The ITO, Ward-3(1), Surat V. Shri Siddharth M.Shah, Surat

ITA 3404/AHD/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68035 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Unexplained investment; Peak credit
• Section: 69

Judgement Text

ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL CH ATURVEDI, A.M.) I.T. A. NO. 3398/AHD/2009 & C.O. NO. 22/AHD/2010 (ASSESSMENT Y EAR: 2006-07) INCOME TAX OFFICER, WARD 3(3), SURAT V/S SHRI GITESH R. SHAH, 703, PLEASANT PALACE, GHOD DOD ROAD, PAN NO.AEUPS5435D (APPELLANT) (RESPONDENT) SHRI GITESH R. SHAH, 703, PLEASANT PALACE, GHOD DOD ROAD, PAN NO.AEUPS5435D V/S INCOME TAX OFFICER, WARD 3(3), SURAT (APPELLANT) (RESPONDENT) ITA NO. 3399/AHD/2009 & C.O. NO. 23/AHD/2010 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER, WARD 3(3), SURAT V/S SHRI MAYUR R. SHAH, 703, PLEASANT PALACE, GHOD DOD ROAD, SURAT PAN NO. AFSPS 3635J (APPELLANT) (RESPONDENT) SHRI MAYUR R. SHAH, 703, PLEASANT PALACE, GHOD DOD ROAD, SURAT PAN NO. AFSPS 3635J V/S INCOME TAX OFFICER, WARD 3(3), SURAT (APPELLANT) (RESPONDENT) ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 2 ITA NO. 3404/AHD/2009 (ASSESSMENT .YEAR. 2006-07) ITO, WARD-3(1), SURAT V/S SHRI SHIDHARTH M. SHAH, M- 12, JOLLY SHOPPING CENTRE, GHOD DOD ROAD, SURAT PAN NO. AYDPS 0883N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.L. KUREEL, SR. D.R. RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 03-12-201 3 DATE OF PRONOUNCEMENT : 13 -12-2013 PER BENCH. 1. THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-II, SURAT DATED 18.09.2009 FOR A.Y. 2006-07 AND ASSESSE E HAS ALSO FILED CO AGAINST ITA NO. 3398/AHD/2009 AND 3399/AHD/2009. 2. BEFORE US THE LD. D.R SUBMITTED THAT THOUGH THE APP EALS ARE OF DIFFERENT ASSESSEES BUT THE ISSUE INVOLVED IN ALL THE APPEAL S ARE IDENTICAL EXCEPT FOR THE AMOUNT AND THEREFORE THE SUBMISSIONS MADE I N CASE OF ONE APPEAL WOULD BE EQUALLY APPLICABLE TO THE OTHERS AND THERE FORE SUBMITTED THAT ALL THE APPEALS CAN BE HEARD TOGETHER. ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 3 3. IN THIS CASE, NONE APPEARED ON BEHALF OF ASSESSEE N OR ANY APPLICATION FOR ADJOURNMENT WAS MOVED TILL THE TIME OF HEARING. FRO M THE RECORDS, IT IS SEEN THAT ON VARIOUS OCCASIONS IN THE PAST, ADJOURN MENTS HAVE BEEN SOUGHT BY THE ASSESSEE. ON THE DATE OF HEARING SINC E THERE WAS NO APPEARANCE BY THE ASSESSEE OR THEIR AUTHORISED REPR ESENTATIVE WE PROCEED TO DISPOSE OFF ALL THE APPEALS ON MERITS ON THE BASIS OF MATERIAL ON RECORD EX-PARTE QUA THE ASSESSEE. SINCE THE ISS UES INVOLVED IN ALL THE APPEALS ARE IDENTICAL, EXCEPT FOR THE AMOUNT WE PRO CEED TO DISPOSE OF ALL THE APPEALS BY WAY OF CONSOLIDATED ORDER FOR THE SA KE OF CONVENIENCE. WE HOWEVER PROCEED WITH THE FACTS IN ITA NO. 3398/A HD/2009 IN THE CASE OF GITESH R. SHAH. 4. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER:- 5. ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F MANUFACTURING AND ASSEMBLING ELECTRICAL PARTS AND IS A PARTNER OF ARR OW ELECTRICALS. ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 06-07 ON 07.11. 2006 DECLARING TOTAL INCOME OF RS. 1,04,907/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED UNDER SECTION 143( 3) OF THE ACT VIDE ORDER DATED 18.12.2008 AND THE TOTAL INCOME WAS DET ERMINED AT RS. 63,92,870/-. AGGRIEVED BY THE ORDER OF A.O., ASSESS EE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 18.09.2009 P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) THE REVENUE IS NOW IN APPEAL BEFORE US AND THE ASSESSEE HAS ALSO FILED CROSS OBJECTION. THE GROUND RAISED BY REVENUE READS AS UN DER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION MADE BY THE A.O. U/S. 69 OF RS. 62,87,958/ - TO RS.12,29,642/-.. ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 4 6. THE GROUND RAISED BY THE ASSESSEE IN C.O. READS AS UNDER:- 1.1 THE CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 1 2,29,642/- AND DIRECTING THE ASSESSING OFFICER TO TREAT IT AS UNDISCLOSED INVESTMENTS. 1.2 THE CIT(A) ERRED IN NOT ACCEPTING THE OVERALL SUBMI SSIONS OF THE ASSESSEE AND IN THE PROCESS MADE THE ABOVE MENTIONED ERRONEOUS ADDITION. 7. SINCE THE ISSUE RAISED BY REVENUE AND THE ASSESSEE IN THE C.O. ARE INTERCONNECTED BOTH ARE CONSIDERED TOGETHER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAD SHOWN 2 BANK ACCOUNTS NAMELY ADINATH BANK AND H DFC BANK IN THE BALANCE SHEET. A.O. WAS IN RECEIPT OF INFORMATI ON THAT ASSESSEE ALSO HAD AN ACCOUNT WITH DEVELOPMENT CREDIT BANK AND FUR THER ASSESSEE HAD DEPOSITED CASH OF RS. 12,70,000/- IN THE SAME BUT T HE ACCOUNT WITH DEVELOPMENT CREDIT BANK WAS NOT SHOWN IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ASSESSEE WAS ASKED TO EXPLAIN THE SAME. A SSESSEE INTERALIA SUBMITTED THAT THE BANK ACCOUNT WITH DEVELOPMENT CR EDIT BANK BELONGS TO HIS HUF AND SINCE THE HUF WAS NOT HAVING ANY TAX ABLE INCOME. ASSESSEE HAD NOT OBTAINED PAN CARD OR FILED RETURN OF INCOME OF HUF. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPT ABLE TO THE A.O., FOR THE REASON THAT NO DOCUMENTARY EVIDENCE WAS SUBMITT ED BY THE ASSESSEE IN SUPPORT OF HIS CLAIM THAT THE DEPOSITS REPRESENT THE INCOME BELONGING TO HUF. A.O. HAS FURTHER NOTED THAT FROM THE DETAI LS OF ACCOUNT OPENING FORM CALLED UNDER SECTION 133(6), FROM THE BANK, IT WAS NOTICED THAT THE BANK ACCOUNT WAS HELD JOINTLY IN THE NAME OF GITESH R. SHAH WITH HIS WIFE PREETIBEN SHAH. HE ALSO NOTICED THAT WHILE OPE NING THE BANK ACCOUNT, THE PAN NUMBER QUOTED WAS OF THE ASSESSEE AND NOT OF HUF. HE ALSO NOTICED THAT THE DEPOSITS IN THE BANK ACCOU NT WAS OUT OF INCOME ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 5 OF PREETI SHAH. HE THEREFORE CONCLUDED THAT THE OWN ERSHIP OF THE BANK OF THE ASSESSEE. ON PERUSING THE BANK ACCOUNT, A.O. N OTICED THAT DURING THE YEAR UNDER CONSIDERATION. ASSESSEE HAD DEPOSITED CA SH OF RS. 12,70,000/- AND DEPOSITS BY CASH/TRANSFER WAS TO THE TUNE OF RS . 