Manas Kumar Naguri, Kolkata V. DCIT, Central Circle - XIII, Kolkata, Kolkata

ITA 1399/KOL/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9474 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 06-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 28-09-2012
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL
• Assessee Lawyers: M D SHAH
• Keywords: Unexplained cash credit; Search and seizure; Peak credit; Accommodation entries
• Section: 69C; 234B; 68; 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A NO.1399/KOL/2012 ASSESSMENT YEAR: 2010-11 MANAS KUMAR NAGURI VS. DEPUTY COMMISSIONER OF IN COME-TAX, (PAN: ACWPN3008P) CENTRAL CIRCLE-XIII, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 21.12.2016 DATE OF PRONOUNCEMENT: 08.02.2017 FOR THE APPELLANT: SHRI M. D. SHAH, AR FOR THE RESPONDENT: SHRI RAJAT KUMAR KUREEL, JCI T, SR. DR ORDER PER DR. A. L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO ASSESSMENT YEAR 2010-11, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) , CENTRAL-II, KOLKATA IN APPEAL NO. 158/CC-XIII/CIT(A)C-II/11-12 DATED 16.07.2012, WHIC H IN TURN ARISES OUT OF ASSESSMENT ORDER PASSED BY THE DCIT, CENTRAL CIRCLE-XIII, KOLK ATA U/S.143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 17.10.2011. 2. THE FACTS OF THE CASE QUA THE ASSESSEE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED IN THE CASES OF SHASHI KA NT KHETAN GROUP ON 08.12.2009 AND SUBSEQUENT DATES. THE SEARCH OPERATION WAS ALSO CON DUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE AND HIS BANK ACCOUNT WITH STANDARD CHARTER ED BANK STANDING IN THE NAME OF M/S. MAPLE TRADERS, PROPRIETORSHIP CONCERN OF THE ASSESS EE. THE ASSESSEE WAS ALSO THE PROPRIETOR OF ONE MORE CONCERN NAMED AS M/S. MODERN TRADERS AN D HAVING ANOTHER ACCOUNT IN THE SAME BANK. DURING THE COURSE OF SEARCH IT WAS ADMIT TED BY THE HIM THAT HIS BOTH THE CONCERNS WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES TO THE VARIOUS PARTIES AND IN LIEU HE USED TO EARN COMMISSION INCO ME @ 0.50% OF THE TOTAL CASH DEPOSITED IN THESE UNDISCLOSED BANK ACCOUNTS. FOR THE YEAR UN DER CONSIDERATION THE ASSESSEE DISCLOSED THE COMMISSION INCOME OF RS.2,75,715/- EARNED BY HI M BY PROVIDING THE ACCOMMODATION ENTRIES BY DEPOSITING THE CASH IN THE SAID UNDISCLO SED BANK ACCOUNTS. IT WAS EXPLAINED BY THE ASSESSEE THAT THE CREDIT ENTRIES IN THE UNDISCLOSED BANK ACCOUNT CAN BROADLY BE CLASSIFIED IN THREE CATEGORIES VIZ. CASH, CONTRA CHEQUES AND CLEA RING CHEQUES. IT WAS SUBMITTED THAT THE CONTRA CHEQUES AND THE CLEARING CHEQUES REPRESENT C HEQUES RECEIVED FROM THE PERSONS 2 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 WORKING IN CONDUIT FOR PROVIDING ACCOMMODATION ENTR IES, CASH REPRESENT AMOUNT RECEIVED FROM THE BENEFICIARIES FROM WHERE HE USED TO GET TH E COMMISSION. NO COMMISSION WAS RECEIVED FROM CONTRA AND CLEARING CHEQUES WHO WERE WORKING IN CONDUITS. THEREFORE, THE UNDISCLOSED COMMISSION HAS BEEN CALCULATED ONLY ON THE AMOUNT OF CASH DEPOSITED IN THE BANK ACCOUNT. IN THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF CASH DEPOSITED IN HIS ABOVE MENTIONED BANK ACCOUNTS, TO FURNISH THE DETAILS