Payment Of Interest On Cash Loan Falls Within The Ambit Of Unexplained Expenditure: Calcutta High Court

The Calcutta High Court has held that the payment of interest on a cash loan falls within the ambit of unexplained expenditure within the meaning of Section 69C of the Income Tax Act.

The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that it cannot be stated that the order passed under clause (d) of Section 148 is a non-speaking order, nor can the order be branded as the outcome of non-application of mind.

The appellant/assessee filed a writ petition challenging the order passed by the department under Section 148A(d) of the Income Tax Act, 1961, and the consequential notice issued under Section 148.

The Single Bench, by the order, rejected the contention of the appellant that the assessing officer has not proceeded merely on the basis of remarks about "potential borrowers and lenders." In the later part of the order, the assessing officer clarifies that, on verification of the documents, he has found credible evidence of actual borrowings done by the appellant and not "potential" in nature.

The Single Bench held that the assessing officer has held that the assessee has availed of a cash loan to the tune of Rs. 40,70,00,000 through finance broker Kaseras and other different lenders, and it has also been recorded. There is a huge unexplained expenditure within the meaning of Section 69C. The cash loan and repayment in cash come within the crux of the provisions of Section 269SS and Section 269T and other relevant provisions of the Income Tax Act.

The Single Bench observed that on perusal of the order in the writ petition, it is evident that it was based on huge materials and evidence regarding the alleged transaction, and the court, in the exercise of its writ jurisdiction, cannot act as an assessing officer.

The assessee submitted that the assessing officer had not provided the reasons or information recorded, which was the basis for initiating proceedings. The reasons or information must have the same rational nexus or live link with the formation of the belief that the income of the appellant has escaped assessment.

The department contended that the writ court, after considering the factual position, rightly held that the disputed questions of fact that were canvassed before it could not be adjudicated in the writ petition. There was sufficient evidence brought on record by the assessing officer while passing the order under Section 148A(d), and it will be well open to the appellant to agitate all the issues during the reopening proceedings by placing documents and evidence in support of the claim. The writ petition was rightly dismissed.

The court noted that to test the correctness of the order, it is necessary that the disputed question of facts be thoroughly analysed. There are several stakeholders in the entire process, which requires a deeper probe into the matter, and such an exercise cannot be done in the exercise of writ jurisdiction. Therefore, the single bench was fully justified in not entertaining the writ petition and leaving it upon the appellant to agitate all issues in the reopening proceedings for which notice under Section 148 was issued on April 7, 2023.

Case Title: Shri Shyam Sundar Dhanuka Versus Union Of India And Others

Case No.: A.P.O.T NO. 187 OF 2023

Date: 30.08.2023

Counsel For Petitioner: Abhrotosh Majumder, Sourav Bagaria, Arup Nath Bhattacharya, Arya Bhattacharya

Counsel For Respondent: Tilak Mitra, Amit Sharma

Click Here To Read the Order