The ITO, Ward-15(2), Mehsana V. Shri Akshay Thakorebhai Panchal, Ahmedabad

ITA 2782/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1795 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 09-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHELEY JINDAL
• Keywords: Unexplained cash credit; Salary income; Opportunity of being heard; Peak credit; Set aside
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM ) ITA NOS.2782 AND 2790/AHD/2009 A. Y.: 2005-06 THE INCOME TAX OFFICER, WARD- 15(2), 7 TH FLOOR, NATURE VIEW BUILDING, ASHRAM ROAD, AHMEDABAD VS SHRI AKSHAY THAKORBHAI PANCHAL, 11, NANDGOPI SOCIETY, B/H TELEPHONE EXCHANGE, VASNA, AHMEDABAD PA NO. ABDPP 1850 H (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SHELEY JINDAL, DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE CIT(A) , GANDHINAGAR DATED 31-07-2009 FOR THE ASSESSMENT YEAR 2005-06 CHALLENG ING THE RESTRICTION OF THE ADDITION TO RS.1,76,532/-OUT OF TOTAL ADDITI ON OF RS.13,38,318/- MADE BY THE AO U/S 68 OF THE INCOME TAX ACT AS WELL AS CANCELING THE PART OF THE PENALTY U/S 271(1) (1) ( C ) OF THE INC OME TAX ACT ON THE SAME AMOUNT. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. THE ASSESSEE IS SERVED OF THE NO TICE OF HEARING THROUGH REGISTERED POST. A/D CARD DULY SERVED UPON THE ASSE SSEE IS AVAILABLE ON RECORD. NONE APPEARED ON BEHALF OF THE ASSESSEE DES PITE SERVICE OF NOTICE. THE ASSESSEE IS, THEREFORE, PROCEEDED EX-PARTE. ITA NO. 2782 AND 2790/AHD/2009 SHRI AKSHAY THAKORBHAI PANCHAL 2 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE IS AN INDIVIDUAL AND WAS HAVING SALARY INCOME FROM M/S. ORIENTAL INS URANCE COMPANY LTD. THE AO RECEIVED INFORMATION FROM AIR THAT THE ASSESSEE HAD TRANSACTIONS WITH UTI BANK LTD. IN THE FINANCIAL YE AR OF RS.13,24,125/-. RE-ASSESSMENT PROCEEDINGS WERE INITIATED AND THE AS SESSEE WAS DIRECTED TO FILE COPY OF THE BANK ACCOUNT, DETAILS OF INVEST MENT MADE AND ITS SOURCES AND DETAILS OF TRANSACTIONS WITH UTI BANK L TD. FOR RS.13,24,125/-. THE AO ON THE BASIS OF BANK STATEME NT FURNISHED BY THE ASSESSEE NOTED THAT THE ASSESSEE HAD DEPOSITED CASH AMOUNTING TO RS.13,38,318/- ON VARIOUS DATES STARTING FROM 17-6- 2004 TO 31-03-2005. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF THE CASH DEPOSITED WITH THE UTI BANK AND IN THE ABSENCE OF ANY EVIDENCE OF SOURCE OF DEPOSIT IN THE BANK, THE AO TREATED THE SAID AMOUNT OF RS.13,3 8,318/- AS UNEXPLAINED CASH CREDITS U/S 68 OF THE INCOME TAX A CT AND MADE THE ADDITION ACCORDINGLY. PENALTY PROCEEDINGS U/S 271 ( 1) ( C ) OF THE INCOME TAX ACT WERE ALSO INITIATED. 4. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE WANTED TO HAVE PERSONAL LOAN FROM PRIVATE BANK FOR PERSONAL USE IN THE FAMILY. HE WAS ADVISED TO HAVE FREQUENT TRANSACTION S IN HIS BANK ACCOUNT AND, THEREFORE, HE DEPOSITED AND WITHDREW FUNDS VER Y FREQUENTLY. THE ASSESSEE CLAIMED THAT PEAK ADDITION MAY BE MADE ACC ORDINGLY. THE LEARNED CIT(A) IN PRINCIPLE ACCEPTED THE FINDINGS O F THE AO WITH REGARD TO UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT BECAUSE TH E ASSESSEE FAILED TO FURNISH ANY EVIDENCE TO EXPLAIN THE SOURCE OF THE D EPOSITS. THE LEARNED CIT(A) ALSO HELD THE CASH DEPOSITED IN THE BANK ACC OUNT ON VARIOUS DATES REMAINED UNEXPLAINED. THE LEARNED CIT(A) HOWEVER, A CCEPTED THE THEORY OF PEAK DEPOSIT BECAUSE THE ASSESSEE MADE DEPOSITS AS WELL AS MADE WITHDRAWALS ON DIFFERENT DATES. THE LEARNED CIT(A), THEREFORE, NOTED THAT IT WOULD BE FAIR TO ASSUME THAT THE ASSESSEE WAS RO TATING THE SAME FUNDS. THE LEARNED CIT(A), THEREFORE, RESTRICTED THE PEAK CREDIT ADDITION OF RS.1,76,532/- AND ALLOWED THE APPEAL OF THE ASSESSE E PARTLY. PENALTY U/S ITA NO. 2782 AND 2790/AHD/2009 SHRI AKSHAY THAKORBHAI PANCHAL 3 271 (1) ( C ) OF THE INCOME TAX ACT WAS ALSO RESTRI CTED TO THE SAME AMOUNT VIDE SEPARATE ORDER. 5. THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS F AILED TO EXPLAIN THE DEPOSITS IN THE BANK ACCOUNT THROUGH ANY EVIDEN CE AND EVEN NO EVIDENCE WAS FILED BEFORE THE LEARNED CIT(A). THERE FORE, THEORY OF PEAK SHOULD NOT HAVE BEEN ACCEPTED BY THE LEARNED CIT(A) . THE LEARNED DR SUBMITTED THAT THE ASSESSEE HAS NOT OWNED ANY CREDI T ENTRY BEFORE THE AO. THEREFORE, THEORY OF PEAK SHOULD NOT HAVE BEEN ADJUDICATED IN HIS FAVOUR BY THE LEARNED CIT(A). THE LEARNED DR ALSO S UBMITTED THAT EVEN THE LEARNED CIT(A) HAS NOT GIVEN ANY SPECIFIC FINDI NG ON THIS ISSUE BECAUSE THE APPEAL OF THE ASSESSEE WAS PARTLY ALLOW ED SUBJECT TO VERIFICATION. THE LEARNED DR, THEREFORE, SUBMITTED THAT ORDER OF THE LEARNED CIT(A) MAY BE REVERSED. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS AN INDIVIDUAL AND HAS EARNED SALARY INCOME FROM M/S. ORIENTAL INSURANCE COMPANY LTD. IT IS ALSO NOT IN D ISPUTE THAT THE ASSESSEE HAS DEPOSITED THE CASH AMOUNTING TO RS.13, 38,318/- IN UTI BANK LTD. ON VARIOUS DATES STARTING FROM 17-6-2004 TO 31-03-2005 I.E. WITHIN THE FINANCIAL YEAR RELEVANT TO THE ASSESSMEN T YEAR IN QUESTION. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS FAILED TO FURNISH ITS SOURCE/EVIDENCE TO EXPLAIN THE SEVERAL DEPOSITS IN THE BANK ACCOUNT. EVEN, BEFORE THE LEARNED CIT(A), NO EVIDENCE OR MAT ERIAL WAS FILED TO EXPLAIN THE SOURCE OF THE CASH DEPOSITED IN THE BAN K ACCOUNT. THEREFORE, THE AUTHORITIES BELOW WAS JUSTIFIED IN HOLDING THE SAME CASH DEPOSITED ON VARIOUS DATES IN THE BANK ACCOUNT OF THE ASSESSEE T O BE UNEXPLAINED DEPOSITS/CASH CREDIT. IT WOULD, THEREFORE, PROVE TH AT THE ASSESSEE NEVER OWNED UP THE CREDIT ENTRIES AS UNEXPLAINED BEFORE T HE AO BECAUSE INITIALLY THE ASSESSEE STATED THESE TO BE DEPOSITS MADE FOR THE PURPOSE OF ITA NO. 2782 AND 2790/AHD/2009 SHRI AKSHAY THAKORBHAI PANCHAL 4 TAKING PERSONAL LOAN. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF BHAIYALAL SHYAM BEHARI VS CIT 276 ITR 38 (ALL) HELD AS UNDER: IN ORDER TO ADJUDICATE UPON THE PLEA OF PEAK CREDI T THE FACTUAL FOUNDATION HAS TO BE LAID BY THE ASSESSEE. HE HAS T O OWN ALL CASH CREDIT ENTRIES IN THE BOOKS OF ACCOUNT AND ONL Y THEREAFTER CAN THE QUESTION OF PEAK CREDIT BE RAISED. HELD, THAT AS THE AMOUNT OF CASH CREDITS STOOD IN T HE NAMES OF DIFFERENT PERSONS WHICH ALL ALONG THE ASSESSEE HAD BEEN CLAIMING TO BE GENUINE DEPOSITS, WITHDRAWALS/PAYMEN TS TO DIFFERENT PERSONS DURING THE PREVIOUS YEARS, THE AS SESSEE WAS NOT ENTITLED TO CLAIM THE BENEFIT OF PEAK CREDIT. THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS VIJAY AGRICULTURAL INDUSTRIES 294 ITR 610 (ALL) FOLLOWING ITS EARLIER DECISION IN THE CASE OF BHAIYALAL SHYAM BEHARI (SUPRA) HELD AS UNDER: THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1979 -80 NOTICED CERTAIN CASH CREDITS IN THE SQUARED UP ACCO UNTS OF THE ASSESSEE-FIRM AND TREATED THEM AS UNEXPLAINED DEPOS ITS LIABLE TO BE TREATED AS INCOME FROM UNEXPLAINED SOU RCES UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961. THIS WAS UP HELD BY THE APPELLATE ASSISTANT COMMISSIONER. ON FURTHER AP PEAL CONTENDING THAT THE PEAK CREDITS SHOULD ALONE BE CO NSIDERED FOR ADDITION UNDER SECTION 68 OF THE ACT AND NOT AS ADDED BY THE ASSESSING OFFICER AND CONFIRMED BY THE APPELLAT E COMMISSIONER, THE TRIBUNAL HELD THAT ONLY THEM AMOU NT OF PEAK CREDIT SHOULD BE DETERMINED BY THE ASSESSING O FFICER AND ADDED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. ON A REFERENCE: HELD, THAT IN RESPECT OF THE SQUARED UP ACCOUNTS OF THE TWO DEPOSITORS, THE ASSESSING OFFICER HIMSELF HAD TAKEN THE PEAK CREDIT AS UNEXPLAINED DEPOSIT AND ADDED IT UNDER SE CTION 68 OF THE ACT. SO FAR AS REMAINING DEPOSITS WERE CONCE RNED THERE WAS NO TRANSACTION BETWEEN THE DEPOSITORS AND THE A SSESSEE. THE PRINCIPLE OF PEAK CREDIT COULD NOT APPLY IN CAS E OF DIFFERENT DEPOSITORS WHERE THERE HAD BEEN NO TRANSACTION OF D EPOSITS AND REPAYMENT BETWEEN A PARTICULAR DEPOSITOR AND TH E ASSESSEE. THE TRIBUNAL WAS NOT JUSTIFIED IN DIRECTI NG THE ITA NO. 2782 AND 2790/AHD/2009 SHRI AKSHAY THAKORBHAI PANCHAL 5 ASSESSING OFFICER TO TAKE THE PEAK CREDIT FOR THE P URPOSES OF SECTION 68 OF THE ACT. 7. CONSIDERING THE FACTS IN THE LIGHT OF THE ABOVE DECISIONS, IT IS CLEAR THAT THE ASSESSEE MADE VARIOUS CASH DEPOSITS IN HIS BANK ACCOUNT FOR WHICH THE ASSESSEE NEVER GAVE ANY EXPLANATION TO EX PLAIN THE SOURCE OF THE DEPOSITS. THE LEARNED CIT(A) WITHOUT CONSIDERIN G THE ISSUE IN THE LIGHT OF THE ABOVE FACTS AND WITHOUT BRINGING ANY F ACTUAL EVIDENCE ON RECORD MERELY PRESUMED ON THE BASIS OF THE SUBMISSI ONS OF THE ASSESSEE THAT THE ASSESSEE WAS ROTATING THE SAME FUNDS. SINC E THE ASSESSEE DID NOT EXPLAIN THIS ISSUE BEFORE THE AO, THEREFORE, TH E LEARNED CIT(A) BEFORE ASSUMING CERTAIN FACTS, SHOULD HAVE GIVEN OPPORTUN ITY OF BEING HEARD TO THE AO TO EXAMINE THE THEORY OF PEAK CREDITS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE LEARNED CIT(A) WITHO UT CONSIDERING THE ISSUE IN PROPER PERSPECTIVE AND WITHOUT GIVING OPPO RTUNITY OF BEING HEARD TO THE AO ACCEPTED THE THEORY OF PEAK CREDIT ON MER E SUBMISSIONS OF THE ASSESSEE. EVEN IN THE FINDING IN PARA 3.3 OF THE IM PUGNED ORDER THE LEARNED CIT(A) DELETED SUBSTANTIAL ADDITION SUBJECT TO VERIFICATION. SUCH A FINDING OF THE LEARNED CIT(A) WOULD SHOW THAT THE L EARNED CIT(A) WITHOUT MAKING ANY FACTUAL FOUNDATION OF PEAK THEORY OR WIT HOUT EXAMINING THE FACTUAL MATERIAL ON RECORD DELETED SUBSTANTIAL ADDI TION WITHOUT ANY BASIS. THE FINDING OF THE LEARNED CIT(A), THEREFORE, CANNO T BE SUSTAINED IN LAW. THE MATTER REQUIRES RE-CONSIDERATION AT THE LEVEL O F THE LEARNED CIT(A) TO DECIDE THE ISSUE ON THE BASIS OF FACTS BY BRINGING THE SAME IN THE IMPUGNED ORDER BY GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE AO. 8. WE, ACCORDINGLY SET ASIDE THE ORDER OF THE LEARN ED CIT(A) ON QUANTUM AND WE RESTORE THE APPEAL OF THE ASSESSEE T O HIS FILE WITH DIRECTION TO RE-DECIDE THIS ISSUE BY GIVING REASONA BLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS WELL AS TO THE AO IN THE ITA NO. 2782 AND 2790/AHD/2009 SHRI AKSHAY THAKORBHAI PANCHAL 6 LIGHT OF THE DECISIONS OF THE HONBLE ALLAHABAD HIG H COURT REFERRED TO IN THIS ORDER. 9. AS A RESULT, DEPARTMENTAL APPEAL IN ITA NO.2782/ AHD/2009 IS ALLOWED FOR STATISTICAL PURPOSES. 10. THE PENALTY ORDER OF THE LEARNED CIT(A) IS BASE D UPON THE FINDING GIVEN IN T4HE QUANTUM APPEAL FOR WHICH WE HAVE ALLO WED THE APPEAL FOR STATISTICAL PURPOSES. THE PENALTY ORDER, THEREFORE, WOULD DEPEND UPON THE QUANTUM APPEAL DECIDED BY THE LEARNED CIT(A). IN VI EW OF THE FINDINGS GIVEN IN ITA NO.2782/AHD/2009, WE SET ASIDE THE ORD ER OF THE LEARNED CIT(A) IN PENALTY MATTER ALSO AND RESTORE THE PENAL TY APPEAL TO HIS FILE ALSO WITH DIRECTION TO RE-DECIDE THE PENALTY APPEAL U/S 271 (1) ( C ) OF THE INCOME TAX ACT BY GIVING REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS WELL AS TO THE AO. 11. AS A RESULT, DEPARTMENTAL APPEAL IN ITA NO.2790 /AHD/2009 IS ALLOWED FOR STATISTICAL PURPOSES. 12. AS A RESULT, BOTH THE APPEALS OF THE REVENUE AR E ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18-12-2009 SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 18-12-2009 LAKSHMIKANT/- ITA NO. 2782 AND 2790/AHD/2009 SHRI AKSHAY THAKORBHAI PANCHAL 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD