VIREN DIAMOND EXPORTS LTD, MUMBAI V. ITO 5(3)(3), MUMBAI

ITA 2667/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75326 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM IZRFKHZ DH LS
• Keywords: Peak credit

Judgement Text

- 1 - VK;DJ VIHYH; VF/KDJ.K ,Q U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI JH VKJ JH VKJ JH VKJ JH VKJ- -- - LH LHLH LH- -- - 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA 'KEKZ] YS[KK LNL; ,OA JH VFER 'KQDYK JH VFER 'KQDYK JH VFER 'KQDYK JH VFER 'KQDYK] U;KF;D LNL; DS ] U;KF;D LNL; DS ] U;KF;D LNL; DS ] U;KF;D LNL; DS LE{K LE{K LE{K LE{K BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 2666 /MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR 2005-06 VK;DJ VIHY LA[;K /ITA NO. 2667/MUM/2012 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR 2006-07 VIREN DIAMOND EXPORTS LTD. OFFICE NO. 1A, 3 RD FLOOR, 19, DR. D.D. SATHE MARG, OPERA HOUSE, M UMBAI 400 004. CUKE@ VS. ITO 5(3)-3 AAYAKAR BHAVAN MUMABAI 400 020. PAN:- AAACV3408Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VIHYKFKHZ DH VKSJ LS @ ASSESSEE BY SHRI K. SHIVARAM IZR;FKHZ DH VKSJ LS @ REVENUE BY SHRI RAVI PRAKASH VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER R.C. SHARMA, AM. THESE ARE APPEALS, FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A) DATED 30.01.2012 FOR ASSESSMENT YEAR 2005-0 6 AND 2006-07, IN THE MATTER OF PENALTY IMPOSED U/S 271(1)(C) OF THE IT ACT. COMMON GROUNDS HAVE BEEN TAKEN IN BOTH THE APPEALS WHICH P ERTAINS TO PENALTY IMPOSED U/S 271(1)(C) BY TREATING ACCOMODATION ENTR IES OF BANK DEPOSIT/BANK RECIEPT TRANSACTION AS UNDISCLOSED INC OME FROM BUSINESS. LQUOKBZ DH RKJH[K@ DATE OF HEARING 22 - 01 - 2014 ?KKS'K.KK DH RKJH[K@ DATE OF PRONOUNCEMENT 22 - 01 - 2014 - 2 - 2. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECOR D PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN DIAMONDS. AFTER COMPLETION O F ASSESSMENT U/S 143(3), THE AO RECEIVED INFORMATION FOR ADDITIONAL CIT, BHILWARA, WITH REGARD TO AMOUNT INVESTED BY ASSESSEE. CONSEQUENTLY THE AO RE-OPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148. THE ASSES SING OFFICER CALLED FOR REQUISITE DOCUMENTS FROM ADDL. CIT, BHILWARA, AND O N SCRUTINY OF THESE DOCUMENTS, THE AO FOUND THAT INVESTMENT OF RS. 23 L AKHS WAS MADE IN SHARES OF SHARDA SPUNTEX PVT. LTD. AND THE PAYMENT WAS MADE FROM BANK ACCOUNT NUMBER 2356 WITH THE CANARA BANK AT KH ETWADI BRANCH, MUMBAI. WITH RESPECT TO THE AMOUNT FOUND DEPOSITED IN THE BANK ACCOUNT, VIDE LETTER DATED 23-12-2008 THE ASSESSEE SUBMITTED THAT THE CANARA BANK ACCOUNT WAS OPENED AND OPERATED BY ONE OF HIS BUSINESS ACQUAINTANCE. HE FURTHER STATED THAT TRANSACTIONS WERE NOTHING BUT ACCOMODATION ENTRIES AT COMMISSION @ 1% WHICH MAY B E TREATED AS THE INCOME OF THE ASSESSEE. THE NAMES OF THE PARTIES WI TH WHOM TRANSACTIONS WERE ENTERED WERE ALSO MENTIONED. THE ASSESSING OFFICER ADDED THE ENTIRE DEPOSITS OF RS. 6,19,95,743/- AS I NCOME OF THE ASSESSEE FOR A.Y. 2005-06 AND RS. 2,73,36,016/- FOR A.Y. 20 06-07. 3. CIT(A) CONFIRMED THE ASSESSMENT ORDER FOR ASSESS MENT YEAR 2006- 07 ON THE BASIS OF CIT(A) ORDER U/S 271(1)(C) WAS P ASSED LEVYING PENALTY OF RS. 2,26,85,792/- FOR A.Y. 2005-06 AND RS. 2,26, 85,792/- FOR A.Y. 2006- 07. HOWEVER THE ASSESEE AGAINST THE QUANTUM OF AD DITION APPROACHED THE ITAT AND ITAT VIDE ORDER DATED 27/02/2013 IN QU ANTUM PROCEEDINGS RESTORED THE ISSUE TO THE FILE OF AO TO WORKOUT THE PEAK CREDIT FOR BOTH - 3 - ASSESSMENT YEARS I.E. 2005-06 AND 2006-07. PRECISE OBSERVATION OF TRIBUNAL FOR A.Y.2005-06 MENTIONED AT PARA 8 WHICH READS AS UNDER:- AS REGARDS THE ALTERNATIVE CONTENTION RAISED BY T HE LEARNED COUNSEL FOR THE ASSESSEE BASED ON PEAK CREDIT THEORY, WE ARE OF THE VIEW THAT THERE IS SOME MERIT IN THIS CONTENTION RAISED BY HIM. IN MY OPINION, IF TH RE ARE ENTRIES SHOWING DEPOSITS MADE IN THE BANK ACCOUNT AND ALSO WITHDRAWALS MADE FROM THE SAID ACCOUNT, THE ADDITION THAT IS REQUIRED TO BE MADE ON SUCH TRANSA CTIONS HAS TO BE WOKRED OUT BY APPLYING A PEAK CREDIT THEORY. HOWEVER, WE FIND MER IT IN THE SUBMISSION MADE BY THE LEARNED DR THAT IN ORDER TO AVAIL THE BENEFIT OF PE AK CREDIT THEORY, THE ONUS IS ON THE ASSESSEE TO ESTABLISH THAT THE WITHDRAWALS MADE FRO M THE BANK ACCOUNT WERE AVAILABLE FOR MAKING THE FURTHER DEPOSITS. FOR EXAM PLE, IF THE AMOUNT OF RS. 23 LAKHS WITHDRAWN FROM THE BANK ACCOUNT WAS ADMITTEDLY UTIL IZED FOR MAKING INVESTMENT IN THE SHARES OF SHARDA SPUNTEX P. LTD, THE SAME CANNO T BE TAKEN INTO CONSIDERATION FOR WORKING OUT THE PEAK CREDIT. IN THE DECISION OF THE TRIBUNAL IN THE CASE OF SURENDRA M. KHANDHAR (SUPRA) CITED BY THE LEARNED COUNSEL FOR T HE ASSESSEE, IT WAS HELD THAT FOR WORKING OF THE PEAK CREDIT, IT WAS FOR THE ASSESSEE TO PROVE THAT THE WITHDRAWALS WREE NOT UTILIZED FOR OTHER EXPENSES OR INVESTMENTS AND WERE AVAILABLE FOR SUBSEQUENT DEPOSITS IN THE SAID BANK ACCOUNT AND BE NEFIT OF PEAK COULD BE GIVEN ONLY WHEN THE RECYCLING OF FUNDS WAS PROVED. KEEPING IN VIEW THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SU RENDRA M. KHANDHAR (SUPRA) AND HAVING REGARD TO ALL THE FACT OF THE CASE, WE RESTO RE THIS ISSUE TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF WORKING OUT THE PEAK CREDIT OF THE TRANSACTIONS OF DEPOSITS AND WITHDRAWALS REFLECTED IN THE BANK ACCOUNT OF TH E ASSESSEE WITH CANARA BANK AND RESTRICT THE ADDITION TO THE EXTENT OF PEAK CREDIT SO WORKED OUT. THE AO SHALL AFFORD SUFFICIENT OPPORTUNITY TO THE ASSESSEE OF BEING HEA RD ON THIS ISSUE. OBSERVATIONS OF TRIBUNAL IN A.Y. 2006-07 ARE CONTAI NED IN PARA 10 OF PAGE 8 WHICH READS AS UNDER:- NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE F OR ASSESSMENT YEAR 2006-07, WHICH INVOLVES A SOLITARY ISSUE RELATING TO ADDITIO N OF RS. 2,73,36,016/- MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) ON ACC OUNT OF DEPOSITS FOUND TO BE MADE IN THE BANK ACCOUNT OF THE ASSESSEE TREATING T HE SAME AS ITS UNDISCLOSED INCOME. AS THIS ISSUE INVOLVED IN ASSESSMENT YEAR 2 006-07 AS WELL AS ALL THE FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF ASSESSMENT YEAR 2005-06 WHICH HAS ALREADY BEEN DECIDED BY US, WE FOLLOW OUR DECISION RENDERED IN ASSESSMENT YEAR 2005-06. THE AO IS ALSO DIRECTED TO REDUCE THE PEAK CREDIT OF TH E EARLIER YEARS FROM THE PEAK CREDIT OF THE YEAR UNDER CONSIDERATION SO AS TO AVOID DOUB LE ADDITION O FHTE SAME AMOUNT AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SURENDRA M. KHANDHAR (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESS EE. 4. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF INCO ME-TAX APPELLATE TRIBUNAL DATED 27 TH FEBRUARY 2013 AND FOUND THAT ISSUE HAS - 4 - BEEN RESTORED TO THE FILE OF AO TO WORK OUT PEAK CR EDIT . IN VIEW OF THE ORDER OF THE TRIBUNAL WHERE QUANTUM APPEAL HAS BEEN RESTORED TO THE FILE OF AO TO WORK OUT PEAK CREDIT, WE RESTORE BOTH THE PENALTY APPEALS TO THE FILE OF AO FOR PASSING OUT A FRESH PENALTY O RDER AFTER PASSING THE QUANTUM ORDER. WE DIRECT ACCORDINLGY. 7. IN THE RESULT BOTH THE APPEALS FILED BY ASSESSEE AR E ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22/01/2014 SD/- SD/- (AMIT SHUKLA) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 2 2 /01/2014 SKS SR. P.S COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI