Heard learned counsel for the parties.

2. This tax appeal under Section 260 A of the Income Tax Act, 1961(for short-Act of 1961) has been preferred against the order passed by the Assessing Officer dated 28.12.2006 and the order passed by the Commissioner of Income-Tax (Appeal) dated 04.3.2008 and the order passed by the Income Tax Appellate Tribunal, Circuit Bench, Ranchi, dated 29.3.2010.

3. The A.O. passed assesorder under Section 147/143(3) of the Act of 1961, in a case where the assessee Ajay Prakash Verma submitted original returns on 22.04.2004 for the assessment year 2003-04, showing his total income of Rs.84,200/-. The assessee had shown his income from tuition, sale of cow milk, income of other sources including agricultural income amounting to Rs.6000/-. The case of the assessee was duly processed on 30.03.2005. However, a notice under Section 147 was issued on 23.11.2005 for the same assessment year which was duly served upon the assessee on 26.11.2005. The reasons for re-opening the case is based on the fact that the assessee had taken loans from 148 different persons amounting to Rs.25.97 lakhs during the financial year 2002-03(relevant to the assessment year 2003-04). All these loans were taken in cash and are below Rs.20000/-. On the basis of this fact, the A.O. had reasons to believe that because of this clandestine deal, the assessee had escaped assessment of income for the assessment year 2003-04.

4. In response to the notice under Section 142(1), the assessee filed a petition dated 12.09.2006 and requested the Department to accept original returns filed on 22.04.2004, as returns was filed under Section 148 of the Act of 1961. In view of the above, the case was fixed for hearing by issuing notice under Section 143(2) afresh. In course of scrutiny, the assessee was asked to file the details of the names and addresses of the persons from whom he had taken loan of Rs.32 lakhs for having allegedly advanced loan to another person, Sri Ajay Kumar of Hazaribagh, later on.

5. Upon this, the assessee submitted a list of the name of the persons, who were 148 in number with their addresses from whom he had taken loan of Rs.25.97 lakhs. As already noticed, all loans were claimed to have been taken in cash and all were below Rs.20000/-.

6. The assessee also submitted that the said loan from 148 persons and others were taken to advance the loan of Rs.32 lakhs to one Sri Ajay Kumar,S/o Bhagat Kishan, Director of M/s Dahanu Agency (P) Ltd., Mumbai, resident of 'Kishan House', Dipugarh, Hazaribagh, Jharkhand. In support of that transaction with said Ajay Kumar, the assessee submitted a photo copy of the agreement dated 10.05.2002. However, even after demanding by the A.O., the original agreement was not submitted. The A.O. finding the peculiar situation of loans from 148 alleged creditors, who alleged to have advanced the huge cash money to the assessee who claimed that he is a politician and his source of income was from the tuition, sale of cow milk with income from other sources including agricultural income amounting to Rs.6000/-. The A.O. demanded further proof from the assessee, who in turn, submitted the loan confirmation form alleged to have been signed by the creditors who are in one proforma and alleged to have been duly signed by 148 persons. The A.O. issued summons under Section 131 of the Act of 1961 to 26 person out of 148 person and also issued enquiry letters under Section 133(6) of the Act, in 30 cases. This method was adopted to test check the genuineness of the assessee's claim that he had taken loan in cash from the said persons to advance the said amount to one Shri Ajay Kumar of Hazaribagh. In response to the notice, some of the persons appeared and some replied to the inquiries made under Section 133(6) in writing. Out of 26 cases, where summons under Section 131 were issued, two summons returned 'unserved' and in 15 cases, no reply to the summons was received and the A.O. found that some of th