55,52,274/-. THE ASSESSEE WAS ASKED TO SUBMIT THE SOURCE OF DEPOSITS . IN THE ABSENCE OF SATISFACTORY EXPLANATION ABOUT THE WITHDRAWALS AND THE CREDITS IN THE BANK ACCOUNT, A.O. WAS OF THE VIEW THAT THE WITHDRAWALS OF BANK ACCOUNT CANNOT BE TREATED FOR THE SOURCE OF SUBSEQUENT DEPO SITS. HE THEREFORE SPLIT THE TOTAL PERIOD OF THE YEAR INTO SMALL PERIODS OF SPAN AND WORKED OUT THE PEAK IN EACH PERIOD AND THE TOTAL PEAK OF ALL THESE SMALL SPANS AGGREGATING TO RS. 62,87,958/- WAS CONSIDERED AS UN EXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT AND ADDED THE SAME TO T HE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE C ARRIED THE MATTER BEFORE CIT(A). CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 7. I HAVE CAREFULLY CONSIDERED BOTH THE POSITIONS. I F IND THAT THE A.R. HAS NOT STRESSED ON THE CLAIM THAT WAS MADE IN ASSESSMENT PROCEEDINGS, THAT THE B ANK ACCOUNT BELONGED TO THE ASSESSEES HUF. THIS IS PERHAPS BECAUSE THE A.O. WAS ABLE TO SUCCES SFULLY AND COMPREHENSIVELY REJECT SUCH A CLAIM ON THE BASIS OF HIS CLEAR FINDINGS AS RECORDED IN P ARA-7, PAGES 4-6 OF THE ASSESSMENT ORDER. THE A.O.S ACTION IN REJECTING THE ASSESSEES CLAIM IS THEREFORE, UPHELD HOWEVER, HIS ACTION OF DIVIDING THE ENTIRE DEPOSITS AND WITHDRAWALS DURING THE FINA NCIAL YEAR IN QUESTION INTO TEN DIFFERENT SPANS, WAS NOT REALLY JUSTIFIED. IN FACT, THERE IS NO ACCE PTED CONCEPT OF DIVIDING THE FINANCIAL YEAR ON THE BASIS OF DEPOSITS AND THE WITHDRAWALS FLOWING FROM SUCH DEPOSITS. THE PEAK THEORY CLEARLY PROVIDES THAT DURING A SPECIFIED PERIOD OF TIME, WH ICH IN THIS CASE OUGHT TO HAVE BEEN THE ENTIRE FINANCIAL YEAR, THE PEAK CREDIT IS TO BE IDENTIFIED , WHICH IS TO BE TREATED AS UNDISCLOSED INVESTMENT UP TO THAT POINT IN TIME, IN RESPECT OF THE TRANSAC TIONS REFLECTED IN A PARTICULAR ACCOUNT. IT IS INTERESTING TO NOTE THAT THE A.O. HIMSELF ACCEPTED THE ASSESSEES REQUEST FOR APPLYING THE PEAK CREDIT THEORY, BUT THE TOTALLY ERRED IN IDENTIFYING ELEVEN DIFFERENT PEAKS IN TEN DIFFERENT SPANS, AN ACTION WHICH WENT BEYOND THE SCOPE OF THE PEAK THEO RY. FROM A COPY OF THE SAID BANK ACCOUNT AS FURNISHED BY THE A.R., IT IS SEEN THAT THE PEAK BAL ANCE WAS ACHIEVED ON 24.01.2006 OF A SUM OF RS. ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 6 12,29,642/- THE A.O. IS DIRECTED TO TREAT THIS SUM AS THE ASSESSEES UNDISCLOSED INVESTMENT AND ADD THE SAME TO THE ASSESSEES TOTAL INCOME AS AGAI NST RS. 62,87,958/- WORKED OUT BY HIM. 7.1 IN HIS WRITTEN SUBMISSION, THE A.R. HAS POINTE D OUT THAT THE A.O. TOOK INTO CONSIDERATION THE DEPOSITS AND WITHDRAWALS MADE BOTH IN CHEQUES AND I N CASH. THOUGH THE WORKING OF ELEVEN DIFFERENT PEAKS WAS NOT JUSTIFIED YET, SINCE THE AS SESSEE HAS FAILED TO EXPLAIN THE DEPOSITS BOTH IN CHEQUES AND IN CASH AS ALSO THE WITHDRAWALS THE PEA K BALANCE INVOLVING BOTH CHEQUES AND CASH TRANSACTIONS WHICH WAS THE SUM OF RS. 12,29,642/- W ILL BE TREATED AS THE ASSESSEES UNDISCLOSED INVESTMENT. 9. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US AND THE ASSESSEE IS ALSO AGGRIEVED BY THE ADDITI ON SUSTAINED BY CIT(A) BEFORE US, THE LD. D.R. TOOK US THROUGH THE FINDINGS OF A.O. FROM HIS ASSESSMENT ORDER AND STRONGLY SUPPORTED THE ORD ER OF A.O. HE FURTHER SUBMITTED THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDIT ION AND THEREFORE THE ORDER OF A.O. NEEDS TO BE UPHELD. 10. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE BANK ACCOUNT OF ASSESSEE W ITH DEVELOPMENT CREDIT BANK WAS NOT DISCLOSED BY THE ASSESSEE. THE DEPOSITS MADE IN THE BANK ACCOUNT WAS ALSO NOT REFLECTED IN THE INCOME O F ASSESSEE. A.O. HAD DIVIDED THE DEPOSITS INTO VARIOUS SPANS AND WORKED OUT PEAK CREDIT IN EACH SPAN & THE AGGREGATE OF PEAK CREDITS OF ALL TH E SPANS WAS CONSIDERED AS UNEXPLAINED INVESTMENTS. CIT(A) WHILE GRANTING RELIEF TO THE ASSESSEE HAS NOTED THAT THE ACTION OF THE A.O. OF DIVIDING T HE ENTIRE DEPOSITS AND WITHDRAWALS, DURING THE FINANCIAL YEAR INTO 10 DIFF ERENT SPANS WAS NOT JUSTIFIED AND THERE WAS NO ACCEPTED CONCEPT OF DIVI DING THE FINANCIAL YEAR ON THE BASIS OF DEPOSITS AND THE WITHDRAWALS FLOWIN G FROM SUCH DEPOSITS. HE HAS FURTHER NOTED THAT FOR WORKING OUT THE PEAK CREDIT, THE ENTIRE ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 7 FINANCIAL YEAR IS TO BE CONSIDERED. HE HAS FURTHER GIVEN A FINDING THAT THE A.O. HAS ERRED IN IDENTIFYING 11 DIFFERENT PEAKS IN DIFFERENT SPANS WHICH WENT BEYOND THE SCOPE OF PEAK THEORY. HE HAS FURTH ER NOTED THAT THE PEAK BALANCE WAS ACHIEVED ON 24.01.2006 AND ON THAT DATE THE BALANCE WAS 12,29,642/- AND THE A.O. WAS THEREFORE DIRECTED TO TREAT RS. 12,29,642/-AS THE UNDISCLOSED INVESTMENT AS AGAINST RS. 62,87,958/- MADE BY HIM. BEFORE US, THE LD. D.R. COULD NOT CONTROVER T THE FINDINGS OF CIT(A) NOR COULD HE BRING ANY MATERIAL IN ITS SUPPO RT. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WIT H THE ORDER OF CIT(A) ON THIS GROUND. THUS THIS GROUND OF REVENUE IS DISMISS ED AND THE C.O. OF THE ASSESSEE IS ALSO DISMISSED. 11. IN THE RESULT THE APPEAL OF REVENUE IS DISMISSED ITA NO. 3399, 3404/AHD/2009 & CO NO. 23/AHD/2010. 12. BEFORE US, LD. D.R. HAS SUBMITTED THAT THE FACTS O F THE CASE IN ITA NO. 3399& 3404/AHD/2009 ARE IDENTICAL TO THAT OF ITA NO . 3398/AHD/2009 AND THE SUBMISSIONS MADE BY HIM IN THE CASE OF ITA NO 3398/AHD/09 ARE EQUALLY APPLICABLE IN THE PRESENT APPEALS AND H E HAS NO NEW SUBMISSIONS TO MAKE. WE THEREFORE FOR REASONS GIVEN HEREINABOVE WHILE DECIDING THE APPEAL IN THE CASE OF SHREE GITESH SHA H ITA NO. 3398/AHD/2009, ALSO DISMISS THE PRESENT APPEALS OF THE REVENUE AS WELL AS CO OF THE ASSESSEE. THUS THE GROUNDS OF REVENUE AND C.O. OF ASSESSEE ARE DISMISSED. ITA NOS. 3398,3399 & 3404/AHD/2009 & C.O. NO. 22 & 23/AHD /2010 . A.Y. 2006- 07 8 13. IN THE RESULT, ALL THE APPEALS OF REVENUE AND CO OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 12 - 2013. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD