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2011 (11) TMI 457 - HC - Income TaxUndisclosed loan advanced - Search and seizure Revenue made addition on ground that entries made in diary of assessee represented loans advanced to the persons by the assessee assessee contended it to be expected contribution by the parties for the purpose of hotel business - Held that - It was not found that there was any doubt with regard to their proposed contribution in the proposed hotel project to be installed by the assessee. It is a case where it is no where found that there was involvement of any actual transaction of amount between the parties. It appears to be a mere proposal where other persons, as they have stated in their affidavits expressed their desire to contribute for the hotel proposal. Thus, even if the source of fund have not been given as to how the money would be arranged, the affidavits cannot be held as untrustworthy. The CIT(A) as well as the Tribunal have rightly considered all the facts in detail and came to the conclusion for disallowing the addition. Whether there is no contravention of Rule 46 of the Rules, 1962 Held that - All the evidences were discussed before the AO and no additional evidence was taken on record at the stage of CIT(A) proceedings or before the Tribunal. Thus, it cannot be held that there was no compliance of statutory requirement of Rule 46 of the Rules, 1962. - Appeal is dismissed
Issues Involved:
1. Deletion of Rs. 19,30,000/- as undisclosed loan under Section 69 and 69(C) of the Income Tax Act. 2. Justification of the Tribunal's agreement that the impugned amount was for a hotel project. 3. Allegation of the Tribunal's order being perverse and contrary to facts. 4. Admissibility of additional evidence under Rule 46 of the Income Tax Rules, 1962. Detailed Analysis: Issue 1: Deletion of Rs. 19,30,000/- as undisclosed loan under Section 69 and 69(C) of the Income Tax Act The Revenue conducted a search on the assessee's premises and found an LIC diary listing various amounts against different persons. The AO treated these amounts as loans given by the assessee and added Rs. 19,30,000/- to the assessee's income as undisclosed investment. The assessee contended that these amounts were proposed contributions for a hotel project, supported by affidavits from the named persons. The CIT(A) and the Tribunal found the assessee's explanation credible and deleted the addition, noting that there was no evidence of actual transactions and the affidavits indicated proposed investments, not loans. Issue 2: Justification of the Tribunal's agreement that the impugned amount was for a hotel project The Tribunal upheld the CIT(A)'s finding that the amounts listed in the diary were intended for a hotel project. The affidavits from the named persons supported this claim, and no evidence suggested that these were loans. The Tribunal noted that the entries did not indicate any actual transaction of money, only a proposal for future investment in the hotel project, which never materialized. Issue 3: Allegation of the Tribunal's order being perverse and contrary to facts The Revenue argued that the Tribunal's order was perverse and contrary to the facts on record. However, the High Court found that the CIT(A) and the Tribunal had properly appreciated the evidence, including the affidavits and the lack of any actual transactions. The High Court held that the findings were based on a correct appreciation of facts and were not perverse. Issue 4: Admissibility of additional evidence under Rule 46 of the Income Tax Rules, 1962 The Revenue contended that the CIT(A) and the Tribunal erred in accepting the affidavits as additional evidence in contravention of Rule 46. The High Court found no merit in this argument, noting that all evidence was discussed before the AO and no new evidence was introduced at the CIT(A) or Tribunal stage. The affidavits were part of the initial proceedings and were properly considered. Conclusion: The High Court dismissed the appeal, holding that the CIT(A) and the Tribunal had correctly appreciated the facts and evidence. The affidavits were credible, and there was no evidence of actual loan transactions. The Tribunal's findings were not perverse, and no substantial question of law arose for consideration. The appeal was dismissed with no order as to costs.
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