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TMI Blog2008 (12) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... ): "1. On the facts and in the circumstances of the case and in law the learned CIT(A) was not justified in sustaining the addition of Rs. 2,00,000 made by AO treating it as income by invoking s. 69D of the Act. Since it is an undisputed position that the borrowing, though not admitted by the assessee, as per records was said to have been done on the basis of promissory notes, therefore, the provisions of s. 69D are not attracted to the borrowings raised by executing such promissory notes. The addition be quashed. 2. On the facts and in the circumstances of the case and in law and in view of ground No. 1 above addition sustained by learned CIT(A) of Rs. 69,500 treating it as interest and brokerage under s. 69C is not justified. The same be deleted. 3. On the facts and in the circumstances of the case and in law the provisions of s. 153C are not attracted to the facts of this case. The assessment being bad in law be quashed. 4. On the facts and in the circumstances of the case and in law the assessee denies its liability to pay interest under s. 234A of Rs. 8,622, under s. 234B of Rs. 50,055. The levy of interest be deleted." ITA No. 1148/Pn/2008 (for asst. yr. 2001-02): "1. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interconnected issues, all the four appeals are being disposed of by way of this consolidated order. 3. The relevant material facts are like this. A search and seizure operation under s. 132 was carried out in the case of one S.H. Soni on 29th July 2003. During the course of this search, some books of accounts and documents are said to have been seized which related to money-lending operations of the said S.H. Soni. According to the AO, "some of such (seized) documents were blank promissory notes signed by the borrowers, blank undated cheques duly signed by the borrowers with amounts borrowed mentioned". The AO was of the view that modus operandi of S.H. Soni was that "the loans were advanced in cash normally for 90 days after deducting the interest amount (varying from 1.5 per cent to 2 per cent per month) and brokerage amount" and "at the time of borrowing, the borrowers hand over blank cheque of the full amount borrowed and promissory note and another promissory note is also obtained to ensure interest payment on due dates by the borrowers which is recorded on the back of it". It was in this backdrop and on the basis of documents seized from S.H. Soni, the AO noted that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was requested to explain why the promissory note was signed by the firm's partner Shri Vilas Attal. 14. In this regard, the contentions of the partner of the firm are as under: (a) In case of any borrowings, promissory/demand note and post-dated cheques are taken even by banks. Most of the times, these documents are signed in anticipation of loan to be disbursed. It also happens that the loan is not taken afterwards. The firm had borrowed funds from market. some times through the broker, Shri Soni by account payee cheques. When such borrowings were made, these documents used to be given in advance. These documents did not bear the name of the advancer as such arrangement used to be done by the broker. Therefore, these documents though signed, were blank. You will appreciate that the documents seized and related to firm are also unnamed. Once again, I confirm that the documents signed were in respect of the amount to be borrowed by account payee cheques only. No cash loan has been taken or demanded. (b) As regards the list of the borrowers and lenders concerned, though the name of the firm is appearing in the list, these documents do not pertain to the firm. As such, I am unab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------- Asst. Total amount of Period of Interest Brokerage Total yr. borrowing in Rs. borrowing in Rs. in Rs. in Rs. ------------------------------------------------------------------- 2000-01 2,00,000 3 months 9,000 1,500 10,500 ------------------------------------------------------------------- 2001-02 2,00,000 12 months 3,600 6,000 42,000 1,00,000 3 months 5,250 750 6,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; 24,000 2,00,000 12 months 36,000 6,000 42,000 ------- 1,08,000 ------------------------------------------------------------------- 2004-05 2,00,000 3 months 9,000 1,500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial on record. As regards the case law relied upon by the appellant, it may be mentioned that these case law relied upon by the appellant are distinguishable on facts and do not apply to the appellant's case squarely. These cases and other similar cases lay down certain well established principles of law regarding burden of proof and appreciation of evidence. There is no dispute about such principles. The question is one of applicability of the principles to the facts in a given case. It has been a well-settled view that the ratio of any decision must be understood in the background of that case. What is of essence in a decision is its ratio and not every observation found therein nor what legally follows from the various observations made in it. It is not a profitable task to extract a suitable sentence here and there from a judgement and to build upon it (vide Ambica Quarry Works vs. State of Gujarat AIR 1987 SC 1073). In my considered view, the principles enunciated in the cited cases do not render any help to the appellant in the facts and circumstances of the present case because the appellant's case is held to be distinguishable on facts." 8. The CIT(A) then proceeded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or make it payable at his order. Then, the cheque is a bearer cheque. Taking into account all these aspects of the matter, it is held that the subject document is a 'Hundi' and cannot be said to be a promissory note. 5.3 In view of the foregoing discussion, it is held that the learned AO is fully justified on facts and in law in making the addition under s. 69D treating the subject document as 'Hundi', sample of which is reproduced in para 5.1 hereinbefore. Accordingly, the additions made by the learned AO under s. 69D are upheld in all the assessment years in which such addition is subject-matter of appeal in the present case. 5.4 As regards addition made on account of unexplained expenditure being in the nature of interest and brokerage, from the seized material, it is absolutely clear that the appellant has borrowed loans from Shri Ashok Oswal, Pravin Datta and Shri S.K. through Shri Shriram Soni, as is clearly brought out in the assessment order. The mode of receipt of money is in cash. Therefore, it is clear that the entry is unaccounted in case of books of accounts of the appellant. If the twin test of looking into the surrounding circumstances and applying the test of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at proposition has been laid down therein in no uncertain terms. The questions of burden of proof and appreciation of evidence are not at all relevant in this context. Every decision is on the facts of a case but what is relevant is whether the decision, when viewed as a judicial precedent, lays down a legal proposition of general application or something confined to the facts of that particular case. To arrive at decision in a particular case, more often that not, the general legal position is appreciated and clarified, or else a judicial precedent can never have a normative effect in other cases. We are unable to share learned CIT(A)'s perception that "the principles enunciated in the cited cases do not render any help to the appellant in the facts and circumstances of the present case because the appellant's case is held to be distinguishable on facts". The CIT(A) states that facts are distinguishable but he does not explain which facts of the assessee's case are different vis-a-vis cases before those judicial authorities, and how such a differentiation affects the legal principles laid down in those judicial precedents. Take for example, the decision of this Tribunal in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be a bill of exchange. A note is taken of the esteemed views of Hon'ble Madras High Court which holds that a promissory note cannot be treated as a Hundi. In the present case. the AO has categorically observed, as we have noted in earlier part of this order, that the promissory notes were found, and it was on the strength of these promissory notes that borrowings were resorted to. Under these circumstances, in our understanding, it is difficult to hold that following the ratio of the Tribunal's decision in Bissheshwarlal Mannalal & Sons case, it cannot be concluded that the borrowings in question were not covered by the scope of s. 69D. The distinction made out by the learned CIT(A) is a distinction without any material difference. 13. We see no reasons to take any other view of the matter than the view so taken by the Co-ordinate Bench. No contrary judicial precedents by equivalent or higher authorities have been brought to our notice. Learned counsel has also cited a number of judicial precedents which support the legal proposition set out in the preceding para, and which was stated in Bissheshwarlal Mannalal & Sons. As for the findings that the borrowing should be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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