Commissioner of Income Tax vs Chandulal Chhugani

I.M. Quddusi, J.—This income tax appeal u/s 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:

Whether on the facts and circumstances of the case, the learned Tribunal was legally justified in deleting the addition of Rs. 3 lakhs made by the Assessing Officer on account of unexplained investment in hundis as undisclosed income

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.

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.

Against the order of the Assessing Officer, an appeal was preferred before the Tribunal by the Respondent-Assessee and the Tribunal vide order impugned dated July 26, 1997 deleted the additions made by the Assessing Officer by recording the findings that the manager, who signed the promissory notes, has categorically stated that no money was received and the proprietor of the concern also confirmed this fact. The total promissory notes found in the locker were about Rs. 18,35,000 and all of them did not belong to the Assessee but they belonged to the family members as well and the Assessing Officer accepted this fact. Further, none of the promissory notes are signed by any of the employees and under these circumstances there is no reason to disbelieve the Assessee''s explanation that the amount was not given as it was not signed by the proprietor of the said concern.

On the basis of the facts of the case, as explained by the Tribunal, and that findings of facts are not disputed that the promissory notes for Rs. 3 lakhs were executed by Shri Chandumal Khubani, proprietor of M/s. Shankar Cloth Stores, Neora and the said Shri Chandumal has denied in the statement about taking loan of Rs. 3 lakhs from the Respondent-Assessee and when 18 promissory notes under the seal of M/s. Shankar Cloth Stores were shown to the said Chandumal, it was stated that the same were signed by the manager Shri Ramesh Kumar Khubani, who has also stated that the Respondent-Assessee did not give loan for the reasons that promissory notes were not signed by Shri Khubani, we are of the opinion that no question of law much less any substantial question of law is involved in this appeal for adjudication and the same is liable to be dismissed.

Accordingly, the instant appeal is dismissed. No order as to costs.