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TMI Blog2024 (11) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... ecute pro-note in advance without mentioning any details. However, fact remains that in many cases, business is carried out on the basis of mutual trust and respect. Especially in the field of financing, more particularly in the field of film financing, it is mostly unorganized sector and transaction happens through mutual trust and belief and going by the place of business where the appellant operates, it is very famous for film financing and thus, in our considered view, the arguments advanced by assessee in light of various evidences including the statement recorded from the assessee during the course of search that the assessee is only a middlemen and arrange finance to film producers through associates/lenders is bonafide and needs to be accepted. How to quantify the income of the appellant? - Considering the nature of the business of the assessee and also amount of business carried out by the assessee for all these years, in our considered view, a reasonable amount of expenditure needs to be estimated. The assessee has earned 6% margin on total loans given to film producers. Against this for various expenditure, the assessee must have incurred 1% income generated from his fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion letter from the donor. Secondly, assuming for a moment, the assessee is not able to prove the gift with relevant evidences, but the amount received from Shri B Girish cannot be treated as unexplained credit or income from other sources u/s 56(2)(vii) for the subject A.Y for the simple reason that the amount has been received in financial years 2007-08 and 2008-09. If at all, the addition is required to be made, then the same can be made for the A.Ys 2008-09 and 2009-10 but not for the A.Y 2011- 12. Therefore, we are of the considered view that the Assessing Officer is erred in making addition towards gifts claims to have been received from brother-in-law. The learned CIT (A) without considering the relevant facts simply sustained the addition made by the Assessing Officer - Decided in favour of assessee. Unexplained cash found during the course of search - HELD THAT:- It is an admitted fact that the cash book maintained by the assessee was not updated as on the date of search. Since the date of search was in between the financial year and there is a time for appellant to update the cash book, the explanation offered by the assessee with regard to the availability of cash balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order. 2. At the outset, it is seen that there is a delay of 21 days in filing of these appeals by the assessee. The learned Counsel for the assessee explained the reasons for such delay. After hearing the learned DR, the delay of 21 days in filing these appeals are hereby condoned and admitted for adjudication. 3. The assessee has more or less raised common grounds of appeal in all the three appeals. Therefore, for the sake of brevity, grounds of appeal filed for A.Y 2010-11 are hereby reproduced are as under: 1. The order of the learned CIT (A) is against the law, weight of evidence and probabilities of case. 2. The learned CIT (A) erred in confirming addition of Rs. 25,00,000/- which is made relying upon the dumb documents. 3. The learned CIT (A) ought to have appreciated that the alleged pro notes does not mention the name of the person who has advanced the money and also the rate of interest and mode of payment such as cash/cheque/draft/PT, therefore, erred in confirming the addition of Rs. 25,00,000/-. 4. The learned CIT in confirming an addition of Rs. 3,47,75,000/- whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heets. Consequent to the search, notice u/s 153A of the I.T. Act, 1961 dated 16/10/2012 was issued and served on the assessee. In response to the notice, the assessee has filed return of income for A.Y 2010-11 on 23/11/2012 by admitting total income of Rs. 4,89,750/-, for the A.Y 2011-12, the assessee admitted total income of Rs. 13,64,760/- and for the A.Y 2012-13 admitted total income of Rs. 38,71,430/-. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer called upon the assessee to explain as to why addition shall not be made towards unexplained investment in film financing business. In response, the assessee submitted that he has received loans and advances from various associates/ lenders and the same has been in turn, advanced to film producers and from this business he earns income of Rs. 400/- per lakh. The Assessing Officer after considering the relevant submissions of the assessee and also taken note of material found during the course of search, coupled with the statement recorded from the assessee has made addition towards unaccounted investment in film financing and additions towards unexplained gifts claimed to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts recorded therein are true and correct. Therefore, rejected the explanation of the assessee and made addition towards loan given to various film producers as unexplained investment in film financing. The details of year-wise addition made by the Assessing Officer are as follows: A.Y 2010-11 S.No Particulars Amount 1 Unaccounted Investment in film financing business 25,00,000 2 Unaccounted Investment in film financing business 3,47,75,000 A.Y 2011-12 S.No Particulars Amount 1 Unaccounted Investment in film financing business 64,00,000 2 Unaccounted Investment in film financing business 10,76,83,000 3 Unaccounted Investment in film financing business 76,00,000 A.Y 2013-13 S.No Particulars Amount 1 Unaccounted Investment in film financing business 1,20,00,000 2 Unaccounted Investment in film financing business 85,00,000 3 Unaccounted Investment in film financing business 1,55,00,000 8. The learned Counsel for the assessee, referring to the document found during the course of search submitted that a promissory note can be enforced under law, if it is complete in all respects. If it is not complete in all respects, it cannot be enforced under law. In the present case, the promissory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposed before the Assessing Officer and denied transactions. The Assessing Officer and the learned CIT (A) after considering relevant facts has rightly made addition towards unaccounted investment in film financing business and their orders should be upheld. 10. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. During the course of search, bundle of loose sheets containing signed and blank promissory notes along with a diary was found and seized. Promissory note indicates loans given to various film producers. Further, the said promissory notes contain the amount of loan, rate of interest and period of loan. The blank promissory note does not contain any information including the name of the lender and rate of interest. The Diary seized during the course of search has details of loans given to various film producers over the period along with rate of interest and other details. The seized documents were confronted to the assessee and a statement on oath was recorded u/s 132(4) of the Act, and called upon the assessee to explain the contents of the promissory notes and other seized documents. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in respect of other documents relied upon by the Assessing Officer including the entries in the diary, we find that the assessee has recorded the date of loan, period of loan, due date of repayment, number of days, interest, etc., against each borrowers. Further, in the same diary, in the right side, the appellant has recorded the name of the associates and the amount received from them. The Assessing Officer took entries recorded in left side of the seized document which relates to the loans given by the appellant to various film producers, however, ignored the right side of the very same seized material which contain the names of associates/lenders and amount received from them. In our considered view, when any document is relied upon for the purpose of making any addition, then the said document should be considered in total without any cherry picking of entries which suits the Revenue. In the present case, the Assessing Officer made addition to the loan claimed to have been given to film producers based on seized document and at the same time, ignored other part of the seized document which contain name of the associates/lenders. Although, the presumption as per sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents advanced by the learned Counsel for the assessee in light of various evidences including the statement recorded from the assessee during the course of search that the assessee is only a middlemen and arrange finance to film producers through associates/lenders is bonafide and needs to be accepted. 13. Having said so, let s come back, how to quantify the income of the appellant. Admittedly, the Assessing Officer made addition towards unexplained investment in film financing business by considering only one part of seized document which relates to loans given to various film producers. The Assessing Officer ignored other part of the very same seized material (right side) which contain details of names of associates/lenders and amount received from them. The assessee right from the beginning claimed that he received amount from various associates/lenders in small amount, aggregate the amount and lend to different film producers and production houses. We find that the seized material A/GSB/Res/02, Page No.1 to 16 contain details of loans given to film producers on the left side and the loans received by the assessee from various associates/lenders on the right side. The same has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer for the A.Y 2010-11 amounting to Rs. 3,72,75,000/-, the Assessing Officer is directed to restrict addition to the extent of 5% of net income on total amount of Rs. 3,72,75,000/- and the balance amount is hereby directed to be deleted. Similarly, for A.Y 2011- 12, out of addition made by the Assessing Officer for Rs. 12,16,83,000/- the Assessing Officer is directed to restrict addition to the extent of 5% net profit on total loans and delete the balance addition. For A.Y 2012-13, out of addition of Rs. 2,52,00,000/-, the Assessing Officer is directed to restrict addition to the extent of 5% net income on total loans and balance amount is hereby deleted. 14. The next issue that came up for our consideration for A.Y 2010-11 is addition of Rs. 5 lakhs towards gift received from brother-in-law. The Assessing Officer made addition of Rs. 5 lakhs towards gift claimed to have been received from brother-in-law on the ground that the assessee could not establish relationship with donor and also creditworthiness of the donor. It was the argument of the assessee that, he has filed confirmation letter from the donor along with the ledger extracts. The assessee further contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year 2008-09 from Shri B Girish who is brother in law of the assessee i.e. husband of Smt. B. Sangeeta. The aggregate amount received is Rs. 31,98,660/- up to the year ending 31/03/2009. This amount was considered as loan from Shri B Girish and therefore, an interest amounting to Rs. 4,97,374/- was credited for the year ending 31/03/2010 and further interest of Rs. 1,21,723/- for the year ending 31/03/2011. The aggregate amount outstanding in the name of Shri B Girish as on 31/03/2011 was at Rs. 38,13,730/- and the same has been treated as gift to the assessee with the consent of Shri B Girish for the subject A.Y. The assessee has furnished all evidences including confirmation and relevant bank account statement of the donor and the assessee. The Assessing Officer ignored the evidences filed by the assessee and made addition u/s 56(2)(vii) of the Act, as income from other sources. We do not subscribe to the reasons given by the Assessing Officer for the simple reason that first of all, the assessee is able to establish identity of the donor and also proved genuineness of the transaction by filing confirmation letter from the donor. Secondly, assuming for a moment, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year and there is a time for appellant to update the cash book, the explanation offered by the assessee with regard to the availability of cash balance as on 30/04/2011 as per updated cash book amounting to Rs. 5 lakhs needs to be accepted. If we accept the source of cash found during the course of search to the extent of Rs. 5 lakhs, but still there is unexplained cash found at the time of search at Rs. 24,43,250/- and the assessee could not explain the source for the same. Therefore, we are of the considered view that out of total cash found during the course of Rs. 29,43,250/-, the appellant is able to explain the cash in hand available as on the date of search for Rs. 5lakhs only. The remaining amount of cash of Rs. 24,43,250/- is still unexplained. Therefore, we are of the considered view that the addition made by the Assessing Officer towards cash found during the course of search needs to be sustained to the extent of Rs. 24,43,250/-. Thus, we direct the Assessing Officer to restrict the addition to the extent of Rs. 24,43,250/- towards cash found and seized during the course of search. 20. The next issue that came up for our consideration for the A.Y 2012-13 is addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of unmarried women up to 200g of jewellery cannot be seized. Likewise, in the case of men up to 100g jewellery, there cannot be any seizure. In the present case, going by the amount of jewellery found during the course of search, it is well within the parameters prescribed by the CBDT for seizure of jewellery. No doubt, the Department has not seized jewellery. However, when it comes to explanation of the source for the said jewellery, it is a customary in India that every household will have certain quantity of jewellery in family and the same has been acquired out of their savings and known source of income. Since going by the quantity of jewellery found in the present case, in our considered view, the same is within the parameters prescribed by the CBDT for not seizure of the jewellery and also the assessee is able to explain the source out of his known source of income. Therefore, we are of the considered view that the Assessing Officer is erred in making addition towards jewellery found during the course of search as unexplained investment. The learned CIT (A) without appreciating the relevant facts simply sustained the addition made by the Assessing Officer. Thus, we s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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