Income Tax Appellate Tribunal - Panji
Nanchand B Shah, Pune vs Asst. Comm. Of Income-Tax,, Pune on 8 December, 2017
आयकर अपील�य अ�धकरण "बी" �यायपीठ पुणे म� ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, PUNE
�ी डी. क�णाकरा राव,लेखा सद�य, एवं �ी �वकास अव�थी, �या�यक सद�य के सम�
BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM
आयकर अपील सं. / ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011
�नधा�रण वष� / Assessment Years : 1998-99 to 2004-05
Nanchand B. Shah
Shah Khandelwal Jain &
Associates, Chartered Accountants,
Level-3, Business Bay, Plot No. 84,
Wellesley Road, Near RTO,
Pune-411 001.
PAN : ADXPS3814J
.......अपीलाथ� / Appellant
बनाम / V/s.
The Assistant Commissioner of Income Tax,
Central Circle -2(2),
Pune.
......��यथ� / Respondent
Assessee by : Shri Neelesh Khandelwal
Revenue by : Smt. Nirupama Kotru, CIT
सुनवाई क� तार�ख / Date of Hearing : 13.09.2017
घोषणा क� तार�ख / Date of Pronouncement : 08.12.2017
आदे श / ORDER
PER BENCH These bunch of seven appeals have been filed by the assessee assailing the order of the Commissioner of Income Tax (Appeals)-I, Pune dated 31.01.2011 common for assessment years 1998-99 to 2004-05. Since the issues raised in these appeals are arising from same set of facts 2 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 and similar grounds have been raised by the assessee assailing the findings of Commissioner of Income Tax (Appeals), these appeals are taken up together for adjudication and are decided by this common order.
2. ITA No.1334/PUN/2011 & ITA No.1335/PUN/2011 for assessment years 2003-04 & 2004-05, respectively have been filed with a delay of 46 days. The assessee has filed an affidavit citing reasons for delay in filing of the appeals. A perusal of the affidavit shows that delay in filing of the appeals for the assessment years 2003-04 & 2004-05 has been caused due to confusion and mis-communication between the assessee and his Authorized Representative to whom the task of filing appeals before the Tribunal was assigned. After perusal of affidavit, we are satisfied that delay in filing of appeals is not intentional or deliberate. The delay has occurred for the bona-fide reasons mentioned in the affidavit. Therefore, delay in filing of appeals for assessment years 2003-04 & 2004-05 is condoned and appeals are admitted to be heard and disposed of on merits.
3. The brief facts of the case as emanating from records are: The assessee is a partner in M/s. Nanchand & Company, engaged in business of wholesale and retail trading of dry fruits. The assessee is also engaged in business of money lending. A search and seizure action u/s. 132 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') was carried out at the business and residential premises of assessee on 29.03.2003. During course of search Rs. 40,00,000/- cash was seized from residence of assessee. A simultaneous search was also carried out in the case of Soni group comprising of Shri Shriram Hiralal Soni and Shri Jugalkishor Soni who are engaged in the business of finance, broking and money lending. 3
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 On the basis of documents found and seized from the premises of Shri Shriram Soni, the Department came to the conclusion that the assessee is engaged in lending of unaccounted cash to Soni Group. The Assessing Officer for the assessment years 1998-99 to 2003-04, framed assessment u/s. 153A r.w.s. 143(3) of the Act. In assessment year 2004-05, assessment was made u/s. 143(3) of the Act. The assessee made declaration of the cash seized in the following manner:
Assessment Nanchand Swati Danendrakumar Total year & Co. Automobiles & Co 1998-99 3,10,000 30,000 3,10,000 6,50,000 1999-00 3,10,000 30,000 3,10,000 6,50,000 2000-01 3,10,000 30,000 3,10,000 6,50,000 2001-02 3,10,000 30,000 3,10,000 6,50,000 2002-03 3,10,000 30,000 3,10,000 6,50,000 2003-04 3,10,000 30,000 3,10,000 6,50,000 2004-05 40,000 20,000 40,000 1,00,000 Total 19,00,000 2,00,000 19,00,000 40,00,000 During the course of assessment proceedings, the Assessing Officer inter alia made addition on account of unaccounted interest income in all impugned assessment years. In assessment years 2000-01 to 2003-04, the Assessing Officer apart from above, made additions on account of unexplained investment in money lending business.
4. Aggrieved by the assessment order in respective assessment years, the assessee filed appeals before the Commissioner of Income Tax (Appeals). The First Appellate Authority, after examining material available on record and submissions of assessee, confirmed the additions. The 4 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 assessee in alternate submission prayed for granting benefit of telescoping. The commissioner of Income Tax (Appeals) rejected assessee's alternate contention as well. Now, the assessee is in second appeal before the Tribunal against the additions confirmed by Commissioner of Income Tax (Appeals). The gist of additions assailed by assessee in the impugned assessment years is as under:
Assessment year Unexplained Unaccounted
investment in interest income.
money lending
business u/s.
29B of the Act.
1998-99 - 5,13,000
1999-00 - 5,13,000
2000-01 7,00,000 6,39,000
2001-02 59,00,000 17,01,000
2002-03 5,00,000 17,91,000
2003-04 - 17,91,000
2004-05 - 17,91,000
Total 71,00,000 87,39,000
5. Shri Neelesh Khandelwal appearing on behalf of the assessee submitted that during the course of search at the business and residential premises of the assessee, except cash and some jewellery, no other document was found by the Department. From total cash of Rs. 41,47,390/- found during search, Rs. 40,00,000/- was seized. The assessee offered aforesaid amount of Rs.40,00,000/- in various assessment years starting from 1998-99 to 2004-05 in the name of three concern i.e. M/s. Nanchand & Company, M/s. Swati Automobiles and M/s. Danendrakumar & Company. During search, the Department also found jewellery worth Rs. 7,48,867/-. The said jewellery was not seized. The 5 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 Revenue on the basis of some documents and entries in the books of Soni seized during search on Soni Group is trying to link that the assessee is engaged in money lending business and had advanced unaccounted cash loans to Soni Group. The ld. AR submitted that document seized from the premises of Shriram M. Soni does not mention the name of assessee. In the documents seized, there are certain names such as 'Nanchandani', 'Namchandani' and 'Namchand Bhai'. The allegation of Department is that aforesaid names have been used by Soni to represent the assessee in its book. The ld. AR submitted that the assessee is not engaged in any business transactions with Shriram M. Soni. Therefore, there is no question of advancing cash loans to Shriram M. Soni. The ld. AR further submitted that assessee has some business transactions with Jugalkishor Soni, brother of Shriram M. Soni. The transactions with Jugalkishor Soni are carried out by way of cheque payment which have been duly reflected in the books. The ld. AR contented that merely for the reason that certain names recorded in the books of Soni closely resemble with the name of assessee, addition could not be made in the hands of assessee unless proved by cogent evidence. The Department has not found any income of assessee from unaccounted money lending activities. During course of search at assessee's premises, no document/notings were found by the Department that would establish that assessee is engaged in cash lending business. The additions have been made solely on the basis of materials found from the premises of third party and that too, not belonging to the assessee. Statement recorded during search does not indicate that at any point of time the assessee had advanced cash loans to Shriram M. Soni. The ld. AR further submitted that Pune Bench of the Tribunal in various cases has deleted the additions where cash transactions were found to be 6 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 recorded in abbreviated /distorted names in the documents/diaries seized during search from Soni Group. The ld. AR in support of his submissions placed reliance on the following decisions:
i) Jagannath Eknath Lahoti HUF Vs. ITO Wd 1(1), Pune ITA No.453/PUN/2012 decided on 11.02.2014.
ii) Shri Ashok Keshvlal Oswal Vs. ITO (ITA No.357/PN/2012) decided on 30.09.2013.
iii) Tulsiram Jodharaj Pallod Vs. ITO (ITA No.1789, 1790 & 1791/PUN/2013) decided on 30.04.2015.
iv) M/s. Kejals Furnishings Vs. ACIT (ITA No. 928, 929/PUN/2011) decided on 28.11.2014.
v) Nandkishor Hiralal Birla HUF Vs. ITO (ITA No. 53/PUN/2011) decided on 30.06.2017.
The ld.AR supplemented his contention by filing written submissions. The relevant extracts of the same are reproduced herein below:
"Ground No. 1 (ITA No.1008 to 1012/PN-2011 & 1334-1335/PN-2011) Issue being addition on account of unaccounted cash investments and imputed interest thereon.
3. promissory notes :
3.1. As per the AO, during the search proceedings in case of Shri Shriram Soni, large number of blank promissory notes and undated cheques of borrower were found and the name of appellant was written in distorted/abbreviation forms on the said promissory notes.
3.2. However, on perusal of the CIT(A) order and as per the submissions made by the DR during the course of hearing before ITAT it has been an accepted fact that no promissory notes has been found in respect of the appellant. None of the undated cheques found belong to the appellant.
4. Distorted/ Abbreviated names :
4.1. Printed ledger extracts has been found from the premises of Shri Sriram Soni wherein the transactions pertaining to Investors/borrowers are reflected. As per the AO the said transactions include the cheque transactions as well as the cash transactions.
4.2. It has been submitted by the AR that the names appearing in the said ledger extracts do not belong to the appellant.7
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 4.3. The name of the appellant is Nanchand Bhogilal Shah whereas the names appearing in the ledger extracts are "Nanchandani", "Namchandani", "Nanchand Bhai", etc.
5. Statement of Shri S.W. Ratnakar (Accountant of Shri Sriram Soni) 5.1. Shri S W Ratnakar, while giving his statement during the search proceedings, stated that "Shri Nanchand Bhogilal Shah" is one of the main investors with Soni concerns. It is an admitted fact that the appellant has invested amounts in cheques with Jugalkishore Soni.
5.2. Assuming he is the same Nanchand Shah, Shri S.W. Ratnakar has not mentioned that the appellant was engaged into investing money in cash and not in cheque.
5.3. Further, he has not clearly mentioned that the entries appearing in the ledger extracts in the names of "Nanchandani", or "Namchandani", or "Nanchandbhai" belongs to the appellant. 5.4. During the course of hearing, the Ld DR had stated that Shri S.W. Ratnakar used to maintain the books of accounts and post the entries in the ledger extract and also he has stated that Mr. Nanchand Shah is one of the major investors with Shri Sriram Soni. The conclusion derived by the Ld DR was on the basis of his reply to questions 5 and 6 of the statement.
5.5. Also, in the written submission provided by the Ld. DR, in para B-3), stated that the argument put forward by the Ld AR that the ledger is not written by Shri Ratnakar is a wrong fact. While putting forward this argument she has referred to para 11.11 pages 85 of the ITAT order in case of Shri Sriram Soni and papers seized in Bundle 100.
5.6 On perusal of the said statement it can be observed that Shri S.W.Ratnakar never mentioned that the ledger extracts were prepared by him. In response to question 5 of the statement, he answered that he used to maintain the amount of cash transaction in a piece of paper daily. And the said paper was daily handed over at the closing of the office to Shri Sriram Soni. The documents contained in the said Bundle 100 are those loose sheets and not the ledger extracts which were referred to during the course of hearing by the Ld. AR. Therefore, the conclusion derived by the Ld DR that the ledger extracts are prepared by Shri S.W. Ratnakar and he has identified the appellant is unsubstantiated and not coming out of record.
5.7 Further, on perusal of his reply to question 3 and 4 of the statement on page 112 & 113 of PB, it can be concluded that he was not at all involved in physical movement of cash. Therefore, he was never a party to receiving / paying cash from/to investors so that he can identify the appellant.
6. Connection with Shri Sriram Soni :
8
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 6.1. During the statement recorded during search proceedings, the appellant had categorically denied any connection with Shri Sriram Soni.
6.2. Whereas, the appellant had stated that he has few transactions with Jugalkishore Soni (Brother of Shri Sriram Soni). But the said transactions are in cheque only and no cash transactions have been entered into by him.
6 .3. During the course of hearing it was submitted that appellant had no connection with Shri Sriram Soni, though he had entered into few cheque transactions with Shri Jugalkishore Soni. It was also submitted that the transactions entered into with Shri Jugalkishore Soni were completely separate transactions on his personal account which had no connection with Shri Sriram Soni by any means.
6.4. During the course of hearing, the Ld DR had stated that appellant denied the cash transactions appearing in the ledger extracts of Shri Soni and accepted the cheque transactions. This conclusion of DR was arrived at on the perusal of reply of appellant to question no. 18 of the statement. It is submitted that on perusal of the ledger extracts it can be observed that there are no cheque transactions in the said ledger extracts. And what the appellant meant to state in the answer was that he has done only cheque transactions with the Soni Group.
6.5 The department has wrongly relied on the paper of Shri Sriram Soni to make additions.
6.6 Also, it has been established fact that Shri Soni on oath refused to identify the investors as well as borrowers.
6.7 Observations from the case of Shri Shriram H. Soni Vs. The Addl.
CIT Central Range-2, Pune (ITA No.474 to 478, 518/PUN/2007) (ITAT Pune B Bench) has been submitted in our earlier written note on case laws.
7. Cash Investor or Money Lender:
7.1. Shri S W Ratnakar, in question 10, was asked to give major cash investor/ money lender, who used to do cash invest/lend money to Soni Bros. In response to the same, he stated that Shri Nanchand Bhogilal Shah was one of the major cash investor / money lender to Shri Soni Bros.
7.2. He has nowhere mentioned that Shri Nanchand Bhogilal Shah used to invest cash with Soni Bros.
7.3. Admittedly, the appellant is a money lender and he has been into the said activity since years and had entered into cheque transactions with several other persons including JugalKishore Soni.
7.4. In such a case, it is a possibility that what Shri S.W. Ratnakar has been referring to must be the cheque transactions with appellant in the nature of money lending and not cash transactions.9
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05
8. Corroborative evidence :
8.1. The case prepared by the department is completely in the absence of any corroborative evidence.
8.2. Department has not found any assets to correspond the income of the appellant from unaccounted money lending activity.
8.3. No documents/notings found with the appellant to show that the appellant was ever engaged in cash lending.
8.4. Additions made solely on the basis of material found from third party and that too not belonging to the appellant.
8.5 None of the statements recorded to show that appellant is the same individual who used to invest cash with Shri Sriram Soni.
9. Case directly covered by decisions of Pune Tribunal with exactly similar facts :
9.1. Jagannath Eknath Lahoti HUF Vs ITO Wd 1(1), Pune ITA no. 453/pn/2012 (ITAT Pune "B" Bench) 9.1.1. Para 2.5, page 4 of the order refers to the observation made by the AO about the assessee's name appearing in the seized documents in abbreviated and/or distorted form. Also, AO has mentioned that Shri Soni declined to identify such investors /persons. 9.1.2. Para 4, page 6 of the order refers to submission of the assessee that Shri Soni has neither identified the assessee as the person who has advanced loan to him nor gave the identity, genuineness or credit worthiness of the loan creditors.
9.1.3. Para 6, page 9 of the order refers to the submission by the assessee categorically stating that he is not the same person as appearing in the seized documents. The assessee also submitted that no promissory note or security in the name of the assessee was found from the premises of Shri Soni. Also, no confirmation or any other document was found from the premises of Mr. Soni so as to confirm that the name appearing in the seized document in fact belonged to the assessee.
9.1.4. The distorted/abbreviated names referred to by the department in this case were: "Jagusheth Lati" (pg 4,5,11, 13 of PB), "J.R. Lati", "Jagannath Lahoti" (in Hindi at pg 88 of PB), "Jagannathji Lahoti" (In Hindi at pg 98 of PB), "J Lahotiji" (in Hindi at pg 111 of PB) 9.1.5. Para 6.1, page 9 of the order refers to a judgment given by Pune Tribunal in case of ITO Vs Ashok Keshvlal Oswal (ITA no 307/pn/2012) for AY 2001-02 wherein similar issue was under
consideration and the addition made was deleted.10
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 9.1.6. Para 8.2, page 12 of the order cites conclusion that the CIT(A) order deserves to be set aside and the addition needs to be deleted.
9.2 Shri Ashok Keshval Oswal Vs. ITO (ITA no. 357/PN/2012) ( ITAT Pune) 9.2.1. Para 2.2, page 2 of the order refers to the distorted/abbreviated form of names used in case of assessee, i.e.: "Oswal Ahsok" or "Oswal ASK" or "Ashok Oswal" (in Hindi at pg 94 of PB) or "Oswal Ashok" (in Hindi at pg 102, 108 of PB) or "Ashok Sheth Oswal (in Hindi at pg 85, 106 of PB) or "Oswal Ashok Sheth" (in Hindi at pg 93 of PB). Further, assessee denied any connection with Shri Soni. Further, assessee has mentioned that no signature of assessee is found on the papers impounded from Shri Soni.
9.2.2. Para 3.14, page 5 of the order refers to the submission made by the assessee that no corroborative material has been put forward by the AO that could establish the identity of the assessee. It has also been submitted that the AO has not found any cheques or promissory notes in the seized material and also there were no signatures.
9.2.3. Para 3.16, page 6 of the order refers to the finding the addition has been made solely on the basis of documents found with Shri Soni and that no corroborative material has been found or bought by the AO.
9.2.4. The Hon'ble ITAT deleted the entire additions in the case of assessee.
9.3 Tulsiram Jodharaj Pallod Vs. ITO ( ITA No. 1789, 1790 & 1791/PUN/2013) ( ITAT Pune) 9.3.1. This case, with exactly similar set of facts including distorted names, was allowed completely in favour of assessee relying on the decision of M/s Kejals Furnishings Vs. ACIT (ITA no. 928, 929/PN/2011) which had relied on the decision of Jagannath Eknath Lahoti HUF Vs ITO Wd 1 (1), Pune ITA no. 453/pn/2012 (ITAT Pune "B" Bench).
9.3.2. The distorted / abbreviated names referred to by the department in this case were: "PALD TJ" (pg 12,17,18 of PB), "D S PALD" (pg 2 of PB) 9.4. M/s Kejals Furnishings Vs ACIT (ITA No. 928, 929/Pn/2011) (ITAT Pune) 9.4.1. This case, with exactly similar set of facts including distorted names, was allowed completely in favour of assessee relying on the decision of Jagannath Eknath Lahoti HUF Vs ITO Wd 1(1), Pune ITA no.
453/pn12012 (ITAT Pune "B" Bench).
9.4.2. The distorted/abbreviated names referred to by the department in this case were: "Kejals - Rashmi G" (in Hindi at pg 90, 98, 103, 105 of PB), "Rashmi Gandhiji Kejals" (in Hindi at pg 11 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 88 of PB), "kejals Ushicover" or "Kejals Rashmi Gandhi" (in Hindi at pg 87 of PB), "Kajals Rashmi" (pg 4 of PB) 9.5 Nandkishor Hiralal Birla HUF Vs. ITO (ITA 53/pun/2011) (ITAT Pune) 9.5.1. This case, with exactly similar set of facts including distorted names, was allowed completely in favour of assessee relying on the decision of Shri Ashok Keshvlal Oswal Vs ITO (ITA no. 357/PN/2012) (ITAT Pune).
9.5.2. The distorted / abbreviated names referred to by the department in this case were: "Nandusheth Birla" (in Hindi at pg 92, 111 of PB), "BIRA NK" (pg 91,93 of PB), Bira H.NANDK" (pg 2, 3, 6, 7, 8 of PB), "Birla Nandusheth" (in Hindi at pg 81,91,93 of PB). Ground No. 3 :
Alternate claim for telescopic effect of the undisclosed income found and offered.
10. Telescopic Effect:
10.1. Cash of Rs.40 lakhs was found and seized from the premises of the appellant during the course of search proceedings.
10.2. The said amount was offered as income of the appellant and sister concerns as undisclosed income from the business activity carried on by them.
10.3. Department has added notional interest amount earned on the cash invested by the appellant with Shri Sriram Soni.
10.4. Assuming that the appellant was involved in investing cash with Shri Sriram Soni, the interest earned on the said investment as well as the unaccounted income from the business activity of the sister concerns shall be available as source for adjustment against the subsequent investments made by the appellant.
10.5. It was argued that said adjustment be granted to the appellant while assessing the income in the hands of the appellant.
10.6. A chart showing telescopic effect has been submitted during the course of hearing which may be perused. The chart has been given only considering the entries found with Soni group. The interest addition made on presumption has not been considered while preparing the said chart.
10.7. The opening balance considered in the chart is as per the department records as they have computed interest thereon and charged to tax.
10.8. Amount of Rs.28,50,000/- has been shown to be received back so as to tally with the closing balance of Rs.66,00,000/- as on 31/3/2001 as per the department."12
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05
6. On the other hand, Smt. Nirupama Kotru representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in confirming the additions. The ld. DR submitted that during course of search in the case of Soni group, direct evidences were found which closely links the assessee with money lending activities and advancing cash loans to Shriram Hiralal Soni. During the course of search in the case of assessee, more than Rs.40,00,000/- were found, out of which Rs.40,00,000/- were seized. The assessee has failed to explain the source of generation of cash Rs. 40,00,000/-. The Tribunal in the case of Shriram H. Soni Vs. The Addl. CIT Central Range-2 in ITA No. 474 to 478, 518/PUN/2017 decided on 17th June, 2010 deleted the addition with the observations that no addition can be made in the hands of Shriram M. Soni either on protective basis or substantive basis. If the aforesaid amount offered by assessee is neither taxed in the hands of assessee nor in the hands of Shriram M. Soni then this amount will escape tax net. The ld. DR referred to the statement of Shri S. W. Ratnakar, Accountant of Shriram Soni at page No. 112 of the paper book. The ld. D.R pointed that in response to question No. 10, Ratnakar admitted that major cash money lender/investor who use to lend/invest money to Soni Brothers include Shri Nanchand Bhogilal Shah. The ld. DR pointed that a diary seized during survey at the premises of Shriram M. Soni was written by Ratnakar. Ratnakar decoded the entries in diary. Therefore, the statement of Ratnakar admitting that assessee was one of the investor/money lender to Soni Group is credible piece of evidence and thus, cannot be ignored. The ld. DR further submitted that Nanchand in his statement recorded u/s.131(1)(b) on 04.12.2003, in reply to question No. 17, admitted that he had business transactions with Jugalkishor Soni. Shriram Hiralal Soni 13 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 and Jugalkishor Soni, both are brother and are engaged in common business. The ld. DR to further strengthen her contentions and to controvert the submissions made on behalf of assessee, filed written submissions. The written submissions filed by ld. DR are reproduced herein below:
"Search & Seizure action under section 132 of the Income Tax Act was carried out by the Investigation with, Pune on the residential premises as well as on the business premises on 29/07/2013.
This search action was a part of search action in Soni-Shah Group. During the course of search action at the premises of Shri Shriram Hiralal Soni incriminating documents were found and seized which revealed that the assessee has made huge unaccounted investment in cash (money lending business) through finance brokers Shri Shriram Hiralal Soni & Shri Jugalkishore Soni (Soni Brothers) From the premises of the Shri Shriram Hiralal Soni following two important documents were found which mentioned the details of the investors and borrowers:-
i) Bundle No. 98 & 99 of Annexure A to Panchnama dated 02/08/2003
ii) Kacha Jama Kharch Bhoi as per Bundle No. 100 Annexure A of same Panchnama It is pertinent to mention that in documents in Bundle 98 & 99 the names of investors and borrowers are written in coded form.
In Bundle No. 98 & 99 the name of one Nanchandani & Nanchandani appear in the Kacha Jama Kharch Bhoi at Bundle No.100 the name Nanchandbhai appears Therefore the 1st question which needs to be answered is that whether transactions mentioned in Bundle no. 98, 99 & 100 belong to one single person having name Nanchandani or whether they belong to different persons.
The details of debit credit entries (Jama -Kharcha) appearing in name of Nanchand Bhai in Bundle No. 100 has been mentioned by AO on page no. 3 under heading Chart A & Chart B(A.Y. 2002-03) The AO has clearly elaborated in his order that these transactions in Bundle 98, 99, & 100 are in fact belonging to one person for whom names Nanchandani, Nanchandani, Nanchandani Bhai or code N/3 has been interchangeably used (Refer Page 6 AO order of 2002-03 Para D) This can be highlighted from below example:-
14
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05
1) The entry on page 26 of Bundle no 100 mention Rs 479000/-
receipt from Nanchand Bhai for M/s. Bora Transport In bracket code (N/3) is used. This means Nanchand Bhai & code N /3 are same person. The document also mentions how much interest is to be calculated.
2) The entry on page 34 bundle No.100 mentions receipt of Rs 4,77,500/- from Nanchand for skyline. This also mentions code (N/3) in bracket this means Nanchand & code N/3 are same person. Similarly many documents mention receipt from Nanchand Bhi for borrowers namely Bora Transport, skyline, G.Hathi Bai, Vinod Transport.
IT IS PERTINENT TO HIGHLIGHT THAT IN BUNDLE NO 98 & 99 the name Nanchandani & Nandchand is used. But the name of borrowers & amounts are same which are mentioned in documents in bundle
100. Few examples to highlight same are Page No. 123 of paper book of Assessee 1) Page 67 of Bundle No. 98 Ledger of Nandchandani-
Skyline account is detailed-
Same borrowers and amount mentioned under name NANDCHAND BHAI in Bundle No.100
2) Page No 126 Paper Book of Assessee Ledger Account of Nanchandani This is interest account of Nanchandani which reveals borrowers as Bohra Transport, Skyline, Vinod Jain- same borrowers & amount mentioned under name Nanchand Bhai is Bundle no.100 The AO on Page 9, 10, 11 of his order has extracted ledger account of Nandchadani & Nanchand to highlight that the name of borrowers are same and amount is same which is mentioned under name Nanchand Bhai (N/3) in Bundle 100.
THIS HOLISTIC COMPARISON OF SPECIFIC ENTRIES IN BUNDLE NO. 98, 99,100 CLEARLY & WITHOUT ANY DOUBT ESTABLISHED THAT THESE ENTRIES BELONG TO ONE PERSON FOR WHOM NAMES NANCHANDANI, NANCHAND, NANCHAND BHAI, OR CODE N/3 HAS BEEN USED INTER CHANGEBLY.
(B) NOW SECOND QUESTION EMERGES IS THAT THIS PERSON for whom names (Nandchandani, Nandchand, Nandchand Bhai code (N/3) has been used is in fact NANDCHAND BHOGILAL SHAH i.e the assessee. This fact has been clearly established by CIT(A) in his order. This will be further established by following arguments:- 15
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05
1) The Assessee vide his letter dated 27.03.2007 in his written submission to CIT(A) has clearly admitted that
(i) He is engaged in business of money lending through broker Soni
-Shah group.
(Refer page 23 italics CIT (A) order)
(ii) The contents of Bundle 98, 99, 100 has been used by AO but the amounts of undisclosed investment prior to block period for determining the interest of block period is objected. (Refer page 30 CIT (A) order).
2) The statement of assessee recorded on 04.09.2003 (Paper Book page 223 onwards)
(i) In Q.17 on (Page 228 of Paper Book) assessee admits he has financial relationship with one of Soni Brothers & he gives money on loan to Shri Jugal Kishor Hiralal Soni.
(ii) In Q. No. 18 The ledger account of Nandchand Bhai ( Bundle No.100) seized form Shri Shriram Soni was shown to assessee pertinent question was asked that these ledger show that money has been lended by assessee through Soni to following borrowers in Cash / Cheque:-
a) T. Halthi bhai
b) Vinod Jain
c) Bora Transport
d) Skyline etc. In response to this assessee replied that he has carefully gone through these pages and he admitted that cheque transactions with above persons are his transactions.
From this reply inference is clear:-
1) He admits that transactions which are in cheque under name Nandchand Bhai are his transaction
2) Financial relationship with Soni Brothers is established.
3) If cheque transactions are true then Cash transactions on same document is also true. In a way assessee himself admits he is mentioned as Nanchand Bhai in ledger seized from Soni Brothers.
3) The statement of employee of the Soni Brothers Shri Ratnakar too is a very important credible evidence in this regard. Shri Sunil W. Ratnakar was accountant of Shri Soni Brothers and while deciding case of Shri Soni, the Honble ITAT held that a statement of Shri Ratnakar dated 30.07.2003 on the seized bundle 98,99 & 100 during search has got a substantial evidentiary value (the statement submitted vide letter dated 30.12.2013 by Department to the Honble Tribunal). In his statement he has stated that the investors used to invest their money & borrowers used to take money as loan through Soni Brothers.16
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 In Q No.3 of statement he states that whenever certain cash is to be received by Soni Brothers, he is keeping the accounts & similarly he maintains account of all cash distributed.
In Q. 5 of statement he states that he maintained the daily cash transactions on papers & paper was then handed over to shri Shriram H. Soni.
In Q. 10 of statement he states that Sh. Nanchand Bhogilal Shah is one of the investors.
The analysis of statement reveals that Sh. Ratankar is in full knowledge of modus operandi and details of investors & borrowers and in fact he admits he made notings on paper (Which letter has supposedly been incorporated in seized ledger no. 98,99,100 from Soni Brothers) He has identified only one NANDCHAND BHOGILAL SHAH as investors & not many persons having names like Nanchand Bhai, Nanchandani, Nandchand etc. The learned AR during course of hearing had vehemently said that this ledger is not written by She Ratankar & hence no credence should be given to his statement.
This is a patently wrong fact. The Hon'ble ITAT while deciding the case of Sh. Shriram Soni in its order ITA No. 474 to 478, 518/PN/2007 dated 17.06.2010 has clearly held that this ledger is in handwriting of cashier Shri Sunil W. Ratankar. Refer Para 11.11 page 85 of ITAT order The order of Hon'ble ITAT clearly held that
i) Bundle No.100 contains hand written loose sheets authored by Sunil Ratankar .
ii) Whatever names of borrowers or investors are written was truly recorded because Mr.Ratankar was recording all these transactions in regular course of business & no part of it can be said to be concocted or merely a fiction. All the above arguments established clearly that the transactions mentioned in Bundle 98, 99 & 100 of seized documents under name Nanchandani, Nandchand, Nanchand Bhai code N/3 in fact belong to assessee i.e. NANCHAND BHOGILAL SHAH. Whether telescoping of 40 Lacs cash seized to be given This was additional ground before CIT(A) never argued before AO
- CIT (A) discussed this same from para 16 onwards & did not give assessee the relief.
- The assessee wants that benefit of 40 Lac surrender income which was made in different assessment years & in different firms of assessee, to be given against addition made in assessee's hand.
- It cannot be given as there is no case that unaccounted cash has been put to tax twice.
17
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05
- The assessee has not made out a case that this cash was time & again used for making investments for money lending with Soni Brothers.
- The disclosure made in different forms has already been consumed and utilized for the assets found in their cases and has been capitalized accordingly in respective hands and hence cannot be used to explain the investment made by assessee with Soni Brothers or interest earned thereon.
- The assessee had recoverable of Rs.64 lacs on date of search from Soni Brothers and also Rs.40 lacs was found seized from assessee. If holistically seen that total undisclosed income of minimum 1.04 crores has been established in no way 40 lacs available with assessee on search can be set off against recoverable from Soni Brothers."
7. We have heard/read the extensive submissions made by both sides and have perused the orders of Authorities below. We have also considered various decisions and documents on which rival sides have placed reliance. The assessee in all appeals has assailed the additions made on account of unaccounted interest income. In appeals for assessment years 2000-01 to 2002-03, the assessee has also impugned addition on account of unexplained investment in money lending business.
8. During search operation carried out at the premises of assessee except cash of Rs.40,00,000/-, no other document was found or seized. The assessee has offered Rs. 40,00,000/- to tax in the names of his three concerns in a period spread over assessment year 1998-99 to 2004-05. The Department has accepted the same. Over and above the cash seized, the Revenue has made impugned additions in the hands of assessee relying on certain documents found and seized during the course of search in the case of Soni group. On the basis of some entries in the books of Soni group, the Department has drawn nexus between the money lending activities carried on by Soni group and the assessee. The contention of ld. DR is that there 18 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 are certain entries in the ledger of Shriram H. Soni in the names of "Nanchandani", "Namchandani" and "Nanchandbhai". All these are pseudonym/coded names of the assessee and are inter changeably used to indicate transactions with the assessee. Reliance has also been placed by the Department on the statement Mr.Ratnakar, Accountant who has purportedly recorded transactions in the books of Shriram H. Soni.
9. The assessee has denied to have any business connection with Shriram H. Soni. However, the assessee has admitted that he had business transactions with Jugalkishore H. Soni, brother of Shriram H. Soni and all transactions with him were said to be through cheque. The ld. AR of the assessee placed reliance on various decision of the Tribunal wherein, the Tribunal deleted the additions in the case of similar situated persons whose names were appearing in the books of Soni group in abbreviated / coded manner.
10. We observe in the case of Shri Ashok Keshvlal Oswal Vs. ITO (supra), the name of assessee appeared in the books of Soni group as "Oswal Ashok" or "Oswal ASK". The Assessing Officer made addition in the hands of Ashok Keshvlal Oswal on the basis of such entries. In first appeal, the Commissioner of Income Tax (Appeal) deleted the addition after seeking remand report from Assessing Officer. The matter travelled to the Tribunal. The Tribunal upheld the findings of Commissioner of Income Tax (Appeal) by observing as under :
"5. We have heard the rival submissions of the parties and perused the record. The first issue we have to decide is whether the identity of the assessee is proved that he is the same "Oswal Ashok" or "Oswal ASK". As per the remand report given by the Assessing Officer, no promissory note or blank cheques on the 19 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 names of the assessee were found. On perusal of the remand report, we find that Assessing Officer himself has examined many persons on suspicion, whose names were "Ashok Oswal" and the middle name was different. Admittedly, in the seized document, there is no middle name. The assessee filed the specific affidavit denying having any relation with Shriram H. Soni. In the remand proceedings, the AO examined bank account and has reported that no transaction was found between Shriram H. Soni and the assessee. It is very much interesting that when the AO himself is not sure about the identity of "Oswal Ashok", the name which is found in the seized document, how the assessee can be fastened with the liability of unaccounted transactions. We find that the AO himself admits that the assessee has specifically denied. Law is well settled that burden is on the Revenue to establish the identity if any person is to be charged under the Act. The action of the AO examining the different persons having the same name prima-facie establishes that Assessing Officer himself is not sure that the assessee is the same person whose name was found noted in the seized document. Moreover, nothing is on record to show that Shriram H.Soni has stated about the assessee that whatever the notings found were in respect of the assessee. No corroborative material is found. In our opinion, the Ld.CIT(A) has rightly deleted the entire addition as there is no evidence against the assessee. We find no merit in the appeal filed by the Revenue. Accordingly, the same is dismissed."
11. Similarly the Tribunal in the case of Jagannath Eknath Lahoti (HUF) Vs. ITO (supra) deleted the additions in the hands of aforesaid assessee, where the additions were made on the basis of names "Jagannath Lahoti"
and "Jaguseth Lati" appearing in the diaries/papers seized from the premises of Shriram H. Soni. The relevant extract of the findings of Tribunal in the case of Jagannath Eknath Lahoti (HUF) Vs. ITO (supra) are as under :
" We find the seized diaries/papers clearly show different names such as " Jagannath Lahoti" and " Jaguseth Lati". However, we find no addition has been made on account of entries appearing in the name of assessee, i.e. Jagannath Lahoti. Even the entries appearing in the name of the assessee for subsequent years has also not been brought to tax by reopening the assessment, a statement made by Ld. Authorized Representative and not controverted by the Ld. Departmental Representative. We, therefore, find merit in the submission of the Ld. Counsel for the assessee that the Department by not reopening the assessment in the subsequent year has accepted that "Jagannath Lahoti" is different from "Jaguseth Lati". Further , the assessee from the very beginning was denying that he is the same person. We find neither any promissory note not any security in the name of the assessee nor any confirmation or any other corroborative evidence was found from the premises of Mr. Shriram H. Soni so as to 20 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 prove that the assessee is the same person especially when Mr. Shriram H. Soni in his statement recorded u/s.132(4) has refused to identify each and every investor."
The Tribunal deleted the additions as the identity of the assessee in the said case was not proved by Shriram H. Soni and no corroborative evidence was found from the residence of Shriram H. Soni to prove that the assessee is the same person as per the name appearing in the seized documents.
12. The Tribunal following the decision in the case of Shri Ashok Keshvlal Oswal Vs. ITO (supra), deleted the additions in the case of M/s. Kejals Furnishings Vs. ACIT (supra.), Tulsiram Jodharaj Pallod Vs. ITO (supra.) and Jagannath Eknath Lahoti HUF Vs. ITO (supra.) for similar reasons. The additions were made in all the aforesaid cases on the basis of diary, papers found and seized during the course of search in the case of Shriram H. Soni. In all the aforesaid cases, names of the parties were recorded either in abbreviated form or in distorted manner. Another important observations of the Tribunal in all the above cases is that in none of the said cases any promissory note or blank cheque or any security document were found from the premises of Shriram H. Soni. Apart from the entries, in the books of Shriram H. Soni in abbreviated/coded names, there are no other corroborative evidences to link the parties with Soni group.
In the present case as well, we find that no document such as promissory note, signed blank cheque, property document in the form of security, etc were found in name of assessee during course of search either at the premises of Soni group or in the premises of assessee. 21
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05
13. The ledger entries in the name of "Nanchandani", "Namchandani" and "Nanchandbhai" in the books of Soni group, may give arise to suspicion that these pseudonyms refer to assessee. However, it is a well settled law that addition cannot be made merely on suspicion howsoever strong it may be, unless supported by corroborative evidence. In the present case, there is no document on record that would show that "Nanchandani", "Namchandani" and "Nanchandbhai" and the assessee are one and the same person. The Tribunal in the case of M/s. Pooja Bhatt Vs. Assistant Commissioner of Income Tax reported as 73 ITD 205 (Mumbai) has held that :
"...........There may be a strong suspicion of payment of on-money in respect of the property deals but no addition can be made on the basis of mere suspicion. It is established principle of law that suspicion however strong it may be does not take the place of proof."
Therefore, the addition in the present case cannot be sustained merely on the basis of suspicion alone.
14. The Authorities below while making additions has placed heavy reliance on the statement of Shri S.W.Ratnakar, Accountant who was purportedly recording all the transactions in the books of Shriram H. Soni. A perusal of the statement of Ratnakar shows that in response to Question No. 10, he has stated that assessee was one of the major money lender to Soni Brothers. However, nowhere in the statement, Ratnakar has stated that names of lenders were recorded in coded manner or names of the lenders were recorded with pseudonym/distorted names. Thus, to say that "Nanchandani", "Namchandani" and "Nanchandbhai" are one and same person and in fact refers to assessee is merely a self drawn conclusion of 22 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 Assessing Officer. The assessee has not altogether denied to have any business connection with Soni Brothers. The assessee in reply to Question No. 17 in the statement recorded on 04.12.2003 u/s. 131(1) (b) of the Act, has admitted that he has business transactions with Jugalkishore H. Soni and such transactions were by way of cheques and no transactions have been made in cash. Thus, in view of admission of cheque transactions by assessee with Jagulkishore H. Soni, the statement made by Ratnakar to that extent is justified. However, the addition in the present case has been made in respect of alleged cash transactions and not the transactions made through banking channels.
15. We have also considered various decisions on which the ld. DR has placed reliance. We find that all the decisions referred by ld. DR are distinguishable on facts and some of the decisions are not even remotely connected with the issues emanating in the present set of appeals. The main emphasis of the ld. DR is that the rules of evidence are not strictly applicable in Income Tax proceedings. There is absolutely no dispute on this proposition. However, the additions cannot be made in the hands of assessee merely on the basis of suspicious entries found in books of third party without there being any material to link the assessee with those entries. Additions in the hand of assessee cannot be made when there is vacuum between the material collected/ seized during search from third party and the assessee. Thus, the decisions cited by ld. DR does not support the cause of Department and hence, no reliance can be placed on them.
16. In view of the facts of the case and various decisions discussed above, we are of considered view that no addition can be made in the hands 23 ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 of assessee in absence of any corroborative evidence to link some suspicious entries found in the books of third party. As has been pointed earlier that mere recording of names closely resembling to the name of assessee in the books of Soni group does not give rise to presumption that the said names are pseudonym/coded names of assessee unless live connection is drawn by way of supporting evidence. Here, we would like to mention that before absolving the assessee completely from the additions made on basis of alleged cash transactions, we direct the Assessing Officer to re-examine the seized material. If the Assessing Officer finds that any transaction in cash is recorded in the name of assessee i.e. Nanchand B Shah or Nanchand Bhogilal Shah, the Assessing Officer may make addition of the same, in accordance with law. Before making any addition, if circumstances so arise, the Assessing Officer shall grant opportunity of hearing to the assessee, in accordance with law. Hence, the impugned order is set aside and appeals of assessee are allowed in principle, subject to the aforesaid directions.
17. The assessee has raised an alternate plea of allowing benefit of telescopy. The said prayer of the assessee has become academic in the light of the fact that we have allowed the appeals of the assessee in principle.
In case the Assessing Officer during re-examination of seized material comes across any cash transaction recorded in the name of assessee, as has been specified above, the issue of telescopy may arise. In that eventuality, the alternate plea of the assessee would not be tenable as the date on which cash Rs. 40 Lacs is seized is subsequent in time vis-a-vis the time of investment. Moreover, the assessee has already offered Rs. 24
ITA Nos. 1008 to 1012, 1334 & 1335/PUN/2011 A.Ys. 1998 -99 to 2004-05 40 lacs cash seized in the names of his various concerns, now adjusting the same against cash transactions with Soni Group, if any, would not arise.
18. In the result, appeals of assessee for the assessment years i.e. 1998- 99 to 2004-05 are allowed for statistical purpose.
Order pronounced on Friday, the 08th day of December, 2017.
Sd/- Sd/-
(डी. क�णाकरा राव/D. KARUNAKARA RAO) (�वकास अव�थी /Vikas Awasthy)
लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER
पुणे / Pune; �दनांक / Dated : 08th December, 2017. SB आदे श क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :
1. अपीलाथ� / The Appellant.
2. ��यथ� / The Respondent.
3. The CIT (Appeals)-1, Pune.
4. The CIT (Central), Pune.
5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, "बी" ब�च, पुणे / DR, ITAT, "B" Bench, Pune.
6. गाड� फ़ाइल / Guard File.
// True Copy // आदे शानुसार / BY ORDER, �नजी स�चव / Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.