Murli Manohar Karnani, Kolkata V. ITO, WD-46(2), KOLKATA, Kolkata

ITA 1099/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1377 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 14-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANAND R BAIWAR
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Peak credit
• Section: 133(6); 131; 148

Judgement Text

1 ITA NO.1099/KOL/2015 MURLI MANOHAR KARNANI., AY 2006-07 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE .., /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 1099/KOL/2015 ASSESSMENT YEAR: 2006-07 MURLI MANOHAR KARNANI (PAN: AMXPK1375P) VS. INCOME-TAX OFFICER, WD-46(2), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 10.08.2017 DATE OF PRONOUNCEMENT 06.10.2017 FOR THE APPELLANT SHRI MIRAJ D. SHAH, AR FOR THE RESPONDENT SHRI ANAND R. BAIWAR, CIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-XXX, KOLKATA DATED 28.10.2014 FOR AY 2006-07. 2. AT THE OUTSET ITSELF, THE LD. COUNSEL FOR THE AS SESSEE SHRI MIRAJ D. SHAH, ADVOCATE BROUGHT TO OUR NOTICE THAT THE ASSESSEE IS NOT PRES SING GROUND NOS. 1 TO 5 AND THE SAID LEGAL ISSUE RAISED BY THE ASSESSEE AGAINST THE REOPENING U/S. 148 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) STANDS DISMI SSED. 3. THE ONLY EFFECTIVE GROUND I.E. GROUND NO. 6, WHI CH IS AGAINST THE ACTION OF THE LD. CIT(A) IN UPHOLDING THE ADDITION OF RS.15,10,67,259 /- AS UNEXPLAINED CASH DEPOSIT. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS R ETURN OF INCOME DISCLOSING TOTAL INCOME OF RS.1,00,190/-. THE AO NOTICED THAT HE GOT AN INFOR MATION FROM THE CIT (CIB) THAT A SUM OF RS.7,40,41,150/- WAS DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE IN HDFC BANK DURING THE RELEVANT ASSESSMENT YEAR. THE AO ISSUED NOTICE U/S. 148 OF THE ACT AND THEREAFTER, THE AO NOTES THAT SHE HAS CONDUCTED ENQUIRY THROUGH THE INSPECTOR AND AS PER HIS REPORT DATED 07.06.2010 IT WAS FOUND THAT THE ASSESSEE IS A MAN OF STRAW . THE INSPECTOR ALSO REPORTED THAT THE ASSESSEE HAS NO BUSINESS WORTH THE NAME AND CON DUCTS HIS ACTIVITIES FROM A TABLE SPACE 2 ITA NO.1099/KOL/2015 MURLI MANOHAR KARNANI., AY 2006-07 IN BURRABAZAR LOCALITY. THE AO NOTES THAT THE ASSE SSEE WAS EXAMINED U/S. 131 OF THE ACT AND THE ASSESSEE STATED THAT HE HAD ONLY RECEIVED C OMMISSION FOR ALLOWING THE IMPUGNED BANK ACCOUNT TO BE USED FOR DEPOSITS AND WITHDRAWAL BY OTHERS. THE AO NOTES THAT THE ASSESSEE HAS FURNISHED LIST OF 64 PERSONS FROM WHOM HE EARNED COMMISSION. THE AO NOTES THAT IT TOOK A LONG TIME TO LOCATE THE ASSESSEE AS HE HAD NO SPECIFIC BUSINESS ESTABLISHMENT. EVEN THOUGH THE AO ACKNOWLEDGES THAT THE IDENTITIES OF ALL PERSONS WHO ACTUALLY HANDED OVER THE HUGE CASH AND SUBSEQUENTLY MADE WITHDRAWAL S USING THE ASSESSEES BANK ACCOUNT MERELY AS A CONDUIT NEEDS TO BE ASCERTAINED; AND TO OK NOTE OF THE FACT THAT THE MONIES WERE WITHDRAWN FROM DIFFERENT PARTS OF INDIA; AND AO NOT ES THAT THE TOTAL AMOUNT OF CASH DEPOSITED COMES TO A TOTAL OF RS.15,10,67,259/-. T HEREAFTER, THE AO MADE REFERENCES U/S. 133(6) OF THE ACT TO A NUMBER OF PARTIES ON TEST CH ECK BASIS FROM WHOM ASSESSEE RECEIVED CASH AND SHE ACKNOWLEDGES THAT SHE RECEIVED REPLY F ROM ONLY TWO PARTIES. THEREAFTER, THE AO ISSUED NOTICE TO THE ASSESSEE ASKING AS TO WHY T HE ENTIRE AMOUNT DEPOSITED IN THE ACCOUNT SHALL NOT BE ADDED AS ITS TOTAL INCOME AS U NEXPLAINED CASH CREDIT. THEREAFTER, THE AO MADE THE ADDITION OF THE TOTAL DEPOSIT IN THE AS SESSEES ACCOUNT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DISMISS THE APPEAL OF THE ASSESSEE. AGGRIEVED, ASSESSEE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE AO PURSUANT TO INFORMATION RECEIVED FROM THE CIT (CIB) CAME TO KNOW THAT CRORES OF RUPEES WERE DEPOSITED IN THE HD FC BANK ACCOUNT OF THE ASSESSEE. SHE DEPUTED AN INSPECTOR TO ENQUIRE ABOUT THE ASSESSEE. THE AO NOTES THAT THE INSPECTOR IN THE INSPECTORS REPORT REMARKED THAT THE ASSESSEE IS A MAN OF STRAW AND HAS NO BUSINESS WORTH THE NAME AND CONDUCTS HIS ACTIVITIES FROM A TABLE S PACE IN BURRABAZAR LOCALITY. THOUGH THE AO STATES IN HER ORDER THAT IT NEEDS TO BE ASCERTAI NED ABOUT THE IDENTITY OF THE BENEFICIARIES WHO ACTUALLY HANDED OVER THE HUGE CASH TO ASSESSEE AND THEREAFTER MADE WITHDRAWALS USING THE ASSESSEE, HOWEVER, WE NOTE THAT SHE MADE NO SUC H ENQUIRY. THE LD. CIT(A) ALSO AGREES THAT THE AO FAILED TO POINT OUT WHO HAS USED THE AS SESSEES ACCOUNT TO TRANSACT CASH. THE LD. CIT(A) THOUGH HAVE NOTICED THAT THE AO HAS NOT ENQUIRED ABOUT THE BENEFICIARIES IN THIS CASE, HOWEVER, HAS CONFIRMED THE ADDITION ON THE RE ASON THAT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN ABOUT THE CASH DEPOSIT IN TH E BANK ACCOUNT, THEREFORE, HE CONFIRMED THE 3 ITA NO.1099/KOL/2015 MURLI MANOHAR KARNANI., AY 2006-07 SAME. BEFORE US, THE LD. AR HAS HIGHLIGHTED THE OB SERVATION OF THE AO ABOUT THE ASSESSEE AND THE ENQUIRY REPORT MADE BY THE INSPECTOR TO SHO W THAT THE ASSESSEES ACCOUNT WAS ONLY USED FOR DEPOSITING THE CASH OF SOMEBODY (64 NAMES ASSESSEE GAVE TO AO WHICH IS PLACED AT PAGE 15 OF PAPER BOOK) AND WITHDRAWALS WERE MADE F ROM HIS ACCOUNT IN LIEU OF COMMISSION AND, THEREFORE, ACCORDING TO LD. AR, THE ENTIRE DEP OSIT CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE LD. AR POINTED OUT THE FACT THAT THE ASSESSEE HAS NO PLACE OF BUSINESS AND DOES HIS BUSINESS FROM A TABLE SPACE IN BURRABZAR L OCALITY AND SINCE THE INSPECTOR ALSO ACKNOWLEDGES THE FACT THAT THE ASSESSEE IS A MAN OF STRAW, THEN IT CANNOT BE SAID THAT THE ASSESSEE IS THE OWNER OF THE CASH DEPOSITED IN THE BANK AND AT BEST COMMISSION EARNED CAN BE BROUGHT TO TAX. IN SUCH A SCENARIO, ACCORDING T O LD. AR, THE TRIBUNAL HAS BEEN CONSISTENTLY TAKING A VIEW THAT ONLY THE COMMISSION CAN BE TAXED AND NOT MORE THAN THAT. WE NOTE THAT THE TRIBUNAL IN ITA NO. 832/KOL/2013 I N SHRI BHAGDEV ROY VS. ACIT, AY 2008-09 DATED 31.03.2017 HAS HELD THAT ONLY THE COM MISSION INCOME CAN BE BROUGHT TO TAX AND NOT EVEN THE PEAK CREDIT CAN BE TAXED. THE PRI NCIPLE OF THE PEAK CREDIT THEORY STEMS ON THE FUNDAMENTAL PREMISE THAT THE MONEY DEPOSITED AN D/OR WITHDRAWN FROM THE ASSESSEES BANK ACCOUNT BELONGS TO THE APPELLANT/ASSESSEE OR I N RESPECT OF WHICH OWNERSHIP VEST IN THE APPELLANT/ASSESSEE. SO, IN OTHER WORDS, OWNERSHIP OF THE FUNDS IS THE SINE QUA NON FOR INVOKING THE PRINCIPLE OF PEAK CREDIT AND THIS PART ICULAR PRINCIPLE OF PEAK CREDIT THEORY HAS BEEN REITERATED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI VS. CIT (2005) 276 ITR 38 (ALL) WHEREIN IT WAS REIT ERATED THAT FOR ADJUDICATING UPON THE PEAK CREDIT THE FACTUAL FOUNDATION HAS TO BE LED T HAT THE ASSESSEE HAS TO OWN ALL CASH CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND ONLY THEREAFTER THE QUESTION OF PEAK CREDIT CAN BE RAISED. IN THAT CASE ALSO ONLY THE COMMISSION INCOME WAS AL LOWED TO BE SUSTAINED AND THE ADDITION BASED ON PEAK CREDIT WAS SET ASIDE. WE NOTE THAT I N MANAS KUMAR NAGURI VS. DCIT IN ITA NO. 1399/KOL/2012 FOR AY 2010-11 DATED 08.02.2017 T HE TRIBUNAL REITERATED THE STAND THAT ONLY COMMISSION INCOME CAN BE TAXED IN SUCH CASES. WE NOTE THAT THE ASSESSEE IS ALLOWING HIS HDFC BANK ACCOUNT TO BE USED FOR SOME BENEFICIA RIES IN LIEU OF COMMISSION. IT IS NOT THE CASE OF THE DEPARTMENT THAT THIS IS ASSESSEES OWN MONEY. THE AO NOTED THAT THE MONIES WERE DEPOSITED AND WITHDRAWN FROM VARIOUS PARTS OF THE COUNTRY AND THE AO ON THE REPORT OF THE INSPECTOR HAS COME TO A FACTUAL FINDING THAT AS SESSEE IS HAVING NO BUSINESS WORTH THE NAME AND CONDUCTS HIS BUSINESS FROM A TABLE SPACE I N BURRABAZAR LOCALITY. THE INSPECTOR IN 4 ITA NO.1099/KOL/2015 MURLI MANOHAR KARNANI., AY 2006-07 HIS ENQUIRY REPORT TERMED THE ASSESSEE AS A MAN OF STRAW AND THE AO ALSO ACKNOWLEDGES THE FACT THAT IT WAS DIFFICULT TO LOCATE THE ASSESSEE B ECAUSE HE DID NOT HAD ANY SPECIFIC PLACE OF BUSINESS. IN SUCH A BACKDROP, WE ARE NOT INCLINED T O ALLOW THE ENTIRE DEPOSIT IN THE BANK ACCOUNT TO BE TAXED IN THE HANDS OF THE ASSESSEE WH OSE BANK ACCOUNT HAS BEEN USED BY SOME BENEFICIARIES IN LIEU OF COMMISSION. DURING EXAMIN ATION OF ASSESSEE U/S. 131 OF THE ACT, HE ADMITTED TO THIS MODUS OPERANDI BEFORE THE AO, NEVE RTHELESS THE AO WITHOUT MAKING ANY FINDING TO DISPROVE THE MODUS OPERANDI OF THE ASSES SEE HAS SIMPLY GONE AHEAD TO TAX THE ENTIRE CASH DEPOSITED IN HIS ACCOUNT CANNOT BE COUN TENANCED. THE AO HAS NOT MADE ANY EFFORT TO IDENTIFY THE BENEFICIARIES IN THIS CASE. SO, THIS IS A CLEAR CASE OF ASSESSEES BANK ACCOUNT BEING UTILISED BY BENEFICIARIES TO DEPOSIT CASH AND LATER WITHDRAW FROM DIFFERENT PARTS OF THE COUNTRY. IN SUCH A SCENARIO, WE DO NO T FIND ANY MERIT IN THE ACTIONS OF THE AUTHORITIES BELOW AND, THEREFORE, WE DIRECT DELETIO N OF THE ADDITION AND IN ANY CASE ONLY THE COMMISSION INCOME ON THE DEPOSITS CAN ONLY BE TAXED IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND FOR THAT WE SET ASIDE THE ORDER AND REMAN D THE MATTER BACK TO FILE OF AO TO DO SO. WE ORDER ACCORDINGLY. 5. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.10.20 17 SD/- SD/- (M. BALAGANESH) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6TH OCTOBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT SHRI MURLI MANOHAR KARNANI, C/O D. J. S HAH & CO., KALYAN BHAVAN, 2, ELGIN ROAD, KOLKATA-700 020. 2 RESPONDENT ITO, WARD-46(2), KOLKATA 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY