Income Tax Appellate Tribunal - Amritsar
Narinder Kumar Sekhri vs Assistant Commissioner Of Income Tax on 18 July, 2003
Equivalent citations: (2003)81TTJ(ASR)1036
ORDER
1. These two cross appeals by the assessee and the Department are directed against the order of the CIT(A), Jalandhar dt. 1st Oct., 1997, for the asst. yr. 1994-95.
2. The assessee is in appeal against the action of the CIT(A) in restricting the rate of interest on pawned jewellery at 21 per cent as against the rate shown by the assessee at 18 per cent while the grievance of the Department is that the CIT(A) was not justified in reducing the rate of interest on pawned jewellery from 24 per cent to 21 per cent.
3. The facts of the case, in brief, are that a search was conducted at the premises of M/s Subhash Chander & Bros. an allied concerns of the assessee on 13th April, 1994. The main source of assessee's income was from pawning of jewellery.
The assessee had shown interest income from pawning at 18 per cent p.a. The AO has enhanced the rate of interest to 24% p.a. on the basis of seized material. The contention of the assessee before the AO was that he was charging the interest at 18 per cent and there was nothing to show that higher rate of interest has been charged. It was sated that there were only one or two slips, which indicated rate of interest at 24 per cent. The AO observed that in the course of search, large number of slips were found tagged with the pawned, jewellery showing names of the pawnees, advances made and interest charged. According to him, the paper slips tagged clearly indicated rate of interest at 2 per cent per month, the AO cited the names of five persons and again the names of three persons in the case of another sister-concern M/s Subhash Chander & Sons carrying on the same business. The assessee also produced one pawnee before the AO in support of his claim, However, the AO was of the view that the market rate of interest ranged from 2 per cent to 3 per cent per month. She also relied upon a case of Shri Om Parkash and others, Nawanshashr. She, therefore, estimated the rate of interest at 24 per cent per annum and made the addition of Rs. 1,64,573.
4. Aggrieved by the order of the AO., the assessee carried the matter in appeal before the CIT(A). The learned CIT(A) applied the rate of 21 per cent per annum and thereby allowed a relief of Rs. 82,236 observing as under :
"2.3 I have considered the facts of the case and gone through the written submissions filed by the assessee before me. I have examined the seized material and on the basis of the exemption, the following proceedings were recorded in the order sheet on 16th Sept., 1997 and 30th Sept., 1997 :
"16-9-1997 Sh. Walia and the AO are present. The AO has produced photocopies of a few slips. No dispute about two slips pertaining to the F.Y. 1993-94. In one slip 2 per cent in another book 2-1/2 per cent and will be verified from the original. Third slip also shows 2 per cent but is dt. 2nd July, 1994, falling in asst. yr. 1994-95. Further slip also shows 2 per cent but relates to Subhash Chander & Sons and not to assessee. AO will produce the original and also Annex. A-24 from where AO has mentioned 5 names. Adj. to 30th Sept., 1997.
Sd/- Sd/- C1T(A), Jal D.S. Walia) 20-9-1997 The AO Sh: Jagjivan Garg, Asstt. CIT, CC-II is present with, original A-23 (wrongly mentioned in assessment order as A-24). Photocopies of all the pawning slips A-23 filed. Copies also given to assessee. Three slips No. 23, 29 & 42 show the rate of interest at 1-1/2 per cent. The fact about what AO has mentioned 5 names in assessment order also checked and found that except in the case of Som Lal where rate of interest is mentioned 2 per cent. Ottyer no rate is mentioned or is not legible. Discussed Sd/- Sd- CIT(A), Jal (D.S. Walia)
2.4 On examination of the seized material in which the rate of interest has been specifically mentioned, it is found that in few slips the rate is mentioned as 1-1/2 per cent and in majority of the slips, no rate is mentioned, the original slips were examined from the seized material purchased by the present AO Photocopies of those slips have been placed in record and also supplied to the assessee. On these facts, I hold that a rate of 2 per cent would be fair and justified. The assessee has calculated at 18 per cent and the AO at 24 per cent. By applying the rate of 21 per cent, the addition made by the learned AO will be reduced to half and accordingly the assessee gets a relief of Rs. 82,236."
