Income Tax Appellate Tribunal - Jaipur
Laxmi Kant Biyani,Jaipur vs Assistant Commissioner Of Income Tax, ... on 26 February, 2025
vk;djvihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, "A-Bench" JAIPUR Jh laanhi xkslkbZ]U;kf;d lnL; ,o Jh xxu Xkks;y ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI GAGAN GOYAL, AM vk;djvihyla-@ITA No 1418 to 1423/JPR/2024 fu/kZkj.ko"kZ@AssessmentYear : 2014-15 to 2019-20 Shri Laxmikant Biyani cuke The ACIT 607A, Crystal Mall, Sawai Jai Singh Highway Vs. Central Circle-3 Bani Park, Jaipur Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACGPB 5240R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Vijay Goyal, CA & Shri Gulshan Agarwal, CA jktLo dh vksjls@Revenue by: Shri Manoj Kumar, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 06/02/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: : 26 /02/2025 PER: SANDEEP GOSAIN, JM All these bunch of six appeals filed by the assessee are against the orders ld. CIT(A)-4, Jaipur dated 25.10.2024 for A.Y. 2014-15, AY 2015-16, AY 2016-17, AY 2017-18, AY 2018-19 and order dated 26-10-2024 for AY 2019-20 which in turn arise from the Assessment orders dated 28-09-2021 for AY 2014-15, dated 21- 09-2021 for AY 2015-16, AY 2016-17, AY 2017-18 and AY 2018-19 and dated 22-09-2021 for AY 2019-20 passed u/s. 153A of the Act by the Astt. Commissioner of Income Tax, Central Circle-3, Jaipur. The Grounds taken by the assessee in each appeal are as under: -
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ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR A.Y. 2014-15 (ITA No 1418/JPR/2024): -
Ground No. 1: - On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without providing the reasonable opportunity to the assessee to submit his submission.
Ground No. 2: - On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A of the Act was bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
Ground No. 3: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 15,00,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving advance/loan to various parties.
Ground No. 4: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in holding that the assessee has not explained the source of the unexplained money, which was used for giving the loan and also erred in holding that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act, This is more so when the Ld. A.O. assessed the income as business income of the appellant and Ld. CIT(A) not provided opportunity to the assessee before holding the same.
Ground No. 5: - The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. A.Y. 2015-16 (ITA No 1419/JPR/2024): -
Ground No. 1: - On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without providing the reasonable opportunity to the assessee to submit his submission.
Ground No. 2: - On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A of the Act was bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the 3 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
Ground No. 3: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 5,50,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving advance/loan to various parties.
Ground No. 4: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in holding that the assessee has not explained the source of the unexplained money, which was used for giving the loan and also erred in holding that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act, This is more so when the Ld. A.O. assessed the income as business income of the appellant and Ld. CIT(A) not provided opportunity to the assessee before holding the same.
Ground No. 5: - The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. A.Y. 2016-17 (ITA No 1420/JPR/2024): -
Ground No. 1: - On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without providing the reasonable opportunity to the assessee to submit his submission.
Ground No. 2: - On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A of the Act was bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
Ground No. 3: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 23,25,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving advance/loan to various parties.
Ground No. 4: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in holding that the assessee has not explained the source of the unexplained money, which was used for giving the loan and also erred in holding 4 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act, This is more so when the Ld. A.O. assessed the income as business income of the appellant and Ld. CIT(A) not provided opportunity to the assessee before holding the same.
Ground No. 5: - The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. A.Y. 2017-18 (ITA No 1421/JPR/2024): -
Ground No. 1: - On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without providing the reasonable opportunity to the assessee to submit his submission.
Ground No. 2: - On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A of the Act was bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
Ground No. 3: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 62,50,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving advance/loan to various parties.
Ground No. 4: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in holding that the assessee has not explained the source of the unexplained money, which was used for giving the loan and also erred in holding that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act, This is more so when the Ld. A.O. assessed the income as business income of the appellant and Ld. CIT(A) not provided opportunity to the assessee before holding the same.
Ground No. 5: - The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. A.Y. 2018-19 (ITA No 1422/JPR/2024): -
Ground No. 1: - On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without providing the reasonable opportunity to the assessee to submit his submission.5
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Ground No. 2: - On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A of the Act was bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
Ground No. 3: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 73,80,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving advance/loan to various parties.
Ground No. 4: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in holding that the assessee has not explained the source of the unexplained money, which was used for giving the loan and also erred in holding that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act, This is more so when the Ld. A.O. assessed the income as business income of the appellant and Ld. CIT(A) not provided opportunity to the assessee before holding the same.
Ground No. 5: - The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. A.Y. 2019-20 (ITA No 1423/JPR/2024): -
Ground No. 1: - On the facts and in the circumstances of the case, the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without providing the reasonable opportunity to the assessee to submit his submission.
Ground No. 2: - On the facts, in the circumstances of the case and in law, the Ld. CIT (A) erred in not annulling the assessment order more so when the assessment proceeding completed u/s 153A of the Act was bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
Ground No. 3: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 15,00,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of 6 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR undisclosed business income and the utilized the same for giving advance/loan to Shri Ramji Lal Sharma.
Ground No. 4: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 1,25,00,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving advance/loan to Shri Lal Chand Ground No. 5: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 15,00,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving loan to Shri Banwari Lal Kumawat.
Ground No. 6: - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in confirming the addition of Rs. 40,00,000/- made by Ld. A.O. by alleging that in the year under consideration the assessee earned this much of undisclosed business income and the utilized the same for giving loan to Shri Malik Khan.
Ground No. 7 : - On the facts and in the circumstances of the case, the Ld. CIT (A) erred in holding that the assessee has not explained the source of the unexplained money, which was used for giving the loan and also erred in holding that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act, This is more so when the Ld. A.O. assessed the income as business income of the appellant and Ld. CIT(A) not provided opportunity to the assessee before holding the same.
Ground No. 8: - The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal.''
2. Since the issues involved in these appeals are almost identical on facts and are almost common except the difference in figure disputed / added in each year. Therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 7
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
3. The brief facts of the case are that the assessee is an Individual and during the years under consideration, he was engaged in the business of lending of money i.e. providing loans to various persons and trading of properties. Further, the assessee was also partner in M/s Finore Minerals LLP. The Income Tax department carried out search & seizure operation over the residence & business premises of the assessee on 05.04.2019. The case of the assessee was centralized in Central Circle-3, Jaipur. During the course of search, the assessee was not in India, therefore, he could not present before the search team. Afterwards, the concerning Investigating officer i.e. Asstt. Director of Income Tax-I, Jaipur (in short ADIT-I, Jaipur) recorded statements of assessee as under:-
Date Place
10.04.2019 At Income Tax office in DDIT Wing u/s 131
11.04.2019 At the time of operation of bank locker at 606, SBI,
Vidhyadhar Nagar, Jaipur
11.04.2019 At the time of operation of bank locker at 101, Bank of
Baroda, M. I. Road, Jaipur
24.05.2019 At office at 607-A, Crystal Mall, S.M.S. Highway, Bani
Park, Jaipur
09.08.2019 At Income Tax office in DDIT Wing u/s 131
However, after the search, the copy of seized records was supplied to the assessee and the reply of the same was also filed to ADIT. The ADIT issued the notice u/s 131 of the Act and recorded the statement of the assessee u/s 131 of the Act on 8 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR 09.08.2019. In such statement, the assessee surrendered the additional income of Rs. 4 Crore on account of undisclosed business income utilized in giving business advances to various parties. However, later on the assessee retracted from the statement by filing the affidavit before AO. In consequence to the search, the assessment of the assessee for A.Y. 2014-15 to A.Y. 2019-20 were completed u/s 153A of the Act. The detail of year wise income returned income viz a viz assessed income and the nature of additions made are as under: -
A.Y. Returned Assessed Addition Nature of addition Finding of Ld. income Income made A.O. at Page No. of assessment order 2014-15 41,78,900 56,78,900 15,00,000 Alleged undisclosed Page 3 to 12 business income (Para 5.2 to utilized for giving 5.4) advance/loan to various parties as found noted in the excel sheet named "Court Cases Party's Status" seized during the course of search.
2015-16 57,33,940 62,83,940 5,50,000 Alleged undisclosed Page 3 to 12
business income (Para 5.2 to
utilized for giving 5.4)
advance/loan to various
parties as found noted
in the excel sheet
named "Court Cases
Party's Status" seized
during the course of
search.
2016-17 33,43,630 56,68,630 23,25,000 Alleged undisclosed Page 3 to 12
business income (Para 5.2 to
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ITA NOS. 1418 TO 1423/JPR/2024
SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR utilized for giving 5.4) advance/loan to various parties as found noted in the excel sheet named "Court Cases Party's Status" seized during the course of search.
2017-18 2,56,95,010 3,19,45,010 62,50,000 Alleged undisclosed Page 3 to 12
business income (Para 5.2 to
utilized for giving 5.4)
advance/loan to various
parties as found noted
in the excel sheet
named "Court Cases
Party's Status" seized
during the course of
search.
2018-19 32,89,400 1,06,69,400 73,80,000 Alleged undisclosed Page 3 to 12
business income (Para 5.2 to
utilized for giving 5.4)
advance/loan to various
parties as found noted
in the excel sheet
named "Court Cases
Party's Status" seized
during the course of
search.
2019-20 54,62,520 2,49,62,520 1,95,00,000 (i) Alleged undisclosed Page 3 to 5
business income (Para 5.2)
utilized for giving
advance of Rs.
15,00,000/- given to Page 7 to 8
Shri Ramji Lal Sharma. (Para 6.2 &
(ii) Alleged undisclosed 6.3)
business income
utilized for giving
advance of Rs. Page 9 to 10
1,25,00,000/- given to (Para 7.2)
Shri Ramji Lal Sharma.
(iii) Alleged
undisclosed business Page 11 to 12
income utilized for (Para 11 to 12)
giving advance of Rs.
10
ITA NOS. 1418 TO 1423/JPR/2024
SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR 15,00,000/- given to Shri Banwari Lal Kumawat.
(iv) Alleged
undisclosed business
income utilized for
giving advance of Rs.
40,00,000/- given to
Shri Malik Khan.
4. Aggrieved from the order of AO, the appellant filed the appeal before ld.
CIT (A), which was decided by Ld. CIT (A) ex-parte vide order dated 25.10.2024 (for A.Y. 2014-15 to A.Y. 2018-19 and dated 26.10.2024 for A.Y. 2019-20. The Ld CIT(A) issued notices on 14.10.2023, 03.11.2023, 08.10.2024 and 16.10.2024 for hearing of the case. In response to notice issued on 03.11.2023 the adjournment requested was filed. Thereafter, two notice were issued in the month of October- 2024, which remained un-complied by the assessee and for this reason, the ld CIT (A) passed the Ex-Parte order by holding that the appellant is not interested in perusing of appeal. In such ex-Parte order the CIT-A decided the appeals filed by the assessee on merit and confirmed the additions so made by giving the elaborate finding. The brief of the findings given by Ld. CIT (A), in the light of which the appeal of the assessee was rejected and the addition was confirmed is summarized hereunder: -
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ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR S. No. Contention of CIT (A) Page No. of order of CIT (A) of A.Y. 2019-20 in which the finding is given
1. Statement of appellant was recorded during search where Page 9 to 19 admission was made and such statement have the (Para ii) evidentiary value. In support of his contention the CIT (A) relied on several decisions.
2. In support of the claim of the assessee that the loans Page 19 to 20 balance includes the accrued interest and that such (Para iii to v) interest and the loans has become bad and allowable to assessee as business loss, the assessee did not file any evidence and supporting in this regard. It is also held by CIT (A) that the assessee has lodged the court cases thus it cannot be accepted that debt has become bad.
3. the alleged business advances are unexplained money of Page 21 to 37 the assessee and the same is taxable u/s 69A of the Act (Para vi to ix) and accordingly taxable u/s 115BBE of the Act without allowing any deduction. The CIT (A) relied upon several decisions. However, the notice u/s 251 (2) as required to be given for enhancement of tax liability has not been issued, thus this finding is not valid in the eyes of the law as the same has given without providing the opportunity to the assessee
4. The LD. CIT (A) held that the additions were made on Page 37 to 42 the basis of noting of seized record, therefore relying on (Para x to xiv) the presumption laid down u/s 132(4A) and u/s 292C he confirmed the additions.
Similar findings, were given while rejecting the appeals of A.Y. 2014-15 to A.Y. 2018-19.
5. Aggrieved from the order of the ld. CIT(A), the assessee preferred the present bunch of six appeals on the various grounds raised in the respect appeal memos filed for each year. The ld. AR of the assessee also filed written 12 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR submission. Since the dispute is similar for all these years the same is decided all together based on the ground disputed in each year.
6. Ground No.1 (ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, ITA No. 1422/JPR/2024, ITA No. 1423/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18, A.Y. 2018-19, and A.Y. 2019-20 respectively): - This ground of appeal is with regard to not providing the reasonable opportunity of hearing to the assessee by ld CIT (A).
6.1 The ld AR of the assessee submitted that the case of the assessee was fixed time to time by ld CIT (A) by issuing the notices on 14.10.2023, 03.11.2023, 08.10.2024 and 16.10.2024. In response to notice issued on 03.11.2023 the adjournment requested was filed. Thereafter, two notices were issued in the month of October-2024, which remained un-complied by the assessee and for this reason, the ld CIT (A) passed the Ex-Parte order. It was submitted that the notices sent in the month of October-2024, were severed on e-Mail but due to bona-fide mistake of the accountant of the assessee, the notices were forwarded to another counsel of the assessee group. Such notices were not sent to the counsel who was actually handling the appeal work. In support of this contention, the sworn affidavit of accountant as well as of assessee was filed before the Tribunal wherein they have elaborated the reason to which the notice issued by ld. CIT (A) in the month of 13 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR October-2024 remained un-compiled. All notices were sent by E-mail address of the assessee. The Ld. CIT (A) did not attempt to serve the notice by other means of service of notice mentioned in section 282 of I.T. Act. Section 282 of Income Tax Act, prescribes several modes of service of notice and apart from the notice sent through e-Mail, the physical delivery of the notice is also a mode of service. Thus, the ld. CIT (A) passed the order by sending the notice on E-Mail and he did not make any reasonable attempt to service the notice physically through speed post. Hon'ble Kolkata High court in the case of Rameshwar Sirkar V/S I.T.O. (1973) 88 ITR 374 has held that in the interest of justice reasonable attempt should be made to serve the notice. The ld AR submitted that ld CIT (A) passed the order without according the reasonable opportunity to the assessee. 6.2 Per Contra, ld DR vehemently submitted that the ld. CIT(A) provided various opportunities to the assessee by issuing several notices to the assessee but the assessee did not avail of the opportunity. The department cannot be made liable for the mistake of the assessee or his accountant. The ld DR justified the order of ld CIT(A), who has decided the appeals on merit by elaborately discussing the issues. 6.3 We have heard the rival contentions and perused the material available on record. We noted that the ld CIT(A) has issued notices on 14.10.2023, 03.11.2023, 08.10.2024 and 16.10.2024. In response to notice issued on 03.11.2023 the 14 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR adjournment requested was filed. Thereafter, two notices were issued in the month of October-2024, which also remained un-complied by the assessee and for this reason, the ld CIT (A) passed the Ex-Parte order and decided the appeal of the assessee on merit. In view of the above facts and circumstances of the case, we hold that the ld CIT(A) has provided proper opportunity to the assessee to submit his contentions before the ld CIT(A) but the same were not availed of by the assessee. In the result ground No. 1 in ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, ITA No. 1422/JPR/2024, ITA No. 1423/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18, A.Y. 2018-19, and A.Y. 2019-20 respectively is dismissed.
7. Ground No. 2 (ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, ITA No. 1422/JPR/2024, ITA No. 1423/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18, A.Y. 2018-19, and A.Y. 2019-20 respectively) : is regarding the legal validity of the assessment orders and addition made therein:-
7.1 The ld CIT(A) made his findings on this issue in ground No1 raised before him in appeal for AY 2014-15 filed by the assessee before him. He held that from the perusal of assessment order it is seen that the contentions raise by the appellant are baseless as the AO has carried out detailed investigation and made the 15 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR assessment considering the material on record including the submission of the appellant and has given detailed reasoning in the assessment order. During the appellate proceedings, the appellant has not furnished any information/evidences to rebut the findings of the AO. It is specifically observed here that in spite of giving many opportunities of being heard to the appellant, as detailed above the appellant has chosen not to make any submissions or furnish any information to substantiate and plead the grounds of appeal.
Based on the material available on file and in absence of any new submission/finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the action of the ld AO.
In AY 2015-16 to AY 2019-20, he relied upon the findings made by him in AY 2014-15 in ground No.1 or repeated the same finding. 7.2 The ld AR vehemently argued the case and also filed written submission as under:-
The order passed by Ld. A.O. is bad in law as the same w the reply and documents filed by the assessee in
1. During the course of assessment proceeding the assessee filed the detailed submission wherein the facts of the case were elaborated. Along with such submission the evidences, in the form of affidavit, evidence of court cases, FIR filed against the defaulter parties, settlement agreement etc. were filed. However, no heed was given to such and without making any inquiry and without making any attempt to find out the truth, the same were brushed aside by holding that the same is after though cooked story. This clearly shows that the assessment was 16 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR made with the pre-set mind for adding the undue and unwarranted sum as income of the assessee, which actually never been the income of the assessee and the assessee was never been in such a position the he could have earned so much income. In this regard we would like to draw your kind attention towards the provisions of section 143(3) of the Act, which provides that "...... after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into consideration into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make as assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment" In this case, the assessment is not made in accordance of this provision of the Act. Before completing the assessment order, the Ld. A.O. in order to strengthen his suspicion with sound evidences, neither made any attempt to disprove the submission of the assessee nor brought any positive evidence on record. She simply proceeded to make the arbitrary additions.
2. Since the assessee has submitted the evidence in support of his contention, which remained uncontroverted, therefore the addition cannot be made in the hands of the assessee. In the case of ITO vs. Daya Chand Jain Vaidy the Allahabad High "When Court a particular held explanation that furnished by the assessee and evidence in support thereof is adduced, the onus shifts on the Assessing Officer to falsify the said material or bring new material on record.
Mere rejection of good explanation does not convert good proof into no proof". Genuineness of vouchers/bills of Jewellery/gold purchased claimed by assessee is not disproved by causing enquiry/verification by AO, then there cannot be any addition on the same as held in the case of Dy. Commissioner of Incom Central Circle-1, Udaipur Versus Ashok Jain - 2024 Jodhpur .
3. It is an admitted position of law that Ld. AO is a quasi-judicial authority and without being biased he should honestly perform his duties by considering the material in judicial perspective and honestly, which available with him or/and made available to him by assessee during the course of assessment proceeding. Hon'ble Supreme Court in case of CIT vs Godhra
746), which says that the real income should only be taxed. It is a settled law that the AO is a quasi-judicial authority and should be governed in his function by judicial consideration and must conform to the rules of natural justice and must proceed without bias Tin Box Co. CIT 249 ITR 216 It(SC). is also settled law 17 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR that the AO must act honestly on the material before him and not vindictively, capriciously, or arbitrarily as held by Hon'ble Supreme Court in the case of Gurumukh Singh Vs CIT 12 ITR 393, 427 (FB), Dakeshwari Cot Vs CIT 26 ITR 775. The taxing authority should not act in a manner as might indicate that scales are weighted against the assessee CIT Vs Simon Carves Ltd (1976) 105 ITR 212,218 (SC). But in the case of the assessee, the Ld. A.O. has brushed aside all the principles of law and framed a high-pitched assessment purely based on presumption and assumption
4. In view of above submission, it is submitted that the Ld. A.O. completed the assessment proceeding by brushing aside all the evidences, facts of the case, legal position and submission of the assessee. The ld. AO by rejecting the submission filed by the assessee made the addition on the basis of surmises and conjectures.
Hon'ble Justice Hidayatullah of the Supreme C
Banerjee Vs CIT [1963] 49 ITR 112 observed
(SC); that
120 the Income Tax
Department cannot by merely rejecting unreasonably a good explanation, convert good "proof into no proof". Hon'ble Supreme Court in the case Shaw & Bros Co Vs CIT 37has ITR held 271that the surmises and conjectures, and the conclusion is the result of suspicion which cannot take the place of proof. Hon'ble Punjab & Haryana High Court in the case (2008) 299 ITR 179 (P&H) also held that suspicion, howsoever strong cannot take the place of legal proof.
5. Thus, the assessment proceeding completed u/s 153A of the Act is bad in law, void-ab-initio, and deserves to be annulled for the reasons that (i) The Assessment order passed by the ld. Assessing Officer is arbitrary, whimsical, capricious, perverse, against the provisions of law and facts of the case, (ii) the assessment is based on surmises and conjectures, without having any positive material and/or on irrelevant material.
The addition was made by blindly and solely rely of the Act, without making any independent inqui fact that such statement was retracted later on
1. The statement was recorded u/s 131 of the Act, empowered to record the statement under this treated as admissible evidence 18 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
a) The Ld. A.O. for making the addition heavily relied on the statement of the assessee recorded during post search investigation u/s 131 of I.Tax Act. The Ld. A.O. brushed aside all the submission and evidences filed by the assessee and instead applying his own independent mind and making the independent inquiry to controvert the evidence filed by the assessee proceed to make the assessee by blindly relying on the statement of the assessee. The ADIT recorded the statement of assessee. The ADIT by issuing the summon u/s 131 of the Act has exceeded his power as he was not empowered to issue the summon under this section. This section specifically mentioned the authorities who can issued the summon under this section and such authorities are Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appels), Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, Commissioner, Dispute resolution panel. Therefore, the issue of summon u/s 131 of the Act and recording statement under this section is bad in law, void ab initio, invalid, against the provisions of the Act and thus such statement cannot be used as admissible evidence in the Income Tax proceedings and no cognizance can be given on such statement.
b) Further, from the statement recorded on 09.08.2019, it is well apparent that the same recorded after 4 month of search and such statement was recorded just to sought the explanation on the seized document, while the written explanation on such documents was already filed by the assessee group to ADIT and thereafter noting specific was informed to the assessee group for which further explanation was to be sought from the assessee group. Thus, the summon issued and statement so recorded was not for obtaining any information or for making any pending verification but the same was used as a weapon just for obtaining the desired surrender by extracting the pressure. As stated earlier, the assessee was in business of Financing and several documents relating to disclosed business like Hundies, Promissory Notes, Property papers of borrowers which were lying with the assessee as security etc were under seizure of the department. The assessee vide his letter dated 25.04.2019 (filed on 26.04.2019 to DIT-Investigation, Jaipur under copy of ADIT-1, Jaipur), 19.06.2019 (filed on 20.06.2019 to PDIT-Investigation, Jaipur under copy of ADIT-1, Jaipur), 06.08.2019 (filed on 07.08.2019 to PCIT-Central, Jaipur) requested to PDIT/PCIT Jaipur, to release some of these seized security documents as the same were required to return back on realization of the loan or for taking legal action against the defaulter parties/ borrowers. However, the same were not release to him and ADIT insisted/pressured to him to make the surrender of undisclosed income. It was threaten to him that in case of non surrender of income as per wish of the department the seized documents would not be released to me. Therefore, in such circumstances the assessee did not having any remedy 19 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR except to make the surrender of income in the statement recorded u/s 131 on 09/08/2019 as desired and directed by department.
c) Summon u/s 131 is a very vital and should only be issued in a crucial situation. The Income Tax authorities should be well aware of its scope, power, misuse and consequences. The Income Tax authority may use this section as a weapon in their hands but at the same time the various courts has also imposed certain limitations on it. The notice should always comply the notice u/s 131 properly and carefully and at the same time the Income Tax authority should not issue notice u/s 131 in every case. The reliance is also placed on following decisions: -
i) Hon'ble Supreme Court of India in the
Brothers (1969) 74 wherein ITR 836it has been held that "Since
by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to be exercised. If the action of the officer issuing the authorization or of the designated officer is challenged, the officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed.
ii) In the case of  G. M. Breweries v. O U I 2000(2) (Bom.),the Court held that the powers given to the income tax authorities u/s. 131(1) are powers of the Court of law. While exercising these powers, the income tax authorities act in a quasi judicial capacity. These powers must be exercised strictly for the purpose set out in section 131(1) and not for any extraneous purposes. Powers u/s. 131 can be exercised only if proceedings are pending before the authority concerned under the Income Tax Act.
iii)In Jagir Singh v. Ranbir Singh, the apex AIRcourt 1979 SC 381,
has observed that an authority cannot be permitted to evade a law by "shift or contrivance". While deciding the said case, the Supreme Court placed reliance on the judgment in Fox v. Bishop of Chester [1824] 2, wherein B and it has C 635 been observed as under:
"'To carry out effectually the object of a statute, it must be construed as to defeat all attempts to do, or avoid doing, in an 20 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR indirect or circuitous manner that which it has prohibited or enjoined'."
iv) Andhra Pradesh High Court in the case of [1958] 34 ITR 216 at page 220 which are as follo " In administering a tax law, irritations to the assessees are inevitable; an officer is bound to do his duty irrespective of the susceptibilities of the assessees or even at the risk of hurting their amour propre. But this would not justify the officers functioning under the Act doing things in an unreasonable way. As has been pointed out by Maxwell on the Interpretation of Statutes, at page 123, tenth edition, all public officers in whom powers are vested by statutes must exercise those powers " within the limits to which an honest man competent to the discharge of his office ought to confine himself, that is, within the limits and for the objects intended by the Legislature."
d) In view if above submission it is submitted that the summon issued under section 131 of the Act without jurisdiction and the statement recorded in consequence to that is not valid and bad in law, therefore no reliance can be placed on such invalid statement and thus the same cannot be used as evidence.
2. As soon as the copies of the statement were pr retracted from such statement, therefore su value .
a) As submitted in forgoing paras, the statement under section 131 of the Act was recorded with a sole intention to get the surrender of the desired income by extracting the pressure. Except to this sole reason, no other fruitful purpose behind recording the statement on the issues, reply of which was already filed, appears from the statement so recorded.
b) At the time of recording of statement on 09.08.2019, which recorded in the office of ADIT-I, Jaipur, because of pressure, psychological torture, mentally disturbance, fear, threats and coercion, Shri Laxmikant Biyani forcibly made admission of certain undisclosed income which was actually incorrect, unearned and was not taxable. After recording the statement, the copy of the same, was demanded from the ADIT, however the concerning ADIT refused to provide the copies of statements by stating that the same will only be provided by the assessing officer, if they intended to use the same against them. Thereafter, vide letter dated 02.03.2020 and 12.07.2021, it was requested to Assessing Officer Dy. 21
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Commissioner of Income Tax, Central Circle-3, Jaipur (In short DCIT- CC-3, Jaipur) to provide the copies of statements. In letter dated 02.03.2020 Shri Laxmikant Biyani clearly mentioned that "in the statement recorded during post search because of mental tension, fear, pressure and threat I made admission of certain undisclosed income, which actually not earned or not taxable. For clarifying such incorrectness in my statement, because of above mention reasons, an affidavit specifying such incorrectness is require to be file and the same can only be filed upon receiving the copies of statements. Therefore, till the copies of statements not provided to me the same are not binding on me and the same are subject of further clarification by way of filing of certificatory affidavit."
The copies of the statements were finally provided to the on 31.08.2021. Therefore, as soon as the copy of statement provided Shri Laxmikant Biyani filed a retraction affidavit to Ld. A.O. on 03.09.2021 (Copy of which is being submitted herewith) and in such affidavit, he narrated all the circumstances under which this income was surrendered.
c) Since, Shri Laxmikant Biyani retracted from the statement, therefore the same loose its legal sanctity and hence relying on such statement no addition can be made in the hands of the assessee. The law relating to retraction is well-settled by Supreme Court in Sri Krishna V. Kurukshetra University, AIR 1976 SC 376, wherein it is held that if the original statement suffers from any defects, the person is entitled to go back on the statement already made by making correct statement. The Supreme Court have laid down the ratio, after considering S. 18 of the Evidence Act, 1872 that any admission made in the ignorance of the legal rights or under duress, cannot bind the maker of the admission. This right has been tested under Income-tax Act and the same has been upheld by Punjab & Haryana High Court in Kisan Lal Shivchand Rai v. CIT, (88 ITR 293).
3. The retraction affidavit remained uncontrov be made on the basis of such retracted statem
a) After the affidavit was filed before the assessing authority, he remained silent on the face of it and carried out no enquiry thereon to verify the correctness thereof. The assessee was not examined on the point of retraction and on the point of the giving of loan to various parties. Assessee as, therefore, entitled to assume that the income tax authorities were satisfied with the affidavit as sufficient on this point. In this regard we will like to draw your kind attention towards the judgement of Hon'ble Jaipur ITAT in the case of Shri Radhey Shya 420/JP/2012 dated 26.08.2013, wherein the retraction affidavit, which was not inquired by Ld. A.O., was treated as valid evidence. 22
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
b) It is an admitted position of law that the contents of affidavits, which are not vague, should be accepted correct. Reliance is placed on the following decisions: -
(i) Mehta Parikh & Co v CIT [1958] 30 ITR 181 (SC) (ii) Daulat Ram Rawatmull v. CIT (1973) 87 ITR 349 (SC). (iii) Shri Nirmal Kumar Kedia V/s DCIT (Vice-Versa) 2019 (6) TMI 467 - ITAT Jaipur (iv) Dilip Kumar Rao Vs CIT (1974) 94 ITR 1 (Bom); (v) Malwa Knitting Works Vs CIT (1977) 107 ITR 379, 381 MP (vi) Sri Krishna Vs CIT (1983) 142 ITR 618 (All). 4. The investigating office is not empowered to of confessional statement
a) The Board of direct taxes issued instruction to the All-Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. vide letter F. No. 286/2/2003-IT (Inv) dated 10.03.2003 in regard of confiscatory statement in the course of search and seizer. The Board has again issued a Circular F.No. 286/98/2013-IT (Inv.II) dated 18th December, 2014 and advised the taxing authorities to avoid obtaining admission of undisclosed income under coercion/undue influence. But in spite of clear-cut board circular the surrender of income was taken which are binding upon them. Hence the surrender obtained from Shri Laxmikant Biyani was illegal and thus no addition can be made by relying to such statement.
b) In the case of CWT vs. Sanwarmal Shivkumar 171 ITR 3 Jurisdictional High held Courtthat theof officers Rajasthan of the Department are bound by the circulars of the board. The Hon'ble Supreme Court in case of Tanna and Modi vs. has held that a fortiori, clarificatory circulars issued by the Central Board of Direct Taxes may also be taken into consideration for the purpose of construction of the statute. The Hon'ble Supreme Court in case of Kerala State Industrial Dev. Corporation has also held Ltd., 259 ITR that Finance Minister's speech before Parliament while introducing bill can be relied on to throw light on object and purpose of provisions. In case of Durgesh Oil Mills, 273 , the ITR Hon'ble 305 (All.) Allahabad High Court has held that it is well settled that the circular issued by the Central Board of Direct Taxes is binding on authorities.
23
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
c) The reliance is also placed on following judgement wherein it was held that circulars issued by the Board are binding: -
(i) NavnitLal C Javeri Vs. Sen (1965) 56 ITR 198 (SC)
(ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC)
(iii) UCO Bank vs. CIT (1999) 237 ITR 889 (SC)
(iv) Union of India vs. Azadi Bachoo Andolan (2003) 263 ITR 706 (SC)
5. Addition cannot be made on the basis of state the same loose its legal sanctity
a) After search the statement of the assessee was recorded u/s 131 of the Income Tax by the ADIT on 09.08.2019. In such statement, the assessee surrendered the undisclosed income of Rs. 4 Crore. However, this surrender was not at will of the assessee. This income was surrendered because of pressure, psychological torture, mentally disturbance, fear and threats of the department, so forcibly Shri Laxmikant Biyani made admission of this income. As soon as the copy of statement provided by the assessee Shri Laxmikant Biyani filed a retraction affidavit in the office of Assessing Officer and in such affidavit, he narrated all the circumstances under which this income surrendered.
b) Thus, once the assessee has retracted from his statement by filing of a valid affidavit, then such statement is no more evidence in the eyes of the law and no addition can be made on the basis of such retracted and incorrect statement. The reliance is placed on following judgements: -
i) Hon'ble Rajasthan High Court in the case of PCIT V/s Sanjay Chhabra DB Income Tax Appeal No. 22/2021 order dated 06.04.2022.
ii) CIT vs. Bhanwar Lal Murwatiya (Rajasthan High Court, Jodhpur) 39 TW 214.
iii) Rajesh Jain Vs. DCIT 100 TTJ 929 (ITAT, Delhi 'A' Bench)
iv) Jyotichand Bhaichand Saraf & Sons (P) Ltd. Vs. Deputy Commissioner of Income-tax, Circle 11(1) in appeal No. 08(PN) of 2011 (Bock period 1996-97 to 2002-03) the I.T.A.T. Pune Bench 'A' vide order dated 27-07-2012.
v) ACIT Vs Ravi Agricultural Industries the I.T.A.T., Agra Bench, Agra (3rd Member) in appeal Not. ITA No. 145/AGR/2006 judgment dated 26-12-2008
vi) Mumbai Tribunal in judgment of Shri Suresh Chandra Agarwal, 24 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR ITA No. 7900/Bom./92, order dated 12-8-1996.
vii) Hukum Chand Jain Vs. Income Tax Officer (2011) 334 ITR 197
(Rajasthan High Court)
viii) Ajit Chintaman Karve V/s I.T.O. (2009) 311 ITR (AT) 66 (Puna)
ix) CIT Vs. Bhaskar Mittal 73 Taxman 437 (Cal)
x) CIT V/s Naresh Kumar Aggarwal (2014) 369 ITR 171 (T&AP)
6. The addition by brushing aside the documents
cannot be solely on the basis of statement rec
a) The Ld. A.O. for making the addition heavily relied on the statement of the assessee recorded during post search investigation. The Ld. A.O. brushed aside all the submission and evidences filed by the assessee and instead applying his own independent mind and making the independent inquiry to controvert the evidence filed by the assessee proceed to make the assessment by blindly relying on the statement of the assessee.
b) It is now an admitted position of law that no addition can be made on the basis of search statement by brushing aside the submission and evidences filed by assessee during the course of assessment proceeding can be made we place reliance on following judgements: -
1. Sh. Rajendra Kumar Jain vs. ACIT, ITA No. 378/JP/2017 dated 27.04.2018 for the AY 2014-15.
2. Basant Bansal vs. ACIT [2015] 63 taxmann. com 199 (Jaipur-
Trib.)/[2015] 171 TTJ 603 (Jaipur-Trib.)
3. Pullangode Rubber Products Co. Ltd. V/s State of Kerala & Anr.
(1973) 91 ITR 18 (SC).
4. Hon'ble Rajasthan High Court in the case of CIT v/s Ashok Kumar Soni 291 ITR 172 (Raj.)
5. CIT vs. Bhanwar Lal Murwatiya (Rajasthan High Court, Jodhpur) 39 TW 214.
6. Hon'ble ITAT Jaipur Bench in the case of Shri Pawan Lashkary ITA No 808/JP/2011 dated 06.01.2012
7. M/s Suresh Medical Agency ITA No 443/JP/2012 dated 21.08.2013, Shri Radhey Shyam Mittal ITA No 420/JP/2012 dated 26.08.2013, Shri Suresh Kumar Mittal ITA No 947/JP/2013 dated 24.09.2015 and Shri Madan lal Mittal ITA No 948/JP/2013 dated 24.09.2015.
8. Hon'ble ITAT Jaipur Bench in the case of DCIT Vs Ashok Kumar Agarwal in ITA No 847/JP/ 2015 order dated 3/10/2016. 25 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
9. Chitra Devi v/s ACIT (2002) 28 Tax-world 454 (ITAT JP)
10. Jagdish Narain Ratan Kumar V/s ACIT 22 TW 209 (JP)
11. CIT Vs. Kader Khan Son 300 ITR 157 (Mad)
12. Paul Mathews 263 ITR 101 (Ker)
13. CIT V/S M/s Dhingra Metal Works Delhi High Court ITA No. 1111/2010.
14. 2024 (4) TMI 138 - ITAT Surat Uday Chhasia Versus The ACIT, Circle - 2 (3), SURAT.
15. 2023 (7) TMI 1433 - ITAT Mumbai Sankpal Developers Versus ITO, Ward-25 (1) (1), Mumbai.
16. 2022 (10) TMI 76 - ITAT Indore Saaras Agro Industries ACIT, Madhya Pradesh And M/S. Kanak Agro Inf Versus Income Tax Officer Ward-1, Madhya
17. 2021 (2) TMI 281 - ITAT Kolkata Assistant Commissioner of Income-Tax, Circle-33, Kolkata. Versus M/S. Sreeleathers.
18. ITAT Indore in the case of Shri Hirdesh Bhargava V/s ITO 2020 (2) TMI 455
19. CIT V/s Digamber Kumar Jain 2013-84 DTR 365.
20. CIT v/s G.Krishnan (1994) 210 ITR 707 Mad.
21. Gargidin Jawala Prasad v/s CIT (1974) 96 ITR 97 (All)
22. Jodhpur ITAT Bench in Maheshwari Industries v. Asstt. CIT [2005] 148 Taxman 74 (Jodh) (Mag.)
23. Rajesh Jain Vs. DCIT 100 TTJ 929 (ITAT, Delhi 'A' Bench)
24. Krishna Terine (P) Ltd. Vs. Assistant Commissioner of Income Tax, ITAT, Ahmedabad 'D' BENCH 56 DTR, ITAT 395
25. Jyotichand Bhaichand Saraf & Sons (P) Ltd. Vs. Deputy Commissioner of Income-tax, Circle 11(1) in appeal No. 08(PN) of 2011 (Bock period 1996-97 to 2002-03) the I.T.A.T. Pune Bench 'A' vide order dated 27-07-2012.
26. ACIT Vs Ravi Agricultural Industries the I.T.A.T., Agra Bench, Agra (3rd Member) in appeal Not. ITA No. 145/AGR/2006 judgment dated 26-12-2008
27. The Mumbai Tribunal in an unreported judgment (Shri Suresh Chandra Agarwal, ITA No. 7900/Bom./92, order dated 12-8-1996)
c) Therefore, in view of the aforesaid orders, the addition made by the ld AO in the case of this assessee, on the basis of the statement recorded u/s 131, and on the same facts and circumstances, deserves to be deleted. Hon'ble MP High Court in the case of Agarwal Warehousing & Leasi Vs CIT (2002) 257 ITR 235 (MP) has held that the orders passed by the 26 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Tribunal are binding on all revenue authorities functioning under the jurisdiction of the Tribunal.
Perverse finding of Ld. CIT(A)
1. The CIT (A) wrongly considered the statement of 132(4) of the Act, while the same were recorded u/s 13 The Ld. CIT (A) at page 9 to 19 of his order cited several case laws to support the evidentiary value of the statements but he wrongly treated the statement of the assessee, as recorded u/s 132(4) of the Act, while such statement was recorded u/s 131 of the Act. The statement recorded u/s 131 alone cannot be considered as evidence like to statement recorded u/s 132(4) of the Act. The Ld. CIT (A) relied on several judgments, which are applicable in case where the statement recorded during search u/s 132(4) and whereas in the case of the assessee statements were recorded by ADIT u/s 131 and also without jurisdiction, so the same cannot be equated with statements recorded u/s 132(4).
2. The presumption laid down u/s 132(4A) and u/s 292C o which the CIT (A) confirmed the addition is a rebu The CIT (A), while confirming the addition placed reliance on the provisions of section 132(4A) and 292C of the Act. However, he ignored the legal position that the same is a rebuttable presumption and once the assessee with documentary evidence has proved his contention, then in such a case in absence of anything contra such evidences would be prevailed over seized records.
3. No evidence that loans became bad was filed The Ld. CIT (A), wrongly held that the assessee did not file any supporting and evidence to prove that the loans became bad. However, the Ld. CIT (A) failed to appreciate that the assessee filed the copy of FIR, Court cases etc., which clearly substantiate that the dispute has arose in between assessee and borrower parties and the borrowers were not repaying the loans, thus the loan/advance became business loss to the assessee.
Other legal infirmities in the assessee order
i) The approval by the joint commission of income Tax was granted in mechanical manner and opportunity of hearing was not provided to the Appellant. 27
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
ii) The approval granted by JCIT u/s 153D of the Act does not contains the DIN (documents identification number), therefore in view of Para No. 4 of CBDT Circular no. 19/2019 [F. No. 225/95/2019-ITA.II] DATED 14.08.2019 such approval is invalid and non-east in the eyes of law and consequently the assessment order passed in pursuance to such approval is bad in law and void. Thus, the impugned assessment order should be treated as invalid and should be deemed to have never been passed.
The ld AR submitted that the assessment order passed by the AO may kindly be held as bad in law and deserves to be annulled.
7.3 Per contra, the ld DR submitted that there is no infirmity in the Assessment orders passed by ld AO. He relied upon the findings made by ld CIT(A). 7.4 We have heard the rival contentions and perused the material available on record. We noted that main contention of appellant is that the AO is quasi judicial authority, he should act honestly considering all the material and documents available before him, he has not made any further inquiry on the evidences and affidavits filed by the assessee, and brushed aside all the material, evidences, documents furnished by the assessee without making inquiry or controverting the same. Further, he made the addition relying on the statements recorded by DDIT u/s 131which were without jurisdiction as the ADIT/DDIT is not empowered to record the statements u/s 131 of the Act. We noted that these statements are not u/s 132(4) or 131(1A) of the Act as no notice u/s 131(1A) of the Act was issued to the assessee and the statements were recorded u/s 131 of the Act. The ld. A/R submitted that the assessee has retracted the statements recorded by ADIT u/s 131 28 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR of the Act by filing affidavit before the ld AO and therefore, the statements recorded u/s 131 of the Act has lost its evidentiary value on this ground also. We noted that ld CIT(A) has discussed the evidentiary value of the statements recorded u/s 132(4) of Income Tax Act but the fact remains that in the case of the assessee the surrender of income as well as retraction of statement is not of the statements recorded u/s 132(4) but of the statements recorded u/s 131 of I.T. Act,1961 which too recorded without authority of law. The ld CIT(A) discussed the provisions of section 132(4A) and 292C of Income Tax Act to emphasized the evidentiary value of seized documents but the fact remains the presumption u/s 132(4A) and 292C is rebuttable presumption and the assessee has rebutted the same by filing several affidavits which have not been controverted by AO. The ld CIT(A) mentioned that no evidence has been filed before the AO to show that the loans have become bad and non- recoverable but the fact remains that the AO was in possession of several materials like papers relating of court cases, FIR etc which clearly proves that the loans were not recoverable in normal course of business. However, all the above said defects and deficiency on the part of AO may have bearing on the additions made in the assessment order which we will consider appropriately while disposing off the separate grounds taken by the assessee on merit but the same cannot make the assessment orders invalid and bad in law. The ld AR contended that the approval granted by JCIT u/s 153D of the Act does not contain the DIN therefore, 29 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR such approval is invalid. Hon'ble Supreme Court of India in the case of CIT V/s Brandix Maurititus Holdings Ltd [2024] 158 taxmann.com 247 (SC) has granted stay on this issue, therefore the argument of the assessee regarding the validity of assessment order, without mentioning of DIN on approval by JCIT u/s 153D is not found to be acceptable and hence the same is rejected. Another contention of the assessee regarding the approval of draft assessment order u/s 153D of IT Act mechanically, we find that the fact of giving approval is duly mentioned in the body of assessment order itself, therefore there is nothing on record to presume that the approval was given in mechanical manner. In the result ground No. 2 in ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, ITA No. 1422/JPR/2024, ITA No. 1423/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18, A.Y. 2018-19, and A.Y. 2019-20 respectively is dismissed.
8. Ground No. 3 (ITA No. 1423/JPR/2014 of A.Y. 2019-20) :- is regarding the addition against loan of Rs. 15,00,000/- to Ramji Lal Sharma 8.1 The AO made the addition of Rs. 15,00,000/- on account of loan given by the assessee to Ramji Lal Sharma on the basis of his findings in para 5.2 of assessment order as under:-
"The reply filed by the assessee has been examined but not found satisfactory. During the course of post-search proceedings, the assessee categorically admitted that this much amount was given to Shri Ramji Lal Sharma out of undisclosed income. Relevant portion of his statement is reproduced hereunder:-30
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR XXXXX Further, seized agreement of loan clearly mentioned that Shri Ramji Lal Sharma had received amount of Rs.15,00,000/- on 08.03.2019 from Sh. Laxmi Kant Biyani, the assessee. No prudent person would have sign any document without receiving the money. Therefore, the explanation submitted by the assessee is nothing but story cooked afterthought. Hence, in the light of clear admission of Shri Laxmi Kant Biyani, notings of seized record and facts & circumstances of the evidences gathered as a result of search it is proved that the assessee earned undisclosed business income and given loan of Rs.15,00,000/- to Shri Ramji Lal Sharma. Hence, the addition of Rs.15,00,000/- is being made to the total income of the assessee for A.Y. 2019-20. Proceedings for penalty u/s 271AAB(1A)(b) of the Act is being initiated separately."
The ld CIT(A) confirmed the addition so made by giving his findings in para (x) as under:-
"As noted by the ld. AO, during the search proceedings, a loose paper file was found & seized as per exibhit-63 of annexure AS. As per this exhibit, the assessee has given cash loan of Rs.15,00,000/- to Shri Ramji Lai Sharma on 08.03.2019. Further, seized agreement of loan clearly mentioned that Shri Ramji Lal Sharma had received amount of Rs. 15,00,000/- on 08.03.2019 from Sh. Laxmi Kant Biyani, the assessee. No prudent person would have sign any document without receiving the money. Therefore, the explanation submitted by the assessee during the assessment was rejected as nothing but story cooked afterthought.
The appellant has claimed that the paper which showed that the cash loan was given by the appellant in which was found during the search and seizure action was executed to act as a security for the loan of equal amount to be given by the appellant through banking channel. This contention of the appellant is illogical and beyond human probabilities and not supported with any documents and is a wild claim. If the loan was to be given through banking channel then there was no need to have an agreement written for the cash loan. The agreement should have mentioned loan through cheque.
In the Income Tax Act the specific legal presumption has been provided under section 132 and 292C of the Act. The same is extracted as under:-
XXXX In view of the above statutory express presumption and in view of the clear cut information in the seized material and in view of the absence of any strong & sterling documentary evidences to the contrary, and in view of the discussion in the applicable legal provisions and the ratio of the judgements as discussed in para (ii) to (ix) above the addition made is hereby confirmed in above terms."31
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR 8.2 The ld AR argued the case and also filed written submissions as under:-
1. The assessee actually did not give any cash loan of Rs. 15,00,000/- to Shri Ram Ji Lal Sharma and the Ld. A.O. blindly relying on the noting of seized record and not considering the submission and evidence filed by the assessee made the addition.
2. The actual fact of this case is that this party was in need of funds, hence he approached to assessee and requested for loan of Rs. 30,00,000/-. The assessee agreed to lend Rs. 30,00,000/- to him through cheque subject to condition that as a security of such loan the party would mortgage his plot No. 46 and 47, Choudhary Colony-I, Village Bilwa, Teh. Sanganer, Jaipur and execute an agreement to sale of these plots in their favor and would hand over the original papers of these plots to them. Further, in order to secure the accruing interest portion and keep the pressure over the party another condition also imposed that a further agreement, just for security, of equivalent amount of loan would also execute, in which the cash payment equivalent to loan would be shown.
3. The party executed all these documents as per requirement (for Rs. 15,00,000/- in favor of Shri Laxmikant Biyani and for Rs. 15,00,000/- in favor of Smt. Sunita Biyani) but despite of repetitive pursuance the party did not hand over the original documents of the plot No. 47, Choudhary Colony-I, Village Bilwa, Teh.
Sanganer, Jaipur, which was agreed to be given as security. This created a doubt in mind of assessee that the party may have had bad intention. In absence of these documents of plot the assessee group refused to disburse the loan to the party, therefore the loan amount noted in the seize record actually was not given to party and the transaction finally did not materialize.
4. This fact is also verifiable from the seized record itself which shows that the security documents prepared in favor of Sumita Biyani were not signed by Smt. Sunita Biyani because the party did not hand over the documents of underlying property agreed to be mortgaged against loan. Further page 56 to 59 and page 53 to 55 of seized annexure is agreement of sale of plot No. 46 Choudhary Colony-I, Village Bilwa, Teh. Sanganer, Jaipur in favor of Shri Laxmikant Biyani and Plot No. 47, Choudhary Colony-I, Village Bilwa, Teh. Sanganer, Jaipur in favor of Smt. Sunita Biyani. In such agreement in payment detail the mode of payment is written as cheque but since the loan actually was not disbursed, 32 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR therefore detail of cheque left blank.
5. Evidence submitted by the assessee during as contention During the course of assessment proceeding of the assessee, to prove her contention the assessee submitted the following documents before Ld. A.O.: -
i) The original sworn affidavit of Shri Ramji Lal Sharma wherein he confirmed the facts of not taking any cash loan from the assessee. Further, the affidavit of Shri Laxmikant Biyani was also filed wherein he also categorically denied of giving the loan. It is an admitted position of law that the contents of affidavits, which are not vague, should be accepted correct. The case law relied in para 4.2.2(3)(b), above is reiterated here also.
ii) Since the loan could not be disbursed to the party, therefore, the original documents of the property and documents executed for loans were to be return back to him. Since during search at assessee group the Income Tax department seized to such original documents, therefore despite of repetitive pursuance of Shri Ramjilal Sharma the assessee group could not return back such documents to the party. Thus, the party sent a legal notice to the assessee for either return back of all original documents or otherwise he will take the legal action against the assessee.
iii) Thereafter, considering the practical difficulties of the assessee group in non-returning of original documents (as the same were under seizure with Income Tax department) Shri Ram Ji La Sharma insisted for a written confirmation regarding not giving of any loan to him and not to misuse the original documents executed for loan. Therefore, on insist of Shri Ram Ji Lal Sharma a notarized settlement confirmation was executed on 27.05.2019. In this, the assessee and her husband Shri Laxmikant Biyani give the confirmation to Shri Ramji Lal that they did not give any loan to him and the original documents executed/taken for giving the loan will return to him as and when the same will receive back from department.
iv) The Ld. A.O. could not disprove the correctness of the affidavit and other documents filed by the assessee and without giving any heed on the 33 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR evidence filed by the assessee, the addition was made.
6. Circumstantial evidences also prove the cont It is submitted that the circumstantial evidences are also in favour of the assessee and the same also proves the contention of the assessee to be correct that no loan was given by the assessee group to Shri Ram Ji Lal Sharma as he could not fulfil the agreed conditions and such circumstantial evidences are as under: -
i) From verification of seized record, it is apparent that the security documents prepared in favour of the assessee are not singed by the wife of assessee It is an admitted position that if the agreement is not signed by the either of the party of the agreement, then the same cannot be treated as really executed. In this regard the reliance is placed in the case of Anil Bala Goyal, v/s DCIT ITA No.1533/Del/2021 order date Hon'ble Delhi ITAT.
ii) As per the seized documents, it is apparent that as a security the original documents of the Plot No. 47, Choudhary Colony-I, Village Bilwa, Teh.
Sanganer, Jaipur was to be handed over by Shri Ram Ji Lal Sharma to the assessee group. During the course of search, the papers of this property were not find to the search party as the same were never handed over by Shri Ramji Lal Sharma to the assessee group, which also shows that the conditions on which the loan to be given could not be fulfilled and therefore actually the loan could not be disbursed.
iii) In agreement to sale in payment detail the mode of payment is written as cheque but since the loan actually was not disbursed, therefore detail of cheque left blank.
7. No independent inquiries were made by Ld. A.O. As apparent from the above submission, during the course of assessment proceeding, the assessee filed the ample admissible evidences to prove his contention but no heed was given by Ld. A.O. on such evidence and the same were overlooked. Even in the assessment order also no discussion has been made to controverted to such evidences.
34
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR The ld AR further submitted in view of his detailed submission and case laws submitted in Ground No 2, the statement recorded by the ADIT on 09-08-2019 u/s 131 of the Act, which too retracted also, cannot be accepted as evidence and on the basis of these statements no addition can be made. He further submitted that presumption u/s 132(4A) and 292C is rebuttable presumption. The assessee has filed affidavit of Shri Ramji Lal Sharma, copy of legal notice received from Ramji Lal Sharma (to return the original property papers of plot No 46, Choudhary Colony as no loan was disbursed to him) and copy of duly notarized settlement agreement to rebut the presumption u/s 132(4A) and 292C of the Act and the ld AO has made no further inquiry and has not controverted the evidences filed by the assessee. The ld AR submitted that the ld AO has not justified in making unwarranted addition and ld CIT(A) has also unjustified in confirming the addition, so the addition deserves to be deleted by Hon'ble ITAT. 8.3 Per contra, ld DR justified the addition made by the AO and relied upon the findings of AO and Ld CIT(A).
8.4 We have heard the rival contentions and perused the material available on record. We noted the Income Tax department during the course of search on 05- 04-2019 seized exhibit -63 of Annexure AS which shows that Ramji Lal Sharma had received amount of Rs. 15,00,000/- on 08-03-2019 from the assessee. Further, 35 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR ADIT recorded the statement of assessee u/s 131 of I. Tax Act on 09-08-2019 wherein the assessee admitted giving of loan to Shri Ramji Lal Sharma. But the fact remains that the assessee has filed sworn affidavit of Shri Ramji Lal Sharma wherein he stated on oath that he has not received loan. The assessee explained that Shri Ramji Lal Sharma was required to mortgage his plot No. 46 and 47, Choudhary Colony-I, Village Bilwa, Teh. Sanganer, Jaipur and was required to execute an agreement to sale of these plots, and would handover the original papers of these two plots to assessee. Shri Ramji Lal Sharma did not handover the original papers of plot No 47, which is apparent from the fact that original papers relating to plot No 46 are in seizure and no paper relating to plot no 47 are under seizure, which clearly shows that the terms and conditions for disbursement of loan were not fulfilled by Shri Ramji Lal Sharma and in such situation, the loan cannot be disbursed to the borrower. The assessee has filed affidavit of Shri Ramji Lal Sharma, legal notice sent by Shri Ramji Lal Sharma for return of original documents and notarized settlement agreement before the AO and the AO has not made any further inquiry to controvert the evidence and explanation filed by the assessee. It is usual practice of finance business to prepare the documents in advance before disbursement of the loan and disbursement of loan is made after fulfilment of all the conditions of loan sanctioned. Further, the ld AR stated that the department has no material to show that loan was given in cash. The 36 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR presumption u/s 132(4A) and 292C is rebuttable presumption and the assessee has rebutted the same by filing the aforesaid evidences and explanation, which has not been controverted by ld AO. Further, we noted that the AO has relied upon the statement of assessee recorded by ADIT on 09-08-2019 u/s 131 of I. Tax Act. The ld AR submitted the copy of notice issued by ADIT dated 06-08-2019 which is u/s 131 of the Income Tax Act. The ld AR filed the copy of statement recorded by ADIT on 09-08-2019 u/s 131 of I. Tax Act. We noted that this notice as well statements are not u/s 131(1A) but u/s 131. Further, the assessee has retracted from the statement recorded by ADIT u/s 131 of the Act by filing an affidavit before the AO as soon as the assessee received the copy of the statement. The assessee in para 5 of the affidavit has stated as under:-
"5. In the statement recorded on 09.08.2019, in the office of ADIT-I, Jaipur, because of pressure, psychological torture, mentally disturbance, fear, threats and coercion, I forcibly made admission of certain undisclosed income which was actually incorrect, unearned and was not taxable.
It is relevant to mention here that my family members and myself are engaged in business of finance, lending of money to needy persons, parties and borrowers on interest basis. As a security of loans given by us, we obtain the several documents from the borrowers as well as in major cases of his guarantors also, which includes original cheques, promissory notes, cheque & promissory notes of guarantors, original property papers, agreements etc. During the course of search, the department seized these security documents taken from lenders most of which were duly recorded in our books of accounts.
Vide my letter dated 25.04.2019 (filed on 26.04.2019 to DIT-Investigation, Jaipur under copy of ADIT-1, Jaipur), 19.06.2019 (filed on 20.06.2019 to PDIT- Investigation, Jaipur under copy of ADIT-1, Jaipur), 06.08.2019 (filed on 07.08.2019 to PCIT-Central, Jaipur) It was requested to PDIT/PCIT Jaipur, to release some of these seized security documents as the same were required to submit into bank for realization of payment of outstanding loans or to return to the parties for realization 37 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR of the loan or for taking legal action against the defaulter parties/ borrowers. However, the same were not release to me and department insisted/pressured to me to make the surrender of undisclosed income. It was threaten to me that in case of non surrender of income as per wish of the department the seized documents would not be released to me. Therefore, in such circumstances I did not having any remedy except to make the surrender of income as desired and directed by department. Therefore, whatever income has been surrendered by me in my statement dated 09.08.2019 was not surrender of actual but forcibly agreed to surrender the same in pressure, psychological torture, mental disturbance, fear, threat, coercion and in order to get rid of the prolonged and harassing actions such as not release of documents, interrogation etc. It is pertinent to mention here that after making the surrender I again requested to PCIT-Central, Jaipur to release of original documents vide my letter dated 16.08.2019, however on 18.09.2019 some part papers/documents were released. Therefore, on 14.10.2019 and 28.01.2020 (filed on 30.01.2020), I again requested to PCIT-Central, Jaipur for release of some original documents and the same were released to me on 20.07.2020 i.e. almost after one and half years from the date of search. Vide my letter dated 24.03.2021 (filed on 25.03.2021) I further requested to PCIT, central, Jaipur for release of some more original documents, which released on 16.07.2021.
Since my original documents were, under seizure with department which were released to me in peace-meal and till date the complete documents have not been released, therefore, under the fear that in case I make the retraction from my surrender made in my statement recorded on 09.08.2019 my original papers will not be released and I would not able to take legal action against the defaulting borrowers. Further also the copies of my statements was not be provide to me so, I could not file the specific retraction affidavit to retract from the incorrect surrender made in my statement for the reasons narrated hereinabove. However, in my letter dated 02.03.2020 I clearly mentioned that in the statement recorded during post search because of mental tension, fear, pressure and threat I made admission of certain undisclosed income, which actually not earned or not taxable. For clarifying such incorrectness in my statement, because of above mention reasons, an affidavit specifying such incorrectness is require to be file and the same can only be filed upon receiving the copies of statements. Therefore, till the copies of statements not provided to me the same are not binding on me and the same are subject of further clarification by way of filing of certificatory affidavit."
The ld CIT(A) cited several decisions in his order to substantiate the evidentiary value of the statements recorded u/s 132(4) of the Act and we carefully gone through these decisions but the fact remains that the ADIT has recorded the statements of the assessee u/s 131 of the Act not u/s 132(4) or 131(1A) of the Act, 38 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR that too after four months of the search and also after receiving the request from the assessee to release some of the seized security documents which he required to return the borrowers on repayment of outstanding loans or for taking legal action against the defaulter borrowers and in absence of these documents his business would ruined, so he was in pressure. In these facts and circumstances the addition cannot be made on the basis of statements recorded u/s 131 of the Act by ADIT which were also retracted later on by the assessee by filing the sworn affidavit before the AO as soon as he received the copy of the statements. The AO has not made any further inquiry on the contents of the retraction affidavit and its contents were not controverted by the ld AO. Further Jaipur ITAT in the case of Shri Nirmal Kumar Kedia ITA Nos. 124 to 126/JP/2019 And 286 to 288/JP/2019 order dated 06-06-2018 has held that sworn affidavit should be accepted as evidence. The findings of ITAT in para 31 was as under:-
"31. From the record we found that the assessee had submitted the affidavit of several parties, wherein they confirmed the payments made against purchases of plots. In case of any doubt the AO could have made the direct verification from parties but the same has not been made. The AO did not issue any summon to any of these party, therefore the sworn affidavit submitted by the parties confirming the amount paid to the assessee group for purchases of plot should be accepted as admissible evidence. The impounded material does not show that the plots were actually sold at the same rate as mentioned in the impounded material. The AO/ld CIT(A) has not rebutted the contents of the affidavits."
In view of the forgoing discussion, facts and circumstances of the case and case relied upon by AR of the assessee the impugned addition of Rs. 15,00,000/- made 39 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR by him on account of loan to Shri Ramji Lal Sharma is not sustainable and hence the same stands deleted. Ground No. 3 in ITA No. 1423/JPR/2014 for A.Y. 2019-20 is allowed.
9. Ground No. 4 (ITA No. 1423/JPR/2014 of A.Y. 2019-20) :- is regarding the addition against loan of Rs. 1,25,00,000/- to Shri Lal Chand 9.1 During the course of search proceedings over the assessee group, the photocopy of some pages of notarized settlement agreement dated 14.06.2018 executed between Shri Lalchand Sharma, S/o Shri Hanuman Sahay and Shri Laxmikant Biyani was found & seized from the office premises of M/s Nidhi Financial Services as per page no. 46, 47 & 48 of exhibit-66 of the Annexure-AS. As per this agreement, Shri Lalchand, S/o Shri Hanuman Sahay could not repay the amount of loan till 14.09.2018. The ADIT recorded the statement of assessee on 09-08-2019 u/s 131 of I.Tax. The AO made the addition of Rs. 1,25,00,000/- relying over the statement of the assessee recorded by ADIT u/s 131 of the Act. The AO made this addition on the basis of his findings in para 6.2 as under:
"6.2 The reply filed by the assessee has been examined but not found satisfactory. During the course of post-search proceedings, the assessee categorically admitted that the amount of Rs.1,25,00,000/- was given to Shri Lal Chand Sharma out of undisclosed business income. During the course of post search enquiry, statement of the assessee was recorded u/s 131 of the Income Tax Act, 1961 on 09.08.2019 and he was asked to explain the details of annexure Exhibit-66 of Annezxure-AS, seized from the office premises of M/s Nidhi Financial Services. Shri Laxmikant Biyani. In reply to question no. 13 of his statement stated that cash loan of Rs.1,25,00,000/- was given to 40 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Shri Lalchand Sharma earlier which was not recorded in his regular books of accounts and admitted that he has earned this unaccounted income of Rs.1,25,00,000/- out of unaccounted business transactions. Relevant portion of his statement is reproduced hereunder:-
XXXX 6.3 In view of seized record and in the light of admission of the assessee during the post-search proceedings, it is apparent that the assessee advanced Rs.1,25,00,000/- to Shri Lal Chand Sharma. Therefore, the explanation submitted by the assessee is nothing but story cooked afterthought and the same is not acceptable. Hence, in the light of clear admission of Shri Laxmi Kant Biyani, evidences of advance in seized record and facts & circumstances of the evidences gathered as a result of search it is proved that the assessee earned undisclosed business income and out of that given loan of Rs.1,25,00,000/- to Shri Lal Chand Sharma. Hence, the addition of Rs.1,25,00,000/- is being made to the total income of the assessee for A.Y. 2019-20. Proceedings for penalty u/s 271AAB(1A)(b) of the Act is being initiated separately."
Ld CIT(A) confirmed the addition on the basis of his following findings in para
(xi) of his order:-
"As noted in the assessment order, during the course of search proceedings, the part of notarized settlement agreement dated 14:06.2018 executed between Shri Lalchand Sharma, S/o Shri Hanuman Sahay and Shri Laxmikant Biyani was found & seized from the office premises of M/s Nidhi Financial Services as per page no. 46,47 & 48 of exhibit-66 of the Annexure-AS. As per this agreement, Shri Lalchand, S/o Shri Hanuman Sahay could not repay the amount of loan till 14.09.2018.
During the course of post-search proceedings, the assessee categorically admitted that the amount of Rs. 1,25,00,000/- was given to Shri Lal Chand Sharma out of undisclosed business income. During the course of post search enquiry, statement of the assessee was recorded u/s131 of the Income Tax Act, 1961 on 09.08.2019 and he was asked to explain the details of annexure Exhibit-66 of Annezxure-AS, seized from the office premises of M/s Nidhi Financial Services. Shri Laxmikant Biyani. In reply to question no. 13 of his statement stated that cash loan of Rs. 1,25,00,000/- was given to Shri Lalchand Sharma earlier which was not recorded in his regular books of accounts and admitted that he had earlier earned this unaccounted income of 41 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Rs.1,25,00,000/-
During the appellate proceedings, the appellant has not furnished any information/evidences to rebut the findings of the AO. It is specifically observed here that inspite of giving many opportunities of being heard to the appellant, as detailed above the appellant has chosen not to make any submissions or furnish any information to substantiate and plead the grounds of appeal. There is substantial evidence on record in support of the assessment order. Based on the material available on file and in absence of any new submission/ finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the action of the ld. AO.
Further, in the Income Tax Act the specific legal presumption has been provided under section 132 and 292C of the Act.
In view of the above statutory express presumption and in view of the clear cut information in the seized material and in view of the absence of any strong & sterling documentary evidences to the contrary, and in view of the discussion in the applicable legal provisions and the ratio of the judgements as discussed in para (ii) to (ix) above the addition made is hereby confirmed in above terms."
9.2 The ld AR argued the case and submitted written submission as under:-
1. During the course of assessment proceeding the assessee categorically submitted that actually he did not give any cash loan/advance of Rs.
1,25,00,000/- to Shri Lal Chand and the Ld. A.O. blindly relying on the statement recorded u/s 131 and without considering the submission and evidence filed by the assessee, made the addition.
2. The actual facts of the transaction with Shri Lal Chand is that in August-2016 the assessee gave amount of Rs. 23,51,000/- (6,00,000/-+17,51,000/-) to Shri Lal Chand and as a security of loaned amount so given, a notarized agreement dated 30.08.2016 was executed in between assessee and Shri Lal Chand for sale of Reservation letter or say Arakshan Patra of plot. The copy of such agreement was filed before A.O. However, after the great pursuance Shri Lal Chand neither repaid the amount taken from assessee nor got transferred the property to assessee which agreed vide agreement dated 30.08.2016. Thus, to recover the amount, which was not intended to be repay back by Shri Lal Chand the assessee lodged a FIR on 05.05.2017 in Police Station Gandhi Nagar, Jaipur. Such FIR is lodged for forgery of Rs. 23,51,000/- which was 42 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR actual amount involved in dispute with this party. The copy of such FIR was also filed to A.O. Upon filing the FIR Shri Lal Chand came into the pressure and requested to assessee to allow him some time to repay back the money or in case non- repayment of money he proposed to transfer of captioned property to assessee. He further requested that mean time the FIR lodge against him may be withdrawn. As a security of his commitment Shri Lal Chand also give to assessee the papers of other properties and assured to assessee to settled his commitment within 10 months. At the assurance given by some common known person and relying on the commitment of Shri Lal Chand, the assessee filed an application in Police Station to dispose of FIR on the ground that the dispute with Shri Lal Chand has been settled. The concerning Police officer accepted the request of assessee and closed the FIR by taking no action against Shri Lal Chand.
However, again Shri Lal Chand did not fulfill his commitment and neither repaid money to assessee of Rs. 23,51,000/- + interest thereon nor transferred the committed property in the name of assessee. Therefore, the assessee threatens to Shri Lal Chand to take the legal action against him. However, again at the assurance of some commonly known person further time was allowed to Shri Lal Chand and some documents for settlement of dispute were prepared for very high-pitched amount as against actual amount of Rs. 23,51,000/- just to keep pressure on Shri Lal Chand. The seized paper 45 to 48 of annexure-66, seized from office of assessee was also got prepared for high pitch amount for above mention reason only and the same have no relevance with actual amount. However, Shri Lal Chand refused to sign such documents as the same were prepared with very high-pitched amount as against actual Rs. 23,51,000/- and only gave verbal assurance to settle the matter very soon.
After passing of time when the matter was not resolved the assessee filed a protest petition in court requesting to direct the Police investigation office to re-investigate the matter of my FIR lodged on 05.05.2017.
The seized document i.e. Page No. 46 to 48 of exhibit 66, is not completes i.e. all the pages of such proposed agreement are not available. Only few pages are under seizure, which is only a photocopy, which have no evidentiary value. The pages are not signed by the parties and the date of document is also not apparent from the photocopies. Though the seal of notary appearing on such photocopied pages but the same is not signed by notary. It is not in knowledge 43 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR of the assessee that how the seal of notary affixed on such photocopies. There is nothing in such photocopies from which it can visualized that this agreement was actually executed and the terms & conditions and amount mentioned therein actually materialized. Nothing is in these seized documents from which it can be visualized that the amount mentioned in these photocopies' pages are with respect of actual transactions, which was actually given by the assessee or receivable to the assessee or received by the assessee. From these seized papers no conclusion can be drawn and the same is just only a rough deaf and dumb document.
The seized document does not reflect that the assessee gave cash loan of Rs. 2.75 crore to Shri Lal Chand Sharma. There is no such reference in seized documents and from the seized documents this presumption cannot be drawn. As per the noting of seized document it can only be presumed that certain amount agreed to be paid by Lal Chand Sharma in settlement of certain dispute. However, from the seized records it is not apparent that what was such dispute and how much quantum involved when the dispute arose.
3. Evidence submitted by the assessee during a his contention In view of above submission, it is well evident that from the seized record it is evident that the assessee has not given amount of Rs. 2.75 Crore to Shri Lal Chand and on the other hand from following evidence submitted during the course of assessment it is well evident that only Rs. 23,51,000/- was given to this person and the entire dispute with this person arose with respect to this amount only: -
i) the agreement dated 30.08.2016 executed for purchase of property.
ii) Copy of FIR lodged against the party.
iii) The original sworn affidavit of Shri Lal Chand, wherein he affirmed these facts. Further, the affidavit of Shri Laxmikant Biyani was also filed wherein he also categorically denied of giving the loan. It is an admitted position of law that the contents of affidavits, which are not vague, should be accepted correct. The case law relied in para 4.2.2(3)(b), above is reiterated here also.
4. As apparent from the above submission, during the course of assessment proceeding, the assessee filed the ample admissible evidences to prove his contention but no heed was given by Ld. A.O. on such evidence and the same 44 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR were overlooked. Even in the assessment order also no discussion has been made to controverted to such evidences.
5. Till the date of assessment neither the amount of Rs. 23,51,000/- was received back from Shri Lal Chand nor the agreed property registered in the name of assessee. Thus, actually the amount of Rs. 23,51,000/- was given to Shri Lal Chand for which the dispute was going on with him. Since the amount of Rs. 23,51,000/- given to Shri Lal Chand was not realizable hence became business loss, therefore the same was not offered as income because eventually the taxable income on account of this amount because Nil. It is an undisputed fact that the advances which were claimed as bad debts/business loss were the business advances of the assessee and once it is proven fact that such advances have become unrecoverable, then in such a situation the deduction of such advances should be allowed to assessee as bad debts/business loss. The reliance is placed on following judgements
a) ACIT vs Shanti Swarup Goyal 27 Taxworld 410 (ITAT Jaipur)
b) CIT Vs Abdul Razak & Co. (1982) 136 ITR 825 (Guj)
c) CIT Vs Jawala Prasad Radha Kishan (1977) 107 ITR 540 (All)
6. It is also very much relevant to mention here that after great pursuance, finally Shri Ramji Lal settled the dispute by selling out his property of Rs. 61 lacs in to assessee in the AY 2023-24. Thus, eventually the assessee realized Rs. 61 lacs in the form of property and this Rs. 61 lacs have been offered by his as his income of A.Y. 2023-24. For verification, the copy of ITR, computation of total income and relevant page of profit & loss a/c, wherein this amount credited as income, are being submitted herewith." The ld AR further submitted that documents seized by the department does not reflect giving of loan of Rs. 1,25,00,000/- and the entire addition was made on the basis of statement of the assessee recorded by ADIT u/s 131 on 09-08-2019, and in view of his detailed submission and case laws submitted in Ground No 2, the statement recorded by the ADIT on 09-08-2019 u/s 131 of the Act, which too retracted also, cannot be accepted as evidence and on the basis of these statements 45 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR no addition can be made. He further submitted that presumption u/s 132(4A) and 292C is rebuttable presumption. The assessee filed affidavit of Shri Lal Chand before the AO affirming that he was given loan of Rs. 23,51,000/- by the assessee. The copy of FIR also supports the figure of Rs. 23,51,000/- of the loan given by the assessee to Shri Lal Chand. The AO has not made any further inquiry or recorded statement of Shri Lal Chand to controvert the contents of the affidavit. The ld A/R submitted that the AO himself has rejected the seized documents as the addition was not made on the basis of seized documents but he made the addition of Rs. 1,25,00,000 on the basis of statements recorded by ADIT u/s 131 of the Act which was without jurisdiction of ADIT and also retracted by the assessee by filing affidavit before the AO as soon as the copy of the statements received by the assessee. The ld AR submitted that the AO has not justified in making unwarranted addition and ld CIT(A) has also unjustified in confirming the addition, so the addition deserves to be deleted by ITAT Bench. 9.3 Per contra, ld DR justified the addition made by the AO and relied upon the findings of AO and Ld CIT(A).
9.4 We have heard the rival contentions and perused the material available on record. We noted the Income Tax department during the course of search on 05-04- 2019 over the assessee group seized photocopy of some pages of notarized 46 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR settlement agreement dated 14:06.2018 executed between Shri Lalchand Sharma, S/o Shri Hanuman Sahay and Shri Laxmikant Biyani which was found & seized from the office premises of M/s Nidhi Financial Services as per page no. 46, 47 & 48 of exhibit-66 of the Annexure-AS. As per this agreement, Shri Lalchand, S/o Shri Hanuman Sahay could not repay the amount of loan till 14.09.2018. Further, ADIT recorded the statement of assessee u/s 131 of I. Tax Act on 09-08-2019 wherein the assessee admitted giving of loan of Rs. 1,25,00,000/- to Shri Lal Chand. The AO made the addition of Rs. 1,25,00,000/- relying on this statement of the assessee. We noted that the AO has not brought to notice any seized document to show giving of loan of Rs. 1,25,00,000/- to Shri Lal Chand. The assessee filed copy of FIR against Lal Chand which shows giving of loan of Rs. 23.51 lacs to Shri Lal Chand and the facts and circumstances clearly establish that the loan amount was not recoverable in normal course of the business and it has become business loss to the assessee. Further, the assessee submitted that he recovered Rs. 61 lacs from the assessee by way of purchase of his property by the assessee in Financial Year 2022-23 which the assessee declared as his income in the return filed for AY 2023-24. The ld AR of the assessee submitted before us the copy of return filed for AY 2023-24. The AO neither relied upon the copy of FIR nor affidavit of Shri Lal Chand filed by the assessee but he made the addition merely on the basis of statements recorded by ADIT u/s 131 of the Act. In ground No 3 47 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR above in para 8.4 we have elaborately discussed and held that on the basis of statement recorded by ADIT u/s 131 of the Act which also retracted by the assessee addition cannot be made in the hands of the assessee. The findings made in this regard in ground No 3 in para 8.4 will hold good mutatis mutandis for this ground as well. In view of the forgoing discussion, facts and circumstances of the case and case relied upon by AR of the assessee the impugned addition of Rs. 1,25,00,000/- made by him on account of loan to Shri Lal Chand is not sustainable and hence the same stands deleted. Ground No. 4 in ITA No. 1423/JPR/2014 for A.Y. 2019-20 is allowed.
10. Ground No. 5 (ITA No. 1423/JPR/2014 of A.Y. 2019-20) :- is regarding the addition against loan of Rs. 15,00,000/- to Shri Banwari Lal Kumawat 10.1 During the course of search proceedings at the business premises of M/s Nidhi Financial Services, a loose paper file was found & seized as per exibhit- 71 of annexure AS. As per this exhibit, the assessee has given cash loan of Rs.15,00,000/- to Shri Banwari Lal Kumawat on 09.01.2019. The AO made the addition on the basis of following findings in Para 7.2 of assessment order as under:-
"7.2 The reply filed by the assessee has been examined but not found satisfactory. As per seized agreement of loan, it is clearly mentioned that Shri Banwari Lal Kumawat had received amount of Rs.15,00,000/- on 09.01.2019 from the assessee. No prudent person would have sign any document without receiving 48 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR the money. Therefore, the explanation submitted by the assessee is nothing but story cooked afterthought. Hence, notings of seized record and facts & circumstances of the evidences gathered as a result of search it is proved that the assessee earned undisclosed business income and given loan of Rs.15,00,000/- to Shri Banwari Lal Kumawat. Hence, the addition of Rs.15,00,000/- is being made to the total income of the assessee for A.Y. 2019-
20. Proceedings for penalty u/s 271AAB(1A)(b) of the Act is being initiated separately."
The ld CIT(A) confirmed the addition on the basis of his findings in para (xii) as under:-
"During the assessment proceedings the appellant made similar baseless contention which has already been adjudicated and rejected in case of loan to Shri Ramji Lal Sharma.
During the appellate proceedings, the appellant has not furnished any information/evidences to rebut the findings of the AO. It is specifically observed here that inspite of giving many opportunities of being heard to the appellant, as detailed above the appellant has chosen not to make any submissions or furnish any information to substantiate and plead the grounds of appeal. There is substantial evidence on record in support of the assessment order. Based on the material available on file and in absence of any new submission/ finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the action of the ld. AO.
Further, in the Income Tax Act the specific legal presumption has been provided under section 132 and 292C of the Act.
In view of the above statutory express presumption and in view of the clear cut information in the seized material and in view of the absence of any strong & sterling documentary evidences to the contrary, and in view of the discussion in the applicable legal provisions and the ratio of the judgements as discussed in para (ii) to (ix) above the addition made is hereby confirmed in above terms."
10.2 The ld AR argued the case and submitted written submission as under:-
1. "The assessee actually did not give any cash loan of Rs. 15,00,000/- to Shri 49 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Banwari Lal Kumawat and the Ld. A.O. blindly relying on the noting of seized record and not considering the submission and evidence filed by the assessee made the addition.
2. The actual fact of this case is that the amount of Rs. 20,00,000/- was paid to this party as loan though cheque and the same is duly recorded in books of accounts.
The payment of Rs. 15,00,000/- mentioned at Page 25 of the seizure annexure was actually did not made to the party but the same only mentioned in the documents just to cover & secure the interest portion if the party get default in future and to keep the pressure over the party for timely repayment of loan. It is relevant to mention here that to secured the loan and as per practice of trade of the assessee generally the assessee provides the loan after taking the similar documents of guarantor of borrower. In this case there was no guarantor, therefore the agreement of loan was prepared with higher amount to keep the pressure on the party if it defaults in making the repayment.
3. During the course of assessment proceeding of the assessee, to prove his contention the assessee submitted the original sworn affidavit of Shri Banwari Lal Kumawat wherein he confirmed the facts of not taking any cash loan of Rs. 15 lacs from the assessee. It is an admitted position of law that the contents of affidavits, which are not vague, should be accepted correct. The case law relied in para 4.2.2(3)(b), above is reiterated here also.
4. As apparent from the above submission, during the course of assessment proceeding, the assessee filed the admissible evidences to prove his contention but no heed was given by Ld. A.O. on such evidence and the same were overlooked. Even in the assessment order also no discussion has been made to controverted to such evidences."
The ld AR further submitted that presumption u/s 132(4A) and 292C of the Act is rebuttable presumption which he rebutted by filing the affidavit of Shri Banwari Lal Kumawat and the ld AO has not controverted the same by making any further inquiry. Further in view of his detailed submission in ground No 2 and 3 no addition can be made on the basis of statements recorded by ADIT u/s 131 of the Act. The ld AR submitted that the ld AO has not justified in making unwarranted 50 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR addition and ld CIT(A) has also unjustified in confirming the addition, so the addition deserves to be deleted by ITAT Bench.
10.3 Per contra, ld DR justified the addition made by the AO and relied upon the findings of ld AO and Ld CIT(A).
10.4 We have heard the rival contentions and perused the material available on record. We noted the Income Tax department during the course of search on 05- 04-2019 at the business premises of M/s Nidhi Financial Services, a loose paper file was found & seized as per exibhit-71 of annexure AS. As per this exhibit, the assessee has given cash loan of Rs.15,00,000/- to Shri Banwari Lal Kumawat on 09.01.2019. We noted that the assessee explained that he paid Rs. 20,00,000/- to Shri Banwari Lal Kumawat by cheque which is verifiable from books of account and the assessee got signed additional paper for Rs. 15,00,000/- as security for interest. It is general practice of the assessee to get the papers signed from guarantor also but in this case no outside guarantor was there so he got the additional paper signed from Shri Banwari Lal Kumawat in lieu of guarantor for security of interest. The presumption u/s 132(4) and 292C is rebuttable presumption and he rebutted the presumption by filing the affidavit of Shri Banwari Lal Kumawat and the AO has not made any inquiry to controvert the contents of the affidavit. In ground No 3 above in para 8.4 we have elaborately 51 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR discussed and held that on the basis of statement recorded by ADIT u/s 131 of the Act which also retracted by the assessee addition cannot be made in the hands of the assessee. Further the assessee has filed affidavit of Shri Banwari Lal Kumawat and the AO has not made any inquiry to controvert the contents of the affidavit and in ground No 3 we have held that the affidavit which have not been controverted by the AO should be accepted as evidence. The findings made in this regard in ground No 3 in para 8.4 will hold good mutatis mutandis for this ground as well. In view of the forgoing discussion, facts and circumstances of the case and case relied upon by AR of the assessee the impugned addition of Rs. 15,00,000/- made by him on account of loan to Shri Banwari Lal Kumawat is not sustainable and hence the same stands deleted. Ground No. 5 in ITA No. 1423/JPR/2014 for A.Y. 2019-20 is allowed.
11. Ground No. 6 (ITA No. 1423/JPR/2014 of A.Y. 2019-20) :- is regarding the addition against loan of Rs. 40,00,000/- to Shri Malik Khan. 11.1 During the course of search action u/s 132 of the IT Act at the business premises of M/s Nidhi Financial Services prop. Shri Laxmikant Biyani, a loose paper file was found & seized as per exibhit-36 of annexure AS. As per this exhibit, Shri Laxmikant Biyani has given loan of Rs. 50,00,000/- [3000000+2000000] to Shri Malik Khan. The ld AO made the addition of Rs. 52
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR 40,00,000/- on the basis of his following findings in para 8.2 and 8.3 of Assessment Order.
8.2 The reply filed by the assessee has been examined but not found satisfactory. The contention of the assessee that he has paid loan of Rs.10 lacs only to Shri Malik Khan is not acceptable as Shri Malik Khan has signed two promissory notes for accepting the loans of Rs.50 lacs. Promissory notes reflecting the details of loans of Rs.50 lacs are reproduced hereunder xxxxx 8.3 The submission of the assessee that he has given only an amount of Rs. 10 lakh is not acceptable as the promissory notes revealed that the loan of Rs.50,00,000/- received by Shri Malik Khan. Shri Malik Khan has signed promissory notes as well as receipts in which he has admitted that loan of Rs.50 Lakh has been received by him. The promissory note is a security for the lendee/lendor issued by the lender. The promissory note generally contains amount advanced/amount due, date of transaction, Name of lender and name & signature of lendee. It is general practice that no one can sign on promissory note as well as receipt without receiving the fund. Thus, it is clear that the assessee has given loan of Rs.50 lacs to Shri Malik Khan.
The ld CIT(A) confirmed the addition on the basis of his findings in para (xiii) as under:-
"As noted by the ld. AO, Shri Malik Khan had signed two promissory notes for accepting the loans of Rs.50 lacs which show complete details of the same. The promissory notes revealed that the loan of Rs.50,00,000/- received by Shri Malik Khan. Shri Malik Khan has signed promissory notes as well as receipts in which he has admitted that loan of Rs.50 Lakh has been received by him. The promissory note is a security for the lendee/lendor issued by the lender. The promissory note generally contains amount advanced/amount due, date of transaction, Name of lender and name & signature of lendee. It is general practice that no one can sign on promissory note as well as receipt without receiving the fund.
During the appellate proceedings, the appellant has not furnished any 53 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR information/evidences to rebut the findings of the AO. It is specifically observed here that inspite of giving many opportunities of being heard to the appellant, as detailed above the appellant has chosen not to make any submissions or furnish any information to substantiate and plead the grounds of appeal. There is substantial evidence on record in support of the assessment order. Based on the material available on file and in absence of any new submission/ finding and any other material for which the appellant was provided so many opportunities, I do not find any infirmity in the action of the ld. AO.
Further, in the Income Tax Act the specific legal presumption has been provided under section 132 and 292C of the Act.
In view of the above statutory express presumption and in view of the clear cut information in the seized material and in view of the absence of any strong & sterling documentary evidences to the contrary, and in view of the discussion in the applicable legal provisions and the ratio of the judgements as discussed in para (ii) to
(ix) above the addition made is hereby confirmed in above terms.
11.2 The ld AR argued the case and submitted written submission as under:-
1. The assessee actually did not give any cash loan of Rs. 40,00,000/- to Shri Malik Khan and the Ld. A.O. blindly relying on the noting of seized record and not considering the submission and evidence filed by the assessee made the addition.
The assessee gave only loan of Rs. 10 lacs to Shri Malik Khan (PROP. KK SONS) on 30.03.019 through cheque No. 020588. This amount is duly recorded in books of accounts of the assessee. Except to this no further amount was actually given to this party.
2. The actual fact of this case is that the party was in need of funds, therefore he approached to assessee and requested for loan of Rs. 50,00,000/-. The assessee agreed to lend Rs. 50,00,000/- to this party and accordingly the documents for loan of Rs. 50,00,000/- were got prepared and upon completion of formality the amount of Rs. 10,00,000/- immediately disbursed to the party through a/c payee cheque. Since at that point of time the balance payment of Rs. 40 lacs was readily not available with assessee and the assessee was going out of India, therefore, he said to party to disburse the balance amount after coming back to India. Since, meanwhile the Income Tax search was conducted over the office of assessee, which resulted disturbance of business operation for time being and thereafter the party was not interested to take the balance amount, as the same was no more required to him. Thus, the balance amount of Rs. 40 lacs were not given to party 54 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR till date.
3. During the course of assessment proceeding of the assessee, to prove his contention the assessee submitted the original sworn affidavit of Shri Malik Khan wherein he confirmed the facts of not taking any cash loan of Rs. 40 lacs from the assessee. It is an admitted position of law that the contents of affidavits, which are not vague, should be accepted correct. The case law relied in para 4.2.2(3)(b), above is reiterated here also.
It is further relevant to mention here that Shri Malik Khan did not repay the loan given to him, therefore a court case was filed against him. The court case was also filed for recovery of Rs. 10,00,000/- only, which itself conclusively proves that loan of Rs. 10,00,000/- was only given to this party. For verification of fact the copy of court case, legal notice and other related documents were also filed to Ld. A.O. It is relevant to mention here that had loan of Rs. 50 lacs were given to the assessee then court case was to be filed for Rs. 50 lacs not for 10 lacs.
4. As apparent from the above submission, during the course of assessment proceeding, the assessee filed the admissible evidences to prove his contention but no heed was given by Ld. A.O. on such evidence and the same were overlooked. Even in the assessment order also no discussion has been made to controverted to such evidences.
The ld AR further submitted the assessee has filed sworn affidavit of Malik Khan which has not been controverted by the AO and he made no further inquiry. He further submitted that the assessee gave Rs. 10 lacs to Shri Malik Khan by cheque which is not recoverable in normal course of the business and the assessee has given legal notice to Shri Malik Khan and also filed court case for recovery of the loan amount of Rs. 10 lacs only which shows that the assessee gave the loan of Rs. 10 lacs only and this loan is also not recoverable in normal course of the business and has become business loss to the assessee. The ld AR submitted that 55 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR the ld AO has not justified in making unwarranted addition and ld CIT(A) has also unjustified in confirming the addition, so the addition deserves to be deleted by ITAT Bench.
11.3 Per contra, ld DR justified the addition made by the ld AO and relied upon the findings of ld AO and Ld CIT(A).
11.4 We have heard the rival contentions and perused the material available on record. We noted the Income Tax department during the course of search on 05- 04-2019 at the business premises of M/s Nidhi Financial Services, a loose paper file was found & seized as per exhibit-36 of annexure AS. As per this exhibit, Shri Laxmikant Biyani has given loan of Rs. 50,00,000/- [3000000+2000000] to Shri Malik Khan. The assessee explained that he has given loan of Rs. 10,00,000/- by cheque and balance of Rs. 40,00,000/- could not be given to Shri Malik Khan as he was expecting to receive the payments in few days from others, which he did not receive. He explained that it is normal practice of the business to get the signature of the borrower on all documents in advance. The assessee also filed sworn affidavit of Shri Malik Khan wherein he affirmed the receiving of loan of Rs. 10.00 lacs by Cheque. We noted that the assessee has also filed copy of legal notice given to Shri Malik Khan and copy of recovery case filed by the assessee in Court against him which was for Rs. 10.00 lacs. The assessee has rebutted the 56 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR presumption u/s 132(4A) and 292C by filing these documents and the ld AO has not made any inquiry and has not controverted the contents of affidavit. We also noted that recovery court case was filed for recovery of Rs. 10 lacs not for 50 lacs. Had he has given the loan of Rs. 50 lacs then recovery court case must be also for 50 lacs which is not in this case, which clearly shows that the assessee has paid Rs. 10 lacs as loan to Malik Khan which too by cheque. In ground No 3 we have held that the affidavit which have not been controverted by the AO, should be accepted as evidence. The findings made in this regard in ground No 3 in para 8.4 will hold good mutatis mutandis for this ground as well. In view of the forgoing discussion, facts and circumstances of the case and case relied upon by AR of the assessee the impugned addition of Rs. 40,00,000/- made by him on account of loan to Shri Malik Khan is not sustainable and hence the same stands deleted. Ground No. 6 in ITA No. 1423/JPR/2014 for A.Y. 2019-20 is allowed.
12. Ground No.3 (ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, and ITA No 1422/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18 and A.Y. 2018-19 respectively) is regarding the addition of Rs. 15,00,000/- (A.Y. 2014-15), Rs. 5,50,000/- (A.Y. 2015-16), Rs. 23,25,000/- (A.Y. 2016-17), Rs. 62,50,000/- (A.Y. 2017-18) and Rs. 73,80,000/- (A.Y. 2018-19) is on account of loan/advance given to various parries.
57
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR 12.1 During the search proceedings at 607A, Crystal Mall, Bani Park, Jaipur two excel files of headed with Court Cases (party status) and Court Cases -Manish Patni were found in the computer hard disk in which details of loans given by the assessee were mentioned and these files show the status of court cases against such parties. The AO mentioned that during the course of post search enquiries, statement of Shri Laxmikant Biyani, the assessee, was recorded u/s 131 of the IT Act on 09.08.2019, in which he was asked to verify the loans related to court cases (party status) and court cases-Manish Patni with the regular books of accounts. The assessee, in reply to question no. 16, has stated that these loans, cases have been filled before the Hon'ble Court to recover the loans. He has also stated that majority of loans had been paid through banking channel which are recorded in the regular books of accounts and remaining loans were given in cash to various persons in various years which are earned from the unaccounted financial services. During the statement recorded u/s 131 of the IT Act on 09.08.2019, the assessee has submitted list of court cases (party status) and court Cases-Manish Patni. As per this list, which is a part of statement recorded u/s 131 of the I.T. Act on 09.08.2019, Shri Laxmikant Biyani, the unaccounted cash loans given to various party are calculated from AY 2007-08 to AY 2018-19. During the course of post- search proceedings, the assessee categorically admitted that this much amount was given out of undisclosed income. Details of assessment year wise cash loans 58 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR were calculated as under:
Amount of cash loans FY Relevant A.Y.
30,000/- FY 2006-07 2007-08
80,000/- FY 2008-09 2009-10
1,00,000/- FY 2010-11 2011-12
4,25,000 /- FY 2011-12 2012-13
26,00,000/- FY 2012-13 2013-14
15,00,000/- FY 2013-14 2014-15
5,50,000/- FY 2014-15 2015-16
23,25,000/- FY 2015-16 2016-17
62,50,000/- FY 2016-17 2017-18
73,80,000/- FY 2017-18 2018-19
The AO found the explanation submitted by the assessee is nothing but story cooked afterthought. The AO held that in the light of clear admission of the assessee during the post-search proceedings, notings of seized record and facts & circumstances of the evidences gathered as a result of search it is proved that the assessee earned undisclosed business income and given loan and made the addition in respective assessment years as under:-
59
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR Relevant A.Y. Amount of cash loans 2014-15 15,00,000/-
2015-16 5,50,000/-
2016-17 23,25,000/-
2017-18 62,50,000/-
2018-19 73,80,000/-
The ld CIT(A) confirmed the addition by holding that during the appellate proceedings, the appellant has not furnished any information/evidences to rebut the findings of the AO. It is specifically observed here that in spite of giving many opportunities of being heard to the appellant, as detailed above the appellant has chosen not to make any submissions or furnish any information to substantiate and plead the grounds of appeal. Further regarding the statements made by the appellant the appellant has not filed any valid retraction letter along with the affidavit in the timely manner giving the justification along with the supporting evidences. The ld CIT(A) cited several case laws to substantiate the evidentiary value of statements recorded under section 132(4) of Income Tax Act.
The ld CIT(A) held that the appellant has made a claim of bad debts or business loss without any supporting. First of all, the appellant has not shown that what is the amount of interest included in such balances for each of such party and for this the appellant was also required to show that the interest was not received earlier 60 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR etc. The appellant has also not shown that the same actually became bad. There is no evidence and no entry for the same in the books of accounts. Also it is seen that the appellant has lodged court case thus it cannot be accepted that the debt had become bad. The claim of the appellant is not bona fide and not genuine and is merely an attempt to not to pay the taxes. The ld CIT(A) held that in the assessment order another contention of the appellant is mentioned that advance/loans were business loans or advances. As the above mention amount was not paid by the parties, thus the same became bad and is allowable to the assessee as business loss, therefore eventually the taxable income would be Nil, because on the credit side the it will be income of the assessee and on debit side the same will be allowed as business loss. Similar contention has been raised in ground of appeal. The appellant has also not shown that the loans actually became bad. There is no evidence and no entry for the same in the books of accounts. Also it is seen that the appellant has lodged court case thus it cannot be accepted that the debt had become bad. The claim of the appellant is not bona fide and not genuine and is merely an attempt to not to pay the taxes. It is also important that no deduction is allowable in the income taxable under section 69 / 69A etc. of the Act as per section 115BBE of the Act. On this ground also the deduction of alleged bad debts is not allowable to the appellant.
12.2 The ld AR argued the case and submitted written submission as under:-61
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
1. During the course of search, the department found an excel sheet in which a list head with "Court Cases Party's Status" was seized. From the heading of the list, it is well apparent that this is with regard to the cases filed against the borrower parties who made the default in repayment of loan/advance given by the assessee and it is also evident that as on the date of search such case was pending as till that the amount could not be recovered from the party. The amount mentioned in the list is entirely not of principal of loans. It also includes the outstanding interest amount, which not realized. The assessee was in Finance business since long period and the documents for loan was found during search since AY 2007-08. The assessee received repayment of loans which were given prior to AY 2014-15 and the same was utilized/rotated back for giving the business loans/advances in AY 2014-15 to AY 2019-20.
2. During the course of assessment proceeding, the assessee submitted the copies of court cases or legal notice/other documents regarding the ongoing litigation with the borrower parties for recovery of the amount. From the documents filed by the assessee, it conclusively proves that the loan given to those parties are not recoverable and converted into business loss or bad and could not be received till the date of search. The Ld. A.O. did not make any inquiry and also not make any comments on the submission filed by the assessee.
3. It is an undisputed fact that lending of funds was part of the business of the assessee and the loan/advance, as found noted in seized record, were business assets and part of the business activities of the assessee. since, these loans/advances were not paid by the parties, thus the same became business loss/bad and is allowable to the assessee as business loss, therefore eventually the taxable income would be Nil, because on the credit side the it will be income of the assessee and on debit side the same will be allowed as business loss.
4. It is an undisputed fact that the loan/advances which were claimed as bad debts/business loss were the business advances of the assessee and once it is proven fact that such advances have become unrecoverable, then in such a situation the deduction of such advances should be allowed to assessee as bad debts/business loss. The reliance is placed on following judgeme
a) ACIT vs Shanti Swarup Goyal 27 Taxworld 410 (ITAT Jaipur)
b) CIT Vs Abdul Razak & Co. (1982) 136 ITR 825 (Guj)
c) CIT Vs Jawala Prasad Radha Kishan (1977) 107 ITR 540 (All)
5. It is open to department to treated such loan/advance as income of the assessee as and when the same are recovered by the assessee.62
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR The ld AR submitted that the AO has not justified in making unwarranted addition and ld CIT(A) has unjustified in confirming the addition, so the addition deserves to be deleted by Hon'ble ITAT.
12.3 Per contra, ld DR justified the addition made by the AO and relied upon the findings of ld AO and Ld CIT(A).
12.4 We have heard the rival contentions and perused the material available on record. We noted that during the course of search proceedings at 607A, Crystal Mall, Bani Park, Jaipur two excel files of headed with Court Cases (party status) and Court Cases -Manish Patni were found in the computer hard disk in which details of loans given by the assessee were mentioned. The ld AR of the assessee explained that from the heading of the list, it is well apparent that this is with regard to the cases filed against the borrower parties who were not re-paying loan/advance given by the assessee and it is also evident that as on the date of search such case was pending as till that the amount could not be recovered from the party and the amount against these loans are not recoverable in normal course of the business. We noted that the assessee submitted before the AO the copies of court cases, legal notice/other documents regarding the ongoing litigation with the borrower parties for recovery of the amount. From the documents filed by the assessee, it conclusively proves that the loan given to those parties are not 63 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR recoverable and converted into business loss or bad and could not be received till the date of search. The A.O. did not make any further inquiry. We noted that lending of funds was part of the business of the assessee and the loan/advance, as found noted in seized record, were business assets and part of the business activities of the assessee and since, these loans/advances were not paid by the parties, thus the same became business loss to the assessee. Section 28 of the I.T. Act deals with the mechanism to compute profits from business or profession. While computing such profits, a loss incurred during an assessee's business is allowed to be reduced from the profits of the business. As per accounting principles, business loss is allowable in order to derive the true profits of the business or profession. On the other hand, sections 30-36 provide specific expenditures that are allowable as deductions. Section 37 is a residuary and general provision. A business trading loss is deductible in computing the profit earned by a business if the following conditions are satisfied:
(i) The loss should be a real loss and not notional or fictitious.
(ii) The loss should be a loss on revenue account and not on the capital account.
(iii) The loss must have actually arisen and been incurred, not merely anticipated or certain to occur in the future.
(iv) The loss should be one that is incidental to the carrying on of the business and must arise or spring directly from or be incidental to the carrying out of the operation of the assessee's business.64
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR
v) There should be no prohibition mentioned in the provisions of the Income Tax Act, against its deductibility.
The claim of assessee is business loss as opposed to a business expenditure which is allowable u/s 28/ 37 of I.T. Act as the assessee satisfies all the above mentioned conditions. Therefore, if income is taken on credit side against the loan, then simultaneously loss is to be allowed as the loans are not recoverable and the net result would be zero. Hon'ble Gujarat High Court in the case of CIT Vs Abdul Razak & Co (1982) 136 ITR 825 (Guj) has allowed the non recoverable loan as business loss u/s 28 of the Act on the basis of the following findings:-
"In view of these well accepted legal principles, in our opinion, by necessary implication, either short-term or long-term financing is an integral part of the commission agency business. As a commission agent, one either buys the goods or sells the goods for one's principal. When he acts as a commission agent for sales of goods, he advances the amount to his principal and adjusts the sale proceeds against such advances. When he acts as a commission agent for buying the goods, he purchases the goods for supply to his principal from his funds and then he is reimbursed by his principal on supply of such goods. A commission agent, therefore, has got to advance amounts from time to time according to the nature of his business. It may be a short-term advance if he is a commission agent for purchase of goods or it may be a long-term advance if it is for sale of goods. We have, therefore, not been able to appreciate as to how the Tribunal approached the problem as if the financial lending which is involved in the business of commission agency is a separate and exclusive business and not an integral part of the commission agency business. It is an admitted position here before us that the assessee-firm was doing the business as commission agents and dealers in grocery articles. It is also an admitted position that M/s. Mohmad Peer Mohmad of Nasik engaged the assessee-firm as commission agents for purposes of purchase of goods. The one set of account in the trading books of the assessee- firm comprises of this commission agency business for purchase of the goods carried on by the assessee-firm on behalf of M/s. Mohmad Peer Mohmad of Nasik. It is no doubt true that the bad debt which has been claimed in the present case is in the course of these advances comprised in another set of account of M/s. Mohmad Peer Mohmad of Nasik in the trading books of the assessee-firm known as " sarafi account ". It is, however, in our opinion, the inference of the Tribunal from these two sets of accounts of M/s. Mohmad Peer Mohmad of Nasik that these 65 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR were two different businesses, which is not justified. It is no doubt true that in the present case before us the bad debt which has been claimed by the assessee-firm was in respect of advance made to the principal, M/s. Mohmad Peer Mohmad of Nasik for paying off their debt to M/s. Gokaldas Virjibhai of Sangli with whom the said principal had independent dealings. It is also an admitted position that the trading account of M/s. Mohmad Peer Mohmad of Nasik in the books of the assessee-firm was settled and there was no outstanding which had been carried to the sarafi account of the said party. These facts, however, in our opinion, are not sufficient to necessarily reach the conclusion as has been done by the Tribunal that the lending was not a part of the general commission agency business. The general lien granted, inter alia, to the factors who are the commission agents for sale of goods under s. 171 and of agents under s. 221 of the Indian Contract Act extends to the general balance of account of their principal which would, therefore, necessarily include the advances made apart from strictly in the course of the business as factors or commission agents for purchase and supply of goods. It is a matter of surprise how the Tribunal lost sight of the finding made by the ITO that in the course of the business of commission agency, the assessee-firm had advanced money to the constituents who were required to pay interest on such advances. It is no doubt true that the ITO has found that these advances were made to the constituents against the goods received from them for sale on commission basis, but that observation of the ITO, in our opinion, does not detract from the nature of the business of commission agents, whether for sale or purchase of the goods, which, in our opinion, necessarily requires the advances to be made. We should not be, however, understood to subscribe to the view that if in a given case a trader doing commission agency business makes advances or lends money to an unknown outsider or to a complete stranger, it would be a part of his commission agency business. In the present case, however the ITO has not only found that the assessee-firm was making such advances in the course of commission agency business but the ITO, Rajkot, has also recorded the statement of one of the partners of the assessee-firm where Shri Ahmed Ibrahim Sahigra stated, inter alia, that the firm was carrying on money-lending business at Bombay and no licence was necessary for such business and the transactions were recorded in the common trading books of account of the firm. In answer to question No. 10 he stated that M/s. Mohmad Peer Mohmad of Nasik approached them for loan and requested them to send money on their behalf to M/s. Gokaldas Virjibhai of Sangli and they complied with the request. As a matter of fact, in the question put to the deponent, the ITO suggested that since M/s. Gokaldas Virjibhai of Sangli from whom M/s. Mohmad Peer Mohmad of Nasik had purchased the goods were not prepared to wait for their dues and as the latter enjoyed better credit facility with the assessee-firm they approached them for paying off the dues to the Sangli party. In answer to question No. 17 as to when they post entries for interest in the books the deponent stated that in the accounts of their constituents they make entries at the end of the accounting period while in the case of other advances, the entries are made when the interest amounts are received. Admittedly, M/s. Mohmad Peer Mohmad of Nasik was the constituent of the assessee-firm. The ITO, Nasik, has also recorded the statement of one of the 66 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR partner of this debtor-firm, where the deponent-partner has stated that their firm of M/s. Mohmad Peer Mohmad of Nasik had trading relations with the assessee- firm for more than 30 years, and they enjoyed greater credit facility with them which was not available from M/s. Gokaldas Virjibhai of Sangli. The Tribunal has overlooked these statements of the assessee and the debtor-firm where it has been clearly stated that these advances were asked for and made in fact having regard to the commercial relations between the parties and the commercial relations were admittedly of principal and commission agents. In our opinion, therefore, the Tribunal was not justified on the facts and in the circumstances of the case to hold that the advance to M/s. Mohmad Peer Mohmad of Nasik was not in the ordinary course of business of the assessee-firm and merely incidental to it. As held by this court in CIT v. Equitorial Pvt. Ltd. [1974] Taxation 37(3)-82, the debt owed by M/s. Mohmad Peer Mohmad of Nasik was one which sprang directly from the business, of the assessee and was allowable as a bad debt, and, consequently, therefore, a trading loss under section 28(1). It is no doubt true that every loss is not so deductible unless it is incurred in carrying out the operation of the business. [vide CIT v. Nainital Bank Ltd. [1965] 55 ITR 707 (SC)]. In that view of the matter, therefore, for the reasons stated in this order, we, are of the opinion that the said loss being a bad debt is allowable as trading loss under s. 28 of the I.T. Act, 1961, and, therefore, for the reasons stated hereinabove, the answer to the question referred to us is in the affirmative, that is, in favour of the assessee and against the revenue."
Further, we noted that the AO has relied upon the statement of assessee recorded by ADIT on 09-08-2019 u/s 131 of I.Tax Act. The ld AR submitted the copy of notice issued by ADIT dated 06-08-2019 which is u/s 131 of the Income Tax Act. The ld AR filed the copy of statement recorded by ADIT on 09-08-2019 u/s 131 of I.Tax Act. We noted that this notice as well statements are not u/s 131(1A) but u/s
131. Further, the assessee has retracted from the statement recorded by ADIT u/s 131 of the Act by filing an affidavit before the AO as soon as the assessee received the copy of the statement. In ground No 3 for AY 2019-20 (ITA No 1423/JPR/2024) in para 8.4 above, we have elaborately discussed and held that on the basis of statement recorded by ADIT u/s 131 of the Act which also retracted by 67 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR the assessee addition cannot be made in the hands of the assessee. The findings made in this regard in ground No 3 for AY 2019-20 (ITA No 1423/JPR/2024) in para 8.4 above will hold good mutatis mutandis for this ground as well. In view of the forgoing discussion, facts and circumstances of the case and case relied upon by AR of the assessee, the impugned addition of Rs. 15,00,000/- for A.Y. 2014-15, Rs. 5,50,000/- for A.Y. 2015-16, Rs. 23,25,000/- for A.Y. 2016-17, Rs. 62,50,000/- for A.Y. 2017-18 and Rs. 73,80,000/- for A.Y. 2018-19 made by him on account of loan is not sustainable and hence the same stands deleted. However, it is directed to AO that if any amount is recovered from these impugned parties, then such recovered amount may be taxed as business income of the year in which recovery is made. In the result Ground No.3 (ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, and ITA No 1422/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18 and A.Y. 2018-19 respectively is allowed.
13. Ground No.4 (ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, and ITA No 1422/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18 and A.Y. 2018-19 respectively and Ground No 7 in ITA No. ITA No. 1423/JPR/2024 for AY 2019-20. In this ground of appeal, the assessee challenged the finding of Ld. CIT (A), wherein he held that the assessee has not explained the source of the 68 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR unexplained money, which was used for giving the loan and also erred in holding that such unexplained money is taxable u/s 69A of the Act and should be taxed the same as per section 115BBE of the Act.
13.1 The AO taxed the loans as business income by relaying the statement of the assessee u/s 131 of the Act recorded by ADIT on 09-08-2019. The ld CIT(A) relying on several case laws held that these loans should be taxed u/s 69A and provisions of section 115BBE should be applied and no deduction of set off of business loss should be given to the assessee against the Income against loans and advances.
13.2 The ld AR argued the case and submitted written submission as under:-
1. The ld AO considering the material available on record, considering the fact that the assessee was in Finance Business since long before the search and even loan documents were found from AY 2007-08 and also considering the statements recorded u/s 131 of Income Tax Act by ADIT, held that the assessee earned undisclosed business income which was utilized in making the loans and advances.
2. Contrary to the findings of ld AO, the Ld. CIT (A) held that the alleged business advances are unexplained money of the assessee and the same is taxable u/s 69A of the Act and accordingly taxable by applying the provisions of section 115BBE of the Act without allowing any deduction. However, the notice u/s 251 (2) as required to be given for enhancement of tax liability has not been issued, thus this finding is not valid in the eyes of the law as the same has given without providing the opportunity to the assessee.
3. In this regard it is submitted that such advances were business advance and, in the assessment, order the Ld. A.O. after considering the facts of the case, treated the same as business income of the assessee. The assessee was in Finance business since long period and the documents for loan was found during search since AY 2007-08. The assessee earned income from business operation and the same was utilized for giving the business loans/advances. Advances and loans given prior to 69 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR AY 2014-15 were realized and rotated back in fresh loan and advances during AY 2014-15 to AY 2019-20. The loan/advance given by the assessee was his business assets like stock in trade in the case of traders. It is an admitted position of law that the business assets can always be taxed as business income only. Therefore.
the ld. CIT (A) is not correct in holding that such advances should be taxable u/s 69A of the Act.
In this regard, the reliance is placed on following decisions : -
i) Veer Enterprises vs. DCIT 158 taxmann.com 655 (Chandigarh Tribunal).
ii) Baljinder Kumar vs. DCIT 157 taxmann.com 739 (Chandigarh Tribunal).
iii) Parmod Singla vs. ACIT 154 taxmann.com 347 (Chandigarh Tribunal).
iv) [2024] 158 taxmann.com 679 (Amritsar - Trib.) [06-12-2023].
v) ITAT Jaipur Nikhhar Fashions vs ACIT, Circle-2, Jaipur ITA No 1020/JPR/2024 (AY 2017-18) order dated 21-11-2024.
13.3 Per contra, ld DR justified the addition made by the AO and relied upon the findings of AO and Ld CIT(A).
13.4 We have heard the rival contentions and perused the material available on record. We noted the assessee is in the business of financing the loans. The department found the evidence in search that the assessee was engaged in this business since long and loan documents were found as the result of search since AY 2007-08. The department has carried out intensive search operation and no material/documentation on record which even remotely demonstrated that assessee had any other source of income other than the business. The only source of income of the appellant is business income from advancing of loans etc. The revenue was not able to advance any evidence during assessment proceeding that the said income is not connected with the business income of the assessee, hence all the 70 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR income earned by the assessee relate to business income only. The ld AO made the addition by holding that:-
"Hence, in the light of clear admission of the assessee during post search proceedings, notings of seized record and facts & circumstances of the evidences gathered as a result of search it is proved that the assessee earned undisclosed business income and given loan...."
Contrary to the above findings of AO, the ld CIT(A) made the following findings in para (vi) of his order:-
"(vi) Further alternatively, it is important that the appellant has not explained the source of the unexplained money which was used in giving the loan. Such unexplained money is taxable under section 69A of the Act irrespectively of the recovery of the debt.
It is also important that no deduction is allowable in the income taxable under section 69 / 69A of the Act as per section 115BBE of the Act. On this ground also deduction of alleged bad debts is not allowable to the appellant. Further, the income added in the assessment order can not be treated as business income of the appellant. On this ground also deduction of the alleged bad-debts is not allowable."
The AO assessed the income as business income utilized in giving the loans after considering the admission of the assessee during post search proceedings, notings of seized records and facts & circumstances of the evidences gathered as a result of search and contra to the findings of the AO, ld CIT(A) held that loans are taxable u/s 69A of the Act and provisions of section 115BBE are applicable over the addition so made by the ld AO. However, the ld CIT(A) has not brought on record 71 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR any inquiry made by him to support his findings. For the sake of clarity, we are reproducing the provisions of section 69A of I. Tax Act as under:-
"69A Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is 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 acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."
As per the provisions of section 69A the addition under section 69A of I. Tax Act can be made only if the explanation of the assessee is not satisfactory in the opinion of "Assessing Officer". The Assessing Officer has been defined u/s 2(7A) of Income Tax Act as under:-
"(7A) Assessing Officer" means the Assistant Commissioner 31[or Deputy Commissioner] 32 [or Assistant Director] 31[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the 33[Additional Commissioner or] 34[Additional Director or] 35[Joint Commissioner or Joint Director] who is directed under clause (b) of sub-
section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;]"
In view of the specific definition of assessing officer in section 2(7A) of I.T. Act, ld. CIT(A) is not assessing officer so he cannot invoke the provisions of section 69A for making the addition particularly when the Assessing Officer has satisfied 72 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR about the ingredients of section 69A of Income Tax Act. In the case of the assessee the AO has not framed an opinion that the explanation given by the assessee was not satisfactory but he framed an opinion after examining the facts, documents and explanation that the additions cannot be made u/s 69A but it should have been made as business income of the assessee. On the contrary, ld CIT(A) has not brought on record any inquiry made by him in the appellant proceedings to justify his findings in this regard. In the appellate proceeding the addition cannot be confirmed by applying altogether different section by invoking a section for which satisfaction is required to be by "Assessing Officer" and the assessing officer after considering the detailed reply and documents was satisfied about the ingredients of section 69A. The Income Tax Appellate Tribunal Delhi Bench 'D': New Delhi in ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur (Date of pronouncement 09/10/2018 ) held that:-
'...If authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorized under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to perform an action on any particular issue, then it is that authority alone who should do that action. We draw support from various decision of Honorable High courts in Ghanshyam K. Khabrani v. ACIT [2012] 346 ITR 443 (Bom), CIT v. SPL'S Siddhartha Ltd. [2012] 345 ITR 223 (delhi ) and also of the Honourable supreme court Anirudhsinhji Karansinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 where in hon. Supreme court held as under :--
--13. It has been stated by Wade and Forsyth in 73 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR 'Administrative Law', 7th Edition at pages 358 and 359 under the heading 'SURRENDER, ABDICATION, DICTATION' and sub- heading "Power in the wrong hands" as below:- "Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them ". "Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise....":' Similar issue was dealt by ITAT Chennai Bench in the case of Smt. Sekar Jayalakshmi vs Income Tax Officer [2023] 150 taxmann.com 120 (Chennai -
Trib.) held that CIT(A) is not empowered to change section under which AO made an addition during assessment. The relevant finding is reproduced as under:-
"In this case, the Assessing Officer made addition of Rs. 6,00,000/- as unexplained credit. However, the Assessing Officer has not mentioned the relevant section under which, the addition was made, but "unexplained credit" comes under section 68 of the Act. In the appellate order, in page No. 7, para (v), the ld. CIT(A) has noted that "However, I am also in agreement with the appellant that the provisions of section 68 are not applicable to the appellant". Therefore, the ld. CIT(A) treated the addition of Rs. 6,00,000/- as unexplained money under section 69A of the Act and confirmed the addition. Section 68 of the Act deals with "unexplained Credit" in the books of the assessee and section 69A of the Act deals with "unexplained money, bullion, jewellery or other valuable article". Both are entirely different. Though the Assessing Officer has not mentioned the section 68 in his order, the 74 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR very fact that he calls it "unexplained credit" and not "unexplained money" as done by the ld. CIT(A), while he invoked section 69A of the Act, it proves that the Assessing Officer invoked section 68 of the Act. I find merit into the contention of the ld. Counsel for the assessee that there is no power conferred upon the ld. CIT(A) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. I am of the considered that law does not permit for such chan per section 250 of the Act, the ld. CIT(A) is e further inquiry as he thinks fit or m Officer to make further inquiry and re per section 251(1)(a) of the Act, in appeal assessment, he may confirm, reduce, en assessment, but there is no such power ld. CIT(A) could change the provision of which assessment Therefore, was in the made.
absence of such power, learned CIT(Appeals) could not have treated the addition made under section 69A of the Act. Therefore, the addition made by the ld. CIT(A) under section 69A of the Act is liable to be deleted."
It is pertinent to mention here that the similar issue has been dealt with and decided by this Bench of ITAT in the case of Motisons Buildtech Pvt. Ltd vs ACIT, Central Circle-2, Jaipur vide its order dated 30-10-2017 in ITA No.385/JP/2017 (Assessee's appeal) for the Assessment Year 2012-13 by observing as under:-
''8.4 We have heard the rival contentions and perused the materials available on record. In this ground, it is noted that the AO made the addition of Rs.3,68,27,500/- out of which the ld CIT(A) deleted the addition of Rs. 2,86,27,500/- and sustained the addition of Rs.82.00 lacs as mentioned at para 3.2.2. and 2.1.4.6 & 2.1.4.7 of the ld. CIT(A)'s order (supra). The question arises as to whether the ld CIT(A) can make the addition u/s 68 of the Act or not. For this purpose, the definition of Section 68 of the Act is as under:-
''Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, 75 ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.' From the above definition, it is noted that Section 68 of the Act does not empower the ld. CIT(A) to make addition under this Act. Thus the addition u/s 68 can only be made by the Assessing Officer. The definition of the Assessing Officer has been provided in Section 2(7A) of the Act which reads as under:-
[(7A) "Assessing Officer" means the Assistant Commissioner [or Deputy Commissioner] [or Assistant Director] [or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub- section (1) or sub-section (2) of section 120 or any other provision of this Act, and the [Additional Commissioner or] [Additional Director or] [Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;] Thus the ld. CIT(A) is not the Assessing Officer as per Income-Tax Act. Therefore, the ld. CIT(A) does not have any legal sanction to make the addition u/s 68 of the Act. "
To attract deeming provision of sections 69A of the Act the foremost requirements that is to be followed is that the income should be from any other source rather than from its regular source of earning. Further, ld CIT(A) has not issued notice u/s 251(2) of I.Tax Act as this finding is amount to enhancement of assessment/tax liability. The provisions of section 251(2) as stood for the assessment years under consideration is as under:-
"2) The Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction."76
ITA NOS. 1418 TO 1423/JPR/2024 SHRI LAXMIKANT BIYANI VS ACIT, CENTRAL CIRCLE-3, JAIPUR In view of the forgoing discussion, facts and circumstances of the case and respectfully following the decisions of coordinating benches of ITAT, we set aside the finding given by Ld. CIT (A) in this regard. In the result Ground No.4 (ITA No. 1418/JPR/2024, ITA No. 1419/JPR/2024, ITA No. 1420/JPR/2024, ITA No. 1421/JPR/2024, and ITA No 1422/JPR/2024 of A.Y. 2014-15, A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017-18 and A.Y. 2018-19 respectively and Ground No 7 in ITA No. ITA No. 1423/JPR/2024 for AY 2019-20 is allowed.
14. In the result appeals filed by the assessee in ITA No. 1418/JPR/2024 to ITA No. 1423/JPR/2024 for A.Y. 2014-15 to A.Y. 2019-20 are partly allowed.
Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.
Sd/- Sd/- (xxu Xkks;y) ¼ laanhi xkslkbZ ½ (GAGAN GOYAL) (SANDEEP GOSIAN) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 26 /02/2025 *Mishra
vkns'k dh izfrfyfivxzsf'kr@Copy of the order forwarded to:
1. The Appellant- Shri Laxmikant Biyani, Jaipur
2. izR;FkhZ@ The Respondent- The ACIT, Central Circle-3, Jaipur
3. vk;djvk;qDr@ The ld CIT
4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
5. xkMZQkbZy@ Guard File (ITA No.1418 to 1423 /JP/2024) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar