Nagpur ITAT deleted addition under section 69A in respect of cash loans as Assessee acted as a finance broker
ITAT Nagpur Order in the Case of Shri Biharilal Shadhuram Chhabriya (ITA Nos. 106 to 109/Nag./2023) has recently deleted the addition under section 69A in respect of cash loans as Assessee acted as a finance broker.
Let us have a Short Overview of the case:
The Issues for Determination before ITAT were as under:
1. Whether the addition under Section 69A on account of cash loans and interest income was justified?
2. Whether the assessee can be treated as the owner of the cash loans recorded in the seized documents?
3. Whether the CIT(A) rightly deleted the addition made by the AO?
In this case, the assessee, Shri Biharilal Shadhuram Chhabriya, was a finance broker who facilitates loans between lenders and borrowers on a commission/brokerage basis.
A search and seizure operation was conducted on 08/11/2018 at H.U. Vaults, Nagpur, which covered locker No. 321 held in the name of the assessee’s employee, Smt. Vanita Prabhakar Kale. Documents relating to money lending transactions, both cheque and cash-based, were seized.
The AO made additions under Section 69A on account of cash loans and corresponding interest income, treating them as unexplained money belonging to the assessee.
The CIT(A) deleted these additions, concluding that the assessee was acting purely as a broker and not as a lender.
Reference was made to section 69A of the Income Tax Act, 1961which provides for the taxation of unexplained money, bullion, jewellery, or other valuable articles found in the ownership of the assessee, where the assessee fails to satisfactorily explain the nature and source of such assets.
It may be noted that section 132(4A) and Section 292C provide for statutory presumptions about the ownership and truthfulness of documents found during search operations.
Tribunal’s Observations and Reasoning
Role as a Finance Broker:
The Tribunal upheld the CIT(A)’s finding that the assessee acted as a finance broker, arranging loans between third parties on a principal-to-principal basis, and earned brokerage income therefrom. The brokerage income was declared and assessed.
No Evidence of Ownership of Funds:
The Tribunal found no credible evidence that the assessee advanced loans from his own funds. The AO failed to prove that the cash loans belonged to the assessee, a necessary prerequisite for invoking Section 69A.
Consistency in Treatment of Documents:
The Tribunal emphasized that the seized documents contained both cheque and cash transactions, recorded in a similar manner. While cheque transactions were accepted as brokered deals between independent lenders and borrowers, cash transactions could not be interpreted differently without cogent evidence.
Burden of Proof on the Revenue:
The Tribunal held that once the assessee provided an explanation consistent with documentary evidence, the burden shifted to the Revenue to rebut this explanation with corroborative material, which it failed to do.
No Unexplained Assets Found Apart from a small amount of cash and jewellery that was duly explained and accepted during assessment, no large cash or assets were found to suggest undisclosed income.
The Copy Of the order is as under:
1724230167-106 + 3 - KMR + VDR - SHRI BIHARILAL SHADHURAM CHHABRIYA - OK
