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TMI Blog2023 (1) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... ive 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 CIT(A) was satisfied and convinced with this explanation of the assessee and had accepted rate of interest paid at 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. 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 raised by the Revenue are accordingly dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 AO relied 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 del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal No. 1(a) & (b), raised by the Revenue are accordingly dismissed. 10. Ground No.2 (a)(b)(c)raised by the Revenue relating 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 discusse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thakar 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 Bholenath Enternrises 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, 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 poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking 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 Met ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintenance 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 it would be also pertinent to state here that a perusal of the sample vouchers produced for the kind perusal of your honour would clearly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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