ALONG WITH ADDRESS AND PAN OF ULTIMATE BENEFICIARIE S RECEIVING THE ACCOMMODATION ENTRIES, DETAILS OF IMMEDIATE BENEFICIARIES TO WHOM CHEQUES WERE ISSUED AFTER DEPOSITING THE CASH AND TO FURNISH THE DETAILS OF PERSONS FROM WHOM CAS H WAS RECEIVED. THE AO ALSO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SEC TION 68 OF THE ACT SHOULD NOT BE INVOKED IN HIS CASE. IN RESPONSE, IT WAS SUBMITTED BY THE A SSESSEE THAT IN THE COURSE OF SEARCH IN THE CASE OF SHRI SHASHI KANT KHETAN, SOME BANK ACCOUNTS BELONGING TO HIM (ASSESSEE) WERE INVENTORIZED AND ATTACHED U/S 132(3) OF THE ACT. I T WAS SUBMITTED BY THE ASSESSEE THAT THESE BANK ACCOUNTS ARE UNDISCLOSED ACCOUNTS AND USED BY HIM FOR THE PURPOSE OF PROVIDING BOOK ENTRIES AND EARNING COMMISSION. HE USED TO EARN COM MISSION TO THE TUNE OF 25P TO 50P ON ALL THE CHEQUES ISSUED CONSEQUENT TO CASH DEPOSITS IN SUCH BANK ACCOUNTS. IT WAS STATED BY HIM THAT SINCE, HE WAS NOT ABLE TO SUBSTANTIATE THE QUANTUM OF EARNING AND TO AVOID FURTHER LITIGATION AGREED TO OFFER THE COMMISSION INCOME AT THE RATE OF 50P WHICH COMES TO RS.2,57,715/- FOR THE YEAR UNDER CONSIDERATION. THE INCOME SO EARNED WAS REDEPLOYED IN THE BANK BALANCE(S). IT WAS SUBMITTED BY THE ASSESSEE T HAT HE IS ENGAGED IN THE BUSINESS OF CONVERTING THE CASH INTO CHEQUES AND DID NOT MAINTA IN ANY BOOKS OF ACCOUNT AND RECORDS OF DEPOSITS AND WITHDRAWALS OF THE UNDISCLOSED BANK AC COUNTS. THEREFORE, HE WAS NOT IN POSITION TO FURNISH THE DETAILS OF THE PERSONS FROM WHOM CASH WAS RECEIVED OR THE IMMEDIATE BENEFICIARIES OR THE ULTIMATE BENEFICIARIES. HOWEVE R, THE DEPOSITS IN THE UNDISCLOSED BANK ACCOUNTS WERE INTER-RELATED WITH THE WITHDRAWALS, B EING INHERENT TO THE NATURE OF THE TRANSACTIONS IN THE AFORESAID BANK ACCOUNTS. WITH R EGARD TO APPLICABILITY OF PROVISIONS OF SECTION 68 OF THE ACT, IT WAS CONTENDED BY THE ASSE SSEE THAT HIS MAIN BUSINESS ACTIVITY WASEARNING COMMISSION ON CONVERTING CASH INTO CHEQU E AND HE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT WHEREIN HE HAD CREDITED ANY SUM. H E WAS MAINTAINING ONLY THE BANK ACCOUNTS WHEREIN THE CASH OF BENEFICIARIES WAS DEPO SITED AND CHEQUES WERE ISSUED TO THEM. 3 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE CASH OR CHEQUES DEPOSITED IN THE UNDISCLOSED BANK ACCOUNTS DID NOT BELONG TO HIM AND, THEREFORE, THERE IS NO QUESTION OF INVOKING PROVISIONS OF SECTION 68 OF THE ACT IN HIS CASE. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT JUDICIALLY IT HAS BEEN HELD BY VARIOUS COURTS THAT THE BANK PASSBOOK OR BANK STATEMENT IS NOT BOOKS OF ACCOUNT. HENCE, ANY DEPOS IT MADE IN THE BANK ACCOUNT CANNOT BE ADDED U/S 68. THE ASSESSEE ALSO SUBMITTED TO THE A O THAT EVEN PROVISIONS OF SECTION 69,69A, 69B AND 69C OF THE ACT ARE NOT APPLICABLE I N HIS CASE, HOWEVER, THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AND IT IS H ELD BY HIM THAT THE PROVISIONS OF SECTION 68 ARE APPLICABLE IN THE CASE OF ASSESSEE BECAUSE T HE ASSESSEE HAS FAILED TO PROVE THE IDENTITY OF THE SERVICE-TAKERS, THEIR CREDITWORTHINESS AND G ENUINENESS OF THE TRANSACTIONS. AS PER THE AO, IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE WITHOUT PREJUDICE TO HIS CONTENTION THAT SECTION 68 IS NOT APPLICABLE, MADE AN ALTERNATIVE PLEA THAT THE DEPARTMENT AT THE BEST CAN BRING TO TAX THE PEAK AMOUNT. THE ASSE SSEE OFFERED SUM OF RS. 2 LAKHS ON ACCOUNT OF PEAK CREDIT. THE AO ACCEPTED THE CONTENT ION OF THE ASSESSEE THAT KEEPING IN VIEW THE NATURE OF BUSINESS ACTIVITY OF PROVIDING BOOK E NTRIES AND AS HELD BY THE ITAT,KOLKATA IN SIMILAR NATURE OF CASES, THE PEAK CREDIT THEORY IS APPLICABLE IN THE ASSESSEE'S CASE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE WORKING OF THE PE AK CREDIT PROVIDED BY THE ASSESSEE AND, THEREFORE, AFTER CONSIDERING BOTH THE BANK ACCOUNTS , HE HIMSELF ARRIVED ON A COMBINED PEAK FIGURE OF RS,52,50,000/- WHICH IS ADDED TO THE INCO ME. THE AO ALSO ADDED THE COMMISSION INCOME WHICH WAS SHOWN BY THE ASSESSEE IN THE RETUR N OF INCOME AS DISCLOSED IN THE COURSE OF SEARCH. 3. AGGRIEVED FROM THE ORDER OF THE AO THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE ORDER PASSED BY THE AO OBSERV ING THE FOLLOWING: 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER. ON FACTS THERE IS NO DISPUTE THAT IN THE COURSE OF SEA RCH OPERATION IT WAS GATHERED THAT THE APPELLANT WAS MAINTAINING BANK ACCOUNTS IN THE NAME OF HIS PROPRIETORSHIP CONCERNS AND, ADMITTEDLY, THESE BANK ACCOUNTS WERE UNDISCLOSED. T HERE IS ALSO NOT DISPUTE ON THE FACT THAT THE APPELLANT WAS ENGAGED IN THE ACTIVITY OF PROVID ING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARY PARTIES. THAT THE APPELLANT USED TO DEP OSIT THE CASH IN HIS BANK ACCOUNTS AND ISSUING THE CHEQUES TO BE REACHED TO THE ULTIMATE B ENEFICIARIES. IN THE BANK ACCOUNTS THE CHEQUES WERE ALSO DEPOSITED WHICH WERE RECEIVED BY THE APPELLANT FROM THE PERSONS WORKING 4 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 IN THE CHAIN OF PROVIDING ACCOMMODATION ENTRIES. IT IS CLAIMED BY THE APPELLANT THAT HE WAS RECEIVING THE COMMISSION FOR THE SERVICES RENDERED TO THE BENEFICIARIES FOR PROVIDING BOOK ENTRIES AND THE COMMISSION WAS CHARGED ONLY ON THE AMOUNT OF CASH DEPOSITS AND THE RATE VARIES FROM 25P TO 50P. IN THE COURSE OF SEARCH OPE RATION, THEAPPELLANT DISCLOSED COMMISSION INCOME @ 0.50% ON THE AMOUNT OF CASH DEPOSITEDIN TH E UNDISCLOSED BANK ACCOUNTS AND SAME WAS SHOWN IN THE RETURN OF INCOME FILED FOR THE YEA R UNDER CONSIDERATION. DURING THECOURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED VARIOUS DETAILS FROM THE APPELLANT LIKE, SOURCE OF CASH DEPOSITED IN THE BANK ACCOUNTS, NAME AND ADDRESSES OF THE IMMEDIATE AND ULTIMATE BENEFICIARIES AND THE NAME AND ADDRESSES OF THE PER SONS FROM WHOM CASH AND CHEQUES WERE RECEIVED BY HIM. THE AO ALSO ASKED AS WHY PROVISION S OF SECTION 68 OF THE ACT SHOULD NOT BE INVOKED. IN RESPONSE, IT WAS SUBMITTED BEFORE THE A O THAT THE APPELLANT HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT OR RECORDS OF THE PERSONS FOR WHOM WORK WAS DONE AND, THEREFORE, HE WAS NOT IN THE POSITION TO PROVIDE ANY DETAILS OF T HE PERSONS AS CALLED FOR BY THE AO. IT WAS ALSO SUBMITTED BY THE APPELLANT THAT THE PROVISIONS OF SECTION 68 OF THE ACT ARE NOT APPLICABLE IN HIS CASE BECAUSE NO SUM WAS FOUND CREDITED IN HI S BOOKS OF ACCOUNT AND THAT THE BANKPASSBOOK OR THE BANK STATEMENT CANNOT BE TREATE D AS APPELLANT'S BOOKS OF ACCOUNT. HOWEVER, THE APPELLANT CAME FORWARD WITH AN ALTERNA TE PLEA THAT KEEPING IN VIEW THE NATURE OF ACTIVITIES CARRIED ON BY HIM, IN HIS CASE, AT THE M OST PEAK CREDIT THEORY MAY BE APPLIED AND THE PEAK CREDIT MAY BE ASSESSED IN HIS HANDS. IN SUPPOR T OF THIS PLEA, THE APPELLANT RELIED ON VARIOUS DECISIONS OF ITAT, KOLKATA. THE APPELLANT W ORKED OUT THE PEAK CREDIT AT RS. 2 LAKHS AND OFFERED THE SAME FOR TAX. THE AO, IN PRINCIPLE ACCEPTED THE CONTENTION OF THE APPELLANT THAT IN HIS CASE PEAK CREDIT THEORY IS APPLICABLE T O ASSESS THE INCOME. HOWEVER, HE DID NOT ACCEPT THE CONTENTION OF THE APPELLANT THAT PROVISI ONS OF SECTION 68 ARE NOT APPLICABLE IN HIS CASE. HE ALSO DID NOT ACCEPT THE WORKING OF PEAK CR EDIT PROVIDED BY THE APPELLANT TO OFFER THE SUM OF RS. 2 LAKHS FOR TAX. THE AO WAS OF THE OPINI ON THAT THE APPELLANT HAS SIMPLY OFFERED THE AMOUNT OF INITIAL DEPOSITS IN THE BANK ACCOUNTS AS PEAK BALANCE. AFTER REJECTING THE WORKING OF THE PEAK CREDIT FURNISHED BY THE APPELLANT, THE AO HIMSELF WORKED OUT THE COMBINED PEAK TAKING INTO ACCOUNT ALL THE ENTRIES IN THE UNDISCLO SED BANK ACCOUNTS AND ARRIVED ON A FIGURE OF RS.52,50,000/-. THE SAID AMOUNT OF PEAK IS ADDED BY THE AO TO THE INCOME OF THE APPELLANT. THE AO ALSO ADDED THE INCOME ON ACCOUNT OF COMMISSI ON AS DISCLOSED BY THE APPELLANT IN THE RETURN OF INCOME. IN THE COURSE OF APPELLATE PROCEE DINGS THE APPELLANT HAS ARGUED THAT THE AO HAS WORKED OUT THE EXCESSIVE PEAK AMOUNT AND SECOND LY, ONCE THE AOHAS ADDED THE PEAK AMOUNT HE SHOULD HAVE NOT ADDED THE COMMISSION INCO MEAGAIN BECAUSE THE COMMISSION IS PART OF THE PEAK AND SAME WAS REDEPLOYED IN BANK BA LANCE. ON CAREFUL CONSIDERATION OF THE FACTS, I AM OF THE OPINION THAT THE AO HAS RIGHTLY INVOKED PROVISIONS OF SECTION 68 OF THE ACT AND HAS ALSO RIGHTLY APPLIED THE COMBINED PEAK CRED IT THEORY AFTER CONSIDERING ALL THE ENTRIES IN THE UNDISCLOSED BANK ACCOUNTS. THE RELIANCE IS P LACED ON THE DECISION IN THE CASE OF ITO, WARD 36(4), KOLKATA VS. UDAY SHANKAR MAHAWAR, ITA N O.1903/KOI/2009, CIT VS. PRAVEEN KUMAR AGARWAL, IT (SS) A NO.61 & 74/KO1/2003 AND CI T VS. LOKNATH PRASAD GUPTA, IT (SS) A NO.185 & 190/KO1/2003, WHEREIN ON SIMILAR ISSUE T HE HON'BLE ITAT, KOLKATA UPHELD THE ADDITION TO THE INCOME BY COMBINED PEAK CREDIT THEO RY. I AM OF THE OPINION THAT THE AO WAS JUSTIFIED IN REJECTING THE PEAK AMOUNT WORKED OUT B Y THE APPELLANT BECAUSE IT WAS NOTHING BUT THE AMOUNT OF INITIAL DEPOSITS MADE IN THE UNDISCLO SED ACCOUNT. HE HAS NOT CONSIDERED ALL THE ENTRIES OF THE BANK ACCOUNTS TO ARRIVE ON THE FIGUR E OF PEAK. UNDER THE CIRCUMSTANCES, I FIND NO REASON TO DISTURB THE PEAK AMOUNT ARRIVED BY THE AO TO MAKE THE ADDITION TO THE INCOME OF THE APPELLANT AND, THEREFORE, THE ADDITION OF COMBINED PEAK CREDIT OF RS.52,50,000/- MADE BY THE AO IS CONFIRMED. I AM ALSO NOT INCLINED TO AGREE WI TH THE SUBMISSION OF THE APPELLANT THAT IF ONCE THE AO HAS ADDED PEAK CREDIT, THEN THE COMMISS ION INCOME CANNOT BE ADDED TO THE INCOME OF APPELLANT. THERE IS NO DISPUTE ON THE FAC T THAT THE APPELLANT HAD EARNED COMMISSION INCOME WHICH WAS ADMITTED BY HIM AND ACCORDINGLY AL SO DISCLOSED IN THE RETURN OF INCOME. IN VIEW OF ABOVE, THE ADDITION ON ACCOUNT OF COMMISSIO N INCOME IS ALSO CONFIRMED. THE GROUND NOS. 1, 2 AND THE ADDITIONAL GROUND ARE DISMISSED. 5 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 3. NOT BEING SATISFIED WITH THE ORDER OF THE LD. CI T(A) THE ASSESSEE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUNDS OF AP PEAL: 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. A.O. ERRED IN INCORRECTLY APPLYING THE 'PEAK CREDIT' THEORY IN THE APPELLANT' S CASE. THE ACTION OF THE A.O. WAS WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN CONFIRMING THE ACTION OF THE A.O. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. A.O ERRED IN MAKING ADDITIONS U/S 68 OF I.T. ACT, IN SO FAR AS THE APPELLANT WAS NOT MAINTAINING ANY BOOKS OF ACCOUNTS. THE ACTION OF THE A.O. WAS WHOLLY UNREASONABLE, UNCALLED FOR A ND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN CONFIRMING THE ACTION OF THE AO. 3. WITHOUT PREJUDICE TO THE ABOVE, THE LD. A.O. ERR ED IN NOT RESTRICTING THE ADDITION UNDER 'PEAK CREDIT THEORY' TO THE EXTENT TO APPELLANT'S OWN FUN DS AND NOT EXAMINING THE EXPLANATION WITH RESPECT TO THE SAME FILED AT THE ASSESSMENT STAGE. THE ACTION OF THE A.O. WAS WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN DISREGARDING THE EXPLANATION WITHOUT PASSING ANY SPEAKING ORDER. 4. WITHOUT PREJUDICE TO THE ABOVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO ERRED IN MAKING ADDITION OF RS. 52,50,000/- AS UNEXPLAINE D CASH CREDIT U/S 68 OF INCOME TAX ACT, 1961 UNDER 'PEAK CREDIT THEORY'. THE ACTION OF THE AO WA S WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN CONFIRMIN G THE ACTION OF THE A.O. 5. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. A.O. ERRED IN TAXING INCOME BOTH UNDER 'PEAK CREDIT THEORY' AND THE 'UNDISCLOSED COM MISSION EARNINGS. THUS, HE HAS TAKEN BOTH MODE OF EARNING AND APPLICATION OF SUCH EARNINGS. T HE ACTION OF THE A.O. WAS WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN CONFIRMING THE ACTION OF THE A0. 6. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. A.O. ERRED IN CHARGING INTEREST U/S. 234A, 234B AND 234C AND/OR INCORRECTLY CALCULA TING THE SAME. THE ACTION OF THE AO WAS WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. THE LD. CIT(A) WAS UNJUSTIFIED IN CONFIRMING THE ACTION OF THE AO. 4. ALTHOUGH, IN THIS APPEAL, THE ASSESSEE HAS RAISE D A MULTIPLE GROUNDS OF APPEAL BUT AT THE TIME OF HEARING THE MAIN GRIEVANCE OF THE ASSES SEE HAS BEEN CONFINED TO GROUND NOS. 4 AND 5 ONLY AND OTHER GROUNDS HAVE BEEN TREAT ED AS SUPPORTING GROUNDS.THE SOLITARY GRIEVANCE OF THE ASSESSEE IN GROUND NOS. 4 AND 5 IS THAT THE AO MADE ADDITION OF RS.52,50,000/- AS UNEXPLAINED CASH CREDIT U/S. 6 8 OF THE ACT, UNDER THE HEAD PEAK CREDIT THEORY, AND THE SAID ADDITION MADE BY AO HAS BEEN CONFIRMED BY THE LD CIT(A). 4.1. LD. AR FOR THE ASSESSEE HAS SUBMITTED BEFORE U S THAT THE AO DID THE ADDITION OF RS.52,50,000/- AS UNEXPLAINED CASH CREDIT UNDER THE HEAD PEAK CREDIT THEORY. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION, THE SEARCH TEAM FOUND OUT TWO UNACCOUNTED BANK 6 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 ACCOUNTS AND THE ASSESSEE UNDER CONSIDERATION GAVE THE STATEMENT AND SUBMITTED TO THE SEARCH PARTY THAT THESE TWO BANK ACCOUNTS DID NOT B ELONG TO HIM, THE ENTRIES THEREIN BELONGED TO OTHER PARTIES. THE ASSESSEE WAS WORKING AS AN A CCOMMODATION ENTRY PROVIDER. THE ASSESSEE USED TO PROVIDE THE ACCOMMODATION ENTRIES TO VARIOUS PARTIES AND HE USED TO GET THE COMMISSION. THE ASSESSEE HAS OFFERED THE COMMISSION FOR TAXATION PURPOSE IN HIS RETURN OF INCOME. THE AO CANNOT MAKE THE ADDITION ON BOTH WA YS I.E. BASED ON THE PEAK CREDIT THEORY AND BASED ON THE UNDISCLOSED COMMISSION EARNED BY T HE ASSESSEE I.E. THE AO HAS TAKEN BOTH MODE OF EARNINGS, THEREFORE, ADDITION CANNOT BE MAD E BASED ON BOTH MODE OF EARNINGS, IT WILL BE EITHER PEAK CREDIT THEORY OR COMMISSION REC EIVED. THE LD. AR FOR THE ASSESSEE SUBMITTED IN DETAIL THAT SEARCH OPERATION U/S. 132 OF THE ACT WAS CONDUCTED IN SHASHI KANT KHETAN GROUP ON 08.12.2009. SEARCH OPERATION WAS ALSO CONDUCTED AT THE PREMISES OF THE ASSESSEE. DURING THE COURSE OF SEARCH IT WAS FOUND THAT THE ASSESSEE IS MAINTAINING TWO UNDISCLOSED BANK ACCOUNTS IN THE NAME OF HIS PROPRI ETORSHIP CONCERNS AND THESE BANK ACCOUNTS WERE USED BY HIM TO PROVIDE THE ACCOMMODAT ION ENTRIES. IN OTHER WORDS, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CONVERTING THE CASH INTO CHEQUES AND EARNING OF COMMISSION INCOME. THE RATE OF COMMISSION VARIES FR OM 25P TO 50 P. THE ASSESSEE SUBMITTED THAT IN THE UNDISCLOSED BANK ACCOUNTS THE RE WERE CREDITS ON ACCOUNT OF CASH AS WELL AS THE CHEQUES. THE CHEQUES WERE DEPOSITED BY THE PERSONS WHO ARE WORKING IN CONDUIT FOR PROVIDING ACCOMMODATION ENTRIES. THE ASSESSEE H AD RECEIVED COMMISSION ONLY ON THE CHEQUES ISSUED BY HIM BY DEPOSITING THE CASH. NO CO MMISSION WAS RECEIVED ON DEPOSITS OF CHEQUES AS THEY WERE THE PART OF THE CHAIN PROVIDIN G BOOK ENTRIES TO VARIOUS BENEFICIARIES. THE LD AR FOR THE ASSESSEE SUBMITTED THAT IN THE CO URSE OF SEARCH, HE VOLUNTARILY OFFERED COMMISSION INCOME OF RS.2,57,715/- FOR TAX AND SAME WAS ALSO INCLUDED IN THE RETURN OF INCOME FILED U/S 139(1) OF THE ACT. IT IS FURTHER S UBMITTED BY THE ASSESSEE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, HE VOLUNTARILY OF FERED ADDITIONAL INCOME OF RS. 2 LAKHS UNDER THE PEAK CREDIT THEORY AS THE APPELLANT WAS N OT ABLE TO GIVE DETAILS OF UNDISCLOSED TRANSACTIONS IN THE BANK ACCOUNT. THE AO, WHILE ACC EPTING THE FACT THAT THE PEAK CREDIT THEORY IS APPLICABLE IN THE CASE OF ASSESSEE, CAME TO CONCLUSION THAT INCOME UNDER PEAK CREDIT THEORY SHOULD HAVE BEEN RS.52,50,000/- AS AG AINST RS. 2 LAKHS OFFERED BY THE ASSESSEE AND ACCORDINGLY, HE ASSESSED THE TOTAL INCOME AT RS .56,72,690/-,WHICH IS WRONG. WHILE 7 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 ASSESSING THE INCOME, IN ADDITION TO PEAK CREDIT, H E ALSO MADE THE ADDITION ON ACCOUNT OF COMMISSION INCOME WITHOUT APPRECIATING THAT THE COM MISSION INCOME WAS REDEPLOYED IN THE BANK DEPOSITS.THE LD. AR FOR THE ASSESSEE STATED TH AT THE AO DID NOT ACCEPT THE PEAK CREDIT OF RS. 2 LAKHS OFFERED BY HIM FOR THE REASON THAT T HE ASSESSEE HAD OFFERED ONLY THE INITIAL DEPOSIT IN THE BANK ACCOUNT. HOWEVER, HE FAILED TO APPRECIATE THAT THE CASH OR CHEQUES DEPOSITED IN THE BANK ACCOUNT WERE NOT THE MONEY OF THE ASSESSEE AND HE WAS HAVING LIABILITY TO REPAY THEM. UNDER THE CIRCUMSTANCES, T HE PEAK OF THAT MONEY WHICH WAS DEPOSITED BY THE APPELLANT ON HIS OWN ACCOUNT COULD BE ASSESSED UNDER PEAK CREDIT THEORY BECAUSE ENTIRE DEPOSITS IN THE BANK ACCOUNT ARE NOT OWNED BY THE ASSESSEE. BUT, THE AO REJECTED THE CLAIM OF THE ASSESSEE AND HE WORKED OU T THE PEAK CREDIT AFTER CONSIDERING ALL THE DEPOSITS IN THE BANK ACCOUNTS AND MADE THE ADDITION . IT IS FURTHER ARGUED ON BEHALF OF THE ASSESSEE THAT THE AO WAS OF THE OPINION THAT PROVIS IONS OF SECTION 68 OF THE ACT ARE APPLICABLE IN THE CASE OF ASSESSEE. HOWEVER, HE FA ILED TO APPRECIATE THAT THE PROVISIONS OF SECTION 68 ARE APPLICABLE ONLY WHEN A SUM IS FOUND TO BE CREDITED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN HIS CASE, NO SUM WAS FOUND TO BE C REDITED IN HIS BOOKS OF ACCOUNT AS THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT. T HE BANK PASSBOOK OR BANK STATEMENT CANNOT BE TREATED AS BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AS HELD BY THE VARIOUS COURTS. IT IS CONTENDED BY THE ASSESSEE THAT, ON TH E FACTS OF THE CASE, THE AO BE DIRECTED TO ACCEPT THE PEAK AMOUNT OFFERED BY THE ASSESSEEVOLUN TARILY IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO ARGUED BY THE LD. AR FOR TH E ASSESSEE THAT THE AO WAS NOT JUSTIFIED IN ADDING COMMISSION INCOME, ONCE HE HAS ADDED AMOUNT OF COMBINED PEAK CREDIT APPEARING IN THE BANK ACCOUNT. HENCE, BOTH THE AMOUNTS OF COM MISSION AND PEAK DEPOSIT CANNOT BE ADDED SIMULTANEOUSLY AND AO BE DIRECTED TO EXCLUDE THE PEAK DEPOSIT AMOUNT FROM THE TOTAL ASSESSED INCOME.THE LD. AR FOR THE ASSESSEE ALSO PL ACED RELIANCE ON A DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI VS. CIT (2005) 276 ITR 38 (ALL), WHEREIN THE HONBLE COURT HAS HELD AS UNDER: 6. THE APPLICANT SUBMITTED THAT AS THE AMOUNT OF CASH CREDIT HAS BEEN TREATED TO TAX BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT AN D THE SAID AMOUNT HAVE BEEN TREATED AS INCOME FROM THE UNEXPLAINED SOURCE, THE APPLICANT W AS ENTITLED TO TAKE UP A PLEA OF ADDITION OF THE AFORESAID PEAK CREDIT AS THE ENTIRE DEPOSITS HAVE BEEN TREATED TO BE INCOME OF THE APPLICANT. THE CONTENTION IS WHOLLY MISCONCEIVED. F OR ADJUDICATING UPON THE PLEA OF PEAK CREDIT THE FACTUAL FOUNDATION HAS TO BE LAID BY THE ASSESSEE. HE HAS TO OWN ALL CASH CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND ONLY THEREAFTER THE QUESTION OF PEAK CREDIT CAN BE RAISED. AS IN THE PRESENT CASE THE AMOUNT OF CASH CREDITS W ERE STANDING IN THE NAMES OF DIFFERENT 8 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 PERSONS WHICH ALL ALONG THE APPLICANT HAD BEEN CLAI MING TO BE GENUINE DEPOSIT, WITHDRAWAL/PAYMENT OF THE AMOUNT TO DIFFERENT SET O F PERSONS DURING THE PREVIOUS YEARS WOULD NOT AT ALL ENTITLE THE APPLICANT TO CLAIM BEN EFIT OF PEAK CREDIT. LD. AR FOR THE ASSESSEE FURTHER PLACED RELIANCE ON A DECISION OF ITAT, DELHI H BENCH IN THE CASE OF SHRI SANJAY KUMAR GARG VS. ACIT IN ITA NOS. 1501, 1502 & 3531 TO 3534 (DEL) OF 2009 FOR AYS 2000-01 TO 2005-06 DATED 28.0 1.2011, WHEREIN IT HAS BEEN HELD AS UNDER: 62 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE MATERIAL AVAILABLE ON RECORD. DURING THE COURSE OF SURVEY OPERATIONS, STATEMENT O F THE ASSESSEE WAS RECORDED WHEREIN IT HAS BEEN CATEGORICALLY ADMITTED THAT NO PURCHASE AND SA LE ACTIVITIES ARE UNDERTAKEN IN THE NAMES OF FIRMS. THE ASSESSEE WAS USING THE FIRMS FOR THE PURPOSE OF PROVIDING SALE BILLS FOR WHICH HE WAS COLLECTING COMMISSION. THE ASSESSEE WAS DEPOSIT ING CASH IN THE BANK ACCOUNTS OF THE DUMMY FIRMS AS WELL AS HIS OWN FIRMS THROUGH WHICH HE WAS CARRYING OUT ACCOMMODATION ENTRY BUSINESS. AT THE TIME OF SURVEY NO EVIDENCE W AS FOUND TO SUGGEST THAT THE ASSESSEE WAS ENGAGED IN REALCOMMISSION BUSINESS. NO OTHER SOURCE OF INCOME WAS ALSO FOUND. IT IS ALSO THE CASE OF ASSESSING OFFICER THAT THE ASSESSEE WAS CAR RYING ON BUSINESS OF ENTRY PROVIDER. THE ASSESSMENTS WERE REOPENED FOR THIS PURPOSE ONLY. TH E ID. CIT (APPEALS) HAS GIVEN A FINDING OF FACT THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND, THEREFORE, THE AMOUNTS DEPOSITED IN THE ACCOUNT OF DUMMY CONCERNS WAS TO BE TREATEDAS TOTAL RECEIPTS ON WHICH COMMISSION WAS TO BE DETERMINED. THEREFORE, WE ARE IN AGREEMENT WITH THE VIEW OF THE ID. CIT(A) THAT ONLY COMMISSION CAN BE DETERMINED ON THE DEPOSITS MADE IN THE BANK ACCOUNTS OF THE DUMMY CONCERNS. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) THAT THE AMOUNT DEPOSITED IN THE ACCOUNT OF DUMMY CONCERNS CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THEREFORE, TH E LD. CIT(A), IN OUR CONSIDERED OPINION, IS JUSTIFIED IN TREATING THE CASH DEPOSITED IN VARIOUS BANK ACCOUNTS CONTROLLED AND OPERATED BY THE ASSESSEE AS THE TURNOVER OF THE ACCOMMODATION E NTRY BUSINESS AND COMMISSION INCOME HAS TO BE ESTIMATED THEREON. 4.2. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE LD. CIT(A), WHICH WE HAVE ALREADY NOTED IN E ARLIER PARA AND IS NOT REPEATED AGAIN FOR THE SAKE OF BREVITY. 4.3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT ON THE SUBMISSI ON OF THE ASSESSEE AS THE PROPOSITION CANVASSED BY THE LD. AR FOR THE ASSESSEE ARE SUPPOR TED BY THE FACTS NARRATED ABOVE.AS HE HAS EXPLAINED BEFORE US CLEARLY THAT THE AO CANNOT TAX THE INCOME UNDER TWO HEADS VIZ., PEAK CREDIT THEORY OR BASED ON COMMISSION RECEIVED. THE ASSESSEE UNDER CONSIDERATION HAS ALREADY OFFERED THE COMMISSION FOR TAXATION PURPOSE AND THE COMMISSION INCOME IS GETTING REFLECTED IN HIS RETURN OF INCOME. THEREFORE, WE A RE OF THE VIEW THAT THE ADDITION MADE BY 9 ITA NO.1399/KOL/2012 MANAS KUMAR NAGURI, AY. 2010-11 THE AO BASED ON THE PEAK CREDIT THEORY AND CONFIRME D BY THE LD. CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.02.2017 SD/- SD/- (A. T. VARKEY) (DR. A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 8TH FEBRUARY, 2017 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT SHRI MANAS KUMAR NAGURI, C/O S. K. KHET AN, ROOM NO. 104, 46, B. B. GANGULY STREET, KOLKATA-700 012. 2. RESPONDENT DCIT, C.C-XIII, KOLKATA. 3. CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .