ITO, New Delhi V. Sh. Pawan Kumar Goswami, Delhi

ITA 1010/DEL/2010

• Counselvise Citation: 101020114 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: P S KOHLI
• Keywords: Income from undisclosed sources; Opportunity of being heard; Peak credit
• Section: 142(1); 69; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI A.N.PAHUJA, ACCOUNTANT MEMBER ITA NO: 1010/DEL/2010 A.Y. : 2005-2006 I T O, WARD 19(3) VS. SH. PAWAN KUMAR GOSWAMI NEW DELHI M 120, SHASTRI NAGAR, DELHI (APPELLANT) (RESPONDENT) APPELLANT BY : SH.BRR KUMAR, SR.D.R. RESPONDENT BY : SH.P.S.KOHLI, C.A. O R D E R PER DIVA SINGH, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DT. 13.11.2009 OF CIT(A)-XXVI, NEW DELHI PERTAINING TO A.Y. 2005-06 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN RAISED BY T HE REVENUE. 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN REDU CING THE ADDITION OF RS.28,44,180/- TO RS.1,42,419/- MADE BY THE A.O. AS INCOME FROM UNDISCLOSED SOURCES. 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN REDUC ING THE ADDITION OF RS.28,44,180/- TO RS. 1,42,419/- AS THE ASSESSEE DURING THE REMAND PROCEEDINGS HAD FAILED TO SUBSTAN TIATE THE SOURCE OF RECEIPTS AND PAYMENT FROM BANK ACCOUNT WI TH SALE AND PURCHASE BILLS AND COULD NOT FURNISH DETAILS OF EXPENSES INCURRED IN CONNECTION WITH RUNNING OF BUSINESS. 2. THE RELEVANT FACTS OF THE CASE AS EMERGING FROM THE ASSESSMENT ORDER ARE THAT AS PER INFORMATION FROM AIR A.O. OB SERVED THAT A SUM OF RS.28,44,180/- HAD BEEN DEPOSITED IN A SPECIFIC BAN K ACCOUNT WITH UTI BANK LTD. IN THE NAME OF ASSESSEE. NOTICE WAS ISSU ED TO THE ASSESSEE ITA 1010/DEL/2010 PAGE 2 OF 7 A.Y. 2005-06 SH. PAWAN KUMAR GOSWAMI ASKING HIM TO FILE HIS RETURN. THE NOTICE AS PER T HE ASSESSMENT ORDER WAS SENT BY SPEED POST. DESPITE THAT NO RETURN OF INCOME WAS FILED BY THE ASSESSEE IN RESPONSE THERETO. ANOTHER NOTICE U /S 142(1) WAS ISSUED REQUIRING THE ASSESSEE TO EXPLAIN THE DEPOSITS OCCU RRING IN THE SAID BANK ACCOUNT FROM 1.4.2002 TO 31.3.2005. SINCE NO DETAI LS EITHER OF HOUSE HOLD EXPENSES OR OF PERSONAL EXPENSES OR ANY OTHER RELEVANT INFORMATION WAS GIVEN BY THE ASSESSEE, THE ASSESSMENT WAS MADE U/S 144 OF THE INCOME TAX ACT, 1961 AND THE SAID AMOUNT WAS ADDE D AS INCOME FROM UNDISCLOSED SOURCES U/S 69 OF THE INCOME TAX ACT, 1 961. 3. IN APPEAL BEFORE THE CIT(A), THE ASSESSEE ASSAIL ED THE A.O. ON THE GROUNDS OF JURISDICTION; LACK OF OPPORTUNITY; MERIT AND ALSO ON THE GROUND THAT INCOME ASSESSED IS EXCESSIVE. IN SUPPORT OF T HE GROUNDS IT WAS URGED THAT THE A.O. HAS MADE NO ENQUIRES BEFORE MAK ING ASSESSMENT WHEREIN AFTER ASSESSING THE INCOME AT RS.1,20,000/- AND ADDITION OF RS.28,44,150/- HAS BEEN MADE ON THE BASIS OF DEPO SITS IN THE BANK ACCOUNT. IT WAS AGITATED THAT THE A.O. DID NOT CAU SE ANY ENQUIRY TO BE MADE TO ASCERTAIN WHETHER THE INVESTMENTS WERE MADE BY THE ASSESSEE OR BY SOME ONE ELSE; IT WAS ALSO URGED THAT IF THERE ARE DEPOSITS THEN THE SAID ACCOUNT ALSO SHOWS WITHDRAWALS AS SUCH AT BEST THE MAXIMUM PEAK CREDIT COULD BE TREATED AS INVESTMENT. RELIA NCE WAS PLACED ON MOTOROLA INC. VS. DCIT, ITAT, DELHI A SPECIAL BEN CH REPORTED AS ITA 2425/DEL/2001 DT. 22.6.2005(2005) 96 TTJ (DEL)(SB) 1: (2005) 95 ITD ITA 1010/DEL/2010 PAGE 3 OF 7 A.Y. 2005-06 SH. PAWAN KUMAR GOSWAMI 269 (DEL)(SB). ALTERNATE ARGUMENTS WERE ALSO ADVAN CED WHICH ARE SET OUT IN PARA 9 AT PAGE 3 OF CIT(A)S ORDER WHICH IS REP RODUCED HEREUNDER. 9. THAT WITHOUT PREJUDICE TO ANY OTHER FACTS AND C IRCUMSTANCES SINCE THE MONEY WAS DEPOSITED AND USED FOR PAYMENT TO DEPOSITORS AS TRANSFER OF FUNDS AND THE ASSESSEE WA S GETTING ONLY A NOMINAL COMMISSION OF 2% FOR USING OF HIS BA NK ACCOUNT THE INCOME SHOULD BE ASSESSED ONLY AT RS.56,883/- B EING 2% OF TOTAL DEPOSITS. 3.1. ASSESSEES SUBMISSIONS WERE FORWARDED BY THE CIT(A) TO THE A.O. AND IN THE REMAND ORDER AS PER THE IMPUGNED ORDER F OLLOWING SUBMISSIONS WERE MADE BY THE A.O. 'IN THIS MATTER, THE ASSESSEE'S FIRST CLAIM IS THA T THE NOTICE ISSUED U/S.142(1) OF THE IT ACT IS AFTER THE CLOSE OF THE ASSESSMENT YEAR AND IS INVALID. THERE IS NO SUCH PROVISION IN THE ACT T HAT NOTICE U/S.142(1) SHOULD BE ISSUED DURING THE ASSESSMENT YEAR ITSELF. PROVISO TO SECTION 142(1) SAYS, 'PROVIDED THAT WHERE ANY NOTIC E HAS BEEN SERVED UNDER THIS SUB-SECTION FOR THE PURPOSES OF T HIS CLAUSE AFTER THE END OF THE RELEVANT ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST OF APRIL, 1990 TO A PERSON WHO HAS NOT MADE A R ETURN WITHIN THE TIME ALLOWED UNDER SUB-SECTION (1) OF SECTION 139 O R BEFORE THE END OF THE RELEVANT ASSESSMENT YEAR, ANY SUCH NOTICE ISSUE D TO HIM SHALL BE DEEMED TO HAVE BEEN SERVED IN ACCORDANCE WITH TH E PROVISIONS OF THIS SUB-SECTION'. THE ASSESSEE DID NOT FILE ANY EV IDENCE FOR FILING HIS RETURN WITH THE PRESCRIBED PERIOD OR THEREAFTER. FR OM THE ABOVE PROVISO IT IS CLEAR THAT THE NOTICE ISSUED U/S; 142 (1) IS VALID. IT IS THEREFORE, REQUESTED THAT THE ASSESSEE'S CONTENTION MAY NOT BE ACCEPTED. SECONDLY, THE ASSESSEE HAS CLAIMED THAT ONLY PEAK C REDIT SHOULD BE ASSESSED AS INCOME FROM UNDISCLOSED SOURCES. DURING THE ASSESSMENT PROCEEDINGS, IN RESPONSE TO THE NOTICE I SSUED U/S.142(1) AND 143(2) OF THE IT ACT, THE ASSESSEE DID NOT SUB MIT ANY DETAILS NOR ATTENDED THE HEARING. IN THE ABSENCE OF ANY RES PONSE FROM THE ASSESSEE, THE ORDER WAS PASSED U/S.144 OF THE IT AC T ON THE BASIS OF THE AIR INFORMATION AVAILABLE ON RECORD. UNLESS THE ASSESSEE SUBMIT COMPLETE DETAILS OF HIS BANK ACCOUNT AND BANK STATE MENT ALONG WITH HIS ALL EXPENDITURE, THE PEAK CREDIT CANNOT BE WORK ED OUT. IT IS THEREFORE, REQUESTED THAT THE ASSESSEE MAY BE DIREC TED TO SUBMIT ALL HIS BANK ACCOUNT DETAILS, COPY OF ALL BANK STATEME NTS FOR THE RELEVANT PERIOD AND COMPLETE DETAILS OF WITHDRAWAL/ INVESTMENT MADE DURING THE YEAR UNDER CONSIDERATION. ' ITA 1010/DEL/2010 PAGE 4 OF 7 A.Y. 2005-06 SH. PAWAN KUMAR GOSWAMI 3.2. CONSIDERING THESE THE CIT(A) CAME TO THE FOLLO WING CONCLUSION. 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CAS E. I OBSERVE THAT THE APPELLANT HAS NOT HAS NOT BEEN ABLE TO FURNISH ANY SATISFACTORY EXPLANATION IN REGARD TO THE NATURE AND SOURCES OF DEPOSITS MADE IN CASH IN ITS AFORESAID BANK ACCOUNT. THE SAME HAVE T O BE, THEREFORE, CONSIDERED FOR ADDITION UNDER THE PROVISIONS OF THE ACT. IT IS, HOWEVER, OBSERVED THAT IN SUCH CASES, THE PEAK CRED IT METHOD IS TO BE APPLIED AS PER THE STANDARD PRINCIPLES OF ACCOUN TANCY AND THE WELL ESTABLISHED POSITION OF LAW ON THE SUBJECT. IT HAS BEEN HELD BY THE HON'BLE ITAT, RAJKOT, IN THE CASE OF ITO VS.MAH ESH KUMAR JAYANTI LAL VORA THAT WHILE MAKING ADDITION U/S. 68 ON THE BASIS OF CASH DEPOSITS, ONLY PEAK CREDIT SHOULD BE CONSIDERE D. IT IS WELL ESTABLISHED THAT NO INCOME CAN BE TAXED TWICE. BY A GGREGATING ALL DEPOSITS, THEY TEND TO GET TAXED TWICE WHICH IS AGA INST THE PRINCIPLES OF TAXATION. THE HON'BLE BENCH HAS ALSO RELIED ON T HE DECISIONS OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF G. V ENKATAREDDY & CO. VS. DCIT (2001) 73 TTJ (HYD) 401 : (2002) 124 T AXMAN 261 (HYD)(MAG.), OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF S.R. ENTERPRISES V S. ITO (2002) 77 TTJ (AHD) 69, O F THE DELHI HIGH COURT IN THE CASE OF ADDL. CIT VS. CHETAN DASS (197 5) 99 ITR 46 (DEL) AND OF THE ALLAHAB~D HIGH COURT IN THE CASE O F CIT VS. NEEMAR RAM BANDHU RAM (1979) 11 (CTR)(ALL) 253 : (1980) 12 2 ITR 68(ALL) TO EMPHASIZE THE POINT THAT PEAK CREDIT METHOD WAS THE CORRECT METHOD OF DETERMINING THE INCOME IN CASE OF UNEXPLA INED CASH CREDITS. 6. ON CAREFUL EXAMINATION OF THE BANK STATEMENT PLA CED ON RECORD, IT IS OBSERVED THAT THE PEAK CREDIT IN THE AFORESAID B ANK ACCOUNT WORKS OUT TO RS.L ,42,419/- AS ON 15/6/2004. 7. IN VIEW OF THE ABOVE DISCUSSION, IT IS HEREBY HE LD THAT THE AO WAS NOT JUSTIFIED IN ASSESSING THE INCOME AT RS.28,44,1 50/- IN THE HANDS OF THE APPELLANT ON THE BASIS OF THE INDIVIDUAL TRA NSACTION STATEMENT AS ABOVE. THE ADDITION MADE BY THE AO ON THIS COUNT IS, HOWEVER, CONFIRMED TO THE EXTENT OF RS.1,42,418/- BEING THE PEAK CREDIT WORKED OUT AS ABOVE. THE APPELLANT, ACCORDINGLY, GE TS A RELIEF OF THE BALANCE AMOUNT ON THIS COUNT. 8. IN RESULT THE APPEAL IS PARTLY ALLOWED. 4. AGGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFOR E THE TRIBUNAL. LD.D.R. RELYING UPON THE ASSESSMENT ORDER SUBMITTE D THAT THE OCCASION ITA 1010/DEL/2010 PAGE 5 OF 7 A.Y. 2005-06 SH. PAWAN KUMAR GOSWAMI TO WORK OUT PEAK CREDIT WOULD ARISE ONLY WHEN COMP LETE BANK DETAILS ARE GIVEN BY THE ASSESSEE. IN THE FACTS OF THE ASS ESSEES CASE HE HAS NOT GIVEN ANY BANK ACCOUNT DETAILS. IT WAS ALSO HIS CO NTENTION THAT NO CASE HAS BEEN MADE OUT BY THE ASSESSEE TO SHOW THAT THES E WERE SAME DEPOSITS WHICH WERE BEING RE-DEPOSITED OR ROTATED FOR BUSINESS, AS SUCH SPECIFIC REASONS FOR WORKING OUT THE PEAK CREDIT, I T WAS SUBMITTED HAVE NOT BEEN CONSIDERED NOR MADE OUT. IT WAS HIS ARGUM ENT THAT THE ASSESSEE HAS TO MAKE OUT A CASE WHY PEAK CREDIT SHO ULD BE TAKEN IN HIS BUSINESS IN THE FACT OF THE PRESENT CASE NEITHER TH E BANK DETAILS NOR THE ANSWER OF THE ASSESSEE HAS BEEN DISCUSSED. 5. LD.A.R. ON THE OTHER HAND RELYING UPON THE IMPUG NED ORDER SUBMITTED THAT PEAK CREDIT METHOD IS THE ONLY CORR ECT METHOD TO CONSIDER HOW THE INCOME COULD HAVE BEEN WORKED OUT. THE LD.A.R. WAS REQUIRED TO ADDRESS WHETHER THE IMPUGNED ORDER HAS BEEN ACCEPTED BY HIM OR HAS HE FILED ANY CROSS APPEAL. IN RESPONSE THERETO HE SAID THAT HE HAS NOT FILED ANY CROSS APPEAL AND THE SAID ORD ER HAS BEEN ACCEPTED BY THE ASSESSEE IT WAS VEHEMENTLY CONTENDED BY HIM THAT THE A.O. HAS NOT MADE ANY ENQUIRY AND HAS MADE ADDITION OF THE E NTIRE DEPOSIT IN THE BANK ACCOUNT. LD.A.R. WAS REQUIRED TO ADDRESS WHET HER ANY COPY OF BANK ACCOUNT HAD BEEN GIVEN AS WITHOUT WHICH IT IS NOT POSSIBLE TO WORK OUT THE PEAK CREDIT. IT WAS HIS STAND THAT IT WAS GIVEN TO THE CIT(A). COPY OF THE SAME WAS PLACED BEFORE THE BENCH. ITA 1010/DEL/2010 PAGE 6 OF 7 A.Y. 2005-06 SH. PAWAN KUMAR GOSWAMI 6. LD.D.R. IN REPLY SUBMITTED THAT THE ASSESSEE IS A CONDUIT AS PER HIS OWN VERSION SUPPOSEDLY MAKING INVESTMENTS OR FACILI TATING INVESTMENTS FOR OTHERS WHICH IS A VERY SERIOUS AND GREY AREA OF CONCERN. IN THE FACTS OF THE PRESENT CASE THE SPECIFIC PARTICULARS BEFORE THE AO WAS ONLY THE AIR REPORT AND HE DID NOT HAVE THE SPECIFIC WITHDRA WAL DETAILS IN REGARD TO WHICH NO EXPLANATION WAS GIVEN BY THE ASSESSEE A S THE ASSESSMENT HAD TO BE MADE U/S 144 OF THE ACT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON A CAREFUL CONSIDERATION OF THE SAME, WE ARE OF THE VIEW THAT IN THE PECULIAR FACTS AND CIRCUMSTANC ES OF THE CASE IT IS APPROPRIATE TO RESTORE THE ISSUE BACK TO THE FILE O F A.O. IT IS SEEN THAT THE CIT(A) HAS NOT CARED TO PROVIDE A COPY OF THE BANK DETAILS TO THE A.O. AND REMAND REPORT THEREON HAS SPECIFICALLY NOT BEEN SOU GHT AS IS EVIDENT FROM THE ORDER IN HIS REMAND REPORT WHICH HAS BEEN EXTRACTED IN PARA 11 AT PAGES 4 AND 5 OF THE IMPUGNED ORDER. ACCORDI NGLY FOR THE REASONS GIVEN HERE IN ABOVE THE IMPUGNED ORDER IS SET ASIDE AND THE ISSUE IS RESTORED BACK TO THE FILE OF A.O. WITH THE DIRECT ION TO DECIDE THE SAME IN ACCORDANCE WITH LAW BY WAY OF A SPEAKING ORDER AFTE R AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JANUARY,2012. SD/- SD/- (A.N. PAHUJA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST JANUARY, 2012 *MANGA ITA 1010/DEL/2010 PAGE 7 OF 7 A.Y. 2005-06 SH. PAWAN KUMAR GOSWAMI COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5.DR 6.GUARD FILE BY ORDER DY. REGISTRAR