MOHAN M MEHARWADE Vs. STATE
INCOME TAX APPELLATE TRIBUNAL
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(1.) THE two applications made under Section 245C of the Income-tax Act, 1961, were allowed to be proceeded with by the Commission, by its orders under Section 245D(1), dated August 23, 1991, and January 13, 1992, for the assessment years 1986-87, 1987-88 and 1988-89.
(2.) The applicant who is an individual is a partner in M/s. Mohan Wine Shop at Hubli in Karnataka in which he holds 90 per cent, share. In the returns of income filed, he disclosed only his share income from the firm. Search and seizure operations under Section 132 of the Income-tax Act, 1961, were conducted in the business and residential premises of the applicant on September 29, 1987. Certain documents were seized from his residential premises and an amount of Rs. 1,20,000 found at the time of the search was also seized. He filed returns of income for the assessment years 1986-87 and 1987-88 on March 30, 1988, and the assessments were completed in March, 1989, and March, 1990, respectively. He filed appeals against the assessment orders before the Commissioner of Income-tax (Appeals) which were pending on the date of the application. As regards the assessment year 1988-89, the return of income was filed on July 29, 1988, and the assessment was pending on the date of application.
On the basis of the documents seized, the Department came to the conclusion that the applicant was carrying on money-lending business. It is stated in the statement of facts by the applicant that on account of his reputation and ability to adjudicate between parties on matters of dispute, the applicant was normally acting as a Pancha for a number of transactions. Gradually, this led to a situation whereby persons in need of money for a short term requested him for arranging loans and persons with surplus money were prepared to rely on his assurance and lend money. Thus, the applicant indulged in arranging for loan transactions between third parties. The rate of interest and terms of payment would differ, from person to person and transaction to transaction. In the case of certain transactions where the applicant merely acted as a mediator in linking the borrower and the lender, the applicant earned some brokerage as a one time payment. However, in certain other transactions where the borrower and the lender transacted through the applicant even without knowing each other personally, it is stated that the applicant would earn periodical income by way Of excess rate of interest ranging from 1 per cent, to 3 per cent, on the money arranged. The additional income offered from this source of activity is as under :
(3.) THE report of the Commissioner of Income-tax under Section 245D(1) has been received. During the hearing, the applicant was represented by Shri T. N. Manoharan, CA, and the Department by Shri V. K. Jayaraman, Commissioner of Income-tax (DR).;
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