A.Kannan, Pondicherry V. ITO, Pondicherry

ITA 31/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4454 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M M BHUSARI
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Unexplained investment; Peak credit
• Section: 263; 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NO.31/MDS/2017 / ASSESSMENT YEAR : 2009-10 SHRI A. KANNAN, VADAMALAYAN FINANCE, NO.C-4, THYAGARA APARTMENTS, 1 ST MAIN ROAD, THANTHAI PERIYAR NAGAR, PUDUCHERRY 605 005. PAN : AAKPK1389E V. THE INCOME TAX OFFICER WARD 4, PONDICHERRY. ( ! /APPELLANT) ( '# ! /RESPONDENT) ! $ /APPELLANT BY : SHRI N. QUADIR HOSEYN, ADVOCATE '# ! $ /RESPONDENT BY : SHRI M.M. BHUSARI, CIT $ /DATE OF HEARING : 26.04.2017 $ /DATE OF PRONOUNCEMENT : 31.05.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : [ THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (APPEALS), PUDUCHERRY DATED 15.11.2016 AND PERTAINS TO THE ASSESSMENT YEA R 2009-10. 2 I.T.A. NO.31/MDS/2017 2. SHRI N. QUADIR HOSEYN, THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS.56,76,005/- U/S. 69 OF THE INCOME TAX ACT (IN SH ORT THE ACT) TOWARDS CASH DEPOSIT IN LAKSHMI VILAS BANK, PUDUCHE RRY. THE LD.AO IN THE ORIGINAL ASSESSMENT VERIFIED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, THE CASH DEPOSITS AND W ITHDRAWALS AND CATEGORICALLY FOUND THAT ONLY PEAK CREDIT HAS TO BE TAKEN AS UNEXPLAINED INVESTMENT IN THE BANK ACCOUNT. THE PR INCIPAL COMMISSIONER OF INCOME TAX BY AN ORDER DATED 26.03. 2014 FOUND THAT THE AO COMPLETED THE ASSESSMENT WITHOUT ANY PR OPER ENQUIRY AND INVESTIGATION WITH REGARD TO DEPOSIT AND WITHDR AWAL OF CASH IN THE ACCOUNT. ACCORDINGLY THE PRINCIPAL COMMISSIONE R SET ASIDE THE ORDER OF ASSESSMENT AND DIRECTED THE AO TO REDO THE ASSESSMENT DE-NOVA AFTER EXAMINING ALL THE ISSUES. 3. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT AS PER THE DIRECTION OF THE COMMISSIONER THE LD. AO EX AMINED ALL THE ISSUES AND FOUND THAT THERE WAS A RECYCLING OF FUND S. THE AO ALSO FOUND THAT CONSIDERING THE CASH BALANCE AVAILABLE W ITH THE ASSESSEE, DEPOSIT IN THE BANK ACCOUNT AND THE NATUR E OF BUSINESS, PEAK CREDIT CAN BE TAKEN AS INCOME OF THE ASSESSEE. THE PRINCIPAL 3 I.T.A. NO.31/MDS/2017 COMMISSIONER AGAIN TAKEN UP THE MATTER FOR THE SECO ND TIME FOR REVISION U/S. 263 OF THE ACT. IN THE SECOND ROUND OF LITIGATION, THE PRINCIPAL COMMISSIONER DIRECTED THE AO TO PASS ORDE R AFRESH ONCE AGAIN. THIS BEING THE SECOND ROUND OF LITIGATION, THE COMMISSIONER OUGHT TO HAVE EXAMINED THE ISSUES HIMSELF. ACCORDI NG TO THE LD. COUNSEL, THE AO EXAMINED THE MATTER THOROUGHLY AND FOUND THAT ONLY THE PEAK CREDIT HAS TO BE TAKEN AS INCOME OF T HE ASSESSEE. THEREFORE EXERCISING THE REVISIONARY POWER FOR THE SECOND TIME, THE PRINCIPAL COMMISSIONER CANNOT DIRECT THE AO ONCE AG AIN TO PASS A FRESH ASSESSMENT. REFERRING TO THE ASSESSMENT ORDE R, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E ENGAGED IN THE BUSINESS OF MONEY LENDING FOR THE LAST THREE DE CADES. AN AMOUNT OF RS.32,50,000/- WAS DEPOSITED ON 09.07.200 8 IN THE BANK ACCOUNT AND ANOTHER SUM OF RS.12,50,000/- WAS DEPOS ITED ON 16.03.2009. THE ASSESSEE HAS WITHDRAWN A SUM OF RS .26,25,000/- THE CASH BALANCE WAS AVAILABLE WITH THE ASSESSEE FO R MAKING THIS DEPOSITS. 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED THAT THE ASSESSEE IS IN THE HABIT OF WITHDRAWING CASH FROM T HE BANK ACCOUNT FOR EMERGENCY REQUIREMENTS AND REDEPOSIT THE SAME W HENEVER 4 I.T.A. NO.31/MDS/2017 NECESSARY. THE ASSESSEE IS ADAPTING THIS TECHNIQUE TO MAINTAIN HIS REPUTATION IN MONEY LENDING AND BUSINESS. THE WITH DRAWAL OF RS.7 LAKHS MADE ON 06.08.2008 AND IT WAS NOT USED FOR AN Y OTHER PURPOSES. THEREFORE IT IS AVAILABLE FOR REDEPOSIT IN THE BANK ACCOUNT. THE AO AFTER EXAMINING THE ENTIRE MATTER AFRESH BASED ON THE MATERIAL AVAILABLE ON RECORD, AS PER THE DIRECT ION OF THE PRINCIPAL COMMISSIONER OF INCOME TAX AND FOUND THAT THE CLAIM OF THE ASSESSEE TO ARRIVE AT THE PEAK CREDIT CAN BE ACCEPT ED. THEREFORE, THE SECOND REVISION BY THE PRINCIPAL COMMISSIONER I S NOT CALLED FOR. 4. ON THE CONTRARY SHRI M.M. BHUSARI, THE LD. DEPAR TMENTAL REPRESENTATIVE SUBMITTED THAT IN THE FIRST ROUND OF REVISION PROCEEDING, THE PRINCIPAL COMMISSIONER DIRECTED THE LD.AO TO REDO THE ASSESSMENT DE-NOVA, SINCE THE AO HAS NOT PROPER LY INVESTIGATED THE MATTER. THE AO ONCE AGAIN BROUGHT PEAK CREDIT FOR TAXATION. THEREFORE THE PRINCIPAL COMMISSIONER INI TIATED REVISION PROCEEDINGS FOR THE SECOND TIME. REFERRING TO THE IMPUGNED ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, THE LD . DR SUBMITTED THAT THE AO HAS NOT EXAMINED THE ISSUE PROPERLY AS DIRECTED BY THE PRINCIPAL COMMISSIONER. THE AO SIMPLY ACCEPTED THE VERSION OF THE ASSESSEE BY PLACING RELIANCE ON THE CASH BOOK PREPA RED AND 5 I.T.A. NO.31/MDS/2017 FURNISHED BY THE ASSESSEE ON THE BASIS OF THE BANK STATEMENT. THE ASSESSEE WAS HAVING A BANK ACCOUNT WITH LAKSHMI VIL AS BANK. THE FIRST ACCOUNT WAS CLOSED ON 03.10.2009 AND THE ASSE SSEE HAS OPENED THE SECOND BANK ACCOUNT ON THE VERY SAME DAY . THE ASSESSEE HAS ALSO OPENED A THIRD BANK ACCOUNT WITH LAKSHMI VILAS BANK. DURING DE-NOVA ASSESSMENT PROCEEDINGS, THE A O HAS NOT EXAMINED THE DETAILS OF WITHDRAWALS AND BANK DEPOSI TS. SINCE, PROPER ENQUIRY WAS NOT DONE BY THE AO AS DIRECTED I N THE REVISIONAL ORDER, THE PRINCIPAL COMMISSIONER FOR THE SECOND TI ME FOUND THAT THERE WAS AN ERROR IN THE ORDER OF THE AO WHICH IS PRE-JUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE THE PRINCIPAL C OMMISSIONER HAS RIGHTLY DIRECTED THE AO TO RE-EXAMINE THE MATTER ON CE AGAIN. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY THIS IS THE SECOND ROUND OF LITIGATION BEFORE THIS TRIBUNAL. I N THE FIRST ROUND OF LITIGATION, THE AO SPECIFICALLY EXAMINED THE CASH D EPOSITS. SINCE THE ASSESSEE COULD NOT EXPLAIN THE TRANSACTION PROPERTY , THE LD.AO TOOK THE PEAK CREDIT OF RS.50,76,005/- AS UNEXPLAINED CA SH INVESTMENT. IN FACT, THE LD.AO HAS OBSERVED AS FOLLOWS IN THE F IRST ASSESSMENT ORDER: 6 I.T.A. NO.31/MDS/2017 UNEXPLAINED INVESTMENTS: U/S.69 THE ASSESSEE HAS BEEN MAINTAINING A SAVING BANK A /C IN LAKSHMI VILAS BANK, J.N. STREET, PONDICHERRY VIDE A /C NO.0542301000025498. A TOTAL SUM OF 1,11,60,000/- DEPOSITED WITH THE BANK ON VARIOUS DATES. ON VERIFICATION OF THE BOOKS OF A/C MAINTAINED BY THE ASSESSEE, IT IS NOTICED THAT THE ABOVE SAID INVESTMENT WAS NOT RECORDED IN THE BOOKS OF ACCOUNT S. THE CASH DEPOSITS MADE IN THE BANK ACCOUNT IS OUTSIDE THE BO OKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. THE ASSESSEES REPRESENTATIVE WAS ASKED TO EXPLAI N THE CASH DEPOSITS IN THE BANK. THE A.R., COULD NOT EXP LAIN THE TRANSACTION. HOWEVER, HE HAS REQUESTED FOR TAKING PEAK CREDIT OF THE CASH DEPOSITS AS INCOME. HENCE, A PEAK CREDIT OF CASH DEPOSITS ON 09.01.09 WAS 50,76,005/- WHICH HAPPENS TO BE HIGHEST POSITIVE BALANCE OF THE ASSESSEE IN THE ACCOUNT. THIS PEAK CREDIT OF 50,76,005/- IS TREATED AS UNEXPLAINED CASH INVESTME NT U/S 69 OF THE IT ACT. THIS ORDER OF THE LD.AO WAS SUBJECT MATTER OF REVIS ION BEFORE THE PRINCIPAL COMMISSIONER. THE PRINCIPAL COMMISSIONER IN FACT FOUND THAT THE LD.AO COMPLETED THE PROCEEDINGS WITHOUT PR OPER ENQUIRY AND INVESTIGATION ON VARIOUS ASPECTS. THE PRINCIPA L COMMISSIONER HAS ALSO FOUND THAT THE CASE LAWS REFERRED BY THE L D.AO ARE NOT RELEVANT AND CANNOT BE APPLIED. IN FACT THE COMMIS SIONER HAS OBSERVED AS FOLLOWS IN THE FIRST ROUND OF LITIGATIO N:- 6. THE ASSESSEE HAS MADE CONTRADICTORY CLAIMS IN H IS WRITTEN SUBMISSION REFERRED TO ABOVE. HIS ADMISSION TO THE FACTS AND THE CIRCUMSTANCES OF THE CASE ITSELF JUSTIFIES THE OBSE RVATIONS MADE IN THE SHOW CAUSE NOTICE THAT THE 'THAT THE A.O HAS NOT MAD E ANY ENQUIRIES BUT HAS ACCEPTED THE ORAL STATEMENTS MADE BY THE AUTHORI SED REPRESENTATIVES 7 I.T.A. NO.31/MDS/2017 OF THE ASSESSEE WHICH ARE NOT SUPPORTED BY ANY EVID ENCES,' WHEN THE ASSESSEE HAS BEEN CARRYING ON A BUSINESS COMPLYING WITH VARIOUS LEGAL REQUIREMENTS, IT BECOMES HIS STATUTORY OBLIGATION T O FURNISH ALL THE DETAILS CALLED FOR AS PER THE PROVISIONS OF THE INC OME TAX ACT, 1961 DURING ANY PROCEEDINGS AND HE CANNOT BE SELECTIVE I N FURNISHING THE DETAILS AND INFORMATION. THE ASSESSEE'S VERSIONS TH AT HE IS ACCEPTING THE PARKING OF FUNDS BY LOT PERSONS WITH HIM AND OUT OF WHICH NO BENEFIT IS DERIVED BY HIM AND THAT UNWRITTEN UNDERSTANDING BET WEEN HIM AND THE PARTIES WITH WHOM HE HAD TRANSACTED BARRED HIM FROM FURNISHING ANY FURTHER DETAILS REGARDING THE CASH TRANSACTIONS CLE ARLY GO TO SHOW THAT THE ASSESSING OFFICER HAS COMPLETED THE PROCEEDINGS WITHOUT PROPER ENQUIRY AND INVESTIGATION ON VARIOUS ASPECTS. IT IS ALSO FOUND THAT THE JUDICIAL CASE LAWS CITED BY HIM ARE NOT RELEVANT AN D CANNOT BE APPLIED TAKING INTO ACCOUNT THE FACTS AND THE CIRCUMSTANCES OF THE PRESENT CASE. THE ASSESSEE CHALLENGED THIS OBSERVATION OF THE PRIN CIAPL COMMISSIONER BEFORE THIS TRIBUNAL IN ITA NO.1170/MDS /2014. THIS TRIBUNAL BY AN ORDER DATED 06.11.2015 FOUND THAT THE LD.AO WAS EXPECTED TO MAKE PROPER ENQUIRY WITH REGARD TO CASH DEPOSITS. SINCE SUCH AN ENQUIRY WAS NOT DONE, IT WAS FOUND THAT THE PRINCIPAL COMMISSIONER HAS RIGHTLY INVOKED HIS REVISIONAL JUR ISDICTION U/S.263 OF THE ACT. ACCORDINGLY THE FIRST REVISIONAL ORDER O F THE PRINCIPAL COMMISSIONER WAS CONFIRMED BY THIS TRIBUNAL. 6. CONSEQUENT TO THE ORDER OF THE PRINCIPAL COMMISS IONER AS CONFIRMED BY THIS TRIBUNAL, THE LD.AO EXAMINED THE M ATTER AFRESH. THE LD.AO AFTER EXAMINING THE CASH BOOK, BANK ACCOUN T AND THE DOCUMENTS IMPOUNDED DURING SURVEY OPERATION FOUND T HAT OUT OF THREE 8 I.T.A. NO.31/MDS/2017 BANK ACCOUNTS WITH LAKSHMI VILAS BANK, THE FIRST BA NK ACCOUNT WAS CLOSED ON 03.10.2009 AND THE SECOND ACCOUNT WAS OPE NED ON THE VERY SAME DAY AFTER THE CLOSURE OF THE FIRST BANK A CCOUNT. THE THIRD BANK ACCOUNT WAS ALSO OPENED SUBSEQUENTLY. AFTER E XAMINING THE DEPOSITS, WITHDRAWAL, CASH BALANCE, DOCUMENTS IMPOU NDED DURING SURVEY OPERATION, THE LD.AO FOUND THAT PEAK CREDIT CAN BE ACCEPTED AS INCOME OF THE ASSESSEE. 7. AGAINST THIS ORDER OF THE LD.AO, THE PRINCIPAL C OMMISSIONER AGAIN FOUND THAT THE LD.AO HAS NOT MADE ANY PROPER ENQUIRY AS DIRECTED BY THE PRINCIPAL COMMISSIONER. THE FACT R EMAINS THAT THE LD.AO EXAMINED THE MATTER AFRESH AS DIRECTED BY THE PRINCIPAL COMMISSIONER IN THE FIRST REVISIONAL ORDER. IT IS NOT IN DISPUTE THAT THE ASSESSEE ENGAGED HIMSELF IN THE BUSINESS OF FINANCE . IN THE DE-NOVA PROCEEDINGS BEFORE THE LD.AO, THE ASSESSEE HAS FILE D ALL THE DETAILS WITH REGARD TO CASH DEPOSITS, WITHDRAWALS AND REDEP OSIT, ETC., THE PRINCIPAL COMMISSIONER AFTER EXAMINING THE MATTER A FRESH IN LIGHT OF THE MATERIALS FILED BY THE ASSESSEE INCLUDING THE D OCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY OPERATION FOU ND THAT THE PEAK CREDIT CAN BE TAKEN AS INCOME OF THE ASSESSEE, SINC E THERE ARE MULTIPLE WITHDRAWALS AND REDEPOSITS. THE QUESTION AR ISES FOR CONSIDERATION IS WHEN THE LD.AO FOR THE SECOND TIME EXAMINED THE 9 I.T.A. NO.31/MDS/2017 MATTER AFRESH AS DIRECTED BY THE PRINCIPAL COMMISSI ONER AND FOUND THAT THERE ARE WITHDRAWALS AND DEPOSITS AND ONLY TH E PEAK CREDIT CAN BE TAKEN AS INCOME, CAN THE PRINCIPAL COMMISSIONER REVISE THAT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE LD.AO MADE PROPER ENQUIRY IN THE SECOND ROUND OF LITIGATION. IN THE FIRST ROUND OF LITIGATION ALSO, THE LD.AO HAS MADE ENQUIRIES AND RECORDED HIS FINDINGS WITH REGARD TO PEAK CREDIT. THEREFORE EXERCISING REVISIO NAL JURISDICTION FOR THE SECOND TIME U/S.263 OF THE ACT IS NOT CALLED FO R. WHEN THE LD.AO EXAMINED THE MATTER AS INSTRUCTED BY THE COMMISSION ER AND FOUND THAT ONLY PEAK CREDIT HAS TO BE TAKEN, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THERE ARE TWO VIEWS POSSIBLE IN THE MATTER. THE LD.AO HAS TAKEN ONE OF THE POSSIBLE VIEWS. WHEN THE LD.AO HA S TAKEN ONE OF THE POSSIBLE VIEW AFTER TAKING IN TO CONSIDERATION THE MATERIAL AVAILABLE ON RECORD, THE PRINCIPAL COMMISSIONER CANNOT SAY FO R THE SECOND TIME THAT THE ORDER OF THE LD.AO IS ERRONEOUS AND PREJUD ICIAL TO THE INTEREST OF THE REVENUE. WHEN THE ASSESSEE IS ENGAGED IN TH E BUSINESS OF FINANCE, IT IS REQUIRED TO KEEP SUFFICIENT CASH BAL ANCE IN HAND FOR MEETING URGENT BUSINESS PURPOSES. WHENEVER THE ASS ESSEE DID NOT NEED MONEY, THE SAME WAS REDEPOSITED IN THE BANK. THIS VIEW OF THE TRIBUNAL IS FORTIFIED BY THE JUDGMENT OF THE APEX CO URT IN MAX INDIA LTD 295 ITR 282. THEREFORE THE PRINCIPAL COMMISSIONER IS NOT CORRECT IN 10 I.T.A. NO.31/MDS/2017 DISTINGUISHING THE JUDGMENT OF THE APEX COURT IN MA X INDIA LTD (SUPRA). IN VIEW OF THE ABOVE DISCUSSION, WE ARE UNABLE TO U PHOLD THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX. ACCORDIN GLY, THE IMPUGNED REVISIONAL ORDER IS SET ASIDE AND THAT OF THE AO IS RESTORED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 31 ST MAY, 2017 AT CHENNAI. SD/- SD/- ( . . ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, /DATED, THE 31 ST MAY, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF.