I T O, Ward-36(4), Kol, Kolkata V. Uday Shankar Mahawar, Kolkata

ITA 1903/KOL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2457 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2009
• Court: TRIBUNAL
• Department Lawyers: K HARIPRASAD
• Assessee Lawyers: A K TULSIYAN
• Keywords: Unexplained investment; Income from undisclosed sources; Document seized; Peak credit; Accommodation entries; Documents seized; Set aside
• Section: 69A; 154

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA ( (( ( ) )) ) . .. . . . . . , ,, , ! ! ! ! '#$ '#$ '#$ '#$ . .. .% %% % . . . . &' &' &' &', , , , () () () () [BEFORE HONBLE SHRI G. D. AGRAWAL, VP & HONBLE SR I D. K. TYAGI, JM] $* $* $* $* / ITA NO. 1903 /KOL/2009 +, #-. +, #-. +, #-. +, #-./ // / ASSESSMENT YEAR : 2006-07 INCOME-TAX OFFICER, WD-36(4), KOLKATA -VS- UDAY SH ANKAR MAHAWAR (PA NO. AFAPM 9477 Q) (01 / APPELLANT ) (2&01/ RESPONDENT ) FOR THE APPELLANT: /SHRI K. HARIPRASAD FOR THE RESPONDENT: /SRI A. K. TULSIYAN (%3 / ORDER PER D. K. TYAGI, JM ( . . . . % %% % . . . . &' &' &' &', () ) THE APPEAL PREFERRED BY THE REVENUE IS DIRECTED AG AINST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 14.09.2009 FOR THE ASSESSMEN T YEAR 2006-07 ON THE FOLLOWING GROUNDS : 1.THAT THE LD. CIT(A)-XX/KOLKATA HZS ERRED IN ALLO WING THE ASSESSEE THE BENEFIT OF TELESCOPING PEAK CREDIT IN THIS CASE. THE TELESCOP ING PEAK CREDIT, AS WORKED OUT BY THE ASSESSEE AND SUBSEQUENTLY ALLOWED BY THE CIT(A)-XX/ KOLKATA, REPRESENTS THE CONSOLIDATED AMOUNT OF DEPOSITS AND WITHDRAWALS OF THE TWO UNDISCLOSED BANK A/CS AMALGAMATED TOGETHER. BUT, AS SUGGESTED IN THE REM AND REPORT, THE PEAK CREDIT SHOULD BE CONSIDERED FOR THE TWO UNDISCLOSED BANK A/CS TAK EN SEPARATELY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED HIS RETURN ON 08.12.2006, SHOWING THEREIN TOTAL INCOME OF RS.1,28,280/-. THE AO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THAT THE ASSESSEE WAS HA VING TWO BANK ACCOUNTS WITH THE HDFC BANK, SALT LAKE BRANCH AND ONE OD ACCOUNT AND THEY WERE NOT DISCLOSED IN THE INCOME TAX RETURN. THE AO CALLED FOR THE COPIES OF BANK STATEMENTS FOR THE RELEVANT PERIOD FROM THE CONCERNED BANK. IT WAS FOUND THAT MONEY WAS DEPOSITED IN BOTH THE BANK ACCOUNTS BYWAY OF CASH, CHEQUE AND FUND TRANSF ER. ACCORDING TO THE AO, TOTAL CASH DEPOSITS OF RS.19,30,000.00 AND CHEQUE DEPOSIT S OFRS.32,79,575.64 WERE MADE IN THE SB A/C. SIMILARLY, TOTAL CASH DEPOSITS OF RS.2 ,05,08,713.00 AND CHEQUE DEPOSITS OF RS.16,98,098.00 WERE MADE IN THE OD A/C. THE AO RE QUIRED THE ASSESSEE TO EXPLAIN THE SOURCE OF DEPOSITS IN THE BANK ACCOUNTS. THE ASSESS EE FAILED TO OFFER ANY EXPLANATION BEFORE THE AO. THE AO THEN PRESUMED THAT ALL CREDIT S IN THE BANK ACCOUNTS REPRESENT 2 INCOME FROM UNDISCLOSED SOURCES AND MADE AN ADDITIO N OF RS.2,44,16,386.00 TO THE INCOME OF THE ASSESSEE. THIS AMOUNT WAS LATER REVI SED BY THE AO TO RS.2,74,16,386.64 VIDE HIS ORDER U/S. 154 DATED 21.7.2009 AS INFORMED BY THE AO IN HIS REMAND REPORT DATED 24.8.2009. IN APPEAL, THE LD. CIT(A) VIDE HI S DETAILED ORDER CONCLUDED THAT IN VIEW OF THE ABOVE AND THE VARIOUS LEGAL PRONOUNCEME NTS AND ALSO THE RATIO LAID DOWN BY THE HONBLE ITAT, KOLKATA, THE ADDITION MADE BY THE AO ON ACCOUNT OF DEPOSITS IN UNDISCLOSED BANK ACCOUNTS IS DIRECTED TO BE RESTRIC TED TO THE COMBINED PEAK CREDIT OF RS.22,80,206.63. GROUND NO. 2 IS PARTLY ALLOWED. AGGRIEVED BY THE SAID ORDER, NOW THE REVENUE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING THE LD. DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT(A)HAS ERRED IN ALLOWING THE ASSESE E THE BENEFIT OF TELESCOPING PEAK CREDIT. THE PEAK CREDIT AS WORKED OUT BY THE ASSES SEE AND SUBSEQUENTLY ALLOWED BY THE LD. CIT(A) REPRESENT THE CONSOLIDATED AMOUNT OF DEP OSITS AND WITHDRAWALS OF THE TWO UNDISCLOSED BANK ACCOUNTS AMALGAMATED TOGETHER. BU T AS SUGGESTED IN THE REMAND REPORT, THE PEAK CREDIT SHOULD BE CONSIDERED FOR TH E TWO UNDISCLOSED BANK A/CS. TAKEN SEPARATELY. HE, THEREFORE, URGED BEFORE THE BENCH T O SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF AO. 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A) AND URGED BEFORE THE BENCH TO CONFIR M THE SAME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) WHILE PARTLY A LLOWING THE ASSESSEES APPEAL HELD THAT THE ADDITION MADE BY THE AO ON ACCOUNT OF DEPO SITS IN UNDISCLOSED BANK ACCOUNTS IS DIRECTED TO BE RESTRICTED TO THE COMBINED PEAK CRED IT OF RS.22,80,206.63 HAS OBSERVED AS UNDER : 4.6. I HAVE PERUSED THE ASSESSMENT ORDER AND THE R EMAND REPORT. I HAVE ALSO CONSIDERED THE SUBMISSION OF THE APPELLANT AND HEA RD THE LD. AR. I HAVE CONSIDERED THE RIVAL SUBMISSIONS IN SO FAR AS THE APPLICABILIT Y OF SECTION 69A IN THE CASE OF THE APPELLANT IS CONCERNED. THE FACT OF THE MATTER IS T HAT THE APPELLANT HAS MAINTAINED TWO BANK ACCOUNTS WHICH ARE ADMITTEDLY NOT DISCLOSED IN THE INCOME TAX RETURN. THERE IS NO DOUBT THAT THE DEPOSITS IN THE UNDISCLOSED BANK ACC OUNTS REPRESENT UNDISCLOSED INCOME OF THE APPELLANT, WHICH SHALL BE DISCUSSED, IN DETA IL, IN THE SUBSEQUENT PARAGRAPHS. I FIND NO LEGAL INFIRMITY IN THE ORDER OF THE AO . IT IS AN ADMITTED FACT THAT THE TWO BANK ACCOUNTS MAINTAINED BY THE APPELLANT WITH THE HDFC BANK ARE NOT DISCLOSED IN THE INCOME TAX RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE APPELLANT COULD OFFER N O SATISFACTORY EXPLANATION AS REGARDS THE NATURE AND SOURCE OF THE DEPOSITS IN TH E BANK ACCOUNTS. THE AO THEREFORE ADDED THE ENTIRE DEPOSITS IN BOTH THE BANK ACCOUNTS AS INCOME FROM UNDISCLOSED 3 SOURCES. THE ADDITION WAS MADE BY THE AO PRIMARILY BECAUSE THE APPELLANT COULD OFFER NO EXPLANATION BEFORE HIM. AS THE LANGUAGE USED BY THE AO IN THE ASSESSMENT ORDER SUGGESTS, SINCE THE APPELLANT FAILED TO DISCHARGE H IS ONUS IN EXPLAINING THE SOURCE OF CREDITS APPEARING IN THE BANK ACCOUNTS, THE AO SIMP LY PRESUMED THAT ALL CREDITS REPRESENTED UNDISCLOSED INCOME OF THE APPELLANT. IT WAS BASICALLY THE ABSENCE OF ANY EXPLANATION FROM THE APPELLANT THAT PROMPTED THE AO TO ADD ALL THE CREDITS AS UNDISCLOSED INCOME. HOWEVER, DURING THE COURSE OF REMAND PROCEEDINGS, THE SUBMISSIONS OF THE APPELLANT WERE DULY CONSIDERED BY THE AO. THE AO HA S FAIRLY ADMITTED THAT APPLYING THE PEAK CREDIT METHOD COULD BE THE CORRECT WAY TO DETE RMINE THE UNDISCLOSED INCOME. BUT, THE AO HAS SUGGESTED THAT PEAK CREDITS FOR BOTH THE ACCOUNTS SHOULD BE WORKED OUT SEPARATELY AND THEIR AGGREGATE SHOULD BE TAKEN AS T HE UNDISCLOSED INCOME. I FIND NO JUSTIFICATION IN THE OBJECTION RAISED BY THE AO AGA INST THE AMALGAMATION OF THE TWO BANK ACCOUNTS. THE AMALGAMATION OF ALL THE DEPOSITS AND WITHDRAWALS IN RESPECT OF ALL UNDISCLOSED BANK ACCOUNTS IS AN INTEGRAL PART OF TH E PEAK CREDIT THEORY. FOR, ANY WITHDRAWAL MADE FROM AN UNDISCLOSED BANK ACCOUNT IS AVAILABLE WITH THE APPELLANT FOR SUBSEQUENT DEPOSITS IN THE SAME BANK ACCOUNT OR IN OTHER UNDISCLOSED BANK ACCOUNTS. AND THEREFORE, FOR ANY WITHDRAWAL MADE FROM ANY UND ISCLOSED BANK ACCOUNT, CORRESPONDING CREDIT HAS TO BE ALLOWED AGAINST SUBS EQUENT DEPOSITS MADE IN THE SAME BANK ACCOUNT OR IN OTHER UNDISCLOSED BANK ACCOUNTS. EVEN THE AO HAS ADMITTED, IN HIS REMAND REPORT, THAT THERE ARE TRANSACTIONS INTER-LI NKING THE TWO BANK ACCOUNTS. THESE INTER-LINKING TRANSACTIONS RELATE TO FUND TRANSFER S. I AGREE WITH THE LD. AR THAT, IN CASE OF INTER-LINKING TRANSACTIONS BY WAY OF CASH, THERE CAN NATURALLY BE NO EVIDENCE. I FIND SUBSTANCE IN THE CONTENTION OF THE APPELLANT THAT O NCE THE PEAK CREDIT METHOD IS ACCEPTED, THEN THE COMBINED PEAK CREDIT WORKED OUT ON THE BASIS OF AMALGAMATED DEPOSITS AND WITHDRAWALS OF ALL THE UNDISCLOSED BAN K ACCOUNTS IS THE ONLY CORRECT METHOD FOR DETERMINING THE UNDISCLOSED INCOME. I HAVE CONSIDERED THE BANK ACCOUNTS AND FOUND THAT THERE ARE VARIOUS CREDITS AS WELL AS WITHDRAWALS IN THE BANK ACCOUNTS. IT IS AN ADMITTED FACT THAT THE BANK ACCOUNTS ARE UNDISCLOSED AND THEREFORE THE DEPOSITS IN THE B ANK ACCOUNTS ARE UNEXPLAINED INVESTMENT OF THE APPELLANT. BUT, THE AMOUNT INVEST ED AT ONE POINT OF TIME WAS WITHDRAWN SUBSEQUENTLY AND WAS THEREFORE, AVAILABLE FOR FURTHER DEPOSITS. THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE AMOUNT WITHDRAW N HAS BEEN UTILIZED BY THE APPELLANT FOR ANY EXPENSES OR FOR ANY INVESTMENT. A ND THEREFORE, THE PEAK CREDIT OF RS.22,80,206=63 WOULD COVER THE TOTAL DEPOSITS AND WITHDRAWALS IN THE BANK ACCOUNTS. THE DECISION OF THE AO TO ADD THE AGGREGATE DEPOSIT S IN THE BANK ACCOUNTS, WITHOUT GIVING BENEFIT OF WITHDRAWALS MADE FROM TIME TO TIM E, IS NOT JUSTIFIED. 4.7 I HAVE CAREFULLY CONSIDERED THE VARIOUS LEGAL P RONOUNCEMENTS RELIED UPON BY THE APPELLANT. THEY ALSO SUPPORT THE CONTENTION OF THE APPELLANT THAT ONLY THE COMBINED PEAK CREDIT OF THE UNDISCLOSED BANK ACCOUNTS SHOULD BE CONSIDERED AS UNDISCLOSED INCOME. FOR, IN THE CASE OF ACIT VS LOKNATH PRASAD GUPTA [IT (SS) A NO. 185 & 190/KOL/2003 ], THE HONBLE ITAT, C BENCH, KOLKAT A UPHELD THE PEAK CREDIT METHOD. IN THIS CASE, THE AO ADDED ALL THE CREDITS APPEARIN G IN AN UNDISCLOSED BANK ACCOUNT, AGGREGATING TO RS.27,49,858/-. THE LD. CIT(A) RESTR ICTED THE ADDITION TO THE PEAK CREDIT OF RS.7,50,975/-. UPHOLDING THE DECISION OF THE LD. CIT(A), THE HONBLE ITAT HELD AS UNDER- WE HAVE CAREFULLY PERUSED THE RESPECTIVE BANK ACCO UNTS AND OBSERVED THAT THERE WERE VARIOUS CREDITS AS WELL S WITHDRAWALS I N THE SAID BANK ACCOUNT BEGINNING ON AND FROM 01-01-1990 TO 20-03-2002, LEA VING A CLOSING BALANCE OF 4 RS.8,461/-. THERE IS NO DOUBT THAT THE DEPOSIT IN T HE BANK ACCOUNT IS AN UNEXPLAINED INVESTMENT BY THE ASSESSEE. HOWEVER, IT IS SEEN THAT EVERY DEPOSIT IS FOLLOWED BY A WITHDRAWAL SUBSEQUENTLY. THE AMOUNT I NVESTED AT ONE POINT OF TIME HAS BEEN WITHDRAWN SUBSEQUENTLY AND THERE WAS A FURTHER DEPOSIT IN THE BANK ACCOUNT. THEREFORE, THE PEAK CREDIT OF RS.7,50 ,975/- COVERS THE TOTAL DEPOSIT AND WITHDRAWAL MADE BY THE ASSESSEE IN THE SAID BANK ACCOUNT. MAKING THE ADDITION OF AGGREGATE DEPOSITS IN THE BANK ACCO UNT WITHOUT GIVING THE BENEFIT OF WITHDRAWALS MADE BY THE ASSESSEE FROM TIME TO TI ME IS NOT JUSTIFIED THE LD CLT(A) HAS RIGHTLY TREATED THE PEAK BALANCE OF RS.7 ,50,975/- AS AN UNEXPLAINED INVESTMENT MADE BY THE ASSESSEE IN THE NATURE OF CR EDITS IN THE SAID BANK ACCOUNT AND, THEREFORE, THE ADDITION OF RS 7,50,975/- IS ON LY CALLED FOR. THE ORDER OF THE LD. CIT(A) IS THEREFORE, UPHELD IN THE CASE OF ACIT VS PRAVEEN KUMAR AGARWAL [IT (SS) A NO. 61 & 74/KOL/2003 ], THE HONBLE ITAT, C BENCH, KOLKATA UPHELD THE COMBINED PEAK CREDIT METHOD. IN THIS CASE, THE APPELLANT MAINTAIN ED VARIOUS UNDISCLOSED BANK ACCOUNTS. THE AO ADDED THE ENTIRE DEPOSITS AMOUNTIN G TO RS.23,55,26,844/-. THE LD.CIT(A) CONFIRMED THE ADDITION ONLY TO THE EXTENT OF THE COMBINED PEAK CREDIT OF RS.23,92,582/-. THE HONBLE ITAT UPHELD THE DECISIO N OF THE LD. CIT(A) AND OBSERVED AS UNDER- THE ID. CIT(A) HAS THEREAFTER OBSERVED THAT SINCE THERE ARE DEBITS AND CREDITS IN THE ABOVE SEIZED MATERIAL AND SINCE THESE ARE RE GULAR DEBITS AND CREDITS IN THE ACCOUNTS AND NO MATERIAL HAS BEEN FOUND TO SHOW THA T THE DEBIT/WITHDRAWALS HAVE BEEN USED FOR ANY INVESTMENT OR ANY EXPENDITUR E BY THE ASSESSCE, IT MEANS THAT THE MONEY WITHDRAWN WAS BEING REGULARLY BEING ROUTED BACK INTO ACCOUNTS THROUGH THE MEDIUM OF COMPANIES AND IN THESE CIRCUM STANCES THERE IS WELL ESTABLISHED SYSTEM OF TAXING ONLY THE PEAK CREDIT. HE HAS, THEREFORE, ASKED THE AO TO EXAMINE THE WORKING OF PEAK CREDIT BY THE ASS ESSEE, WHICH HAS BEEN CONFIRMED BY THE A.O. VIDE LETTER DATED 25.02.03 AN D THE LD. CIT(A) HAS THEREAFTER CONFIRMED THE ADDITION TO THE EXTENT OF PEAK CREDIT AMOUNTING TO RS.23,92,582/- AGAINST THE ADDITION OF RS..23,55,26 ,844/-. IN HIS RIVAL SUBMISSION, THE LD. COUNSEL FOR THE AS SESSEE HAS SUBMITTED THAT FROM THE PERUSAL OF SEIZED DOCUMENTS, IT WAS ABSOLUTELY APPARENT THAT THE ASSESSEE WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO DIFFERENT BENEFICIARIES AND NOTINGS CONTAINED IN THE SEIZED REGISTER WERE NOTHI NG BUT THE RECEIPT OF CASH AND DEPOSIT OF CHEQUES AND OTHER RELATED ENTRIES TO ENA BLE HIM TO WORK AS AN ENTRY OPERATOR. THE LD. COUNSEL HAS POINTED OUT THAT THE ID. CIT(A) HAS GIVEN A SPECIFIC OBSERVATION AFTER PERUSING THE RELEVANT SE IZED MATERIAL THAT ENTRIES CONTAINED IN SUCH SEIZED MATERIAL WERE NOTHING BUT ENTRIES MADE BY THE ASSESSEE FOR CARRYING OUT HIS ACTIVITY AS AN ENTRY OPERATOR AND FOR THIS PURPOSE ONLY TAXING OF PEAK CREDIT COULD HAVE BEEN THE BEST OPTI ON WHICH HAS ALSO BEEN DONE BY THE LD. CIT(A). IN SUPPORT OF HIS CONTENTION, HE TANS RELIED ON THE DECISION OF ITAT, KOLKATA IN I.T.(SS.)A. NO 190/KOJ/2003 DATED 11.10.2004 IN CASE OF AC1T VS LPKNATH GUPTA, WHEREIN THIS TRIBUNAL HAS HELD TH AT IN EASE EVERY DEPOSIT IS FOLLOWED BY A WITHDRAWAL THEN THE PEAK CREDIT ONLY COVERS THE TOTAL DEPOSIT AND WITHDRAWAL MADE BY THE ASSESSEE AND THE SAME CAN BE TREATED AS UNEXPLAIND INVESTMENT BY THE ASSESSEE. 4.8 IN VIEW OF THE ABOVE AND THE VARIOUS LEGAL PRO NOUNCEMENTS AND ALSO THE RATIO LAID DOWN BY THE HONBLE ITAT, KOLKATA, THE ADDITION MAD E BY THE AO ON ACCOUNT OF 5 DEPOSITS IN UNDISCLOSED BANK ACCOUNTS IS DIRECTED T O BE RESTRICTED TO THE COMBINED PEAK CREDIT OF RS.22,80,206.63. GROUND NO. 2 IS PARTLY A LLOWED. IN THIS VIEW OF THE MATTER, AND IN THE ABSENCE OF A NY CONTROVERTING MATERIAL BROUGHT ON RECORD BY THE REVENUE AT THE TIME OF HEARING BEFORE US, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. THEREFORE, THE APPEAL OF THE REVENUE IS DISMISED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.7.10 SD/- SD/- . .. . . . . . , , , , ! ! ! ! . . . . % %% % . . . . &' &' &' &', , , , () (G. D. AGRAWAL) (D. K. TYAGI) VICE PRESIDENT JUDICIAL MEMBER ( (( (4 4 4 4) )) ) DATED :16TH JULY, 2010 #56 +7 +8# JD.(SR.P.S.) (%3 9 2++: %:-;- COPY OF THE ORDER FORWARDED TO: 1. 01 /APPELLANT ITO, WARD-36(4), KOLKATA. 2. 2&01 /UDAY SHANKAR MAHAWAR, 28, ARMENIAN STREET, KOLKATA -1. 3. +3 / THE CIT, KOLKATA 4. +3 ()/ THE CIT(A), KOLKATA 5. #=+' 2+ / DR, KOLKATA BENCHES, KOLKATA &: 2+/ TRUE COPY, (%3>/ BY ORDER, $ /DEPUTY REGISTRAR .