Cash Loan Additions Based Solely on Third-Party Statement Deleted: ITAT Delhi

Gian Chand & Sons (HUF) Vs ACIT (ITAT Delhi)

The appeals were filed by the assessee against the orders of the Commissioner of Income Tax (Appeals)-16, New Delhi dated 26.11.2018. Since identical issues arose in all the appeals, they were heard together and disposed of by a common order. The case was fixed for early hearing pursuant to an order dated 27.08.2021.

During the hearing, the assessee relied upon the decision of the Coordinate Bench of the Income Tax Appellate Tribunal in M/s Shagun Jewellers (P) Ltd. Vs ACIT, ITA No. 9890/Del/2019 dated 16.06.2020. The Departmental Representative supported the orders of the lower authorities.

The Tribunal examined the earlier decision relied upon by the assessee. In that case, a search conducted at Ahmedabad and New Delhi resulted in the seizure of documents relating to an alleged unaccounted money lending business involving Shri Asharam Bapu and his associates. During the investigation, the statement of Shri Devi Das Tikamdas Chattani was recorded under Sections 131A read with 131 of the Income-tax Act. According to his statement, the loan accounts were maintained by Shri Popat Lal Vani, while Shri Sant Lal Aggarwal allegedly handled disbursement of cash loans in Delhi to numerous parties. Based on information received from the Investigation Wing, the Assessing Officer reopened the assessment under Section 148, alleging that the assessee had received cash loans reflected in seized documents.

The earlier Tribunal order observed that the entire addition rested on the statement of Shri Devi Das Tikamdas Chattani and that no direct evidence had been brought on record to establish any cash transaction between the assessee and the alleged lender. It further noted that Shri Sant Lal Aggarwal, whose statement formed part of the assessment record, repeatedly stated that he did not know Shri Devi Das Tikamdas Chattani, had never handled ₹200 crore, and had not undertaken the alleged transactions, except for certain admitted business dealings. The Tribunal also observed that the Assessing Officer had not confronted Shri Devi Das Tikamdas Chattani with the statement of Shri Sant Lal Aggarwal. It held that merely because Shri Sant Lal Aggarwal’s statement supported the assessee, it could not be disregarded. The assessment order itself recorded that it “cannot be ruled out” that cash loans had been received, which the Tribunal considered indicative of additions based on surmises and conjectures. Consequently, the addition of ₹1,55,16,090 was deleted in that case.

In the present appeals, the Tribunal reproduced the ledger entries relating to the assessee for Assessment Years 2009-10, 2010-11, 2011-12, 2012-13, and 2013-14. These entries reflected debit and credit transactions, interest entries, beneficiary names, and related details which the Tribunal noted were similar to the ledger considered in the earlier decision in M/s Shagun Jewellers (P) Ltd.

After examining the record, the Tribunal found that the earlier decision had already considered the ledger accounts and the statements of various persons recorded during and after the search. It observed that no fresh material had been brought before it by the Revenue to distinguish the present case from the earlier decision. The Tribunal therefore declined to depart from the ratio laid down in the decision in M/s Shagun Jewellers (P) Ltd.

With respect to Ground No. 5 for Assessment Year 2011-12 concerning repayment of loan, the Tribunal held that since the issue arose from the same ledger account, the reasoning adopted in the earlier decision applied mutatis mutandis to that ground as well.

Accordingly, following the Coordinate Bench decision and in the absence of any new material distinguishing the facts, the Tribunal allowed all the appeals filed by the assessee.

Five Alternative SEO Titles

• ITAT Delhi Deletes Cash Loan Additions Following Earlier Coordinate Bench Decision:
• Allows Appeals as Revenue Produced No New Material Beyond Earlier ITAT Ruling: ITAT Delhi
• Removes Additions Based on Seized Ledger Entries Following Coordinate Bench Decision: ITAT Delhi
• Deletes Alleged Cash Loan Additions Based on Earlier Shagun Jewellers Ruling: ITAT Delhi
• Allows Assessee’s Appeals as Identical Issues Were Covered by Earlier ITAT Decision: ITAT Delhi

FULL TEXT OF THE ORDER OF ITAT DELHI

The present appeals have been filed by the assessee against the orders of the ld. CIT(A)-16, New Delhi dated 26.11.2018.

2. Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.

3. The case has been fixed for early hearing as per the order dated 27.08.2021.

4. During the hearing before us, the ld. AR relied on the order of the Co-ordinate Bench of ITAT in ITA No. 9890/Del/2019 dated 16.06.2020 in the case M/s Shagun Jewellers (P) Ltd. Vs ACIT.

5. The ld. DR relied on the orders of the authorities below.

6. We have perused the above quoted order and find the background and facts of the case are similar except the quantum involved. For the sake of ready reference, the relevant portion of the order relied by the ld. AR is reproduced as under:

“5. Briefly stated, the facts of the case are that a search was conducted at Ahmadabad and New Delhi in which certain documents were found and seized by the search party. From the documents found, unaccounted money lending business of Shri Asharam Bapu and his associates came into light. It also came to the knowledge of the Revenue that there were several beneficiaries. Statement of one Shri Devi Das Tikamdas was recorded u/s 131A r.w.s 131 of the Act on 25th and 26th September, 2015.

6. In his statement, Shri Devi Das Tikamdas Chattani stated that whole of the loan account was maintained by one Shri Popat Lal Vani. Shri Devi Das Tikamdas Chattani also stated that one Shri Sant Lal Aggarwal was handler of Rs. 200 crores at Delhi from where the loan was disbursed to around 100 parties, out of which 60 such parties were transacted through Shri Sant Lal Aggarwal.

7. The Assessing Officer of the assessee was informed by the Investigation Wing of the department that from verification of documents seized, it clearly appears that Shri Sant Lal Aggarwal received cash loans from Shri Asharam and further disbursed to other parties and the assessee is one of the beneficiaries. According to the Assessing Officer, the following cash loans were given to the assessee:

8. On the strength of the information received from the ADIT, INV, the Assessing Officer assumed jurisdiction u/s 148 of the Act and accordingly, statutory notices were issued and served upon the assessee.

……..

25. Coming to the merits of addition of Rs. 1,55,16,090/-, once again, the entire addition revolves around the statement of Shri Devi Das Tikamdas Chattani. In his statement, Shri Devi Das Tikamdas Chattani stated that Shri Sant Lal Aggarwal is handler and is the main person for disbursing cash loan to 60 parties. The alleged cash loans given to the assessee is already exhibited elsewhere at para 7 hereinabove.

26. As mentioned elsewhere, the foundation of the impugned addition is the statement of Shri Devi Das Tikamdas Chattani. Except for that, there is no direct evidence brought on record to show that any cash transactions took place between the assessee and the said person.

27. On the contrary, the statement of Shri Sant Lal Aggarwal which is part of the assessment order and is extracted at pages 17 to 24 of the assessment order shows that Shri Sant Lal Aggarwal, answering to question No. 13, emphatically stated that he does not know who Shri Devi Das Tikamdas Chattani is. Once again, answering to question No. 18, Shri Sant Lal Aggarwal stated that he does not know who is Shri Devi Das Tikamdas Chattani. Answering to question No. 19, Shri Sant Lal Aggarwal stated that he does not know Shri Devi Das Tikamdas Chattani and never handled Rs. 200 crores and no such transaction was done by him except selling rice to the Ashram. In the very same statement, Shri Sant Lal Aggarwal accepted the transaction of M/s Index Securities and Research Pvt Ltd and the appellant company.

28. The Assessing Officer never confronted Shri Devi Das Tikamdas Chattani to Shri Sant Lal Aggarwal. If the statement of Shri Devi Das Tikamdas Chattani is to be believed, then on the same facts, statement of Shri Sant Lal Aggarwal cannot be ignored or brushed aside lightly. Merely because the statement of Shri Sant Lal goes in favour of the assessee, cannot be a reason to disbelieve the same. As mentioned elsewhere, there is no direct evidence brought on record which could suggest that some cash transactions took place between the assessee and the searched person. The observations made by the Assessing Officer at page 25 of the assessment order clearly show that the entire addition has been made on surmises and conjectures. The relevant para of the assessment order reads as under:

“From above it is clear that M/s. Shagun Jewellers has had transactions with M/s Index Securities & Research Put Ltd which was a conduit company managed by Mr.Santlal Aggarwal who has further acted on behalf of Sh. Asharam Bapu. Hence, it cannot be ruled out that cash loan were received by the assessee from Santlal Aggarwal. Moreover, the seized material retrieved, clearly indicates that the assessee company has paid Rs. 1,55,16,090/- in cash on account of interest on such cash loan.”

29. Considering the facts of the case in hand, in the light of statement of Shri Sant Lal Aggarwal, we do not find any merit in the impugned addition and the same is directed to be deleted. Accordingly, Ground Nos. 4 and 5 are allowed.”

7. The amounts mentioned in the ledger account in the case of the assessee which is the similar ledger considered by the ITAT in the order of the M/s Shagun Jewellers is mentioned below:

A.Y. 2009-10

A.Y. 2010-11

A.Y. 2011-12

A.Y. 2012-13

A.Y. 2013-14

8. Since, the order of the ITAT has already dealt with the copy of the ledger account, statements of various persons recorded during the search and post search, in the absence of any new material brought before us, we decline to deviate from the ratio in the order of the ITAT in the case of M/s Shagun Jewellers Pvt. Ltd.

9. With regard to the Ground No. 5 in the A.Y. 2011-12 pertaining to repayment of loan since the same being the part of the same ledger account, the similar ratio of adjudication applies mutatis mutandis.

10. In the result, all the appeals of the assessee are allowed.

Order Pronounced in the Open Court on 01/11/2021.