THE COMMISSIONER OF INCOME TAX, V. SHRI B J DHANMAL JAIN

ITA/742/2006

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against Shri B J Dhanmal Jain, following a search operation that uncovered unaccounted money and a post-dated cheque. The Revenue challenged the Tribunal's decision, which had accepted the assessee's explanations that the unaccounted money was from his wife's sale of agricultural land and that the post-dated cheque was not income as it was not encashed and was outside the relevant assessment period. The High Court examined the substantial questions of law regarding the source of the loan amount and the treatment of the post-dated cheque as income.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 733479 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 25-07-2012
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K R PRASAD
• Assessee Lawyers: E SANMATHI
• Keywords: Income Tax; Incriminating documents; Search and seizure; Unaccounted money; Undisclosed income; Licensed Money Lender
• Section: 260A

Judgement Text

"1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 25TH DAY OF JULY 2012 PRESENT THE HON'BLE MR. JUSTICE K.SREEDHAR RAO AND THE HON'BLE MR. JUSTICE B.MANOHAR ITA No.742/2006 BETWEEN : 1 THE COMMISSIONER OF INCOME TAX, No.55/1, SHILPASHREE VIDHYARANYA COMPLEX, VISHVESHWARANAGAR MYSORE. 2 THE ASSISTANT COMMISSIONER OF INCOME TAX, INVESTIGATION CIRCLE – 1, No.55/1, SHILPASHREE VIDHYARANYA COMPLEX, VISHVESHWARANAGAR MYSORE. .. APPELLANTS (By Sri E SANMATHI, ADV.) AND : SHRI B J DHANMAL JAIN PROP. CHANDRAPRABHA SPICES B.H. ROAD, SAKLESHPUR. ...RESPONDENT (By M/S K R PRASAD, ADVs.) This ITA is filed under Section 260A of the Income Tax Act, 1961, praying to set aside the orders passed by the Income – Tax 2 Appellate Tribunal, Bangalore in IT(SS)A No.177/Bang/1997 dated 5.10.2005 confirming the order of the Appellate Commissioner and confirm the order passed by the Assistant Commissioner of Income Tax, Investigation Circle-I, Mysore. This ITA coming on for hearing this day, K.SREEDHAR RAO, J, passed the following: ORDER The appellants/Revenue have made a search in the premises of respondent/assessee on 1.11.1996. During the search, incriminating documents were found. A sum of Rs.3,58,750/- was found to have been advanced by the assessee to several borrowers. The said amount was found to be unaccounted one. In the search, a post dated cheque of Rs.5,75,000/- was also found. 2. The assessee, who was a licensed money lender, gave an explanation that in respect of Rs.3,58,750/-, it was explained that his wife has sold an agricultural land to one Sri K B Sheshe Gowda, who had paid Rs.10 lakhs by way of cash and Rs.7 lakhs by way of cheque. A sum of Rs.3,58,750/- lent by the assessee was in fact belonging to his wife. With regard to the post dated cheque, it was submitted that the same was seized and was not encashed. The assessee did not get any income from the said cheque. The assessee has explained that he had entered into an agreement with one Sri C 3 V Krishna for purchase of land and had advanced a sum of Rs.1,50,000/-. It is further explained that a cheque of Rs.5,75,000/- was in fact received by him from one Sri K L Jayaprakash. The said cheque was not encashed and was seized by the department. The AO has rejected the explanation of the assessee. The Tribunal in appeal rejected the order of the AO and accepted the explanation of the assessee and thus dropped the proceedings. Hence, the Revenue is in appeal. 3. The following substantial questions of law are framed for consideration: 1) Whether the Tribunal was justified in holding that the advance of loan amount made by the assessee against the pawned articles from the funds provided by his wife on the sale of her land when she has not received any sale consideration in cash from her vendee? 2) Whether the Tribunal was right in holding that the post date cheque in the name and possession of the assessee cannot be treated as income when the same was accrued and the entire transaction was completed? 4. The first question is a question of fact that one Sri K B Sheshe Gowda was summoned and a sworn statement was recorded . He produced documentary and oral evidence to show that he has paid a sum of Rs.10 lakhs to the wife of the assessee in cash. The Tribunal 4 after considering the oral and documentary evidence has found that the explanation of assessee is sound and proper. 5. With regard to the post dated cheque, unless the same is encashed, it cannot be treated as income. The date for encashment of the cheque falls beyond the block period. Therefore the Tribunal has rightly found that it was not proper for the AO to assess the sum of Rs.5,75,000/- for tax for the period not falling within the block period of assessment and cannot be included as undisclosed income of the assessee. Hence, the order of the Tribunal is sound and proper that calls for no interference. The substantial of questions of law are answered against the appellants/Revenue. Accordingly, the appeal is dismissed. Sd/- JUDGE Sd/- JUDGE bkm. "