Income Tax Appellate Tribunal - Mumbai
Biren V. Savla vs Assistant Commissioner Of Income Tax on 23 September, 2005
Equivalent citations: (2006)100TTJ(MUM)1006
ORDER
D.C. Agrawal, A.M.
1. These three appeals are filed by assessee against three orders of CIT(A), each dt. 29th Oct., 2004 and raised the following common ground :
On the facts and in the circumstances of the case and in law, and in view of very detailed submissions, evidences and decided legal cases, the Hon'ble CIT(A) erred in confirming the addition of Rs. 3,32,37,000 (1993-94)/Rs. 8,26,90,000 (1994-95)/Rs. 3,51,69,000 (1995-96) under Section 69 of the IT Act.
1994-95 2. "On the facts and in the circumstances of the case and in law, and on submissions of the various evidence, the CIT(A) erred in confirming the addition of Rs. 25,000 on account of cash loans.
2. The facts of the case are that the assessee is a finance broker. A search and seizure operation under Section 132 was carried out on 3rd Jan., 1995 and 4th Jan., 1995. During the course of search cash, jewellery was found and seized as detailed below :
1. Cash seized from residence Rs. 95,000
2. Appropriation of cash from bank Rs. 5,44,079
3. Seizure of jewellery Rs. 28,900
3. In addition to the above, the authorized officers found incriminating documents which were marked as A-l, 2, 3, 4 and 5 and were seized. A-l is list of Hundis indicating names of borrowers and lenders, rate of interest and date of borrowing and date of maturity. A-2 and A-4 are two diaries, which contain the names of borrowers, lenders, rate of interest, date of borrowing, amount and the date when money is to be returned and the amounts of commission. The name of the borrower is written at the top indicating thereby that borrower had borrowed the funds from various lenders as listed therein. All these transactions were recorded in A-2 and A-4 are through cheques and the assessee earned brokerage thereon. These transactions are admittedly found to be duly recorded in the regular books of account of the assessee. This position was accepted by the AO in the assessment order as well as by the CIT(A) in the appellate order, wherein he mentioned that "diaries numbered A-2 and A-4 are an account of financial transactions made by the appellant through bank account. These transactions are recorded in his regular books", The diaries Nos. A-3 and A-5 reflected cash transactions and show names of borrowers and lenders, rate of interest and date of borrowing and commission/brokerage. Thus, the details of the transactions as recorded in A-2 and A-4 are similar rather identical to those recorded in A-3 and A-5. However, transactions recorded in A-3 and A-5 did not find place in books of account. The AO after examining the A-3 and A-5 worked out undisclosed income by observing as under :
3. As per the seized note book A-3 and A-5, the unaccounted income of the assessee has been arrived after drawing the peak amount from the two note books for financial years 1992-93, 1993-94 and 1994-95. The details of the peak amount for each year is as under:
Financial year Peak amount 1. 1992-93 Rs. 3,32,37,000 2. 1993-94 Rs. 8,26,40,000 3. 1994-95 Rs. 3,61,69,000
During the course of assessment proceedings for asst. yr. 1994-95, the peak amount of Rs. 8,26,40,000 was added to the total income of the assessee under Section 69 of the IT Act, 1961. For asst. yr. 1995-96 also the peak amount of Rs. 3,61,69,000 was added to the total income under Section 69 of the IT Act, 1961. A detailed discussion was already made in the body of the assessment order for asst. yrs. 1994-95 and 1995-96. On the same basis, even for the asst. yr. 1993-94, the peak amount of Rs. 3,32,37,000 is added to the total income of the assessee under Section 69 of the IT Act, 1961.
4. Though the assessment order for the asst. yr, 1993-94 is silent about how and on what basis the addition is made, the assessment order for asst. yr. 1994-95 is detailed and shows the application of the mind by the AO while making addition.
5. During the course of assessment for the asst. yr. 1994-95, while explaining the diaries A-3 and A-5, the assessee pointed out that figures recorded therein were in coded words and absolute figures will be obtained by adding two zeroes after those figures; that is for example if 10 is written, the absolute figure would be 1,000 after adding two zeros. The AO was, however, not convinced. He was of the view that, they are coded by three digits meaning thereby that Rs. 30 recorded in the diary would stand for Rs. 30,000. During the course of search, the statement of the assessee was recorded and he made a disclosure of Rs. 40 lacs, which was later retracted vide his letter dt. 12th Sept., 1996. The disclosure was reduced from Rs. 40 lacs to Rs. 10 lacs, as the assessee alleged that disclosure at the time of search was made under pressure and threats, This reduced disclosure included renovation of the house for which additional disclosure of Rs. 10 lacs was made during the search under Section 132(4),
6. During the course of assessment proceedings for the asst. yr. 1994-95, it was explained to the AO that the diaries A-3 and A-5 contain a record of his brokerage and commission received/receivable by him on arranging the funds from the lenders to the borrowers. The outgoings are not from him but from lenders to the borrowers. The assessee was only entitled to his brokerage and commission for arranging the finance. The only difference in A-2/A-4 and A-3/A-5 is that former is record of transactions made through banking channels while the latter is the record of cash transactions. Otherwise, there is no difference. The AO did not agree and made addition to the total income by holding that the outgoings recorded in A-3/A-5 is the money of the assessee, which is unexplained and is liable for addition under Section 69. He, thus, made an addition of Rs. 8,26,90,000. In addition, a sum of Rs. 25,000 was further added on account of a Hundi which was not verifiable with seized diaries A-3/A-5.
7. In the asst. yr. 1995-96, a sum of Rs. 3,51,69,000 was added as undisclosed income after giving a credit of Rs. 10 lacs already disclosed. In the asst. yr. 1992-93, a sum of Rs. 3,32,37,000 was taxed. All these items were added under Section 69 of the Act. The view of the AO was that, whatever is advanced to various borrowers through the assessee was unaccounted investment of the assessee and since it is not explained it is taxable under Section 69. The peak was worked out by giving credit to the money already covered in asst. yrs. 1993-94 and 1994-95.
8. The CIT(A) confirmed the addition on the ground that opportunities were given to the assessee vide letters of the AO, dt. 13th Aug., 1996, 15th Nov., 1996, 21st Jan., 1997 asking the assessee to produce documentary evidence and details to prove that these unaccounted income pertained to others and to furnish the names and address of the borrowers and lenders. It was explained before the CIT(A) that assessee is only a finance broker and money reflected in diaries A-3 and A-5 is not his money and money belonged to others, which has been borrowed by the persons whose names are also recorded in A-3 and A-5. He was only earning finance brokerage on such lending and borrowing. He has been filing returns for the last ten years, which is evident from the books and other documents seized by the Department. Therefore, the finance arranged by him as finance broker cannot be attributed as his personal money. The appellant is only entitled for brokerage for 10 paise per Rs. 100 per month. Lending and borrowing always takes place on principal to principal basis between lender and borrower. It is only for the purpose of keeping track of the entitlement of his brokerage, the appellant has to maintain diaries. The diaries contain loan transactions. This fact has been accepted by the AO. The diaries A-2 and A-4, which are similarly written as A-3 and A-5 contain amount of loan and brokerage. The fact that the lending as recorded therein are not appellant's income has been accepted by the AO as no addition of this nature has been made on the basis of A-2 and A-4. This is a fact that similarly written diaries A-2 and A-4 contain entries and transactions pertaining to others and the lending is not appellant's money should also apply in respect of A-3 and A-5. The appellant would be under tremendous risk of loss of life and physical harm if he would furnish the names and addresses of those who lent money and all those who borrowed the money. The assessee is only entitled for brokerage, which is his only income. The CIT(A) considered the arguments of the assessee and of the AO in the assessment order and confirmed the additions by observing as under :
3.3 The argument of the appellant and fact of the case have been considered. The case laws relied upon by the appellant have been gone through. The first issue to be resolved is whether the appellant is only a finance broker or he has been advancing loans on his own out of his own funds and charging interest as has been claimed by the AO. The second issue that needs to be resolved is regarding the statement recorded under Section 132(4) which was later on retracted by the appellant. Ordinarily, the significance of the statement made by the assessee cannot be belittled by its subsequent retraction. The admission/confession is an important piece of evidence against the assessee. Yet, however an assessee is entitled to show that the alleged admission/confession was made under duress or in ignorance of facts and legal position. One way of establishing that the statement was not voluntary and that coercion, threat or inducement was exercised is to attack the circumstances in which the statement was recorded. For example, if during the course of search nothing incriminating is found, yet on persuasion and pressure from the search party or to ward off further trouble of search being continued, a surrender is made on some vague ground without any firm basis to support it, the retraction is justified. On the contrary, if documents are found to show that income is earned, invested or enjoyed without having been disclosed in the regular books of account or in the return of income and the documents and/or undisclosed assets found during the course of search prima facie demonstrate the existence of concealed income, the surrender would get corroborated. In the case of the appellant, there is no dispute as to the fact that the diaries numbered A-3 and A-5 are an account of cash transactions by the appellant. These transactions do not find place in the regular books of account. It clearly shows that the income relating to these transactions has not been shown by the appellant. The dispute is only with regard to the fact that the transactions are with regard to the finance arranged for others as broker or own money is used for earning interest. The unaccounted transactions are there, it is not denied. The smoke is not without fire. Even if the appellant has retracted from the statement, the evidence was there to prove the unaccounted transaction. Hence, the retraction in the case of the appellant cannot be accepted. Now the question is as to whose money was used in the unaccounted transactions. The AO had given ample opportunity to produce evidence to show that the appellant was simply arranging loans for others and earning brokerage income. The appellant did not furnish the names and addresses of the parties mentioned in the diaries. In this context the statement of the appellant particularly question No. 5 of the statement under Section 132(4) regarding the content of account books marked A-3 and A-5 is very important. It has been stated by the appellant that these two books contained the details of money advanced by him to different parties on different dates as cash loans. These two books may be containing the ledger accounts of various parties for the financial year 1993-94 and the current financial year. Actually these are in the form of the fund flow on various dates. The exact quantum cannot be worked out right now and for that the peak is to be drawn for the loans advanced. However, the appellant could recollect that in the total cash loans, the funds involved for financial year 1993-94 and financial year 1994-95 are around Rs. 40 lacs, this amount of Rs. 40 lacs is not accounted in books of account and, therefore, the appellant admitted that this is his unaccounted income for the financial year 1993-94 and financial year 1994-95. From the statement, it is quite clear that the appellant has suppressed income by declaring that he is only earning 1.2 per cent per annum as brokerage whereas, as per his statement given under Section 132(4) he had advanced cash loans out of his own funds, on which he must be earning very high rate of interest. It is at this juncture a mention of the order of the Settlement Commission is very relevant. It is important to mention here that the appellant had filed settlement application dt. 14th May, 1997 for the asst. yrs. 1993-94 to 1995-96. The Hon'ble Settlement Commission has passed an order dt. 20th Feb., 1998. While rejecting the application, the Hon'ble Settlement Commission has made following observations :
Section 245C(1) clearly provided that a settlement application should contain a full and true disclosure of income, which has not been disclosed before the AO and the manner in which such income has been derived. This is the threshold condition that the application must fulfil if his application is to be allowed to be proceeded with under Section 245D(1). Answer to the question whether full and true disclosure of income which has not been disclosed before the AO and the manner in which such income has been derived has been made in the settlement application, depends on the facts and circumstances of each case. In the present case, the seized documents in the form of diaries are written in the hand of the appellant. Admittedly, in these diaries details of cash loans advanced to different persons are recorded. The addresses of the persons are not recorded. The appellant has claimed in the SOF and before the Commission that the funds for advancing these cash loans have been provided, by different persons and he earned only brokerage for bringing the lender and the borrower together, The name of these persons and addresses are also recorded. It will be correct" to assume that no person would have parted with his money unless the applicant is well-known to him and enjoys his confidence. The identity of these persons is known to the appellant. He knows their addresses as he has admitted in the SOF and during the course of hearing. For the reasons given in the SOF, he has declined to furnish the address of these persons and thus disclose their identity for purposes of verification. We are not fully satisfied with these reasons. The appellant is either trying to protect these persons or is holding back information, which is necessary to decide whether he had advanced cash loans out of his own funds. He offered for assessment Rs. 40 lacs as invested in cash loans out of his own funds during the course of statement under Section 132(4). Later he resiled from this statement and came out with the explanation that he was only a. finance broker and all the cash funds were provided by others. Whatever be the truth, which is known to the appellant, he is holding back information, which is vital to determine his taxable income. He is also not co-operating by not furnishing complete information about those persons whose names are recorded in his diaries. By doing so he is abetting the malady of black economy. The Commission cannot be used to provide shelter to such appellant and his associates who are nurturing the black economy and in the spirit of rectitude is not coming forward with full and true disclosure of information.
11. Sri C.V. Kothari, advocate's argument that non-furnishing of addresses of persons who allegedly provided cash funds to the appellant for advancing loans, does not make settlement application incomplete, is not acceptable. Information regarding identity of those persons whose names are recorded in the diaries maintained by the appellant is necessary to verify the correctness of the appellant's claim that he did not invest his own cash funds [as against his statement under Section 132(4) that he had invested Rs. 40 lacs in cash] and he earned brokerage at the rate of 0.01 per cent per month instead of interest which could be substantial. Therefore, the application is complete.
Considering the above discussion, it is quite clear that the information regarding identity of those persons, whose names are recorded in the diaries maintained by the appellant, is necessary to verify the correctness of the appellant's claim that he did not invest his own cash funds as against his statement under Section 132(4), Since the appellant failed to disclose the identity of the persons for whom he had acted as broker, the verification of the claim of the appellant was not possible by the AO. Considering the facts and circumstances of the case and particularly in the light of the statement of the appellant 'under Section 132(4) of the Act, the AO is quite justified in coming to the conclusion that the appellant had invested his own money for earning interest. Hence, the AO is quite justified in working out, the peak amount. The peak in the financial year 1992-93 is calculated at Rs. 3,32,37,000 by the AO. The peak for the asst. yr. 1994-95 is amounting to Rs. 11,59,27,000. After giving benefit of set off for the amount-relating to asst. yr. 1993-94, the peak comes to Rs. 8,26,40,000. The AO is, therefore, quite justified in making the addition of Rs. 8,26,40,000 under Section 69 of the IT Act, 1961. Even the case laws relied upon by the appellant do not hold his claim. It is because the fact of the case of the appellant stands on a different footing. There is statement by the appellant under Section 132(4) of the Act and the diaries marked as A-3 and A-5 contain the details of the unaccounted loans advanced. Further, the appellant failed to identify the persons whose names have been written in the seized documents. Hence, the addition made by the AO on the basis of the peak amount of Rs. 8,26,40,000 as unaccounted investment under Section 69 of the Act is quite justified and is, therefore, confirmed.
9. For other years also the CIT(A) practically followed the order passed by him for the asst. yr. 1994-95.
10. During the course of hearing, the learned Counsel for the assessee submitted that the assessee is a finance broker and is arranging funds on behalf of, clients. The modus operandi is that parties wishing to borrow money approach the assessee with their requirements, The assessee tries to find prospective lender and match the requirements inter se. These funds are directly lent to the borrower by the lender. Similarly, the parties who intend to place funds, approach the assessee who match it with the requirements of the borrowers and the transactions between the two takes place. The assessee acted purely as broker and borrowing and lending take place on principal to principal basis. In no case, the funds are brought to the books of the assessee. He is entitled only for brokerage, which varies from 10 paise to 15 paise per hundred per month. The assessee has to maintain the diaries for recording the transactions and for keeping track of his brokerage.
11. As regards the note books A-2, A-3, A-4 and A-5, it was submitted by the learned Counsel for the assessee that they are party ledgers in respect of business of finance brokerage done by the assessee. While the note books marked as A-2 and A-4 pertain to the finance brokerage business done through cheques, the diaries A-3 and A-5 pertained to the finance brokerage business done in respect of cash transactions. All the four books contained name of the borrower, name of the lender, amount, period, and brokerage.
12. The learned Counsel for the assessee submitted that during the course of assessment proceedings, the appellant was asked vide letter dt. 13th Aug., 1996 to furnish the details of transactions as contained in note books marked as A-3 and A-5 with names and address of the parties to whom loans have been advanced by the assessee. It was explained to the AO and CIT(A) that assessee is engaged in the business of finance brokerage and funds mentioned therein pertained to his clients and do not pertain 10 him. Regarding production of names and address of borrowers and lenders, it was submitted that by very nature of the transactions no cogent documentary evidence could be prepared. Since they are cash loans no person would ever accept it. Even if appellant would have submitted the names and addresses, none of the parties would ever accept that they have borrowed or lent money. In addition, the assessee would suffer the risk of loss of life or physical harm or loss of business. The learned Counsel for the assessee further submitted that there are the names of borrowers and lenders, which are common in A-3 and A-5 and A-2 and A-4. If the AO wanted, he could have summoned those persons as the addresses of those persons are available, but no such attempt was made. The learned Counsel for the assessee further submitted that about 13 Hundis were seized which are in Annex. A-1. These Hundis contain the names and addresses of the borrowers and lenders. Except one lender, others are mentioned in A-3 and A-5. The list of these parties as summarised from these Hundis are as under :
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Sr. No. Name of party Appearing in diary A-4 Appearing in diary A-3
(cheque transactions) (cash transactions)
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Borrowers :
1 Rahul Hire Purchase Page No. 29 : borrowed from Page No. 215 : borrowed 10 parties from 3 parties
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2 Rambia Bothers Page No. 41 : borrowed from Page No. 235 : borrowed 18 parties from 18 parties
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3 National Plastic Page Nos. 43 & 45 : borrowed Page Nos. 179 & 181 :
Industries from 5 parties borrowed from 14 parties
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4 Neelkamal Plastic Page Nos. 53 & 55 : borrowed Page No. 183 : borrowed
from 38 parties from 19 parties
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5 Dedhia Paper Page No. 75 : borrowed from 1 Page No. 59 : borrowed
party from 15 parties
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6 Raj Sales Page No. 63 : borrowed from Page Nos. 225 & 226 11 parties borrowed from 50 parties
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Lenders :
1 Mithabhal Page No. 15 Page No. 3Laxmichand
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2 Bhanabhai Vijpal Page Nos. 15 & 60 Page Nos. 7 & 105
-----------------------------------------------------------------------------------------3 Sandhya Vilesh Page No. 41 Page Nos. 13 & 71
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4 Indian Fabrics Page No. 3 Page No. 49-----------------------------------------------------------------------------------------
5 Vasant Morarji Page No. 9 Page No. 189-----------------------------------------------------------------------------------------
6 V. Hirji Page No. 55 Page No. 206-----------------------------------------------------------------------------------------
13. As per assessment order, the AO issued summons under Section 131 to these parties. There was no response from them except one, who stated that the assessee agreed to finance Rs. 50,000 to him and he has taken receipt for money on the promise that he will give cash but no cash was given or receipt was given back. Thus, this transaction was proved : After issuing summons, the AO stopped enquiries, meaning thereby that he was satisfied that the names mentioned in the diaries belong to those parties.
14. The learned Counsel for the assessee also submitted that the theory of peak adopted by the AO is not workable because it presumed that money advanced to the borrowers belonged to the assessee, which is not true. Therefore, it is the total transactions without peak that matters. The learned Counsel for the assessee took us to p. 130 of assessee's paper book, which is a sample of diary A-3 and A-5. He referred to the top of that page, which shows the name of the borrower and details therein gives the amount advanced by the lender, rate of interest, date of advance and also whether period of loan was extended. On p. 140 of the assessee's paper book similar details are given. It was submitted by the learned Counsel for the assessee on that basis that once the submissions of the assessee regarding diaries A-2 and A-4 are accepted then rejection of the similar explanation in respect of A-3 and A-5 is legally factually not acceptable. It is accepted by the AO that money reflected in diaries A-2 and A-4 do not belong to the assessee. It is also accepted that transactions in all the diaries were taken place on principal to principal basis. It is also a fact that the money through cheque or cash never entered the appellant's hands. The assessee has acted purely as a finance broker. There is absolutely no evidence with the Department that dairies A-3 and A-5 contained entries in respect of any income of the appellant or loan taken or granted by the appellant. As per Section 69, argued by the learned Counsel for the assessee, any investment made and not recorded in his books and for which no satisfactory explanation is given may be treated as assessee's income but the primary onus lies on the Department to prove that assessee had made investment. For the purposes of Section 69, it is to be proved that it is assessee's investment. If it is not assessee's investment then Section 69 cannot be invoked. Even otherwise, where explanation is not found satisfactory it does not automatically lead to an addition under Section 69. The word "may", used in Section 69, indicates a discretion to be exercised before such addition can be made and such discretion has to be exercised judiciously. There has to be some evidence which would show as to whether sources of the assessee are such as may be capable of yielding such income, whether his wealth or spending pattern would justify such income. In the present case argued by him, the Department did not establish that the diaries A-3 and A-5 reflect appellants own investment. The presumption raised under Section 132(4) is purely with respect to ownership of diaries, which are memorandum of third party transactions. They are not evidence of investment. It is improper that explanation of the assessee has been rejected merely on the ground of non-furnishing of names and address for which assessee has genuine difficulties and reasons which cannot be ignored by the Department, Such rejection of explanation cannot automatically lead to the additions of amounts contained in the diaries as assessee's undisclosed income under Section 69, For this proposition that an investment/income not belonging to the assessee cannot be taxed in the hands of the assessee under Section 69, the learned Counsel for the assessee relied on the following decisions :
(i) Miss Rose Ben v. Asstt. CIT (1998) 65 ITD 57 (Mumbai);
(ii) K.T.M.S. Mohammed v. ITO (1980) 9 TTJ (Mad) 501:
(iii) Shivji Manji Amba v. Dy. CIT (1995) 51 TTJ (Ahd) 61: and
(iv) Asstt. CIT v. Shailesh S. Shah (1997) 59 TTJ (Mumbai) 574 : (1997) 63 ITD 153(Mumbai).
15. For various other arguments, the learned Counsel for the assessee relied on following judicial pronouncements :
(i) CIT v. Rameshwar Prasad Bagla (1968) 68 ITR 653 (All);
(ii) CIT v. Moghul Durbar ;
(iii) CIT v. Daulatram Rawatmull ;
(iv) CIT v. H.R. Karandikar and Ors. :
(v) CIT v. Smt. P.K. Noorjehan ;
(vi) CIT v. Daya Chand Jam Vaidya ;
(vii) CIT v. Ram Richpal ;
(viii) CIT v. K. Arunachala Mudaliar ; and
(ix) S. Hastimal v. CIT (1963) 49 ITR 273 (Mad).
16. According to learned Counsel for assessee, the totality of the circumstances has to be taken into consideration and combined effect of the circumstances is determinative of the question as to whether a particular fact is proved. Section 69 confers only discretion to the AO to deal with investment as income because words used are "may" and not "shall" in the said section. The onus to establish nexus between conclusion and primary fact is on the party who claims such nexus. In the present case, the nexus between primary facts, i.e., diaries A-3 and A-5 and investment/income of the assessee has not been established. The credit appearing in the account of 18 years old girl and explained as coming from her uncle was accepted by the Hon'ble Supreme Court as plausible cause in CIT v. Smt P.K. Noorjahan . In the absence of any evidence, every explanation cannot be rejected. The discretion has to be used depending upon the circumstances. It was submitted by the learned Counsel for the assessee that the documents should be read as a whole. Once it is accepted on the basis of diaries A-3 and A-5, money has been advanced to borrowers then it should also be accepted that such money is coming from lenders, Advances alone should not be accepted as true but money coming from lenders and going to borrowers should also be accepted as true. Every part of the documents has to be taken as true. For this proposition, the learned Counsel for the assessee relied on the decision of Hon'ble Gujarat High Court in the case of Navjivan Oil Mills v. CIT and also Kantilal & Bros v. Asstt. CIT (1995) 51 TTJ (Pune) 513: (1995) 52 ITD 412 (Pune) and 69 TTJ (Del) 41 (sic). The learned Counsel for the assessee also submitted that a similar issue has arisen before the Pune Bench of Tribunal in ITA No. 47/Pn/2000 for the asst. yr. 1995-96 in the case of Ramanlal P. Chordia v. Asstt. CIT, decided on 7th Feb., 2001 [reported at (2004) 87 TTJ (Pune) 713--Ed.], wherein it was held that in case of finance broker, amount recorded in the diaries is not the assessee's income and cannot be taxed under Section 69.
17. At the end, the learned Counsel for the assessee submitted that the money given to borrowers is not the assessee's money and, therefore, it cannot be taxed under Section 69, The Department has failed to establish that money advanced by the lender to borrowers was in fact assessee's own money.
18. The learned Departmental Representative primarily relied on the order of the AO and of the CIT(A) and submitted that onus is primarily on the assessee to furnish names and address of the lenders and borrowers so as to establish their identity. Thereafter, the onus will shift to the Department. In spite of repeated opportunities given to the assessee, he utterly failed in providing the names and addresses of the lenders and borrowers as recorded in A-3 and A-5. Since onus has not been discharged by the assessee, the amounts recorded in A-3 and A-5 is deemed to belong to assessee. Further, the assessee has given a statement under Section 132(4) during the course of search that money advanced and recorded in A-3 and A-5 is partly his money. The assessee has failed to furnish any material to show that money advanced to different borrowers belong to somebody else. The Department has discharged the onus when enquiries were made. The AO accepted the transactions recorded in A-2 and A-4, which were the cheque transactions but since no evidence in respect of cash transactions were furnished, they are to be treated as deemed income of the assessee under Section 69. Further, the transactions are recorded in secrecy. The Department need not prove further. The onus is on the assessee to declare open them and establish the nature of transactions. For this proposition, he relied on Surendra M. Khandhar v. Asstt. CIT (2001) 71 TTJ (Mumbai) 366 : (2001) 76 ITD 121 (Mumbai) and Hotel Kiran v. Asstt. CIT (2002) 77 TTJ (Pune) 87 : (2002) 82 ITD 453 (Pune). It was also submitted by the learned Departmental Representative that no coercion was applied, the statement given by the assessee under Section 132(4) was voluntary. There was a clear admission in the statement recorded on 3rd Jan., 1995 (question No. 5) that money advanced belonged for the assessee. The retraction was after couple of months and, therefore, from the retraction, it could not be said there had been a coercion or pressure while recording the statement under Section 132(4).
19. According to learned Departmental Representative, even ITSC has rejected the application of the assessee on the ground that the assessee did not furnish any evidence in respect of lenders and borrowers as recorded in A-3 and A-5. He also argued in the alternative that money recorded in the name of lenders should be taxed under Section 68 as unexplained credits.
20. In rejoinder, the learned Authorised Representative submitted that statement recorded under Section 132(4) on 3rd Jan., 1995 was made under coercion, which was later retracted, Further, all the entries in the diary A-3/A-5 contain the names of the lenders. There is no entry where there is no name of any lender from which it could be inferred that the lent money belonged to the assessee. Hence, retraction was made.
21. We have heard the rival submissions and considered the facts and materials on record. The whole case of the Department for all the three assessment years is based on two diaries A-3 and A-5 found during the course of search. The photocopies of the diaries produced before us in assessee's paper book were perused. It is an admitted fact that diaries were maintained in the normal course of finance business. We have also perused the xerox copies of diaries A-2 and A-4, which reflected cheque transactions. We find that the contents in the two sets of diaries are similar in nature. Against the name of the borrowers, the names of various lenders were written, against each transaction interest rate is mentioned. The names of lenders appear against more than one borrower on different pages. Similarly one borrower borrows money from different lenders. There are separate interest rates in respect of different lenders giving money to the common borrower. Each page is borrower-wise kept and no separate page or details is kept in respect of lenders, The transactions recorded in A-2 and A-4 are admittedly made through cheques and recorded in regular books of account and transactions in A-3 and A-5 are in cash and are not recorded in regular books of account. There are common parties in the two sets indicating thereby that some parties have taken money in cash as well as through banking channels. These diaries on right side reflect brokerage received by the assessee from various persons. The assessee is admittedly a finance broker arranging finance for various persons, i.e., borrowers and money is obtained from parties, i.e., lenders. The money is generally borrowed for a short period of time which is at many times extended and a mark is made in the diary. It seems that the assessee is charging brokerage only from the borrowers and not from the lenders. The brokerage varies from 10 to 15 paise per hundred per month arranged for the borrower. The entries in A-3 and A-5 did not reflect that assessee is receiving interest. In most of pages, e.g., pp. 113 to 126 of assessee's paper book, we find that only 10 paise or 15 paise is written against the names of lenders. Against this arranging of money to the borrower, the assessee will receive commission at rate of 10 to 15 paise per hundred per month from the borrower. The due date on which borrowers have to repay the amount is also mentioned. The extended date is also mentioned by putting one stroke. If the account is settled all the strokes are scratched. If the assessee had not arranged this finance from the lender then there was no need for him to write the names of such lenders. It is not possible to believe that assessee intended to hoodwink somebody by mentioning the names of lenders.
22. The Department considered all the diaries A-2, A-3, A-4 and A-5 as genuine, true and reflecting the transactions, which were actually taken place. In respect of A-2 and A-4, Department accepted that the money belongs to the lenders and it was taken by borrowers and assessee has only received brokerage at the same rate as mentioned in them. However, similarly written and similarly placed other two diaries A-3 and A-5 are not accepted as true, merely because they contain cash transactions. No doubt, transactions recorded in A-3 and A-5 are in cash, the lenders have paid money in cash and borrowers have taken money in cash and brokerage also seems to have been paid in cash which is also undisclosed as the money advanced is undisclosed. If presumption under Section 132(4) is raised in respect of A-2 and A-4 then same should be equally and in identical proportion be raised in respect of A-3 and A-5. The principle is that a document found in search should be treated as genuine with respect to all the entries recorded therein. The Revenue is not justified in taking a view that only a part of the contents, i.e., the names of the borrowers is correct and not the names of lenders. We derive support for this proposition that entire documents should read as a whole and contents of entire documents should be treated as correct or rejected as a whole, from the following decisions :
1. Glass Lines Equipment & Co. Ltd. v. CIT ;
2. Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC);
3. Navjivan Oil Mills v. CIT (supra);
4. Chander Mohan Mehta v. Asstt. CIT (Inv.) (1999) 65 TTJ (Pune) 327 : (1999) 71 ITD 245 (Pune); and
5. Kantilal & Bros. v. Asstt. CIT (supra).
23. It may be seen that these two diaries A-3 and A-5 and for that matter A-2 and A-4 also, are neither a ledger nor cash book. A ledger is a record of individual account of parties, with whom the cash or credit transactions had been conducted by an assessee and such transactions find place in cash book or journal. Thus, ledger is a subsequent record of the events already recorded in the cash book or journal. A ledger shows posting of entries from cash book or journal. If there is no cash book or journal maintained, no ledger account of parties can be prepared as there will not be any chronological record of events undertaken by the assessee. In fact, any ledger without having a support of cash book or journal would be unreliable unless it is possible to reconstruct the cash book-cum-journal from the ledger or to prepare a trial balance on its basis.
24. The present four diaries, in the shape they are maintained are neither the cash book nor journal nor a ledger. It is a sort of a memorandum in the form of a ledger where record of a borrower has been maintained so as to remember that from whom he has borrowed the funds and at what rate of interest and for what period, or whether there has been an extension of borrowing period. Thus A-2, A-3, A-4 and A-5 are not the ledger in strict sense.
25. Addition in the total income has been made by the AO in the present case under Section 69. The section reads as under:
69. Unexplained investments.--Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the AO, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
From the bare reading of the above section, it is clear that first thing the AO has to prove is that it is the investment of the assessee. In other words, the ownership of the investment must be proved to be that of the assessee. The onus is on the Department to prove it before actually deeming the income, relevant to the investment, as that of the assessee. Further, the words used in Section 69 are "may presume". It casts a discretion with the AO to treat the alleged investment as unexplained or explained. It goes without saying that such discretion has to be exercised judiciously. If the AO ignores the preponderance of probabilities then it could not be said that such discretion was exercised judiciously. We derive support from the decision of the Hon'ble Supreme Court in CIT v. Smt. P.K. Noonahan (supra).
26. For invoking Section 69, the Revenue has to establish that investment belonged to the assessee. In the present case, we find that onus cast on the Revenue to establish that outgoings belonged to the assessee has not been discharged. Therefore, in our view, the deeming provisions of Section 69 cannot be invoked in this case. For making addition under Section 69, there ought to be some material to prove that outgoings taken by the borrowers belonged to the assessee.
27. Where certain document is found in the search from the premises of the assessee then a presumption is drawn under Section 132(4A) that transactions recorded therein belonged to the assessee. But such presumption is not absolute. Section 132(4A) reads as under:
(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed--
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
28. It shows that presumption under Section 132(4A) is rebuttable as the words used in the section are "it may be presumed". It is only a question of fact as to whether investment in loan advanced belonged to the assessee or not, and such presumption about ownership is always rebuttable We derive support from the decision in CIT v. S.M.S. Investment Corporation (P) Ltd. . Under Section 132(4A) like in Section 114 of Evidence Act, the words used are "may be presumed". It is not a mandate that whenever books of account, etc. are seized, the authority shall necessarily draw the presumption irrespective of any other facts, which may dissuade the Court or the authorities from doing so. [Ref. : ITO v. T. Abdul Majeed ]. Thus when the AO raised the presumption under Section 132(4A) about A-3 and A-5 that outgoings so recorded in them are investment for the assessee, then, the assessee simultaneously discharged the burden lay on him by submitting that A-2 and A-4 are also a similar record of the events as A-3 and A-5 and once outgoings recorded in A-2 and A-4 are treated as investment of the lenders, the similarly placed diaries A-3, A-5 also record the outgoings whose money/investment belonged to the third parties, i.e., the lenders. The AO did not point out any cogent reason as to why the onus (that) lay on the assessee by virtue of presumption under Section 132(4A) is not discharged. In our view, the onus lying on the assessee regarding explaining the investments in outgoing or about the ownership of the investment is discharged the moment the AO accepted that the outgoings recorded in similarly placed document A-2 and A-4 belonged to the third parties. After this the burden again shifts to the Revenue to prove, with some additional material that even though outgoings recorded in A-2 and A-4 belonged to third parties but outgoings recorded in A-3 and A-5 belonged to the assessee. No such material has been brought on record or no cogent reasons have been advanced. There cannot be two standards of presumption, one for set A-2 and A-4 and other for A-3 and A-5.
29. The difference the Revenue has tried to make between two sets is that while in the first, i.e., A-2 and A-4 the transactions are done through banking channels whereas in A-3 and A-5 transactions are done in cash. This cannot be a valid reason, in our view, to treat the outgoings in A-3 and A-5 as belonging to the assessee. There is no presumption that all the cheque transactions are genuine and hence deemed to have been explained or that all the cash transactions are non-genuine and hence unexplained. In the context of Section 68 Hon'ble Calcutta High Court held that the payment by account payee cheques are not always sacrosanct [Ref.--CIT v. Precision Finance (P) Ltd. ]. Therefore, it cannot be said that burden is not discharged from the assessee merely because transaction recorded in A-3/A-5 are in cash whereas burden is discharged from the assessee in respect of A-2 and A-4 from explaining as to whom the outgoings belonged. Thus, in our view similarly placed documents have to be treated similarly and onus is also shifted similarly. As there is no further material with the Revenue so as to fasten the ownership of the outgoings to the assessee, we hold that outgoings do not belong to the assessee and, therefore, he is not bound to furnish explanation,, as to the source of such outgoings treated as investment and then deemed income by the AO on the ground that they are not explained. Further, the assessee is not bound by Section 69 to explain the source of investment as the same belonged to third parties.
30. Further, Clause(ii) of Section 132(4A) states that "the contents of such books of account and other documents are true", raises the presumption that outgoings recorded in A-3/A-5 like in A-2/A-4 belonged to lenders. It is difficult to accept the proposition that there can be a presumption in respect of outgoings (that it belongs to assessee) and there cannot be a presumption in respect of incomings (that they belonged to the lenders).
31. Next question which arises for consideration is that once AO believes on outgoings, he should have also believed on incomings. The documents should have been read as a whole and not in part. The presumption contained in Section 132(4A) should be raised for entire documents and not for a part of it (Ref. Kishanchand Shobhrajmal v. Asstt. CIT (1991) 42 TTJ (Jp) 423 : (1992) 41 ITD 97 (Jp). Similar decisions have been given in Glass Lines Equipment Co. Ltd. v. CIT (supra), Mehta Parikh & Co. v. CIT (supra), Navjivan Oil Mills v. CIT (supra), Chandra Mohan Mehta (supra) and T.S. Kumarasamy v. Asstt. CIT (1998) 65 ITD 188 (Mad). The documents have to be read as a whole and, therefore, once outgoings are recorded as coming from lenders then this fact should also be accepted as true unless proved otherwise.
32. Following observations of the Courts/Tribunals in the above referred cases are relevant in this context:
(i) Glass Lines Equipments Co. Ltd. v. CIT (supra) "that the CIT(A) for the purpose of upholding partial disallowance had relied upon one portion of the affidavit, viz., where the assessee-company had through its director offered Rs. 38,349 for disallowance. As regards the balance portion the affidavit was categorical in terms and the assessee-company had made a positive averment to the effect that all other items of expenditure were allowable, i.e., all other items of expenditure were relatable to setting up of the plant and bringing fixed assets into existence and putting them into working condition. In none of the appellate orders, viz., those of the CIT(A) and the Tribunal, was there any discussion in relation to this part of the affidavit. In fact, the order of the Tribunal was absolutely silent as regards the affidavit and there was no indication whatsoever that the Tribunal was even aware about the existence of the affidavit which was on record. None of the authorities considered it necessary to cross-examine the deponent with reference to the statement made in the affidavit, and, hence, under these circumstances it was not open to the Revenue to challenge the correctness of the statement made by the deponent in the affidavit. In other words, consequently, the assessee was entitled to assume that the authorities were satisfied with the affidavit as sufficient proof on this point. In the present case, we find that the CIT(A) while dealing with the affidavit had conveniently chosen to accept only one part of the statement which was in favour of the Revenue and against the assessee while ignoring the portion wherein specific averments were made in relation to the balance items of expenditure. In view of the settled legal position, it was not open to either the CIT(A) or the Tribunal to ignore a part of the contents of the affidavit. Out of the total expenditure incurred by the assessee-company there was one item of depreciation amounting to Rs. 53,957 which would stand on a different footing as against the remaining items. In relation to this, the Tribunal had held that the depreciation could not be allowed to be capitalised as it did not represent an expenditure incurred towards installation of assets whether directly or indirectly. There cannot be any dispute as regards the principle laid down by the Tribunal that the assessee cannot claim benefit twice in relation to the item of depreciation, once on revenue account and again by seeking capitalisation of the same. However, from the facts available on record it was not possible to state with certainty that the assessee had in fact claimed double benefit as apprehended by the Tribunal. The Tribunal had to adjust its decision after ascertaining the factual position. In the circumstances of the case, the Tribunal was not justified in law in holding that the expenditure, except as regards the item of depreciation, was not part of the actual cost of the plant.
(ii) Navjivan Oil Mills v. CIT (supra) It is settled legal position that the seized material has to be read and accepted as a whole and it is not permissible to pick and choose or make further estimates therefrom unless and until there is cogent material in support of undertaking such an exercise. In the present case as was pointed out to us, the ITO has after processing the seized material made further estimates therefrom and hence the addition made and sustained on the basis of such estimate cannot be said to result in a situation where it would be possible to ascribe the failure to return the correct income to the assessee on account of any fraud, or any gross or wilful neglect.
(iii) Mehta Patikh & Co. v. CIT (supra) The appellants encashed on the 18th Jan., 1946, high denomination notes of Rs. 1,000 each, of the face value of Rs. 61,000. After examining cash balances from 20th Dec., 1945, to 18th Jan., 1946, the ITO found that in order to sustain the contention of the appellants that this amount did not represent undisclosed profits, he would have to presume that there were 18 high denomination notes on the 1st Jan., 1946, and that all cash receipts thereafter upto 18th January were received in notes of Rs. 1,000 which he found impossible to do, and assessed the whole amount of Rs. 61,000 as undisclosed profits. Before the AAC, the appellants produced affidavits from some persons to the effect that Rs. 43,000 were paid in 1,000 rupee notes during the relevant period. The AAC did not accept the affidavits and confirmed the order of the ITO. The Tribunal, on appeal, accepted the appellants' explanation as to Rs. 31,000 but rejected it as to Rs. 30,000. The High Court held there were material before the Tribunal to hold that the sum of Rs. 30,000 represented undisclosed profits, and as the finding was one of fact and was not arbitrary or unreasonable, confirmed the Tribunal's order. On further appeal to the Supreme Court:
Held :(i) that applying the true principles as to interference with findings of fact of the Tribunal, the Court was under the circumstances entitled to consider whether the finding that Rs. 30,000 represented undisclosed profits was correct;
(ii) as the cash book of the appellants was accepted, and the entries therein were not challenged, and neither further accounts nor vouchers were called for, and the persons who gave the affidavits were not cross-examined, it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made in the affidavit;
(iii) the view of the Tribunal that it was impossible for the appellants to have had 61 notes on 18th January and rejection of 30 such notes was based on pure surmise, and as the appellants had furnished a reasonable explanation for possession of 61 notes, there was no justification for having accepted their explanation in part and discarded it in relation to the sum of Rs. 30,000 and no part of the sum of Rs. 61,000 could in the circumstances of the case have been assessed as undisclosed profits.
Facts proved or admitted may provide evidence to support further conclusions to be deduced from them which conclusions may themselves be conclusions of fact and such inference from facts proved or admitted could be matters of law. The Court would be entitled to intervene if it appears that the fact-finding authority has acted without any evidence or upon a view of the facts, which could not reasonably be entertained or the facts found are such that no person acting judicially and properly instructed as to the relevant law would have come to the determination in question.
Venkatarama Ayyar, J., preferred to rest his decision on the ground that the finding of the Tribunal that high denomination notes of the value of Rs. 30,000 represented concealed profits was not supported by any evidence, and was, in consequence, erroneous in point of law and liable to be set aside.
Judgment of the Bombay High Court in Mehta Parikh & Co. v. CIT (supra) reversed.
(iv) Chander Mohan Mehta v. Asstt. CIT (supra)
8. However, if we consider above loose papers along with the statement recorded under Section 131, then certainly these loose papers can be considered as relevant material having evidentiary value. Therefore, it is necessary to examine this statement. The statement explains the nature of the transactions. It has been explained in the statement that particular list contained the names of the persons to whom the assessee had advanced monies as loan on interest at the rate of 36 per cent per annum. It is further explained that the other list in the loose papers contains the names of the persons from whom the assessee had borrowed the money on interest at the rate 24 per cent. It has also been explained that in such lists, the last three zeros have been deleted while recording the amount against the name of a person. For example, the sum of Rs. 50 would mean Rs. 50,000, Rs. 30 would mean Rs. 30,000 and so on. It is on the basis of this statement that AO inferred that assessee was engaged in money lending activity. Therefore, the evidentiary value attached to the loose papers is only because of this statement. In these circumstances, we are of the considered view that this statement has to be considered and accepted as a whole if the AO wants to use it in evidence. The AO cannot be allowed to blow hot and cold simultaneously. Revenue cannot be permitted to use that part of the statement which is beneficial to it and reject the other part of the statement which is detrimental to it. This view has also been taken by the Tribunal, Ahmedabad Bench in the case of Ghanshyambhai R. Thakkar (supra). The decision of the Supreme Court in the case of Mahendra Manilal Nanavati (supra), also says that admission has to be considered in its entirety. However, the senior Departmental Representative has also relied on para 213 of the aforesaid decision of the Supreme Court for the proposition that even the part statement can be rejected. We find that para 213 is part of the dissenting judgment. According to the majority judgment, the entire admission was to be acted upon. We, therefore, reject this submission of the learned senior Departmental Representative.
9. In view of the above, it is held that the entire statement of the assessee has to be accepted. If that is so, no addition can be sustained on the basis of the materials mentioned above. The loose papers were maintained and kept by the assessee for his private knowledge and information and not meant for disclosing to the Department. If the statement of the assessee is to be rejected in toto, then no addition can be made on the basis of loose papers since those would be dump papers as discussed in the earlier part of our order. If the statement of the assessee is accepted in toto, then contents of the statement are to be accepted and the borrowings mentioned in these loose papers have to be accepted as genuine. In either case, no addition is called for. No doubt, the presumption to the correctness of the documents can be rebutted by the Department, but the Revenue has not been able to bring any material on the record for rebuttal. Therefore, we are of considered view that no addition can be sustained on the basis of these materials.
(v) Kantilal & Bros. v. Asstt. CIT (supra)
18. One cannot be permitted to blow hot and cold in the same stream. 'Head I win' and 'tail you lose', approach is alien to the principles of justice. The doctrine of 'approbate and reprobate' as borrowed in our jurisprudence from the Scotch law gives strength, to this basic rule. There cannot be approval and rejection in the same stream. To attempt to take advantage of one part and to reject the rest is against the fine norms of jurisprudence. The fact of the present case goes to show that Revenue made certain breach in regard to this tenet of law.
33. From all these decisions, we infer that:
(i) A document seized in the search should be read as a whole.
(ii) No party can pick and choose one part of document for its advantage.
(iii) If an explanation relating to a transaction is found in the seized material, the same has to be considered. The onus will shift on to the Department to adduce further material to support its contention that ostensible as appearing from the document is not real.
(iv) The initial burden lying on the assessee to explain the transactions (in this case, outgoings) can be discharged either from the statement recorded under Section 132(4) or from other documents found and seized in the search. Once onus shifted from the assessee, it is for the Department to prove by adducing additional material that the statement so given was false or not true or that corroborative entries from other documents are false or not reliable.
34. There is another aspect of the case. It is not always desirable to reject the explanation furnished by the assessee. Totality of circumstances and preponderance of probability has to be taken into account, before rejecting the explanation furnished by the assessee. If, as in the present case, the sources of income of the assessee are not such that it would yield large scale profits or there is no evidence of large scale hidden or secret wealth, then the plausibility of explanation of the assessee that outgoings are not his money but are the money of the lenders, is required to be accepted. In this context, following observation of Hon'ble Supreme Court is relevant (headnotes) :
CIT v. Smt P.K. Noorjahan (supra) :
In the corresponding clause of the Bill which was introduced in Parliament, while inserting Section 69 in the IT Act, 1961, the word "shall" had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word "may". This clearly indicates that the intention of Parliament in enacting Section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under Section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under Section 69 of the Act to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case, Held, dismissing the appeal, that in the instant case, the Tribunal had held that the discretion had not been properly exercised by the ITO and the AAC, taking into account the circumstances in which the assessee was placed and the : Tribunal had found that the investments could not be treated as income of the assessee. The High Court had agreed with the said view of the Tribunal. There was no error in the finding recorded by the Tribunal. Section 69 could not be invoked in respect of the investments of the assessee.
35. In this case, following facts are relevant:
(i) That the assessee is a finance broker and arranges finance for borrowers.
(ii) That the assessee's similar diaries A-2 and A-4 have been accepted by the Department as referring borrowing by the borrowers from the lenders, i.e., money borrowed by the borrowers do not belong to the assessee.
(iii) Description of the transaction in A-3/A-5 clearly indicates that money belonged to the lenders.
(iv) There is no material adduced by the Department so as to show that money paid to the borrowers belonged to the assessee.
(v) The AO issued summons to various lenders/borrowers but stopped thereafter from proceeding further to find out as to whether the money borrowed by the borrowings belonged to the lenders or to the assessee. Thus, the apparent factual aspects as reflected from the seized diaries A-3/A-5 were accepted by the AO as real.
36. The alternative ground of the learned Departmental Representative that incomings should be deemed to be income of the assessee under Section 68 also cannot be accepted. It is because the Section 68 can be invoked only when cash is passed through the books of the assessee, i.e., cash must come in the books of the assessee and then should be used by the assessee in his business or otherwise.
37. We have already discussed the nature of diaries A-3, A-5 and A-2/A-4. There are memorandum of transaction between lenders and borrowers arranged by the assessee on which the assessee is entitled for brokerage/commission. These diaries are neither cash book nor ledgers. They strictly do not fall in the definition of the book for the purposes of cash credit. Even presuming that they are the books of the assessee, then really speaking there is no credit coming in these books so as to fall in the concept of cash credit, which could be deemed as income of the assessee in absence of a satisfactory explanation. Where cash transaction takes place outside the kitty of the assessee or outside the books of the assessee, like in the present case, the case cannot be considered under Section 68 also. In any case, we feel that the AO seems to be satisfied that there was no case under Section 68, that is why he invoked only Section 69. There is no allegation or facts shown by the Department that alleged cash given to the borrowers has passed through the books of the assessee. In fact they are not reflected in the balance sheet, not even in the case of A-2 and A-4, whose transactions have been accepted as correct and recorded in regular books of account. Therefore, basic premises for invoking Section 68 is not built up. Section 68 cannot be invoked.
38. Now, come to the statement under Section 132(4) recorded by the investigating officers. Question No. 3 of the statement recorded on 3rd Jan., 1995 states as under :
Question No. 3 : What are the business activities of your family members, i.e., your father, mother and wife ?
Answer : My father Shri Vallabhji K. Savla is also doing business as a finance broker at the address mentioned above. No other business is carried out by any members of the family.
39. Thus, this contention that outgoing belongs to the assessee is in respect of documents in A1. Question No. 5 and its answer are as under :
Question No. 5 : What are the contents of the locker mentioned above ?
Answer : Two lockers at Bank of India, Maheshwari Udyan branch contains jewellery belonging to me, my wife, my father, my mother and my daughter. These lockers do not contain jewellery belonging to anybody else. The locker at Bank of Baroda, Panjarpole Lane branch contains share certificates, belonging to me and my family members. Locker at Bank of India, B. Bazar branch is empty.
40. From this, it is clear that the assessee is admitting the ownership of money advanced to the business by him is only Rs. 40 lakhs. This may be a case where there may not be a name of the lender. In any case, this statement was retracted subsequently. Notwithstanding such retraction, the statement given under Section 132(4) has to be read as a whole and the liability of the assessee is to be restricted to what he has owned under Section 132(4). Since there is a retraction the onus lie on the Department to find out as to how much money so advanced belonged to the assessee. There is a categorical assertion by the learned Counsel of the assessee that all the entries in A-3/A-5 contain the names of the lenders. We have also test checked. Since all the entries in A-3/A-5 contain the names of the lenders, therefore, what the assessee means in the statement is that money was advanced through him and it does not, therefore, lead to the inference that money so advanced belonged to the assessee, Thus, not much weight can be given to the question and answers recorded on 3rd Jan., 1995 particularly when legal implication of the words used in the statement are not clear to the deponent and when he is under lot of stress due to search operation and--fear of life due to disclosure of the names of the lenders. Further, the statement cannot be read in isolation of seized documents, which reflect that borrowings by borrowers belonged to the lenders. This is particularly important when Department did not pursue further on the summons issued by it to the common lenders/borrowers in two sets. Thus, merely on the basis of part of the. statement in question No. 5 on 3rd Jan., 1995, it cannot be inferred that entire lending reflected in A-3/A-5 belonged to the assessee. This plea of the Revenue is not accepted.
41. The next issue arises is that assessee has failed to provide the names and addresses of the borrowers recorded in the diary A-3/A-5. It is an admitted position that entries in A-2 and A-4 are recorded in regular books and are through banking channels. It is also an admitted position that there are common names of lenders and borrowers in A-2/A-4 and A-3/A-5. Nothing stopped the Department from pursing these common entries by calling the details from the bank, from the regular books, summon the parties and record the statements about transactions so recorded in A-3/A-5. The Department chose not to pursue the matter further in respect of some summons issued by the AO. If the Department accepts that entries common in two sets as listed in para 12 of this order are genuine, then it should accept that all the entries in A-3/A-5 are genuine and true. If after carrying out enquiries/investigation in respect of these common entries, the AO comes to the conclusion that cash advanced to the borrowers as named against these lenders belonged to the assessee, then onus would have shifted to the assessee. But, not, before. Hence, nothing much can be derived from not providing names/addresses of all the lenders/borrowers particularly when what was available in common list was accepted as true. Hence, this plea of the Revenue is also rejected.
42. Thus, we hold that there is no case for making addition in the case of the assesses under Section 69 and even under Section 68 of the Act, in respect of the borrowings in the case of the finance broker. He can at best be assessed only on the finance brokerage. The additions so sustained by CIT(A) under Section 69 are hereby deleted. These grounds of the assessee in all the three years are allowed.
43. Regarding one ground for a sum of Rs. 25,000 taken in asst. yr. 1994-95, the learned Counsel for the assessee did not press for the same. It is treated as rejected,
44. In view of this, the appeal of the assessee in asst. yrs. 1993-94, 1995-96 are fully allowed, while in the asst. yr. 1994-95 is partly allowed.