant u/s 68 of the Act. 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 explain the "deposits" and "interest payment due" contained in the above mentioned pages of the seized Annexure A-4. In his statement recorded on 208-03-2005 he stated that he had taken secured loans of Rs. 1.24 crores form bank and cash loan of about 1.25 crores from private sources, from time to time, and interest was being paid by him on these loans. Thereafter, on 04/04/2005 Shri Harshad Shukla pointed out of the contents on Page 90, showing the interest due in cash and in cheque, for the month of January, 2004. As per the contents of this page, total interest due in cash is shown at Rs. 2,63,897 and in cheque at Rs. 70,093/-. Since the aggregate monthly interest shown is Rs. 2,63,897/- the principal sum would be more than Rs. 3 crores. Shri Shukla IT(SS)A No.234 /Ahd/2014 11 was asked to explain. In reply to this question, he stated that total amount of initial cash advance would be around Rs. 75 lakhs,, and this amount of initial cash advance would be around Rs. 75 lakhs, and this amount grew because of adding of outstanding interest dues year after-\ear. During the last 2 to 3 years he has been in financial difficulties, and he could not pay back the loans, and also periodical interest, and these outstanding interest have been added to the principal amount. In order to find out the outstanding cash loans, on which interest is calculated as per page 90, an analysis of the seized papers from the group has been carried out. It is noticed from the impounded page 90 of Annexure A-4 that an amount of Rs. 22,500/- is being paid as interest in cash to Shri Babubhai Desaibhai Patel. The amount of advance obtained from this person, is mentioned on a seized paper, (paper 133 of Annexure A-2), from the premises of M/s. Om Shivam Corporation. As per the contents of this page, it is noticed that Shri Babubhai Desaibhai Patel, has given an amount of Rs. 15,00,000/- from the sale proceeds of his land, as a loan to Harshad Shukla, in the month of August, 2002. If the amount of monthly interest payable on Rs. 15 lakhs is Rs. 22,500/-, then the rate of interest would work out to 1.5% per month. As stated above, the total amount of interest due to be paid in cash ahs been worked at Rs. 2,63,897/- for the month of January 2004 (page 90 of Annexure A-4). On the basis of interest rate of 1.5%, the principal amount of cash loan would work out to Rs.1,75,93,133/-. Shri Harshad Shukla, has stated that the 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% would be = Rs.2,34,86,666/-“ 17. From the above, it was pointed out that the AO noted from the documents impounded during the search that the assessee had made payment of interest in cash and cheques to various persons. He found that the total interest payable by cash was Rs.3,52,300/- IT(SS)A No.234 /Ahd/2014 12 in February 2003 and applying rate of interest at 1.5% thereon the principal components of the cash loan was worked at Rs.2,34,86,666/- for the said month. 18. Ld.DR contended that the Ld.CIT(A) had conveniently overlooked this cash loan figure computed on the basis of seized documents by the AO while restricting the addition to Rs.1.25 Crs. He stated that when the AO had taken the peak of two amounts of cash loans computed by the AO on different dates during the impugned year and the Ld.CIT(A) had deleted the same , he should then have restricted the addition to the other amount instead of restricting it to the amount admitted by the assessee to have taken in cash. 19. The ld.counsel for the assessee contended that the Ld.CIT(A) had rightly restricted the addition to Rs.1.25 Crs as admitted by the assessee to have taken in cash and had not considered the other figure of 2.34 Crs of cash loan worked out by the AO on the basis of seized documents since it had been explained to him that the interest rate of 1.5 % applied by the AO for working out the principal component of 2.34 Crs cash loan in February 2003was incorrect. He stated that it had been demonstrated to the ld.CIT(A) that the assessee had in fact paid interest at the rate of 2- 2.5% . In this regard, our attention was drawn to the submissions made to the Ld.CIT(A) alongwith the detail calculating the cash loan by applying the said interest rate placed before us at PB Page No 2-.6 as under: “The only ground relates to addition of Rs.3,88,35,500/- being peak cash loan alleged to have been recorded the appellant on 6.12.2002. Briefly stated the facts are during the course of search various loose papers, documents etc. were found and seized. The appellant had not obtained copies of the seized material from the department. Subsequently during the course of appellate proceedings copies of the relevant papers have been IT(SS)A No.234 /Ahd/2014 13 obtained. On page No.96 of Annexure A-4 various amounts have been stated which according to the Learned Assessing Officer was required to be multiplied by Rs.100/-. In this regard it is submitted that 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 loose paper would also reveal that an amount of Rs.40000/- has been stated to have been paid to Mr. Prembhai Agrawal against Rs.60000/- due. This pertains to the interest amount and not the principal amount as stated by the Learned Assessing Officer in the Assessment Order. It may be submitted here that a working of the total borrowings made by the appellant based on the rate of interest for which the interest calculation has been done is enclosed herewith. To prove the contention of the appellant that the amounts stated in the said loose papers pertains to interest amount copies of the vouchers wherein the borrowings have been made are enclosed herewith. The original vouchers are also produced for the kind perusal of your honour. The cheque amount stated on the said loose papers pertains to amount borrowed by the appellant in cheque which is reflected in the Balance Sheet of various concerns with which the appellant is associated. For the instances the cheque amount stated against Shri P.P. Upadhyay of Rs.2000/- is nothing but the interest amount payable to Shri P.P. Upadhyay from whom an amount of Rs.50000/- was borrowed prior to 01.04.1997 and the amount of interest payable to him at 2% works out to Rs.1000/-which is stated on page No.96 of Annexure A-4 found and seized during the course of search. Similarly in respect of amount stated against item No.51 of Shri P.K. Roy pertains to the borrowings made by him by cheque of Rs.50000/- which is reflected in the Balance Sheet of Metro Electric Engg. Co. copy of the Balance Sheet is enclosed herewith. IT(SS)A No.234 /Ahd/2014 14 Similarly in respect of the amount borrowed from C.J. Velal (Sr.No.43) the said amount of Rs.2,00,000/- is reflected in the books of Control Systems Corpn as well as Maintenance Contract Pvt. Ltd. in the audited accounts. Copy of the Schedule of the Balance Sheet is enclosed herewith. Similarly the vouchers for payment of interest are also enclosed herewith which indicate that the amount stated on the loose papers are nothing but the interest paid to them and not the principal amount as stated by the honour in the assessment order. In view of the aforesaid facts and circumstances it is submitted that the addition made by the Ld. A.O. is incorrect and unjustified. The total borrowings in cash basis on the interest stated on the loose paper works out to Rs. 1,06,09,500/- against the addition of Rs.3,88,35,500/- 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.2500/- was due to him towards the interest payment. Similarly in respect of amount received from MinabenThakar it is submitted that the said amount of Rs.13000/- pertains to interest of borrowings made by the appellant from her which can be substantiated from ledger account as appearing in the books of Maintenance Corpn. Copy of which is enclosed herewith. In view of the aforesaid facts and submissions it is submitted that the appellant had received only Rs. 1,06,09,500/- based on the working of the interest on the said loose papers and therefore the addition made by the Ld. A.O. multiplying the said figure at by 100 is incorrect and unjustified. Further itwould be also pertinent to state here that a perusal of the sample vouchers produced for the kind perusal of your honour would clearly IT(SS)A No.234 /Ahd/2014 15 indicate that the borrowings / save been made in various financial years relevant to various years and not during the previous year relevant to A.Y. 2003-04 . Hence the entire addition made by the Learned Assessing Officer in A.Y. 2003-04 is incorrect and unjustified. In view of the aforesaid facts and submission it is submitted here that the addition made by the Learned Assessing Officer r's merely on conjectures and surmises and hence be deleted. For this purpose reliance is also placed on the decision of Ashok Kumar Aggarval 38 TTJ 189, wherein it was held that "Suspicion though a ground for scrutiny of evidence, cannot be made the foundation of a decision. Conjectures is not a substitute for legal proof. Suspicion, however strong, cannot take the place of proof. The ITO would not be justified in deciding a case upon his own suspicion or upon mere supposition after discarding the evidence produced by the assessee. One must be careful not to carry caution to an extreme length and not to discard oral evidence merely because it is oral and unless the impeaching and discrediting circumstances are clearly found to exist. The general rule is that whenever it is intended to impeach the credit of a person whose statement has been recorded, his attention must be drawn to the discrediting facts so that he may have an opportunity of explaining them." Considering the above facts and circumstances it is submitted that the addition made by the Learned Assessing Officer is merely on conjectures and surmises and therefore be deleted. IT(SS)A No.234 /Ahd/2014 16 20. The ld.counsel for 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 pointedout that the figures of these cash loans was less than that admitted by the assessee of having taken at 1.25 crores andaddition upheld by the ld.CIT(A) of Rs.1.25 crores, therefore was justified. IT(SS)A No.234 /Ahd/2014 17 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 being Rs.3.88 crores and Rs.2.34 crores, the ld.CIT(A) had deleted the addition of peak of the two i.e. Rs.3.88 crores, and therefore, he should have fallen back and restricted addition to other figure of cash loan of Rs.2.34 crores; that the ld.CIT(A) has erred, therefore, in restricting it to the extent of Rs.1.25 crores. 23. We do not find any infirmity in the order of the Ld.CIT(A). As pointed out by the ld.counsel for the assessee, during appellate proceedings, the assessee besides explaining that the amount of cash loan of Rs.3.88 crores worked on the basis of documents Annexure-2, Page No.96 was incorrect, had also demonstrated the fact that the said documents in fact reflected figure of interest to be paid or payable by the assessee on various loans taken by him in cash and cheque and also that the rate of interest paid by the assessee varied from 2% to 2.50% and principal components of the cash loan accordingly, based on the cash interest paid by the assessee worked out to Rs.1.06 cores. The ld.CIT(A) found the IT(SS)A No.234 /Ahd/2014 18 submission of the assessee relating to this document to be correct, as not reflecting principal components of cash loans taken, and in fact reflecting only interest component. He has dealt with this aspect exhaustively while deleting the addition made of the peak of Rs.3.88 crores worked out on the basis of this document. The Revenue has not contested the finding of the ld.CIT(A) in this regard while deleting the addition of Rs.3.88 cores. 24. The assessee, we have noted, had also substantiated the rate of interest paid @ 2- 2.5% with necessary documents also. The assessee had pointed out that in the cheque column of page no.6 of Annexure-2, the amount of Rs.1000 mentioned against P.P. Upadhay was the interest amount paid on loan taken from him of Rs.50,000/- by cheque; that rate of interest accordingly worked out to 2%. Similarly, in respect of amounts stated against one Shri P.K. Roy of Rs.6,620/-, the same represented interest paid on loan taken by cheque of Rs.1.80 lakhs at the rate of 2.2%. In the case of CJ Velal also the assessee has pointed out that an amount of Rs.24,463/- and Rs.22,840/- represented interest paid by cheque and cash respective at the rate of 2% on loan taken by cheque of Rs.4.50 lakhs, and by cash of Rs.4 lakhs. The assesseehad correlated this figure of loans taken with the amount reflected in the audited balance sheets 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 IT(SS)A No.234 /Ahd/2014 19 of the assessee that figures mentioned in the said documents represented interest amount and not the cash loans, which finding has not been challengedby 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 noted from the contents of the Page 90 of the seized documents that it reflected details of interest due in cash and in cheque for the month of January2004 and noted that the total interest due in cash was Rs.2,63,897/-. On the basis of these documents, which was correlated with another documents, the AO noted that the assessee had taken interest at the rate of 1.5% on loan taken from one Shri Babubhai Patel at Rs.15 lakhs on which interest was noted to be paid on this document pageno.90 of Rs.22,500/-. These findings of the AO in this regard are noted at para 5-6 of the assessment. It is, on this basis, the AO applied rate of 1.5% to arrive at the amount of cash loan for the month of Feb., 2003 worked out on the basis of page no.99-100 of Annexure-2. As is evident, the rate of interest of 1.5% pertained to the month of January 2004 i.e. relating to subsequent year. The assessee on the other hand demonstrated to the ld.CIT(A) and substantiated the same also that during the impugned year, he had paid interest at the rate of 2.5%. Therefore, we agree with the ld.counsel for the assessee that the ld.CIT(A) was satisfied and convinced with this explanation of the assessee and had accepted rate of interest paid at IT(SS)A No.234 /Ahd/2014 20 2.5%; that therefore, he had not considered cash loans computed by the AO for the month of February, 2003 at Rs.2.34 crores and instead had restricted the addition to the amount of cash loans admitted by the assessee of Rs.1.25 crores. 26. In view of the above, we do not find any merit in the grounds of the appeal of the Revenue seeking restriction of addition on account of cash loan to Rs.2.34 crores as opposed to the ld.CIT(A) restricting to 1.25 crores. The Ground nos.2(a)(b)(c) raised by the Revenue are accordingly dismissed. 27. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 6 th January, 2023 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 06/01/2023