Now, the Department as well as the assessee are in appeal.
5. The grievance of the assessee is that the CIT(A) was not justified in estimating the rate of interest at 21 per cent as against 18 per cent applied by the assessee, while the Department is aggrieved against the action of the CIT(A) in reducing the rate of interest from 24 per cent to 21 per cent.
6. The learned Departmental Representative while supporting the order of the AO vehemently argued that in the slips found during the course of search, rate of interest was mentioned, as 2 per month, therefore, the AO was justified in estimating the interest by applying the rate of interest at 24 per cent per annum. He further submitted that the learned CIT(A) has reduced the rate of interest without bringing out any material on record. He, therefore, submitted that the order the CIT(A) may be set aside.
7. Shri Sadhir Sehgal, Advocate, the learned counsel for the assessee, while appearing for the assessee, argued that the assessee is maintaining regular books of accounts where 18 per cent rate of interest has been recorded and no defects in such maintenance of books had been noticed as mentioned by the CIT(A) in his findings. Shri Sudhir Sehgal, Advocate, the learned counsel for the assessee, also brought to our notice that the addition on account of search material i.e., slips as found during the search has not been justified since in the similar case of the assessee's family namely M/s Subhash Chander & Bros, and Shri Chander Pal (father of the assessee), the Settlement Commission had examined that material in detail and against the suggestion of the CIT Jalandhar recommending the adoption of interest at 24 per cent per annum, interest at 18 per cent has been held to be in order. He further submitted that the order of the settlement commission is binding upon the Departmental authorities and final. He further pointed out that the basis for estimating the interest rate was the same seized material, which was in the case of Shri Chaman Lal and Subhash Chander & Bros. Therefore, the rate disclosed by the assessee at 18 per cent should be accepted.
8. We have carefully considered the rival submissions and have also perused the orders of the authorities below. We have also considered the documents, which are placed on record. It is noticed that 32 slips were found during the course of search. In those slips, rate of interest had been mentioned. It is further noticed that in certain cases no rate of interest was mentioned while in some other, the rate of interest was shown at 2 per cent per month and also at 1.5 per cent per month. Shri Sudhir Sehgal, Advocate, the learned counsel for the assessee, has filed two sets of chart, which are reproduced hereunder :
Chart showing the slips of interest S No. Name of the Pawnee Date Amount Actual rate of int. as per slips.
Rate of int. as perAO
1.
Manject Kaur 5-5-1994 3,000 1.5%
-
2. Kuldeep Singh 13-6-1994 400 Nil
-
3. Sis Ram 12-6-1994 1,000 1.5%
-
4Jagan Dass 25-7-1992 2.500 1.5%
5. Pala 2-9-1993 1,300 1.5%
6. Jagan Nath 7-6-1993 2.000 2.0%
-
7Kuldeep Singh 24-6-1993 500 1.5%
-
8. Malkeet Ram 9-12-1989 800 1.5%
-
9. Parlasho 28-2-1993 1,000 Nil 10 Kulwinder Kaur 23-6-1994 1,000 Nil
11. Surjit Singh 23-9-93 1,000 Nil 2%
12. Sukhwinder Singh 29-1-1994 600 Nil 2%
13. Joginder Kaur 25-6-1994 800 1.5%
14. Som Lal 6-1-1994 1,000 2.0% 2%
15. Prem 2-7-1994 1,500 2.0%
16. Lachhoo 15-6-1993 1,500 1.5% 2%
17. Mohan Singh 28-6-1993 1,200 Nil 2%
18. Kala Ram 25-6-1994 1,000 1.5% Second Chart
1. Harbhajan Singh 8-4-1994 1,200 2%
2. Sheru Ram 23-11-1993 700 1% 2%
3. Sohan Lal 12-8-1993 1,000 1.5% 2%
4. Satya 25-3-1994 2,500 1.5%
5. Santokh Singh 28-3-1994 500 1.5%
6. Manohar Lal 18-5-1992 1,600 Nil
7. Giano 17-2-1994 1,000 1.5%
8. Surinder pal 11-5-1994 800 1.5%
9. Mohan Singh 8-9-92 450 1.0%
10. Giano 3-5-1994 1,200 Nil
11. Viddya 23-5-1994 1,000 1.5%
12. Harvinder Kaur 23-6-1994 2,500 1.5%
13. Amar Nath 3.5.1994 1,500 1.5%
