NADESSAN SIVAPRAGASAM, CHENNAI V. ACIT ,CENTRAL 3(1), CHENNAI

ITA 113/CHNY/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2627 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 18-04-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Document seized; Peak credit; Tangible material; Retraction; Documents seized
• Section: 12; 2; 11; 20

Judgement Text

66आयकर अपील य अ धकरण, ‘ ‘सी’ यायपीठ, चे नई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘C’ BENCH, CHENNAI ी वी . द ु गा राव, या यक सद य एवं ी जी. मंज ु नाथ, लेखा सद य के सम$ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER आयकरअपीलसं./I . T. A. No s. 1 1 2 to 1 1 4/ Ch n y/ 2 0 2 1 ( नधा रणवष / A s se s s m e nt Yea r s : 2 0 15 - 16 t o 20 17 - 1 8) Mr. Nadessan Sivapragasam, 10, Achi Illam,1 st Cross Street, De Silva Road, Mylapore, Chennai-600 004. V s The Assistant Commissioner of Income Tax, Central Circle -3(1) Chennai. PAN: ABQPN 7170H (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओरसे/ Appellant by : Mr. Rakesh Joshi, C.A यथ क ओरसे/Respondent by : Mr. M. Rajan, CIT स ु नवाईक तार ख/D a t e o f h e a r i n g : 05.07.2022 घोषणाक तार ख /D a t e o f P r o n o u n c e m e n t : 27 .07.2022 आदेश / O R D E R PER G. MANJUNATHA, AM: These three appeals filed by assessee are directed against common order passed by the learned Commissioner of Income Tax (Appeals)-18, Chennai, dated 07.01.2021 and pertain to assessment years 2015-16 to 2017-18. Since, facts are identical and issues are common, for the sake of convenience, these three appeals were heard together and are being disposed off, by this consolidated order. 2. At the outset, learned AR for the assessee submitted that these appeals filed by the assessee are time barred by 5 days for which necessary petition for condonation of delay 2 ITA Nos. 112 to 114/Chny/2021 along with affidavit explaining reasons for the delay has been filed. The AR further submitted that the assessee could not file appeals within the time allowed under the Act, due to the fact that the assessee was unwell due to fever and because of self- quarantines which caused delay of 5 days. The delay in filing appeals is neither intentional nor willful but for the unavoidable reasons, therefore, delay may be condoned in the interest of advancement of substantial justice. 3. The learned DR, on the other hand, strongly opposing condonation of delay petition filed by the assessee submitted that the reasons given by the assessee does not come within the ambit of reasonable and bonafide reasons, which can be considered for condonation of delay and hence, appeals filed by the assessee may be dismissed as not maintainable. 4. Having heard both sides and considered the petition filed by the assessee for condonation of delay, we are of the considered view that reasons given by the assessee for not filing the appeals within the time allowed under the Act comes under reasonable cause as provided under the Act for 3 ITA Nos. 112 to 114/Chny/2021 condonation of delay and hence, delay in filing of appeals are condoned and appeals filed by the assessee are admitted for adjudication. 5. The assessee has more or less raised common grounds for all three assessment years, and therefore, for the sake of brevity, grounds of appeal filed for the assessment year 2015- 16 are reproduced as under:- “ 1. The order of the learned Commissioner of Income Tax Appeal is arbitrary, incorrect and also against facts & circumstances of the case. 2. The CIT(A) had erred in upholding order of the Assessing Officer in regard to additions made and assessment made thereon. 3. The CIT(A) had failed to appreciate that the Assessing Officer has neither pointed out any discrepancies in books of account nor rejected books of account maintained by the assessee, instead he relied only on seized records which do not provide any conclusion to rely upon. 4. The CIT(A) had failed to appreciate that the Assessing Officer erred in making addition of Rs.4,27,00,000/- and without any tangible material evidence on record. 5. The CIT(A) had failed to appreciate that the Assessing Officer had relied on sworn statements to his convenience without proper justification when the assessee had made two different statements under shock, stupor and duress. 6. The CIT(A) had failed to appreciate that the Assessing Officer did not corroborate entries in seized materials vis a vis 4 ITA Nos. 112 to 114/Chny/2021 books of account or any other external evidences in support of additions made. 7. The CIT(A) ought not to have accepted order of the Assessing Officer as same is bad in law as he had no reasons to assess an income different from what had been offered by appellant 8. Both Assessing Officer and learned CIT(A) erredon relying sworn statements made by assessee and ignored submissions after search particularly when the assessee brought fats to the notice of the A.O / CIT(A) during the course of assessment. 9. The ClT(A) had erred in concluding that loose sheets hand written without any description / narration as incriminating and speaking document when no meaningful details is recorded which any ordinary man of prudence will maintain for reference. 10 The CIT(A) had erred in applying various Doctrines to facts To the case. 11. The CIT(A) had erred in concluding that the assessee had generated the unaccounted money and utilized unaccounted income without establishing the investments and expenditure incurred by the appellant. 12. The CIT(A) had erred in reasoning that appellant was not able to establish coercion or mentioning in panchanama without appreciating the fact thatappelIant cannot establish and record such fact during search proceedings.. 13. The CIT(A) had erroneously assumed on probability of generation of cash in the appellant business without 5 ITA Nos. 112 to 114/Chny/2021 appreciating the control of Govt. over arrack shop in Pondiherryand Karaikal and reasoned upholding oforder of A0 on surmise. 14 The CIT (A) had failed to follow the various case laws as brought to his notice by the appellant during the course of appeal proceedings before him. 15. The CIT(A) erred in sustaining the addition made by AO in respect of Rs. 1,65,90,000/- based on loose sheets without any evidentiary value. The learned CIT(A) as well as AO had erred in concluding that the said amount represents income of the assessee without proper reason. 16.The CIT(A) had followed judicial cases which are different from facts and circumstances of the case of appellant. 17.Without prejudice to above grounds, appellant prays that Assessing Officer maybe directed to grant telescoping benefit of receipts and payments as indicated in seized material.” 6. The brief facts of the case are that the assessee is engaged in the business of dealer in petrol pump and trading in liquor. The main business activity of the assessee is retail trade of country liquor in and around Karaikkal approved by the Govt. of Puducherry. The assessee is also engaged in the business of dealer of Hindustan Petroleum Corporation Ltd., besides, the assessee is one of the promoter/director of M/s.Kals Distilleries Pvt. Ltd., which is engaged in the business of manufacturing of 6 ITA Nos. 112 to 114/Chny/2021 Indian made foreign liquor (IMFL) and supply only to Tamilnadu State Marketing Corporation, a State Govt. owned undertaking. A search & seizure operation u/s.132 of the Income Tax Act, 1961, was conducted on 26.05.2016 at the residential premises of the assessee. During the course of search proceedings on 26.05.2016, certain books and documents were found and seized, which contains details of transactions of unaccounted income generated and spent outside regular books of account during the financial years 2014-15 to 2016-17 and relevant pages of seized documents (diaries) is scanned and extracted in the assessment order in para 8 on pages 5 to 30 of the assessment order. The assessee was asked to explain notings in the seized documents. A sworn statement u/s.132(4) of the Income Tax Act, 1961, was recorded on 26.05.2016 and in response to question No.14, the assessee stated that notings contained in seized diary relating to unaccounted income generated from his business and spent outside regular books of account and writings is in lakhs. He further stated that he could not recollect details of persons from whom unaccounted income is received and for what purpose same was spent. However, he admitted undisclosed income of Rs.4.27 crores for 7 ITA Nos. 112 to 114/Chny/2021 financial year 2014-15 and Rs.6.61 crores for financial year 2015-16 and Rs.5.10 crores for financial year 2016-17. He further stated that above disclosure includes a sum of Rs.1.60 crores cash found during the course of search in the residential premises of the assessee and further, a sum of Rs.3.00 crores cash given to Mr. Santosh. The assessee has reiterated his admission of undisclosed income made during the course of search in the statement recorded on 26.05.2016 and by another statement recorded on 18.06.2016. However, instead of undisclosed income offered in the case of M/s.Kals Distilleries Pvt. Ltd., the assessee came forward to offer undisclosed income in his individual capacity as unaccounted income generated from proprietary concern, M/s. Natesh Agencies. Further, immediately after search, i.e., about two weeks from date of search, the assessee had filed a letter dated 18.06.2016 along with affidavit dated 04.08.2016 and retracted from his admission of additional income on the ground that admission was taken during the course of search by coercion, but not on the basis of any material found during the course of search. 7. Consequent to search, notice u/s.153A of the Income Tax Act, 1961 was issued. In response, the assessee filed his return 8 ITA Nos. 112 to 114/Chny/2021 of income on 10.08.2018 and declared total income, which was declared in the original return of income filed u/s.139(1) of the Act, without admitting any undisclosed income offered during the course of search. The case was taken up for scrutiny. During the course of assessment proceedings, the Assessing Officer has called upon the assessee to explain as to why undisclosed income offered during the course of search towards unaccounted income generated outside regular books of account should not be added to total income. In response to notice, the assessee vide his letter dated 26.10.2018 filed detailed written submissions on the issue and argued that admission taken during the course of search and the statement recorded u/s.132(4) of the Act is not voluntary, but by coercion. The assessee has retracted from his statement by filing letter dated 18.06.2016 along with affidavit dated 04.08.2016 and explained why admission made during the course of search is incorrect. 8. The Assessing Officer rejected submissions of the assessee on the ground that retraction made by the assessee subsequent to date of search is an afterthought and without 9 ITA Nos. 112 to 114/Chny/2021 any basis and thus, made additions towards undisclosed income offered during the course of search and cash found during the course of search on the ground that incriminating materials found during the course of search and its contents clearly established fact of earning unaccounted income and spending outside regular books of account is proved. Further, the assessee has admitted additional income and also specified manner in which such undisclosed income is earned. The admission made by the assessee is further strengthened by the statement of Mr.Santosh, employee of NAC Jewellers Pvt. Ltd, where he has stated that the assessee had given amount of Rs.3.00 crores in cash, as land advance and for purchase of pooja articles. The assessee has reiterated his stand in subsequent statement recorded u/s.132 (4) of the Act. In the statement recorded during the course of assessment proceedings u/s.131 (1) of the Act, the assessee has confirmed seized documents belongs to him and transactions appearing in diaries relating to proprietary concern. Although, the assessee has filed retraction along with affidavit, but said letter and affidavit are not acknowledged by the investigation officer. Therefore, the Assessing Officer opined that information 10 ITA Nos. 112 to 114/Chny/2021 collected during the course of search, coupled with statement recorded from the assessee during the course of search and post-search investigation clearly established fact of unaccounted income earned from business and spent outside regular books of account. Therefore, made additions towards unaccounted income offered during the course of search for the assessment years 2015-16 to 2017-18. 9. Being aggrieved by the assessment order, the assessee preferred appeal before the CIT(A). Before the learned CIT(A), the assessee has filed detailed written submissions on the issue which has been reproduced at para 6 on page 10 to 21 of the learned CIT(A) order. The sum & substance of arguments of the assessee before the learned CIT(A) are that purported diary found during the course of search is nothing but a dumb document, which does not show any light on income earned from business outside books of account and spent for expenses. The assessee further contended the he is in the business of retail trading of country liquor and also dealer for Hindustan Petroleum Corporation Ltd., cannot generate so much unaccounted income, because these two trades are 11 ITA Nos. 112 to 114/Chny/2021 highly regulated by the Government. From the seized documents nothing can be made out whether any income is earned during the relevant period and if earned, from which source said income is earned. Similarly, nothing could be made out from document regarding expenditure incurred outside books of account. If you see document, stereotype recording is recorded whereby it recorded some figures in credit and some figures in debit and credit side says ‘amount supply’ and debit side says ‘amount paid’. The Assessing Officer inferred that credit side amount supply means income earned, which is not disclosed in regular books of account and summed up and made additions for each assessment years. However, the Assessing Officer has conveniently ignored debit side of the amount paid on the ground that debit pertains to expenditure incurred outside books of account. But, fact remains that from the said document nothing is discernible, whether any income is earned and from what source of income and any expenditure is incurred for what purpose, therefore, on the basis of said document, no addition can be made. The assessee has also agitated additions made by the Assessing Officer in light of certain judicial precedents and argued that except admission, 12 ITA Nos. 112 to 114/Chny/2021 the Assessing Officer has not brought on record any evidence to prove that the assessee has earned unexplained income. Although, the Assessing Officer has heavily relied upon decision of the Hon’ble Madras High Court in the case of Kishore Kumar Vs. DCIT (2014) 52 taxman.com 449, but if you go through said decision, the assessee has admitted undisclosed income, which is based on certain incriminating materials. Further, there was no retraction from the assessee and in that context, the Hon’ble Court came to the conclusion that admission is piece of evidence and additions can be made on that basis. Therefore, the assessee submitted that additions made by the AO should be deleted. 10. The learned CIT(A), after considering relevant submissions of the assessee and also taken note of various facts, opined that documents found during the course of search in the form of diary, coupled with statement recorded during the course of search clearly brought out facts of earning unaccounted income from his business and spending for expenses outside books of account. The assessee had also explained modus operandi of generating unaccounted income 13 ITA Nos. 112 to 114/Chny/2021 by way of inflation of expenditure. A perusal of seized materials and noting contained therein indicate that incriminating documents is speaking one where systematic and regular recording has been made on date-wise. A comparison with regular books of account has indicated that cash receipts evidenced by jottings have not been reflected in the books of account. The jottings have evidentiary value, because they are not random jottings, but regular systematic capturing data maintained in parallel besides regular books of account. The handwriting of author of the impugned seized materials that was recovered has established place from which seized materials was recovered has been brought on record. From the above, it is very clear that generation of unaccounted money and utilization of unaccounted income so generated as evidenced from seized materials. The assessee has explained modus operandi of generation of unaccounted income and has admitted additional income in the statement recorded u/s.132(4) of the Income Tax Act, 1961. The said admission has been reiterated in subsequent statement recorded u/s.132(4) of the Act. Although, the assessee has filed retraction along with affidavit, but could not prove filing of affidavit before the 14 ITA Nos. 112 to 114/Chny/2021 investigation officer, which is evidenced from fact that there is no signature or acknowledgement in the retraction letter filed by the assessee. Further, retraction filed by the assessee is an afterthought, because the assessee has clearly admitted undisclosed income, which is supported by material found during the course of search. Therefore, the learned CIT(A) opined that there is no merit in the arguments taken by the assessee that additions made by the Assessing Officer on the basis of admission is incorrect . The learned CIT(A) also discussed issue at length in light of various decisions, including decision of Hon'ble Jurisdictional High Court of Madras in the case of B.Kishore Kumar Vs. DCIT (supra) and opined that where the assessee himself stated in sworn statement recorded during the course of search about undisclosed income, same has to be levied to tax on the basis of admission without scrutinizing documents. The learned CIT(A) has also discussed the issue of retraction in light of certain judicial precedents and held that the assessee has retracted his admission on the ground that coercion and undue influence, however, failed to demonstrate with evidence that admission taken during the course of search is by coercion and undue influence. Therefore, 15 ITA Nos. 112 to 114/Chny/2021 rejected arguments of the assessee and sustained additions made towards undisclosed income. Aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 11. The learned A.R for the assessee submitted that the learned CIT(A) erred in sustaining additions made towards undisclosed income offered during the course of search without appreciating fact that document relied upon by the Assessing Officer does not show any light on undisclosed income earned by the assessee and spent towards expenditure outside regular books of account. The learned A.R further submitted that if you go through document relied upon by the Assessing Officer, it is very clear that so called diary claims to have been found during the course of search contain some debits and credits with some figures. However, nothing can be made out from the document to show that the assessee has earned unaccounted income. Further, the Assessing Officer has conveniently taken credit entires in the documents and observed that the assessee has earned undisclosed income, whereas ignored debit side of the documents, even though, the assessee has clearly stated that debit side also pertains to expenditure incurred. The 16 ITA Nos. 112 to 114/Chny/2021 learned A.R for the assessee referring to seized documents found during the course of search and financial statements filed by the assessee for relevant assessment years submitted that the assessee is into the business of trading in arrack in the State of Puducherry and said business is highly controlled by the State Government. The assessee is also engaged in the business of distributor for Hindustan Petroleum Corporation Ltd., which is once again, highly controlled trade from Govt. If you go through nature of business carried out by the assessee and total sales achieved for relevant assessment year, it is highly improbable that the assessee has earned so much unaccounted income from said business. Further, if you go through seized documents, nothing is specified regarding income & expenditure. It is only the Assessing Officer has inferred that credit entry represents income, debit entry represents expenditure and both sides are outside regular books of account of the assessee, without specifying from which source the assessee has earned unaccounted income and what purpose the assessee has spent expenditure outside books of account. No doubt, one entry in the document pertains to cash paid to Mr.Santosh of NAC Jewellers Pvt. Ltd. 17 ITA Nos. 112 to 114/Chny/2021 for purchase of land, which was claims to have been paid on 27.05.2016 i.e., on the date of search. The cash paid to said party was also found in the premises and he had admitted fact that the assessee has paid cash. Except this, nothing is made out from the document that to whom said amount is paid. The Assessing Officer has simply ignored all debit entries and taken credit entries as unaccounted income and made additions for all three years. Therefore, the learned A.R submitted that first of all, there cannot be any additions on the basis of said document, because it is dumb document, nothing can be made out from said document to allege that the assessee has made unaccounted income outside regular books of account. If at all, document is considered to be correct, then, when the Assessing Officer has considered credit entries as income earned outside regular books of account, he ought to have considered debit entries, which is paid for expenditure incurred outside regular books of account. If you accept this theory, only possible solution is to adopt peak credit theory to sustain additions made by the Assessing Officer, for which the assessee has filed working of peak credit for each of the assessment years and arrived at peak credit of Rs.36.25 lakhs 18 ITA Nos. 112 to 114/Chny/2021 for the assessment year 2015-16, Rs.73.13 lakhs for the assessment year 2016-17 and Rs.422.00 lakhs for the assessment year 2017-18. Therefore, requested to direct the Assessing Officer to work out additions by applying peak credit theory. 12. The learned DR, on the other hand, supporting order of the learned CIT(A) submitted that there is no merit in the arguments of the counsel for the assessee for applying peak credit theory, because question of application of peak credit theory comes into operation only in case of repeated cash deposits and withdrawals from bank accounts. In this case, documents found during the course of search indicate unaccounted income earned from his business for three years and said income has been spent for expenditure outside books of account. The assessee has admitted unaccounted income earned from his business, which is supported by entries contained in documents found during the course of search. However, the assessee could not establish payments made to various persons for expenditure outside books of account and purpose of such payments. Therefore, question of application of 19 ITA Nos. 112 to 114/Chny/2021 peak credit theory does not arise. The learned D.R further submitted that as regards arguments of the assessee that documents found during the course of search does not show any light on undisclosed income or expenditure, the learned DR submitted that the Assessing Officer as well as learned CIT(A) has brought out clear facts in light of documents found during the course of search, coupled with statement recorded from the assessee, modus operandi of generating unaccounted income and spending for expenditure outside regular books of account and thus, made additions towards undisclosed income earned for all three years and hence, their orders should be upheld. 13. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The facts borne out from records indicate that during the course of search on 26.5.2016 document called diary marked as ANN/KVK/NS/B&D/S-2 (page 1 to 12) was found and seized, which contains some jottings date-wise with narration amount from supply for credit side and amount paid for debit side. The incriminating documents found during the course of search was extracted in para 8 of the assessment 20 ITA Nos. 112 to 114/Chny/2021 order. A statement u/s.132(4) of the Act was recorded from the assessee on the date of search and called upon the assessee to explain contents recorded in the seized documents. In response to specific question, the assessee claims to have admitted earning unaccounted income and spending for expenditure outside regular books of account for three assessment years. The Assessing Officer, on the basis of admission of the assessee in the statement recorded u/s.132(4) of the Income Tax Act, 1961, come to the conclusion that the assessee had earned unaccounted income which was not disclosed in the regular books of account and made additions for three assessment years. In the process, the Assessing Officer has ignored explanation furnished by the assessee in light of retraction along with affidavit filed immediately after date of search on the ground that retraction filed by the assessee is only an afterthought, but not based on any evidences. The Assessing Officer has discussed the issue at length in light of statements recorded from the assessee, coupled with documents found during the course of search and also cash found in the premises of Mr. N. Santhosh of M/s.NAC Jewellers Pvt. Ltd. According to the Assessing Officer, the 21 ITA Nos. 112 to 114/Chny/2021 assessee has paid a sum of Rs.3.00 crores in cash to Mr.Santosh on the date of search, as per seized documents found during the course of search. This is strengthened by cash found in the premises of Mr.Santosh, where during the course of search a sum of Rs.3.00 crores was found in the premises of Mr.Santosh. Therefore, the Assessing Officer was of the opinion that the assessee has earned undisclosed income which is outside regular books of account and thus, made additions for three assessment years. 14. In light of above factual background, if you examine reasons given by the Assessing Officer to make additions towards undisclosed income for three assessment years, we find that except purported diary found during the course of search and statement recorded from the assessee, nothing is on record which indicates that the assessee has earned undisclosed income of such magnitude amount from his two business activity of retail trading activity in country liquor in the State of Puducherry and trading in petrol & diesel from the agency of Hindustan Petroleum Corporation Ltd., because trading in country liquor in the State of Puducherry is highly 22 ITA Nos. 112 to 114/Chny/2021 regulated by State Government and from said business, it is highly improbable to generate such huge amount of unaccounted income. The assessee has maintained regular books of account which are audited by Accountant and in the said books of account, the Assessing Officer does not made out any discrepancy with regard to income or expenditure. The assessee has purchased goods from Puducherry Distillers Ltd. for all three assessment years. If you verify purchases made by the assessee as per audited financial statement with Form 26AS, purchases reported in financial statement in three assessment years is matching with purchases reported in Form 26AS. The Assessing Officer has not brought on record any evidence of sales outside regular books of account, in fact except so called diary no evidence was with the Assessing Officer to allege that the assessee has made sales outside regular books of account. Therefore, from the above, it is very clear that from retail trading of country liquor, possibility of generating unaccounted income is highly improbable. As regards retail trading of diesel and petrol, the assessee is a dealer for Hindustan Petroleum Corporation Ltd. The dealership of oil marketing companies is highly regulated, where dealers 23 ITA Nos. 112 to 114/Chny/2021 will get nominal amount of commission on sales made. The question of generation of unaccounted income from dealership of oil marketing companies is highly improbable. Once again, the assessee has maintained regular books of account which was audited by an Accountant. The Assessing Officer does not make out any discrepancy in books of account nor does the Auditor have reported any adverse comments in the books of account of the assessee. From the above, it is very clear that from the business of dealer of Hindustan Petroleum Corporation Ltd., question of generation of such huge magnitude of unaccounted income cannot arise. 15. Thus, from the above factual background, if you examine reasons given by the Assessing Officer to make additions towards unaccounted income on the basis of document found during the course of search, we ourselves do not subscribe to reasons given by the Assessing Officer for simple reason that so called document relied upon by the Assessing Officer does not show any light on unaccounted income earned by the assessee from his two business. We have carefully gone through seized document, which is part of assessment order 24 ITA Nos. 112 to 114/Chny/2021 and jottings contained in said document. The seized diary is a dumb document containing some numbers without any details of party from whom income was earned or source from which said income was generated. Similarly, the document contains some numbers without any details of party to whom it was paid and purpose of payment. It was simply recorded that on so & so date amount from supplies and same has been considered by the Assessing Officer as unaccounted income. Similarly, it was mentioned that amount paid on some date and the Assessing Officer inferred that said payment is for expenditure which is outside regular books of account and thus, the Assessing Officer has rejected debit side of the document claims to have incurred for expenditure and assessed credit side of the document as income earned from undisclosed source of income. First of all, document relied upon by the Assessing Officer cannot be considered as a document, because in the said document nothing can be discernible, whether earning of income and spending for expenditure. Therefore, same cannot be taken as evidence in absence of any corroborative details to substantiate entries. Therefore, we are of the considered view that the Assessing Officer has completely erred in considering 25 ITA Nos. 112 to 114/Chny/2021 said document and relied upon entries contained therein to come to the conclusion that the assessee has earned unaccounted income from his business. 16. Coming back to legal position as enumerated by decisions of various courts and the tribunals. The Assessing Officer has heavily relied upon the decision of the Hon'ble Jurisdictional High Court of Madras in the case of B.Kishore Kumar Vs. DCIT (supra) and observed that once admission is made in the statement recorded u/s.132(4) of the Act, there is no need to go into verification of documents, because admission is sufficient to make addition. We have gone through decision relied upon by the Assessing Officer. No doubt, the Hon’ble Madras High Court has come to the conclusion that once there is voluntary admission from the assessee in the sworn statement recorded u/s.132(4) of the Act, same needs to be taxed, on the peculiar facts of that case, where the assessee has given admission towards undisclosed income which is supported by incriminating documents found during the course of search. Further, the assessee has not retracted from his admission, however, contested the issue only during the course 26 ITA Nos. 112 to 114/Chny/2021 of assessment proceedings. Under those facts, the Hon’ble High Court came to the conclusion that admission in the statement is sufficient to make additions, unless contrary evidence leads to take different view. In this context, it is worthwhile to refer to decision of the Hon’ble Supreme Court in the case of M/s. Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala (1973) 91 ITR 18, wherein the Hon’ble Supreme Court has laid down proposition that an admission is extremely important piece of evidence, but it cannot be said that it is conclusive. In other words, admission is a piece of evidence, where said admission is supported by evidences which suggest undisclosed income earned from business. In absence of any corroborative evidence to strengthen admission made in the statement recorded u/s.132(4), no addition can be made only on the basis of admission itself. The very same legal principle has been expressed by the Hon’ble High Court of Madras in the case of CIT Vs S.Jayalakshmi Ammal (2016) 74 taxmann.com 35, wherein it was held that if there is no corroborative documentary evidence, then statement recorded u/s.132(4) of the Act, alone should not be basis for making any addition. A similar view has been expressed by the Hon’ble Jharkhand 27 ITA Nos. 112 to 114/Chny/2021 High Court in the case of M/s. Shree Ganesh Trading Company Vs. CIT (2013) 30 taxmann.com 170. The Hon’ble Delhi High Court in the case of CIT Vs Anzal Properties & Industries (2018) 98 taxmann.com 398 (Del), has reiterated similar legal position. Various Benches of Tribunals, including decision of the ITAT., Mumbai, in the case Pooja Bhatt Vs ACIT 73 ITD 205, has considered an identical issue and held that addition based on rough notes not sustainable, unless corroborative evidence suggests that what is recorded in loose sheet is true and correct which suggests unaccounted income earned from business which is not recorded in regular books of account. The sum & substance of ratio laid down by various High Courts and Tribunals are that admission in the statement recorded u/s.132(4) is important piece of evidence, provided such admission should be supported by corroborative evidence, which suggests what is recorded in incriminating materials found during the course of search is true and correct, which shows unaccounted income earned by the assessee from business which is not recorded in the regular books of account. This legal principle is also strengthened from the CBDT Circular No.286/2/2003 dated 10.03.2003, where it has directed is field 28 ITA Nos. 112 to 114/Chny/2021 officers to focus on collection of evidences during search and seizure which lead to information as regards undisclosed income, instead of taking admission of income in the statement recorded u/s.132(4) of the Income Tax Act, 1961. 17. In light of above legal and factual background, if you examine case of the assessee, absolutely there is no evidence with the Assessing Officer to allege what is recorded in the seized document shows unaccounted income earned by the assessee from his business. As we have noted already in our order, document relied upon by the Assessing Officer is nothing but dumb document, which does not show any light on financial transactions of the assessee, be it income earned from undisclosed source or expenditure incurred outside regular books of account. The jottings recorded in the so called diary does not show anything about income from whom said income is earned or source from which said income is earned or expenditure incurred outside regular books of account. Therefore, on the basis of said document additions made by the Assessing Officer is highly incorrect. Further, the assessee has filed retraction immediately 15 days after date of search along 29 ITA Nos. 112 to 114/Chny/2021 with affidavit and stated that admission taken during the course of search is by coercion and undue influence, but not based on evidences gathered during the course of search. In the retraction letter dated 18.06.2016 and affidavit dated 04.08.2016, the assessee has explained manner in which statement was recorded u/s.132(4) of the Act, and said letter was filed before the investigation officer, however, the department has ignored retraction filed by the assessee. It is well established principle of law by the decision of the Hon’ble Allahabad High Court in the case of L. Sohan Lal Gupta Vs CIT (1958) 33 ITR 786 that an affidavit filed by the assessee cannot be discarded, unless an opportunity is given to the assessee to substantiate its case. In this case, the Assessing Officer as well as learned CIT(A) has discarded retraction letter filed by the assessee only on the basis of admission of undisclosed income recorded in the statement u/s.132(4) of the Income Tax Act, 1961. In our considered view, the Assessing Officer as well as learned CIT(A) were completely erred in making additions towards only credit entries in the seized documents, disregarding explanation furnished by the assessee. 30 ITA Nos. 112 to 114/Chny/2021 18. Coming back to another important aspect of the issue. The ld. AR has made an alternative argument without prejudice to its first argument. The assessee contended that if at all, a credit entry in the seized documents is considered as sales made outside regular books of account, then entire sales cannot be added as income, but only net profit from the business should be treated as income of the assessee. The assessee has also made arguments for applying peak credit theory in light of debits and credits contained in very same seized documents and argued that if at all document is to be relied upon, then only peak credit recorded in the document should be considered as undisclosed income of the assessee. The peak credit theory is not a foreign to the income-tax proceedings. Various courts and tribunals time and again are batting for peak credit theory depending upon facts and circumstances of each case, more particularly, where large amount of cash transactions are involved, the courts observed that peak credit theory is best method to determine undisclosed income of the assessee to avoid duplication of additions towards income & expenditure. In this case, so called diary found during the course of search contains some credit and 31 ITA Nos. 112 to 114/Chny/2021 debit entries. Although, there is no narration in the entries to describe it as income, however, the Assessing Officer has considered entries as unaccounted income earned by the assessee from his business. The said incriminating diary found during the course of search also contains debit entries and the Assessing Officer has conveniently ignored those entries on the ground that said entries pertain to expenditure incurred outside regular books of account, although, there is no narration with regard to nature of entry and to whom said amount is paid. It is well established principle of law by the decisions of the courts and the tribunals that when something is recorded in the seized documents, be it income or expenditure, both needs to be considered for the purpose of taxation and this principle is supported by the decision of the ITAT., Mumbai in the case of Pooja Bhatt Vs. ACIT (supra), where the Tribunal held that expenses eligible for deduction in the seized document should be considered while arriving at net income. 19. In this case, the Assessing Officer has admitted that what was recorded in the seized document towards debit side is expenditure outside regular books of account, although nature 32 ITA Nos. 112 to 114/Chny/2021 of said expenditure is not known to the assessee as well as the Assessing Officer. Therefore, we are of the considered view that when the Assessing Officer has taken credit entries as income of the assessee earned from undisclosed source of income, he ought to have considered debit side of entries as expenditure incurred for earning said income. If you consider same analogy, then the Assessing Officer should have considered income as well as expenditure. If you consider debit entry as expenditure, then only net income from said document needs to be taxed. Since, we have already stated in earlier part of this order, credit entry does not depict any income and debit entry does not show any light on expenditure, then the only possible method to determine undisclosed income for the above period is adoption of peak credit theory and in this case, particularly peak credit theory is best method to determine undisclosed income of the assessee. The assessee has filed working of peak credit, which is available in paper book filed for relevant period. The assessee has copied entries contained in seized documents relied upon by the Assessing Officer and recorded date-wise receipts and payments. For the financial year 2015-16 as on 23.03.2015, peak credit works out to 33 ITA Nos. 112 to 114/Chny/2021 Rs.36.25 lakhs, which is net of debit and credit entries recorded in seized document. Therefore, addition is required to be made to the extent of Rs.36.25 lakhs for the assessment year 2015- 16. Hence, we direct the Assessing Officer to sustain additions to the extent of Rs.36.25 lakhs for the assessment year 2015- 16 towards undisclosed income. The assessee has worked out peak credit of Rs.73.13 lakhs as on 25.03.2016 which is relevant to the assessment year 2016-17, on the basis of net of debit and credit entries from so called diary found during the course of search. Therefore, we direct the Assessing Officer to restrict addition to the extent of Rs.73.13 lakhs for the assessment year 2016-17. Similarly, the assessee has worked out peak credit of Rs.422.00 lakhs for the assessment year 2017-18 on 27.05.2016, which is on the date of search, which includes a sum of Rs.3.00 crores cash paid by the assessee to one Mr. Santosh of M/s.NAC Jewellers Pvt. Ltd. and confirmed by the party. Therefore, addition is required to be made to the extent of Rs.422.00 lakhs for the assessment year 2017-18 and thus, we direct the Assessing Officer to sustain addition to Rs.422 lakhs for the assessment year 2017-18. 34 ITA Nos. 112 to 114/Chny/2021 20. The next issue that came up for our consideration for the assessment year 2015-16 is addition of Rs.1,65,90,000/- towards unaccounted cash receipts. During the course of search & seizure operation, certain loose sheets were found and seized from the residential premises of Mr.S.Vasudevan, which contains details of cash receipts and corresponding cash payment. During the course of assessment proceedings, the assessee was asked to explain contents of the loose sheets along with supporting documentary evidence. In response, the assessee filed a reply dated 28.12.2018 and furnished details with regard to seized documents and explained that these cash receipts are pertain to income generated from his proprietary concern M/s. Natesan Agenices and same was duly accounted for in the regular books of account amounting to Rs.50,40,000/-. In respect of other entries, like amount in the name of Mr.N. Palaniswamy, M/s. Pearl Transport, Mr. TNJ Natarajan and M/s. M.S.Wines amounting to Rs.1,65,90,000/-. The assessee could not explain nature and source. Therefore, the Assessing Officer has made additions as unaccounted income. 35 ITA Nos. 112 to 114/Chny/2021 21. We have heard both the parties and considered relevant materials on record. Even before us, except entry in the name of M/s. Natesh Agencies amounting to Rs.50,40,000/-, the assessee could not explain other entries in the name of P.Palaniswamy for Rs.61,00,000/- M/s.Pearl Transport for Rs.10,00,000/- Mr.TNJ Nadarajan for Rs.49,90,000/- and M/s. M.S.Wines for Rs.45,00,000/- totaling to Rs.1,65,90,000/-, except stating that those entries does not belong to him and persons from whose premises said document is found needs to be explained contents of the document. We do not find any merits in the arguments of the assessee for the simple reason that document pertains to business activities of the assessee and further, persons specified in the document are all associates of the assessee and hence, it is for the assessee to explain contents recorded in the document. Since, the assessee could not explain contents; we are of the considered view that the Assessing Officer has rightly made additions towards entries as unaccounted income in the hands of the assessee. Hence, we are inclined to uphold findings of the learned CIT(A) and reject ground taken by the assessee. 36 ITA Nos. 112 to 114/Chny/2021 22. In the result, appeals filed by the assessee for all three assessment years are partly allowed. Order pronounced in the open court on 27 th July, 2022 Sd/- Sd/- ( वी. द ु गा राव) (जी. मंज ु नाथ) (V.Durga Rao) (G.Manjunatha) "या यक सद$य /Judicial Member लेखा सद$य / Accountant Member चे"नई/Chennai, 'दनांक/Dated 27 th July, 2022 DS आदेश क त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आय ु ,त (अपील)/CIT(A) 4. आयकर आय ु ,त/CIT 5. *वभागीय त न1ध/DR 6. गाड फाईल/GF.