PANDURANG W. SALGAONKAR, MUMBAI V. ITO 25(2)(2), MUMBAI

ITA 1267/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3157 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPT
• Keywords: Peak credit
• Section: 143(3); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CBENCH, MUMB AI BEFORE SRI MAHAVIR SINGH, JM AND SRI RAMIT KOCHAR, AM ITA NO.1267/MUM/2014 (A.Y.:2009-10) SHRI PANDURANG W. SALGAONKAR, C-203, RAJESH NAGAR, NEAR J. B. KHOT SCHOOL, BORIVALI (W), MUMBAI 400 098 VS. THE INCOME TAX OFFICER, WARD - 25 (2) (2), MUMBAI PAN: AABPS 8483 N APPELLANT .. RESPONDENT APPELLANT BY NONE RESPONDENT BY SHRI NAVEEN GUPT, DR DATE OF HEARING 13-06-2016 DATE OF PRONOUNCEMENT 15-06-2016 O R D E R PER MAHAVIR SINGH, JM : THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDER OF CIT (A)-35, MUMBAI PASSED IN APPEAL NO.CIT (A)-35/ITO-25(2)(2)/ ITA.406/11-12 DATED 19-11-2013. ASSESSMENT WAS FRAMED BY THE ITO, WARD 25(2)(2), MUMBAI FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 21-12- 2011 U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT). 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF THE CIT (A) CONFIRMING THE ACTION OF THE AO IN MAKING A DDITION OF CASH DEPOSITS IN BANK ACCOUNT AND NOT ALLOWING PEAK CREDIT. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT AS PER THE AIR INFORMATION THERE WAS CASH DEPOSIT AMOUNTING TO RS. 37,41,500/- IN THE SAVINGS BANK ACCOUNTS MAINTAINED BY THE ASSESSEE WITH R. S. COOPERATIVE BANK LTD. ITA NO.1267/MUM/2014 2 THE ASSESSEE COULD NOT FILE DETAILS OR COULD NOT EX PLAIN THE SOURCE OF DEPOSITS OF CASH IN THE SAVINGS BANK ACCOUNT NO.011/5038 MAI NTAINED WITH THE ABOVE STATED BANK AND ACCORDINGLY THE AO TREATED THE CASH DEPOSITS IN THIS ACCOUNT AS UNEXPLAINED AMOUNTING TO RS.17,77,100/-. AGGRIEV ED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT (A). BEFORE CIT (A) THE ASSESSEE ONLY REQUESTED FOR TAKING THE PEAK CREDIT AND ALSO FOR CONSIDERING THE CASH WITHDRAWALS TO BE SET OFF AGAINST THE DEPOSITS. BUT CIT (A) HAS NOT C ONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND CONFIRMED THE ADDITION BY OBSERVIN G AS UNDER:- 6A. ON THE ISSUE OF C ASH DEPOSITS OF RS.17,77,100 /-, THE APPELLANTS ONLY CONTENTION WAS THAT IT WAS PERSON AL IN NATURE AND MERE SUBMISSION OF CASH LEDGER (WHICH SHOWS ONL Y CONTRA ENTRIES) AND PERSONAL BALANCE SHEET DOES NOT CONCLU DE PROPER DISCLOSURE OF THE NATURE AND SOURCE OF ALL THE DEPO SITS IN THE BANK. THE APPELLANT HAS CONTENDED THAT THE ONLY INT ENT AND PURPOSE OF WITHDRAWING AND DEPOSITING CASH WAS TO M AINTAIN MINIMUM BALANCE IN BANK ACCOUNT AND HOLD THE AMOUNT IN CASH. NO PERSON WOULD WITHDRAW CASH MERELY FOR THE PURPOS E OF DEPOSITING THE CASH BACK IN THE BANK. IN THE ABSENC E OF SOURCE OF CASH DEPOSITS, THE ADDITION OF RS.17,77,100/- IS UP HELD. THE APPEAL ON THE ABOVE GROUND IS DISALLOWED. AGGRIEVED AGAINST THE ACTION OF CIT (A), NOW THE AS SESSEE IS IN APPEAL BEFORE US. 4. IT IS NOTICED THAT THE ASSESSEE IS NOT INTERESTE D IN PURSUING THIS APPEAL AND HENCE, THIS APPEAL IS HEARD ON MERITS AS THE MATERIALS ARE AVAILABLE ON RECORD. 5. WE HAVE HEARD THE LEARNED SR. DR AND GONE THROUG H THE CASE RECORDS. WE FIND THAT THE ASSESSEE BEFORE CIT (A) H AS CONTENDED THAT HE HAD MADE WITHDRAWALS AS WELL AS DEPOSITS IN CASH IN THE SAME BANK ACCOUNT AND THE WITHDRAWALS SHOULD BE LINKED TO CAS H DEPOSITS AND ACCORDINGLY SET OFF SHOULD BE ALLOWED. ACCORDING TO THE ASSESSEE, A PEAK CREDIT SHOULD HAVE BEEN ALLOWED AND ONLY PEAK ADDIT ION SHOULD HAVE BEEN MADE IN THE CASE OF THE ASSESSEE. ON ENQUIRY F ROM THE BENCH THE LEARNED SR. DR FAIRLY AGREED FOR SETTING ASIDE OF T HIS ISSUE TO THE FILE OF ITA NO.1267/MUM/2014 3 THE AO FOR ASSESSING PEAK CREDIT ONLY. 6. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THIS ISSUE I S COVERED BY THE DECISION OF COORDINATE BENCH IN THE CASE OF ITO VS. SHRI PIYUSH PODDAR IN ITA NO. 1050/KOL/2011 FOR AY 2006-07 DATED 07.09.2015, WHER EIN EXACTLY ON SIMILAR CIRCUMSTANCES, THE TRIBUNAL HAS DIRECTED THE AO TO ASSESS THE PEAK CREDIT AND BY OBSERVING HELD AS UNDER: '10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE A PART FROM HIS REGULAR INCOME HAD A BANK ACCOUNT WITH CENTRAL BANK OF INDI A WHICH WAS USED BY HIM ONLY FOR THE LIMITED PURPOSE OF PROVIDING ACCOM MODATION ENTRIES TO VARIOUS PARTIES. INITIALLY THE ASSESSEE TOOK A STAN D THAT HE WAS DERIVING FINANCE COMMISSION @.25% OF ALL THE TRANSACTIONS IN THE ACCOMMODATION ENTRY BUSINESS AND OFFERED THE SAME TO TAX., HOWEVE R, HE SHIFTED HIS STAND BY ACCEPTING THE PEAK CREDIT THEORY BEFORE THE LD. CIT (A). THIS IS EVIDENT FROM THE FACT THAT HE HAD NOT PREFERRED FURTHER APPEAL B EFORE THE TRIBUNAL AGAINST THE LD. CIT(A)'S ORDER. IN ACCORDANCE WITH THE DIRE CTIONS OF THE HON'BLE CALCUTTA HIGH COURT, WE HAD EXAMINED THE VERACITY O F THE CLAIM OF PEAK CREDIT THEORY MADE BY THE ASSESSEE IN RESPECT OF AL L THE TRANSACTIONS IN CENTRAL BANK OF INDIA. IT IS OBSERVED THAT THE ASSE SSEE HAD ROTATED HIS OWN FUNDS IN CENTRAL BANK OF INDIA FOR PROVIDING ACCOMM ODATION ENTRIES TO VARIOUS PARTIES. IT IS NOT DISPUTED THAT THE GENUIN ENESS OF THE TRANSACTION COULD NOT BE PROVED BY THE ASSESSEE BY MENTIONING T HE NAMES, ADDRESSES, PAN, CONFIRMATION OF THE PARTIES TO WHOM THE PAYMEN TS WERE MADE AND FROM PAYMENTS WERE RECEIVED BY THE ASSESSEE. HENCE IT IS PROVED THAT TRANSACTIONS CONTAINED IN THE BANK ACCOUNT ARE NOT GENUINE. ONCE THE TRANSACTIONS IN THE BANK ACCOUNT ARE PROVED INGENUINE THEN IT IS AN ACC EPTED PRACTICE OF ADOPTING THE PEAK CREDIT THEORY FOR THE PURPOSE OF DETERMINATION OF UNDISCLOSED INCOME OF THE ASSESSEE. HENCE, RELIANCE PLACED BY THE LD. DR IN THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT RE PORTED IN 276 ITR 38 WHICH REJECTED THE CONCEPT OF PEAK CREDIT THEORY IS NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE. IN THE CASE BEFORE THE HON'BLE ALLAHABAD HIGH COURT, THE ASSESSEE CLAIMED THAT THE CREDITS IN THE BANK ACCOU NT REPRESENTED GENUINE LOANS BORROWED AND THE CHARACTER OF THE LOAN TRANSA CTIONS WERE NOT DISPUTED AND HENCE THEIR LORDSHIPS OF ALLAHABAD HIGH COURT H ELD THAT THE PEAK CREDIT THEORY WOULD NOT BE APPLICABLE IN THAT CASE. BUT IN THE FACTS OF THE INSTANT CASE, THE ASSESSEE HAD CLEARLY OWNED UP THE TRANSAC TIONS AND THAT HE IS ENGAGING HIMSELF IN ACCOMMODATION ENTRY BUSINESS WI TH HIS OWN FUNDS AS WELL AS FUNDS RECEIVED FROM PARTIES TO WHOM THE ACC OMMODATION ENTRIES ARE PROVIDED BY THE ASSESSEE AND THE NAMES AND ADDRESSE S OF SUCH PARTIES COULD NOT BE PROVIDED BY HIM FOR WANT OF MAINTENANCE OF B OOKS AND DETAILS. THIS GOES TO PROVE THAT THE GENUINENESS OF THE TRANSACTI ONS CONTAINED IN THE ACCOMMODATION ENTRY BUSINESS AS REFLECTED IN THE SA ID BANK ACCOUNT COULD NOT BE PROVED BY THE ASSESSEE. THIS IS A DISTINCT A ND CRUCIAL FACTOR WHICH DISTINGUISHES THE DECISION RENDERED BY THE HON'BLE ALLAHABAD HIGH COURT IN 276 ITR 38 WHICH WAS HEAVILY RELIED UPON BY THE REV ENUE. 11. ON PERUSAL OF THE BANK ACCOUNT WITH CENTRAL BAN K OF INDIA, WE ARE SATISFIED THAT THE DEPOSITS AND WITHDRAWALS ARE CLO SELY LINKED WITH AND RELATED TO EACH OTHER ON DAY-TO- DAY BASIS. IT IS A LSO OBSERVED THAT THE LD. AO HAD NOT BROUGHT ANY MATERIAL OR EVIDENCE ON RECORD TO PROVE THAT THE WITHDRAWALS MADE BY THE ASSESSEE FROM THE SAID BANK ACCOUNT HAVING UTILIZED FOR MAKING ANY OTHER INVESTMENTS OUTSIDE THE BOOKS OR MEANT FOR ANY OTHER PURPOSE OTHER THAN FOR ACCOMMODATION ENTRY BUSINESS . IT IS PERTINENT TO LOOK INTO THE DECISION RENDERED BY THE KOLKATA TRIBUNAL IN THE CASE OF MAHESH ITA NO.1267/MUM/2014 4 KUMAR GUPTA IN IT(SS)A. NO.11/KOL/2014 DATED 0.2.20 05 WHEREIN ITAT OBSERVED THAT THE CLAIM OF THE ASSESSEE WAS THAT TH E CHEQUE WITHDRAWALS WERE FOR GIVING LOAN FOR THE SHORT PERIOD. HELD AS FOLLO WS :- 'THE AO CANNOT REFUSE TO GRANT SET OFF FOR THE WITHDRAWAL MADE BY CHEQUE WITHOUT BRINGING ON RECOR D ANY MATERIALS SO THAT THE AMOUNT WITHDRAWN BY CHEQU E CANNOT HAVE BEEN RECEIVED BACK BY THE ASSESSEE AND UTILIZED BY HIM IN MAKING SUBSEQUENT DEPOSITS BY CH EQUE. TAKING ALL THIS INTO CONSIDERATION, WE ARE OF THE CONSIDERED OPINION THAT AO SHOULD ADOPT PEAK CREDIT METHOD TO ARRIVE AT THE UNDISCLOSED INCOME OF THE ASSESSEE IN THE UNDISCLOSED BANK ACCOUNT NO.SB 6664 WITH THE SYNDICATE BANK.' REFERENCE MAY ALSO BE DRAWN TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS SMT. P.K.NOORJEHAN REPORTED IN 237 I TR 570(SC) WHEREIN THEIR LORDSHIPS HAVE HELD THAT MERE UNSATISFACTORIN ESS OF THE EXPLANATION OFFERED BY THE ASSESSEE, DOES NOT, AND NEED NOT, AU TOMATICALLY RESULT IN DEEMING THE VALUE OF INVESTMENT TO BE THE INCOME OF THE ASSESSEE. THAT IS STILL A MATTER WITHIN THE DISCRETION OF THE OFFICER AND, THEREFORE, OF THE TRIBUNAL. IN OTHER WORDS, THE DISCRETION HAS BEEN CONFERRED ON T HE INCOME TAX OFFICER U/S 69 OF THE ACT TO TREAT THE SOURCE OF INVESTMENT AS THE INCOME OF THE ASSESSEE IF THE EXPLANATION OFFERED BY THE ASSESSEE IS NOT FOUN D SATISFACTORY AND THE SAID DISCRETION HAS TO BE EXERCISED KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR CASE. THE INCOME TAX OFFICER IS NOT OBLIGED TO TREAT THE VALUE OF INVESTMENT AS INCOME IN EVERY CASE WHERE THE EXP LANATION OFFERED BY THE ASSESSEE IS FOUND TO BE UNSATISFACTORY. 12. HENCE IT WOULD BE UNREASONABLE TO TAX ALL THE D EPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE. TO THIS EXTENT, WE DO NOT APPRECIATE THE ACTION OF THE LD. AO IN TAXING THE ENTIRE CREDITS OF RS.6,30,89,4 13/- AS UNDISCLOSED INCOME OF THE ASSESSEE FOR A.Y.2006-07. TO PUT THIS ONGOIN G DISPUTE TO REST, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE DIRECT THE LD . AO TO ASSESS THE PEAK CREDIT IN THIS CASE IN RESPECT OF BOTH CASH AS WELL AS CHE QUE TRANSACTION CONTAINED IN THE SAID BANK ACCOUNT BY VERIFYING THE VERACITY OF THE FIGURES WORKED OUT BY THE ASSESSEE AND BRING TO TAX THE SAME. WE DRAW SUP PORT FROM THE DECISION RENDERED BY 'C' BENCH OF KOLKATA ITAT IN ITA NO.206 9/KOL/2010 FOR A.Y.2007-08 DATED 23.03.2012 IN THE CASE OF ITO VS SHRI GANGA PRASAD VYAS WHEREIN IT WAS HELD THAT 'WE FIND THAT THE ASSESSEE HAS FILED STATEMENT OF PEAK CREDIT I.E. DEPOSIT AND WITHDRAWALS FROM THE B ANK ACCOUNT OF SBBJ WHEREIN THE PEAK CREDIT AS ON 24.01.2007 WAS AT RS. 1,80,247/-. WE FURTHER FIND THAT THE MONEY DEPOSITED IN THE BANK ACCOUNT W AS WITHDRAWN EITHER ON THE SAME DAY OR ON SUBSEQUENT DATES. IT IS SEEN THA T THE TOTAL ADDITION OF THE AGGREGATE DEPOSITS IN THE BANK ACCOUNT AFTER GIVING BENEFIT OF WITHDRAWALS IS THE PEAK AMOUNT AND IN THAT CASE PEAK AMOUNT IS TO BE ADDED. WE FIND THAT THE ASSESSEE HAS MAINTAINED A BANK ACCOUNT WHICH IS ADMITTEDLY NOT DISCLOSED TO THE REVENUE AND THERE IS NO DOUBT THAT THE DEPOS ITS IN THIS BANK ACCOUNT REPRESENTS UNDISCLOSED INCOME OF THE ASSESSEE TO BE ASSESSED AS UNDISCLOSED INCOME BUT QUA ONLY THE PEAK AMOUNT. THE ASSESSEE H AS FILED COMPLETE STATEMENT OF PEAK DEPOSIT AND WITHDRAWALS WHICH IS AT RS.1,87,247/- AND BEFORE CIT(A). WE ARE OF THE VIEW THAT THE CIT(A) H AS RIGHTLY DIRECTED THE AO TO RESTRICT THE ADDITION TO THE EXTENT OF PEAK AMOU NT AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUE'S APPEAL IS DISMISSED.' 13. HOWEVER, WE WOULD LIKE TO MAKE IT CLEAR THAT TH IS DIRECTION TO THE LD. AO TO ASSESS THE PEAK CREDIT IN THIS CASE SHOULD NOT B E CONSTRUED AS A CONCLUSIVE PROOF IN THE HANDS OF THE BENEFICIARY IN THE SAID B ANK ACCOUNT FOR EXPLAINING THEIR AMOUNTS. ACCORDINGLY, THIS ISSUE IS SET ASIDE TO THE FILE OF THE LD. AO TO ITA NO.1267/MUM/2014 5 COMPLETE THE ASSESSMENT IN ACCORDANCE WITH THE DIRE CTIONS MENTIONED HEREINABOVE.' IN VIEW OF THE ABOVE ORDER OF THE CO-ORDINATE BENCH IN THE CASE OF PYUSH PODDAR (SUPRA), WE REMIT THE ISSUE BACK TO THE FILE OF THE AO AND DIRECT HIM TO ASSESS THE PEAK CREDIT OUT OF THE CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE ON THE SAME PRINCIPLE AS IN THE CASE OF PY USH PODDAR (SUPRA). ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS SET ASIDE TO THE FILE OF AO AND ALLOWED FOR STATISTICAL PURPOSES . 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06/2016. SD/ SD/- (RAMIT KOCHAR) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 15/6/2016 LAKSHMIKANTA DEKA/SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO.1267/MUM/2014 6 DATE INITIAL DICTATION PAD ATTACHED WITH THE DRAFT ORDER YES 1. DRAFT DICTATED ON 13-06-16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 13-06-16/ 14-06-16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.