14. Gurmaj Kaur 10-7-1994 1,000 1.5% From the above charts, it would be clear that in 18 slips, the rates mentioned is 1.5% whereas only four such slips mentioned rate of 2 per cent. It is also apparent from the above charts that in 8 slips, no interest rate has been mentioned whereas in two slips, rate of interest mentioned is at 1 per cent. At the time of hearing Shri Sudhir Sehgal, Advocate, the learned counsel for the assessee, explained that no uniform rate of interest is possible because if a person is closely connected and is a past acquintance, at times, even no interest was charged. It is also apparent from the record that the assessee had produced one pawnee, namely, Smt. Jang Rani before the AO who admitted that interest at 1 per cent per month was being paid to the assessee. Furhermore, the assessee was maintaining regular books of accounts where 18 per cent rate of interest p.a. has been recorded and no defects in such maintenance of books have been noticed by the lower authorities. It is also true that in the case of Shri Chaman Lal Sekhri and M/s Subhash Chander & Bros. Lamba Bazar, Nurmahal, Distt. Jalandhar, the Settlement commission has examined the seized meterial and after considering the entire relevant facts of the case applied, interest at 18 per cent per annum. In the instant case, the learned CIT(A) has applied the rate of 21 per cent without any basis. In our view, the learned CIT(A) ought to have accepted the claim of the assessee, particularly when the seized material indicated that in the case of 18 slips, rate of interest has been mentioned at 1.5 per cent per month and in 8 slips, no rate of interest was mentioned and also in few slips, rate of interest was at 1 per cent per month. In other words, the learned CIT(A) has not given any basis while adopting the rate of interest at 21 per cent. On the contrary, the stand of the assessee was supported by documentary evidence. It is also relevant to point out that the AO estimated the rate of interest at 2 per cent per month on the basis of only four slips. However, in majority of the slips, the rate of interest was either 1.5 per cent or nil, which fact is evident from the above charts. Thus, considering the entire documentary evidence, we are of the view that the claim of the assessee is justified. We accordingly direct the AO to accept the claim of the assessee as regards to the rate of interest shown at 18 per cent per annum instead of 21 per cent per annum applied by the CIT(A).
8.1 In view of the above discussion, we allow the appeal of the assessee and dismiss the appeal of the Department on his issue.
9. There is yet another issue in the Departmental appeal, which relates to the deletion of addition of Rs. 1,83,992 on account of foreign gifts.
9.1 During the course of assessment proceedings, the AO noticed that there was credit entry of Rs. 1,83,922 on 3rd Aug., 1993, in the savings bank account No. 1621 of the assessee with the Canara Bank. The assessee stated that the entry was on account of gift received from one Shri N.C. Handa to the tune of 4000 pounds. According to the AO the assessee failed to authenticate the genuineness of the gift and also noticed that there was no relation of the assessee with the donor. She also observed that the capacity of the donor has not been proved. According to her, the exercise of the assessee appeared to launder black money through hawala transactions. She also relied on the judgment of the Hon'ble Supreme Court in the case of Shreelekha Banerjee and Ors. v. CIT (1963) 49 ITR 112 (SC) and also on the judgment of the Hon'ble Punjab & Haryana High Court in the case of Gumani Ram Siri Ram v. CIT (1975) 98 ITR 337 (P&H). She also relied on another judgment mentioned in the assessment order at page No. 4. Accordingly, the addition of Rs. 1,83,922 was made on account of unexplained cash credit despite the fact that the assessee had filed confirmation in the form of affidavit.
10. In further appeal, the learned CIT(A) deleted the addition for the reasons stated in para 3.1 of the impugned order.
11. Before us, Shri K.S. Talwar, the learned Departmental Representative strongly supported the order of the AO and submitted that the CIT(A) was not justified in deleting the addition. On the other hand, Shri Sudhir Sihgal, Advocate, the learned counsel for the assessee, submitted that Shri N.C. Handa is holding responsible position in a company in U.K. He further submitted that the assessee has also filed a photocopy of confirmation letter from the said donor. He also relied on the decision of this bench of the Tribunal dt. 11th June, 2001, in the case of Sh. Satnam Singh, Noormahal v. ITO, Ward-2, Fhagwara in ITA No. 947(Asr)/1994 for the asst. yr. 1991-92.
12. We have heard the learned representatives of both the parties at length and have also carefully gone through the orders of the authorities below. In our view, the issued is squarely covered by the decision of this Bench of the Tribunal in the case of Shri Satnam Singh, Noormahal (supra) wherein the Tribunal has held as under :
"On perusing the order of the AO, it appears that the addition of Rs. 1,10,590 was made because the assessee failed to produce the donor Sh. Balbir Singh for examination. It is also noticed that the AO presumed "that the assessee must have paid money for purchase of land and aginst this payment he received draft from Sh. Balbir Singh amounting to Rs. 1,10,590" but there is no evidence on record which could prove the aforesaid contentions of the AO It is an admitted fact that the assessee received the gifts from Sh. Balbir Singh through drafts of Rs. 70,000 and Rs. 40,590.25 credited on 9th Jan., 1991 and 18t March, 1991, respectively in the account of the assessee. In this regard the assessee filed two certificates from the Canara Bank, Noormahal, dt. 7th March, 1992, certifying that the aforesaid amount was the proceeds of foreign inward remittance received by way of drafts which clearly establishes that the assessee received the gift from Sh. Balbir Singh, N.R.I, who vide affidavit admitted that the gifts were given to the assessee and in the affidavit the source of the gift was also disclosed. When all the particulars were submitted and explained to the AO there was no justification in making the addition merely on the ground that the assessee failed to produce the donor who was residing abroad. The Tribunal, Chandigarh Bench in the case of R.K. Syal v. Asstt. CIT (2000) 66 TTJ (CM) 656 (supra) held "that the assessee having produced affidavits of NR! donors affirming the gifts, addition amounts representing gifts could not be made only on the ground that there was no occasion or relationship for making gifts." Similarly, Tribunal, Rajkot Bench in the case of Asstt. CIT v. Radhey Sham Bansal (supra) held "That the gift received by the assessee from a foreign party out of love and affection could not be treated as income of assessee when the genuineness of the gift could not be doubted, identity of donor was established and his capacity to make the gift is not questionable." The Hon'ble Delhi High Court in the case of CIT v. Sunita Vachani, held as under :
That even though it may be surprising as to how large sums of money are received by a family in India by way of gifts from strangers from abroad but unless there is something more tangible than suspicion, it will be difficult to regard the moneys received in India from abroad as representing the income of the assessee in India.
By considering the ratios laid down in the said cases, we are of the view that there was no justification in making the addition of Section 1,10,590 received from Shri Balbir Singh, when the assessee disclosed the identity, mode of payment, credit worthiness of the donor (vide his affidavit). Hence, the addition confirmed by the learned CIT(A) deserves to be deleted."
13. In the instant case also, the gift was received by the assessee through banking channels and money was remitted from U.K. It is not the case of the Department that the assessee had sent the money to U.K. and converted the same into Pounds and then somebody on behalf of the assessee sent the money again to the assessee in India. The AO has not brought out any material on record that the gift received in Pounds was the money of the assessee. She, therefore, was not justified in holding that the transaction was a hawala transaction particularly when no such documentary evidence had been brought on record. In our view, the decision cited hereinabove, is squarely applicable to the facts of the present case and in that view of the matter, we decline to interfere with the findings of the CIT(A) on this issue. This ground is without any merit and is hereby dismissed.
14. In the result, the assessee's appeal in allowed while the Departmental