Income-tax Officer, V. Shri Sunil Laxman Patil, Kolhapur

ITA 2054/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9219 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 14-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Peak credit
• Section: 143(3); 131; 69; 6

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.2054/PN/2014 / ASSESSMENT YEAR : 2011-12 INCOME TAX OFFICER, WARD-2, ICHALKARANJI. . / APPELLANT V/S SHRI SUNIL LAXMAN PATIL, 11 TH LANE, JAYSINGPUR, TAL: SHIROL, DIST. KOLHAPUR 416 101. PAN :ACGPP2470H. . / RESPONDENT / APPELLANT BY : SHRI ANIL CHAWARE. / RESPONDENT BY : SHRI M.K. KULKARNI. / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A), KOLHAPUR DT.14.08.2014 FOR THE ASSESSMENT YEAR 2011-12. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS AN INDIVIDUAL STATED TO BE IN THE BUSINESS OF LIQUOR RUNNING IN THE NAME AND STYLE OF JOTIRLING LIQUOR SHO P. / DATE OF HEARING : 25.05.2017 / DATE OF PRONOUNCEMENT: 30.06.2017 2 ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2011-12 ON 28.09.2011 DECLARING TOTAL INCOME OF RS.3,31,900/-. THE CAS E WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) VIDE ORDER DT.25.03.2014 AND THE TOTAL INCOME WAS DETERMINED AT RS.57,25,556/-. AGGRIEVED BY THE ORDE R OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO VIDE O RDER DT.14.08.2014 (IN APPEAL NO.KOP/21/14-15) GRANTED PARTIAL R ELIEF TO ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVE NUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW , THE LD . CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE ASSESSIN G OFFICER WITH RESPECT TO UNEXPLAINED DEPOSITS IN CASH IN SAVING ACCOUNTS AMO UNTING TO RS . 50,32,345/ - EVEN WHEN TH E A SSESSEE HIMSELF HAS E X PRESSED HIS INABILIT Y TO PRO V E THE C REDITS AS WE LL A S THE SOURCES THEREOF . 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LA W, TH E LD . CIT(A) HAS ERRED IN HOLDING THAT ONL Y PEAK CREDITS HAVE CONSIDERED FOR ADDITIONS IN RESPE CT OF CASH DEPOSITS MADE IN NANDAN I S A HAKARI BANK LTD. , NANDANI , FOR THE REASON THAT THE ASSESSEE WAS NOT ABL E TO LINK THE DEPOSITS WITH BUSINESS AND THEREFORE TH E WITHDRA W AL S COULD ONL Y REFLECT HIS CONSUMPTION/ PERSONAL EXPENSES WH I CH CAN NOT BE C ONSIDERED WHILE FINDING THE PEAK CREDITS. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , THE LD. CIT(A) ERRED IN DIRECTING THAT ONL Y PEAK CREDITS OUGHT TO BE TREATED AS I NCOME W H I L E IGNORING THE FACT THAT IT IS BEYOND THE REALM OF PROBABILITI ES AND HUMAN NATURE TO DEPOSIT AN AMOUNT IN BANK ( IN SMAL L D E NOMINATION) AND WITHDRAW THE SAME IN CLOSE PROXIMIT Y IN CASH , ESPECIALLY WHEN ITS BUSINESS EXIGENCY WAS NEVER PROVED. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW , TH E LD. CIT(A) ERRED IN HOLDING THAT THE ADDITION MADE ON ACCOUNT OF UNEXPLAINED INV E STMENT IN PIGM Y DEPOSITS AMOUNTING TO RS.3 , 27 , 922/ - IS NOT WARRANTED SINCE PEAK OF THE BALANCE OUT OF SAVING B ANK ACCOUNT TAKEN CARE OF THE SAME DESPITE THE FACT ON RECORD THAT THE ASSESSEE WAS UNABLE TO LINK THE WITHDRAWAL S FROM UNDISCLOSED SAVING BANK ACCOUNTS WITH THE PIGMY DEPOSITS. 3 3. BEFORE US, AT THE OUTSET, LD.D.R. SUBMITTED THAT THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BUT ALL THE GROUNDS ARE INTER- CONNECTED AND CAN BE CONSIDERED TOGETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON THE BASIS OF AIR INFORMATION, AO NOTICED THAT ASSESSEE HAD DEPOSITE D AN AMOUNT OF RS.50,32,345/- IN TWO SAVINGS BANK ACCOUNTS MAINTAINED BY HIM. IN SAVING BANK ACCOUNT NO.996, CASH DE POSIT WAS TO THE EXTENT OF RS.30,92,570/- AND IN SAVING BANK A CCOUNT NO.2024, THE CASH DEPOSIT WAS RS.19,39,775/-. AO NOTED T HAT THESE BANK ACCOUNTS WERE NOT DISCLOSED BY THE ASSESSE E AND THEREFORE THE ASSESSEE WAS ASKED TO EXPLAIN THE TRANSA CTIONS AND THE SOURCE OF DEPOSITS OF CASH. THE ASSESSEE INTER-ALIA SUBMITTED THAT HE HAD RECEIVED ADVANCE FROM 19 PERSONS FOR ALLOTME NT OF PLOTS AND THE CASH RECEIVED FROM THEM WAS DEPOSITED IN T HE BANK ACCOUNT AND WAS WITHDRAWN FOR PAYMENT IN CASH FOR THE RE-GRANT FEE TO GOVERNMENT AND PAYMENT FOR CANCELLATION OF PLOTS TO OLD PLOT HOLDERS. AO NOTED THAT NO AMOUNT WAS WITHDRAWN MA KING PAYMENT TO GOVERNMENT AND TO THE OLD PLOT HOLDERS. ON THE CONTRARY, THE WITHDRAWALS WERE SEEN FOR MAKING FIXED DE POSITS AND REPAYMENT OF THE LOAN OF THE ASSESSEE. THE ASSESSE E WAS THEREAFTER ASKED TO PRODUCE ALL THE 19 PERSONS. SINCE T HE ASSESSEE FAILED TO PRODUCE THE 19 PERSONS, ALL THE 19 PER SONS WERE SUMMONED AND OUT OF THEM, STATEMENTS OF 18 PERSONS WER E RECORDED U/S 131 OF THE ACT WHEREIN THEY HAD DENIED O F MAKING ANY FINANCIAL TRANSACTIONS WITH THE ASSESSEE AND SUBSEQUE NTLY DENIED TO HAVE PAID ANY CASH. AS THE SUBMISSIONS OF THE ASSESSEE FOUND FALSE, HE HELD THE CASH DEPOSITS OF RS.50,32,345/- AS 4 UNEXPLAINED MONEY AND ACCORDINGLY, BROUGHT IT TO TAX U/S 69A OF THE ACT. 5. AO ALSO NOTICED THAT ASSESSEE HAD DEPOSITED CASH IN PIGMY ACCOUNTS AND THE AGGREGATE OF SUCH DEPOSITS WAS TO TH E EXTENT OF RS.3,27,922/-. HE NOTICED THAT THE PIGMY ACCOUNTS (LISTED A T PAGE 10 OF THE ORDER) WERE NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND ASSESSEE HAD NOT EXPLAINED THE SOURCE OF THE DEPOS ITS. HE THEREFORE HELD THAT THE PIGMY DEPOSITS MADE IN CASH ARE UNEXPLAINED AND ACCORDINGLY ADDED THE DEPOSITS OF RS.2,27,9 22/ AS THE INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A), WHO GRANT ED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER : 5. O N CONSIDERIN G TH E A BO VE S UBM I SSION A N D G O I NG THROUGH TH E TW O BANK AC C OUNTS I FIND TH A T THE RE ARE S E VE R A L DEPOS IT S A ND W ITHDRA WA LS FROM THES E A CCO UN T S. A C COUNT NO . 9 96 HA S BEEN O PER A T ED TILL A U G U S T , 2010 A FTER W HICH I T WAS C LO SE D A ND A/C NO . 2 024 WAS O P E NED . THE C REDI TS AND DEBITS IN THESE TWO AC CO UNTS AR E UNDI SC L O SED. THIS FA C T HA S BEEN A C C E PT E D BY THE A SSESS EE . THEREFOR E , TH E AS S E SSIN G O F FI CER WAS JU S TIFIED IN MA KIN G TH E A DD IT ION UND E R SEC TI ON 6 9 A . R EGA RD I N G THE TRAN S ACTI O N I N THE A CCOUNTS IT WA S ST A TED TH AT A S SE SSE E HA D E N TE RED IN T O PURCHA SE A ND S A L E OF PLOTS W ITHOU T A CTU A LL Y TRANSFERRING THE PR O PERT Y B Y REGISTERING IN HIS N A ME . AMOUNTS R ECEIVED FR O M S ALE O F PL O TS H A V E BEE N DEPOS I T E D IN A CCOUNTS AND W IT HDRAWAL M A D E T O P A Y TO P A RT IES AN D A L S O FOR P E R S ON A L IN V ES T MENTS . IT WAS C L AI M ED T H A T T R ANSACTIONS RE L ATED T O PLOTS OF 19 P E RSONS. O N E NQU IRY, T H E AS SESS ING OF F L C . ER F OUND THAT L8 PERSONS HAVE D E NIED A N Y SUCH TR AN S A CTION AND ONE PERSON WAS NOT FOUND. THEREFORE , IT IS UNDOUBTED TH A T TH E TRA NS AC TI O N S ARE UNDISCLOSED. HOWEVER, WHEREVER POSSIBLE, NATURE OF THESE TRANSACTIONS HAS TO BE EXAMINED TO DECIDE ON THE AM OUNT OF UNDISCLOSED INCOME. IF THERE ARE BOTH CREDIT AND D EBIT IN THE BANK ACCOUNTS, CUMULATIVE DEPOSITS CANNOT BE TA KEN AS INCOME, BUT ONLY THE PEAK BALANCE SHOULD BE TAKEN A S UNDISCLOSED INCOME. BECAUSE IN SUCH A CASE, SAME A MOUNT WOULD BE REPEATEDLY DEPOSITED AND WITHDRAWN DUE TO WHICH TAKING THE CUMULATIVE AMOUNT WILL EXAGGERATE THE INCOME. AS OBSERVED BY THE ASSESSING OFFICER, CERT AIN CREDITS ALSO RELATED TO PROCEEDS FROM FIXED DEPOSIT S AND MANY WITHDRAWALS WERE UTILIZED FOR MAKING FIXED DEP OSITS. APPELLANT HAS TAKEN THE PLEA THAT 8 % OF TURNOVE R SHOULD BE TAKEN AS PROFIT UNDER SECTION 44AE . THIS PLEA IS NOT A CCEPTA B LE SINCE HE IS NOT ABLE T O E STABLISH THAT DEB I TS AND CREDITS R E LAT E T O T H E LIQUOR BUSIN E SS . WE HAV E T O SEE THE 5 PEAK AMOUNT CREDIT E D OR DEBITED IN THE ACCOUNTS. AMOUNTS FROM FIXED DEPOSIT ENCASHMENT WILL ALSO GO TO INCRE ASE THE CREDIT AND THE AMOUNTS OF INVESTMENTS MADE OUT OF B ANK ACCOUNTS WILL REDUCE THE PE A K . ON THE WHOLE , PEAK METHOD WILL B E THE MOST LOGIC A L METHOD . AFTER EXCLUDING THE AMOUNTS RELATING TO FIXED DEPOSITS, INTEREST ON FIX ED DEPOSITS, PEAK HAS BEEN WORKED OUT AS RS.7,12,976/- IN RESPECT OF A/C NO.996 AND RS.7,92,910/- IN RESPECT OF A/C NO.2024. PIGMY DEPOSITS HAVE ALREADY BEEN INCLUDED IN BANK ACCOUNTS, THEREFORE, THESE ARE NOT ADDED SEPAR ATELY. THE AMOUNTS EXCLUDED ARE AS UNDER : I) DEPOSIT OUT OF FD RS.12,30,000/- II) FD INTEREST RS.31,005/- III) LIC MATURITY AMOUNT RS.1,04,189/- SINCE FDS AND LIC HAVE BEEN MADE IN EARLIER YEAR, T HE MATURITY AMOUNTS CANNOT BE TAXED IN CURRENT YEAR. ONLY THE INCOME FROM INTEREST CAN BE TAXED. 6. SINCE A/C NO.2024 WAS OPENED AFTER CLOSING A/C NO.996, THEREFORE, PEAK IN RESPECT OF ONLY ONE ACCO UNT, WHICHEVER IS HIGHER, WILL BE TAKEN. THEREFORE, THE UNDISCLOSED INCOME WOULD BE AS UNDER : I) PEAK BALANCE RS.7,92,910/- II) FD INTEREST IN A/C NO.996 RS.3,889/- III) FD INTEREST IN A/C NO.9024 RS.31,005/- TOTAL : RS.8,27,804/- IN VIEW OF THE ABOVE, THE DISALLOWANCE IS RESTRICTE D TO RS.8,27,804/- AND THE BALANCE IS DELETED. 7. NEXT GROUND RELATES TO ADDITION OF RS.3,27 , 922 /- ON ACCOUNT OF PIGMY DEPOSITS . PROCEEDS OF PIGMY DEPOSITS OF RS.2 , 96 , 224/ - HAS ALREADY BEEN INCLUDED ABOVE. THEREFORE , ONLY THE BALANCE DIFFERENCE OF RS.31,728/- NEEDS TO BE ADDED. THEREFORE, OUT OF THIS ADDITION RS.31,728/- IS SUSTAINED AND THE BALANCE IS DELETED. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN AP PEAL BEFORE US. 6. BEFORE US, LD.D.R. TOOK US THROUGH THE FINDINGS OF LD. CIT(A) AND STRONGLY, SUPPORTED THE ORDER OF AO. LD.A.R. O N THE OTHER HAND REITERATED THE SUBMISSIONS MADE BEFORE AO AN D LD. CIT(A) AND SUPPORTED THE ORDER OF LD. CIT(A). 6 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH REGARD TO UNEXPLAINED CASH DEPOSITS IN BANK ACCOUNT AND PIGMY DEPO SITS. WE FIND THAT LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS UPHELD THE ADDITION MADE U/S 69A OF THE AC T AND DIRECTED THE ADDITION TO BE MADE ON THE BASIS OF PEAK C REDIT BY NOTING THAT WHEN THERE ARE BOTH CREDITS AND DEBITS IN T HE BANK ACCOUNT, CUMULATIVE AMOUNT WAS NOT THE INCOME AND ONLY THE PEAK BALANCE CAN BE CONSIDERED AS UNDISCLOSED INCOME. LD . CIT(A) AFTER NOTING THAT CERTAIN CREDITS RELATING TO PROC EEDS FROM FIXED DEPOSITS AND MANY WITHDRAWALS WERE UTILIZED FOR MAKING FIXED DEPOSITS, DIRECTED THE EXCLUSION OF THE AMOUNTS RELAT ING TO FIXED DEPOSITS AND INTEREST ON FIXED DEPOSITS AND THEREA FTER WORKED OUT PEAK AMOUNT WITH RESPECT TO CASH DEPOSITS AND PIGM Y DEPOSITS AND HAND GIVEN PARTIAL RELIEF TO ASSESSEE. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONT ROVERT THE FINDINGS OF LD. CIT(A) NOR HAS POINTED OUT ANY FALLACY WITH TH E CONCLUSION ARRIVED BY LD. CIT(A). IN VIEW OF THESE FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND THU S, THE GROUNDS OF REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 30 TH DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER PUNE; ! DATED : 30 TH JUNE, 2017. YAMINI 7 '#$%&'&$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. 6. COMMISSIONER OF INCOME TAX-(A), KOLHAPUR. CIT-II, PUNE / CIT (CENTRAL), PUNE. #$% &&'(,* '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // TRUE COPY // //TRUE COPY// . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.