COMMISSIONER OF INCOME-TAX Vs. CHANDULAL CHHUGANI

JUDGEMENT

(1.) This income-tax appeal under Section 260A of the Income-tax Act, 1961 (for short the "Act") preferred by the Appellant-Revenue against the order of the Income-tax Appellate Tribunal, Nagpur (for short "the Tribunal") has been admitted on June 19, 2009 on the following substantial questions of law:

(2.) The brief facts of the case are that a search and seizure was conducted in the residential and business premises of the Respondent-Assessee. A notice was issued to the Assessee to explain the loose papers, documents, books of account and other valuable assets found and seized. The statement of the Respondent-Assessee was recorded during the search. The Assessing Officer (for short "AO") noted that during the course of initial statement, the Assessee had not disclosed ownership of the locker with the Punjab National Bank and the said fact came into notice of the Appellant Revenue subsequently. The said account was opened and hundis and FD Rs worth Rs. 18,35,000 were found. The Assessee admitted that source of investment on hundis and FD Rs is out of the concealed income and offered for taxation. During the course of hearing, the Assessee submitted that the promissory notes/hundis found in the locker was only to the tune of Rs. 18,35,000 and not Rs. 27,43,000. The Assessee submitted that promissory notes belonged to different persons in the Chhugani family and in support he filed list of promissory notes of each of the family members and confirmation of loans taken by various parties on hundis. As per the list, the Assessee advanced only Rs. 5,25,000 only on promissory note. There were eighteen promissory notes for Rs. 3,00,000 executed by M/s. Shankar Cloth Stores, Neora, however, Shri Chandumal Khubani, proprietor of M/s. Shankar Cloth Stores has denied in his statement about taking the loan of Rs. 3 lakhs. The promissory notes under the seal of M/s. Shankar Cloth Stores, Neora were shown to Shri Chandumal Khubani, he has stated that the promissory notes were signed by his manager namely Shri Ramesh Kumar Khubani for his business. The said Shri Chandumal stated that the Respondent-Assessee called him to Raipur for signing the promissory notes, but he could not go to Raipur due to his ill health and after his recovery from illness, when he contacted the Respondent herein, the Respondent informed him that promissory notes were misplaced and thereafter since there was no need of money, he never approached the Assessee for the same.

(3.) The Assessing Officer did not accept the explanation offered by the Assessee regarding the above eighteen promissory notes and held that the Assessee did advance a sum of Rs. 3 lakhs to Shri Chandumal by recording that no prudent businessman shall leave promissory notes after signing the same with any money-lender and added an amount of Rs. 3 lakhs to the total income of the Assessee.